Tower Hamlets Council is embarking on a £4.5 million, three-year plan to address audit failures and bolster its internal control environment. The initiative, discussed at the Audit Committee meeting on Thursday 23 July 2026, aims to rectify a series of statutory recommendations and significant weaknesses identified by external auditors EY.
EY's provisional audit plan for the year ending 31 March 2026 highlighted several key risks, including management override of controls, revenue recognition, property, plant, and equipment valuations, and the implementation of IFRS 16 leases. These risks have remained consistent from the previous year, with a subtle change in focus on one revenue recognition risk.
Significant weaknesses were also identified in the Council's value for money arrangements. At the end of the financial year 2025/26, four statutory recommendations and six significant weaknesses remained open. Actions are underway to embed improvements, with a new Director of Compliance appointed to lead the review of the action plan. The Council has allocated £4.5 million over three years to support this initiative, with £2 million earmarked for 2026/27.
The plan involves a two-phase approach: mobilisation, which was completed in December 2025, and implementation, targeted for completion by December 2026. The Council anticipates an unmodified audit opinion might be achievable by 2029-30, assuming all goes well. This projection is illustrated in a chart showing the projected progression of audit opinions from disclaimer to unqualified over several financial years.
Key areas of focus for the improvement plan include financial management and accountability, the effective operation of internal controls, contract management and procurement, and the process for conducting internal investigations. The Council is also addressing weaknesses identified in the Annual Governance Statement, the effectiveness of the internal audit function, and the Audit Committee itself.
Regarding the internal audit function, Kate Brunning, Interim Head of Internal Audit, Anti-Fraud and Risk, highlighted the appointment of a new Head of Internal Audit to strengthen the Council's approach to implementing recommendations. A self-assessment indicated general conformance with Global Internal Audit Standards (GIAS), but also areas for improvement, particularly regarding the absence of an External Quality Assessment (EQA) in 2025/26, which is planned for later in 2026/27. The Head of Internal Audit's annual opinion for 2025/26 provided Limited Assurance
on the Council's governance, risk management, and control arrangements. The internal audit team's reporting line has changed, and the job description for the Head of Internal Audit needs updating.
Councillor Martin Parker noted that the Audit Committee's terms of reference appeared to delegate little to the committee, despite its requirement to make recommendations to Council and produce an annual report. Officers have been asked to review this. The Chair, Barry Quirk, stressed the importance of clarity on the basis for making recommendations and the need to align with the committee's delegated authority. A draft Audit Committee training and development programme is also in development.
The report detailed progress on four workstreams: Financial Management & Accountability, Effective Operation of Internal Controls, Contract Management and Procurement, and Process for Conducting Internal Investigations. EY also noted that they would be reporting the majority of significant weaknesses and statutory recommendations from the previous year regarding the Council's value for money arrangements.
