The City Fund is projected to face a cumulative deficit from the 2027-28 financial year onwards, once transitional funding arrangements cease. This necessitates the identification and implementation of alternative solutions to address a medium-term financial gap and protect reserves.
This warning comes from the City of London's Audit and Risk Management Committee, which reviewed the 2025-26 City Fund Statement of Accounts and associated audit findings reports. Grant Thornton UK LLP's audit reports highlighted that while the City Fund's financial position remains strong with significant reserves, there was a projected cumulative deficit from 2027-28 onwards when transitional funding arrangements cease. The primary driver behind this projected deficit is the cessation of these transitional funding arrangements.
Auditors also identified a significant weakness in housing safety standards, resulting in a C3 rating following an inspection by the Regulator of Social Housing. Furthermore, an improvement recommendation was raised regarding the timeliness of performance reporting to Members.
Recommendations were also made regarding strengthening bank reconciliation processes. The audit identified a minor disclosure amendment and a recommendation to strengthen bank reconciliation processes for the Pension Fund. For the City Fund, the auditors noted a net £20.5 million in surplus provision of services and balance sheet classifications within assets and liabilities, with several classifications identified as not reflecting initial intentions. Some of these classifications emanated from capital assets, and management has accepted the recommendations to adjust the position. The meeting information also mentions a £79,000 unreconciled amount on the bank account for the Pension Fund, similar to the previous year, with a recommendation to look into this in more depth in 2026-27. However, specific proposed solutions for the identified weaknesses in bank reconciliation processes are not detailed.
Despite these challenges, the Audit and Risk Management Committee recommended the approval of the 2025-26 City Fund Statement of Accounts to the Finance Committee. The committee's findings and recommendations can be found in the Public reports pack.
