Havering Council's audit committee has received a sobering assessment of the authority's budget management, with the Head of Assurance Annual Report 2024/25 revealing significant weaknesses in this area.
These weaknesses have led to financial inefficiencies, potentially resulting in a misallocation of resources, which may have impacted on service delivery within the areas affected, ultimately resulting in financial loss to the Council.
Jeremy Welburn, Head of Assurance, presented the report to the Audit Committee, highlighting instances of potentially fraudulent activity and a control failure within the Temporary Accommodation service. These issues, identified in the final quarter of 2024/25, point to a broader problem with budget oversight across the council. The report notes that a number of control failures have been identified towards the end of 2024/25 across three service areas.
Given the issues identified, the Head of Audit can only provide limited assurance on the overall effectiveness on the control environment, specifically the management and oversight of departmental budgets and expenditure,
the report stated.
The report noted that last year's (2023/24) annual opinion concluded that reasonable assurance could be provided that there was generally a sound system of internal control across the Council, but that procurement processes and contract management arrangements continues to be an area of significant risk to the Council. Significant work has been undertaken by the Council to mitigate this risk during 2024/25 and continue into 2025/26. This opinion concludes that continued efforts will increasingly manage this risk effectively.
The internal audit programme of work for 2024/25 identified the following areas where only limited assurance could be provided on the control environment:
- Court of Protection: Deputyship and Appointeeships
- Engagement of Consultants via Matrix
- Procurement Processes
- Tenant management Organisations. The specific risks associated with Tenant Management Organisations that led to limited assurance are:
- Lack of agreed Business Plans
- Non-compliance with the MMA and the Councils policies and procedures
- A lack of awareness of the responsibilities among the Estate Managers.
- Late payment of invoices by the Council to the TMO.
- Lack of documents relating to financial management and controls, recruitment, staffing and governance
- Lack of appropriate TMO banking arrangements for procurement activities.
- Financial limits set within MMA are not fit for purpose
- No documentation to show quotes have been obtained for works exceeding £2,000
- Lack of understanding of responsibilities for repairs and maintenance which in the event of an insurance claim the Council would ultimately be responsible for any financial costs incurred
- Quotes were not obtained before entering in to a contract with a supplier.
- Monthly records for purchase card expenditure were not able to be reconciled accurately to spend incurred.
- A lack of documentation retained on file to evidence the appropriate approval process had been followed for purchases.
- Lack of documentation retained securely in relation to spend using the Metro Bank debit card.
- Contracts are not in place for services that have been procured on an ongoing basis.
- The TMO have multiple inaccessible accounts, as the signatories are no longer available.
- The Estate Manager is using their own personal funds to subsidise the TMOs ongoing costs.
- It is unclear as to whether the TMO has long term financial viability due a complete lack of financial and budget documentation being prepared and maintained.
- No declaration of interests for board members and staff.
- Lack of controls around the management of petty cash transactions and reimbursements
- Board meeting minutes not adequately completed and maintained on file
While reasonable assurance could be provided on the overall system of internal control, the identified issues have been highlighted as a Significant Governance Issue in the Annual Governance Statement for 2024/25.
The Annual Governance Statement for 2024/25 noted:
A number of control failures have been identified towards the end of 2024/25 across three service areas. Reviews undertaken of these incidences have highlighted a combination of inconsistent application of the financial framework and poor management oversight in a limited number of areas. These issues have led to financial inefficiencies, potentially resulting in a misallocation of resources, which may have impacted on service delivery within the areas affected, ultimately resulting in financial loss to the Council.
Actions planned for 2025/26 to address the issues include a follow-up report to the Audit Committee in June 2025, which will provide a summary of the issues, causes, and actions related to control failures identified towards the end of 2024/25, and additional reviews added to the Internal Audit Plan 2025/26 to ensure assurance is given on the specific risks identified and that the control environment continues to improve during 2025/26.
