Agenda item

For the Audit Committee to consider the draft Auditor’s Annual Report from KPMG, which highlights their findings from the on-going audit of the Council’s statutory accounts 2024/25, value for money (VFM) risk assessment review and other relevant information.

Mr Kaycee Ikegwu, Head of Finance (Housing & Chief Accountant), Mr Tim Cutler (KPMG) and Mr Josh Parkinson (KPMG), introduced the report.

The meeting heard:

·         In relation to all council housing, the accounting was driven by the CIPFA code and it suggested that the Council should be allocating beacons to the properties. All of the properties would fit into different property types. There could be a varying number of different types of beacon. KPMG was making sure that each property had been properly allocated to the correct beacon. The best way for KPMG to do this was to get to the underlying information like tenancy agreements, floor plans or physical inspections. The independent valuers, for each beacon, would look at current market information to say what the appropriate valuation was for, say, a two-bedroom flat in Haringey and apply that beacon valuation to the whole population. This was seen as more proportionate than going around valuing every single two-bedroom flat separately.

·         The Council would assign different beacons to different properties but over the Council’s entire portfolio, there were around 430 different beacons. This would be 430 beacons across all 16,000 properties.

·         In an ideal environment, before entering into any expenditure transactions with a supplier, the Council would check to see if there was a related party in the case and whether there was any potential conflict. However, in practice KPMG found that this was not the case and therefore the deficiency had been raised. However, there was also a separate deficiency around the completeness of some declarations of interest.

·         An audit had been completed around the declarations of interest and the procedure was for any officer to declare any interest in any activity where there was a potential conflict or a perceived conflict that could arise. This was the Council's overarching framework. If an officer was about to enter into a contract where there may be a conflict or a perceived conflict, they should declare it through the Council's normal channels for declarations of interest and this should be fed up to the appropriate officer.

·         A query was raised regarding an annual process where interests were declared and a specific process where interest was declared for specific transactions. In response, the meeting heard that the annual declaration was not fully complete. However, there should be an ongoing process all year round. Generally, when an account was to be paid, there needed to be a trigger in the system stating any internal interests.

·         There appeared to be a weakness in both of these processes, because if no interest was recorded, a notification for an internal interest could not be triggered. This issue would be taken away to see how it could be addressed.

·         The ISA260 report that would be submitted to the Committee in January 2026 would contain all the detailed performance improvement observations relating to the financial statements or accounts audit. KPMG was starting to feed those back to management, but in January 2026, the Committee would provide detail in writing along with management responses.

·         It was very difficult to get a proportionate cost to a journal system that provided enforced segregation duties. It was difficult to get that type of system functionality for a public sector entity. This was also true for pensions and value-as-assumptions. There was a cost-benefit balance to the Council procuring another set of professional advice to validate the set of professional advice that the Council already had. The Council’s auditors employed its own specialists to do this anyway. However, auditing standards required KPMG to outline issues that needed to be addressed. The issue relating to declarations of interest was a notable point, but ultimately there was a system functionality element to this. The Council should be able to get confidence that its register of interest was complete. This would also be raised again in January 2026 to reaffirm its importance. If the Council had its controls working effectively and was aware of its completeness, KPMG would always test the accuracy of it as a retrospective look as part of the Council’s related party disclosures in its accounts. However, there was also a more prospective control that the Council’s system could help enforce at the point of entering a transaction. There were other ways of doing this that did not necessarily rely on the system being the informant.

·         The Council would get a response in January 2026 to every one of the risks identified in the audit plan earlier in the year.

RESOLVED:

1. That the Committee notes the contents of the draft auditor’s annual report, the VFM report and any further oral updates given at the meeting by KPMG.

2. That the committee notes that the final auditor’s annual report will be submitted in January 2026. Management will, at that time, provide responses to any issues raised by the external auditors.

3. That the committee notes management responses to the VFM risk assessment issues and recommendations raised by external auditors.