Agenda item

Officers introduced the item, outlining the report and appendices.

 

The 2024/25 accounts had a backstop date of the end of February. There were some dependencies within the accounts. It was noted that confirmation of the Council’s EFS application was awaited before final updates were made to the Statement of Accounts. It was highlighted that the recommendation was to delegate approval of the Statement of Accounts to the Corporate Director of Finance in consultation with the Chair, pending the outcome of the EFS application, which was expected in approximately one week.

 

The 2024/25 audit opinion would be disclaimed, reflecting sector-wide challenges. Returning to ‘clean’ accounts was estimated to take approximately two to four years.

 

Progress against recommendations noted within the GRIP showed improving RAG statuses but substantial work remained.

 

EY outlined their two appendices:

• the Audit Results Report, which summarised the results of audit work on the financial statements for 2024/25; and
• the Draft Auditor’s Annual Report, which summarised the overall results of the audit to date and consideration of the Council’s value for money arrangements and any significant weaknesses.

Both would be updated to reflect the final position once the accounts were updated and approved. EY thanked officers for their cooperation.

 

In relation to the 2024/25 audit, EY had identified four significant weaknesses in the Council’s Value for Money arrangements:

1. Financial sustainability: low reserves, a significant DSG deficit, and a large budget challenge
2. Quality of financial/ performance information, including impacts of the Oracle implementation
3. Finance team capacity
4. Implementation of Oracle Fusion

 

Seven statutory recommendations had been reported in July 2025, related to:

• Developing and delivering savings and transformation plans
• Reviewing service delivery models for efficiency and value for money
• Managing the DSG deficit
• Improving forecasting
• Fixing Oracle issues and associated processes
• Strengthening the finance function
• Maintaining pace on finance modernisation and GRIP

 

In the Draft Auditor’s Annual Report, EY had issued an additional non-statutory recommendation asking the Council to reassess whether the assumptions and forecasts underpinning the 2025/26 budget were sufficiently robust to support the conclusion that a balanced budget was set and to consider further actions if that could not be demonstrated.

 

EY described the Council’s financial position as critical, and unsustainable without corrective action and EFS. Reserves were very low; the DSG deficit was significant; and the ability of the Council to absorb further shocks was limited. It was also highlighted that Internal Audit has been unable to provide overall assurance for 2024/25, which heightened concerns in relation to governance and control.

 

EY raised concerns that the Draft Auditor’s Annual Report (issued on 27 November 2025) had not been considered by Members prior to this meeting.

 

The audit opinion for 2024/25 Council accounts will be disclaimed, citing incomplete procedures and lack of assurance over prior years following earlier disclaimers.

 

EY noted that the Audit Results Report had considered arrangements during 2024/25 (up to 31 March 2025), and there had been actions since then which would be referenced in updates on the GRIP and FMP. Early-year forecasts of overspends had emerged unusually quickly, prompting the budget-assumptions recommendation.

 

On Oracle, EY highlighted governance observations including around the decision to launch it, addressing associated risks, and monitoring the project costs and benefits.

 

On information quality, there had been challenges with Oracle EPM budget reporting, and difficulties in accessing certain school information which had impacted audit execution.

 

There had been delays on routine controls and publication of draft accounts in September which had reflected a conscious quality focus. However, future timeliness must align with statutory guidance to rebuild assurance.

 

Across these weaknesses, a number of recommendations were presented within the report, such as the statutory recommendations and the additional recommendation around reviewing the balanced budget. There were also recommendations within the appendix, specifically in relation to Oracle implementation, as well as any future IT implementations.

 

It had been agreed that, given the delays to the publication of draft accounts and some of the challenges encountered in previous audits and capacity of the finance team, and to complete the audit by the backstop date, PPE calculations would be descoped.

 

EY had been unable to make all the progress they had hoped but had made progress in a number of areas that had proved difficult in previous years. EY thanked officers for their help in those areas.

 

The Council was approximately two years behind the sector-wide envisaged rebuilding timetable. EY wanted to see all green/ amber RAG statuses in 2025/26 to move away from disclaimed opinions. Officers advised that while a significant dent was expected in the 18 red areas flagged for March 2025, they were cautious about achieving zero red statuses, noting that PPE was out of the scope.

 

Regarding a risk around Oracle data migration, assurance was ultimately obtained, but only with significant effort due to complex legacy structures and post-migration adjustments.

 

There was a new control recommendation relating to timely completion of bank and fixed-asset reconciliations, and several 2022/23 recommendations remained open pending completion of work.

 

Referencing the misstatement section of the report, it was noted that not all procedures had been completed. There were no significant findings in terms of monetary values. There were some findings on classifications. Discussions were ongoing around the Annual Governance Statement.

 

On the Pension Fund, all procedures had been completed, and a clean opinion was anticipated. There was only one control recommendation.

 

Members queried whether EFS would cover both 2024/25 and 2025/26. Officers confirmed the original 2024/25 request (to bolster reserves) was deferred and rolled into the 2025/26 request to align with accounts closure timelines. EFS confirmation was expected next week and officers were optimistic.

 

Members asked why negative reserves and treasury misallocations were not spotted through usual monitoring. Officers cited capacity pressures and heavy workloads resulting in missed review points. Adjustments expected to wash out had not done so, indicating that the review process was not robust enough at that time.

 

Members asked if the late introduction of the FMP represented a failure in financial governance. Officers clarified that the beginning of the FMP was in early 2025, before the Section 24 report had been issued. The FMP was then amended as a result of this and other internal and external reviews.

 

Members asked what role Grant Thornton and Local Government Association had played in identifying these issues and why with such external intervention was necessary to recover basic balance sheet problems. Officers advised that as part of the last budget, there was an initial assessment of the financial position prior to the FMP. Grant Thornton had been engaged for phase one and two. The LGA had been engaged to support as necessary.

 

On audit adjustments of £3.278m, officers stated that these followed normal audit dialogue. The largest adjustment related to a £2m dividend from Hillingdon First. The Council can received dividends if they are valid.

 

Members asked about how the recommendation around the balanced budget had been taken forward. Officers advised that they had undertaken a lot of work on assessing the reasons behind the financial forecasts to ensure a good understanding of the current position. The GRIP and FMP had begun prior to the issue of the S24 report. Regarding EY’s additional recommendation around the budget, this would be tracked via the GRIP. Officers would also be doing a review.

 

Councillors raised concern that the Draft Auditor’s Annual Report had not been considered prior to this evening. Councillors also suggested convening another Audit Committee to sign off the accounts. EY clarified that the Draft Auditor’s Annual Report had been issued on 27 November 2025, before the deadline of 30 November, and summarised the status of the audit at that point in time. Given the significant value for money findings, EY would have expected that report to have been considered prior to this evening. Officers advised that it was within the Committee’s discretion to decide if they wanted to hold an additional meeting, or to delegate approval of the accounts.

 

Members asked for more information about notice to EY of planned restatements. EY clarified that under accounting standards, during the preparation of the current financial statements, if a material error was identified in the prior period’s statements, there was a requirement to restate it. Within the draft financial statement, published in September, there were a number of restatements. EY had since worked through these with officers and concluded that these were not restatements and should not have been restated within the accounts. The only restatement left concerned a directorate restructure.

 

Members asked about compliance of the Annual Governance Statement with the Local Code. Officers said the published draft was signed in July based on knowledge at that date. Final wording of the Annual Governance Statement will be updated to reflect current evidence and audit feedback.

 

The Chair thanked everyone for their work. EY had noted the critical financial position that the authority was in. The Chair noted that the Committee needed to express its concern about the position and stressed the seriousness of it. The Chair thanked EY for the clarity of their reporting.

 

A motion to delegate authority to sign off the accounts was moved, seconded and, when put to a vote, agreed.

 

The intention was to proceed by delegation unless unexpected issues arose from the EFS decision.

 

RESOLVED: That the Audit Committee:

 

1. Noted the final position regarding the Statement of Accounts, Draft Auditors Annual Report, and Audit Results Report 2024/25 for the London Borough of Hillingdon for ratification and delegated final sign-off to the Corporate Director of Finance, in consultation with the Chair who will sign off the accounts on behalf of the Audit Committee, following approval of the Council’s EFS application; and

 

2. Noted the final position regarding the Statement of Accounts, Auditors Annual Report, and Audit Results Report 2024/25 for the Hillingdon Pension Fund for ratification.