On 3 December, the council published an annual report by its auditors, Ernst and Young.
The report highlighted 10 areas of significant weakness and four statutory recommendations.
The Council welcomes and is acting on the EY report’s recommendations as part of our improvement plan, while noting that this report covers a period from 20 to 8 months ago and therefore does not reflect the Council’s current position as significant improvements have been made since then.
Many of these areas are historic issues dating back as far as 2017. For example, the Council’s accounts from 2017 were not signed off until 2023/24, and many of the social housing issues date back to 2017 and were uncovered when the council brought its housing management in house in November 2023.
The Council has invested in and is prioritising identifying and tackling these long-standing issues, and its progress has been recognised more recently by both the Local Government Association (LGA) and the Government.
The LGA’s Corporate Peer Challenge Review report published last week praised the council for ‘high quality services’; ‘a commitment to continuous improvement’; and ‘strong financial management’.
We recognise the statutory responsibilities of the external auditor under the Local Audit and Accountability Act 2014 and the Code of Audit Practice.
Further to our response to the auditor's report, the Council is providing additional context and information about the steps taken to address historic weaknesses, while continuing to engage constructively to act on the EY’s recommendations.
Historical issues and council improvements
Tower Hamlets Council has taken decisive action to address the ten significant weaknesses identified by its external auditor, embedding these improvements within its Continuous Improvement Plan (CIP) and supported by a robust Value for Money Response Mobilisation Plan. These measures demonstrate the Council’s commitment to transparency, accountability, and delivering best value for residents.
1. Financial Reporting
Issue: Accounts were not signed off between 2017 and 2023, creating a backlog that undermined confidence in financial governance. Accounts for 2016-17 to 2022-23 were only signed off by auditors between March 2023 and December 2024.
Improvements: Improvements include stronger working papers, bi-weekly audit coordination meetings, and early engagement with valuers for 2025/26. These steps ensure timely, reliable financial reporting and compliance with audit standards. This work has been recognised by the LGA which described the council as having ‘strong financial management’ after a specialist team of experts revisited the council in October this year.
2. Internal Controls & Risk Management
Issue: Weaknesses in internal controls and risk management date back to 2018.
Improvements: A refreshed Corporate Risk Strategy is now embedded across the organisation, supported by quarterly reviews and tailored training. Internal audit follow-up rates have improved significantly (82% for 2023/24). Our proactive approach earned the Public Sector Risk Management Award 2025, reflecting sector-leading progress.
3. Procurement & Contract Management
Issue: Governance gaps in procurement and contract management have persisted since 2017.
Improvements: The council has delivered a comprehensive Procurement Improvement Programme, including a new waiver monitoring system, Power BI dashboards for transparency, and quarterly Cabinet reporting. Over 500 staff have completed contract management training, and systemic reforms now ensure tighter controls and compliance with the Procurement Act 2023.
4. Internal Investigations
Issue: Investigative processes lacked consistency and capacity.
Improvements: A new Team Leader is driving a full review of the investigations function, supported by strengthened governance and quarterly reporting to Audit Committee. Policies and procedures are being updated, and an external review will provide independent assurance by March 2026.
5. Internal Audit Function
Issue: Infrastructure weaknesses and a backlog of fraud cases dating back from previous years.
Improvements: Following an independent External Quality Assessment confirming compliance with professional standards, we have implemented improvements and committed to a further review by June 2026. A new co-source contract enhances resilience and responsiveness.
6. Annual Governance Statement
Issue: AGS was not published for seven years prior to 2022/23.
Improvements: We have adopted updated CIPFA guidance early, transitioning responsibility for the AGS to the Strategy team to ensure independence. Revised arrangements will be presented to Audit Committee in December 2025.
7. Golden Triangle (Statutory Leadership)
Issue: Leadership instability left statutory roles vulnerable.
Improvements: Leadership stability has been strengthened with permanent appointments and bespoke mentoring for statutory officers. Recruitment for a permanent Section 151 Officer continues, supported by external consultants, while interim arrangements ensure continuity and resilience.
8. Audit Committee Effectiveness
Issue: Weak oversight and independence were identified.
Improvements: The Council has appointed an independent chair and enhanced training programmes are in place for members. Action tracking has been improved, and the Committee will report annually to Full Council to reinforce transparency and accountability.
9. Best Value Inspection
Issue: Governance and cultural weaknesses were highlighted in 2024.
Improvements: We have embedded the Ministerial Directions into our CIP, which now includes over 40 projects across four programmes: Vision & Partnerships, Governance & Political Culture, Culture & Workforce, and One Corporate Team. External validation from the LGA Peer Review confirms significant progress.
10. Social Housing
Issue: Challenges inherited from the former ALMO (Tower Hamlets Homes) came to light after the Council insourced the service in November 2023 in order to drive forward improvements.
Improvement: The Council decided to bring Tower Hamlets Homes in-house in November 2023 in order to drive forward improvements. The Council has since committed £140 million to upgrade existing properties and commissioned an independent review, leading to self-referral to the Regulator for Social Housing this year, as other local authorities have done, to enhance independent oversight and transparency as we work to improve the housing services. Our “Your Voice, Our Action” improvement plan, developed with the Regulator of Social Housing, is delivering better governance and tenant safety. Monthly engagement with the regulator and bi-monthly Cabinet oversight to ensure transparency and progress.
Posted on Monday 15th December 2025