Havering's Internal Auditors Just Upgraded the Council's Grade. Their Own Follow-Up Check on Last Year's Failure Came Back Failed Again.
Estimated reading time: 6 minutes
In short. Havering Council's draft Annual Governance Statement for 2025/26, prepared for its Audit Committee on 30 June 2026, says the council's Head of Audit and Assurance has upgraded the overall internal audit opinion from "limited" to "reasonable" assurance [1]. Last year's limited rating followed suspected fraudulent activity in two areas of the council and a separate control failure in the temporary accommodation service [1]. The same document's own audit tables show that of twelve system-level audits completed this year, seven still came back "limited", including a dedicated follow-up review of that same temporary accommodation overspend [2].
Havering Council's Annual Governance Statement is written to be read as reassurance. "This statement... provides reasonable assurance to all stakeholders," it opens, "that... processes and systems have been established which ensure that decisions are properly made and scrutinised, and that public money is being spent economically and effectively" [1]. The headline number inside it supports that reading. Last year, the council's Head of Audit and Assurance could only offer limited assurance over its system of internal control. This year, the same officer has raised that to reasonable assurance [1]. Read past the headline into the council's own supporting appendix, tabled at the same Audit Committee meeting, and the picture is less settled than the upgrade suggests.
What went wrong last year
The 2024/25 downgrade had a specific cause. Internal audit identified "instances of suspected fraudulent activity... in two areas of the Council in the final quarter of the year, alongside a separate, significant control failure within the Temporary Accommodation service" [1]. Across the three service areas combined, the council's own account is blunt about what that meant in practice: "inconsistent application of the financial framework and poor management oversight," failures serious enough that "both the first... and second... line of defence were ineffective," with outcomes that "ultimately result[ed] in financial loss to the Council" [2]. A Significant Governance Issue was raised in last year's statement to force management and the Executive Leadership Team to track the problem through the year [1].
The upgrade, and what sits underneath it
This year's statement explains the improved opinion by pointing to where the new limited-assurance findings fell. Internal audit's 2025/26 programme flagged four further areas as limited assurance, Community Leasing, Garage Allocations, a Procurement Processes follow-up and one of two Tenant Management Organisation reviews, and the council's reasoning is that because these sit in "specific and contained areas of the Council's operations, they do not give rise to thematic concerns about the overall control environment" [1]. The committee report summarising the year puts it more plainly still: "limited assurance findings are isolated, with no evidence of systemic control failure" [2].
That framing describes the new findings. It does not mention what happened when auditors went back to the issue that caused last year's downgrade in the first place. The same appendix's own systems audit table lists twelve named reviews completed in 2025/26, with an assurance rating against each [2]. Two came back reasonable. Seven came back limited: Budget Management, Community Leasing, Garage Allocations, Procurement Processes Follow Up, Temporary Accommodation (Additional Overspend), a further follow-up review of that same Temporary Accommodation overspend, and one of the two Tenant Management Organisation reviews [2]. Three were marked not applicable. Budget Management and the Temporary Accommodation overspend are not new entries on this list. They are the carried-over issue from last year's downgrade, tested again, and rated the same way again, this time with a dedicated follow-up review of the overspend itself also coming back limited [2].
The statement's own account of what happened to that carried-over Significant Governance Issue is correspondingly cautious. It records that the issue "has been carried forward into 2026/27 to ensure the focus on improvements and ELT oversight and review remains in place" [1]. Of the two issues the statement does mark as closed during 2025/26, neither is this one. One is delivery of a balanced 2025/26 budget, where the council ended the year 37.7 million pounds overspent against a net budget requirement of 205 million pounds, funded through a capitalisation direction and counted as closed because the outturn came in 32.5 million pounds better than the original mid-case assumption [1]. The other is the technical disaggregation of the onesource IT shared service from the London Borough of Newham [1]. The fraud-and-oversight issue, the one that actually produced last year's downgrade, is not among them.
A separate, continuing finding
The statement also carries forward a second long-running issue that predates the fraud cases entirely: Starting Well, the council's children's social care service, was found inadequate by Ofsted's Inspection of Local Authority Children's Services in December 2023, and remains under an improvement plan with Department for Education oversight, with a full reinspection not expected before spring 2027 [1]. The statement lists corporate investment of 7.7 million pounds and a bi-monthly Practice Improvement Board, chaired by the council's DfE-allocated adviser, as the mechanism for tracking it [1]. It is a separate governance issue from the fraud and budget-management findings, carried in the same document for the third year running.
What the fraud cases cost, and what counter-fraud work found elsewhere
The statement does not say what happened to the two suspected fraud cases that triggered last year's downgrade: no figures, no outcome, no indication of whether either was referred on. What it does set out, in a separate appendix, is the record of the council's counter-fraud team across the whole of 2025/26, which is a different, broader body of work than the two specific cases under review. Between 1 April 2025 and 31 March 2026 the team received 64 new cases, closed 50, and had 37 open including carry-over, while a parallel stream of referral and preliminary-enquiry cases opened 52 and closed 56, leaving 90 open at year end [2]. Formal intervention recovered 11 properties let on false pretences, a notional saving the council puts at 861,300 pounds, and blocked one fraudulent Right to Buy application worth a further 38,000 pounds [2]. None of those figures can be read as the outcome of the two specific cases that caused the 2024/25 downgrade; the statement simply does not revisit them by name.
Why this is happening against a tight budget, not a comfortable one
Havering is not reading this statement from a position of financial comfort. The same document that reports the improved audit opinion also records that the council needed a 77 million pound Exceptional Financial Support package, provisionally agreed by the Ministry of Housing, Communities and Local Government in February 2026, to set a balanced 2026/27 budget on a worst-case basis, with a 65.9 million pound midcase figure built into the published Medium Term Financial Strategy [1]. That figure, and the pressures behind it, were still moving when Cabinet received its first monitoring report of the new financial year in September, which put the EFS need at 54.2 million pounds, an improvement driven mainly by central budgets rather than the underlying demand pressures in children's and adult social care [3]. A council managing that scale of structural gap has less room than most to absorb a repeat finding on the controls that are supposed to catch misallocated spending before it happens.
What happens next
The statement itself is still in draft. It was tabled for the Audit Committee's review and noting on 30 June 2026 alongside the Head of Assurance Opinion and Counter Fraud Outturn report, and alongside approval of the draft Internal Audit Plan for 2026/27, which includes a second follow-up review of the Temporary Accommodation recommendations "post Finance review" [2]. The statement's final version will not be settled until the audited 2025/26 accounts are signed off; on the precedent of the 2024/25 accounts, which received a disclaimed opinion from Ernst and Young on 25 February 2026 as a direct result of the government's national audit backstop, that sign-off is unlikely to arrive quickly [1]. Whether the specific weakness behind last year's downgrade is actually closed will depend on what the next follow-up review finds, not on the grade the council has already given itself for the year now ended.
Sources
- London Borough of Havering, "Annual Governance Statement 2025/26" (draft), approved for Audit Committee, 30 June 2026. https://www.havering.gov.uk/downloads/file/7467/draft-annual-governance-statement-2025-to-2026
- London Borough of Havering, Audit Committee, agenda pack for the meeting of 30 June 2026, including "Assurance End of Year Report 2025/26" with Appendix 1 (Head of Assurance Opinion 2025/26), Appendix 2 (Counter Fraud) and Appendix 3 (Internal Audit Plan 2026/27). https://democracy.havering.gov.uk/documents/g8334/Public%20reports%20pack%2030th-Jun-2026%2019.00%20Audit%20Committee.pdf?T=10
- London Borough of Havering, Cabinet, "1st Quarter Revenue and Capital Monitoring Report 2026/27", report for the meeting of 16 September 2026. https://democracy.havering.gov.uk/documents/s85579/10.0%20P3%2026-27%20Budget%20Monitoring%20Q1%20Cabinet%20report%20-%20Final%20week%20DRAFT%20-%20post%20agenda%20clearing%20-%20Copy.pdf