Public reports pack Thursday 09-Jul-2015 19.00 Corporate Committee

CORPORATE COMMITTEE – DRAFT AGENDADate: Thursday 9 July 2015Time: 7.00 pmVenue: Room 8, Lambeth Town Hall, Brixton Hill, SW2 1RWCopies of agendas, reports, minutes and other attachments for the Council’s meetings are available onthe Lambeth website. www.lambeth.gov.uk/moderngovMembers of the CommitteeCouncillor Mary Atkins, Councillor Tim Briggs, Councillor Adrian Garden (Chair), Councillor NeilSabharwal and Councillor Iain SimpsonSubstitute MembersCouncillor Bernard Gentry, Councillor Jack Holborn, Councillor Claire Holland, Councillor LouiseNathanson and Councillor Andrew WilsonFurther InformationIf you require any further information or have any queries please contact:Maria Burton, Telephone: 020 7926 8703 / 07785 660 360; Email: mburton2@lambeth.gov.ukMembers of the public are welcome to attend this meeting and the Town Hall is fully accessible. If youhave any specific needs please contact Facilities Management (020 7926 1010) in advance.Queries on reports:Please contact report authors prior to the meeting if you have questions on the reports or wish to inspectthe background documents used. The contact details of the report author is shown on the front page ofeach report.@LBLdemocracy on Twitter http://twitter.com/LBLdemocracy or use #LambethLambeth Council – Democracy Live on Facebook http://www.facebook.com/

Digital engagementWe encourage people to use Social Media and we normally tweet from most Council meetings. To getinvolved you can tweet us @LBLDemocracy.Audio/Visual Recording of meetingsEveryone is welcome to record meetings of the Council and its Committees using whatever, nondisruptive,methods you think are suitable. If you have any questions about this please contact DemocraticServices (members of the press please contact the Press Office). Please note that the Chair of themeeting has the discretion to halt any recording for a number of reasons including disruption caused bythe filming or the nature of the business being conducted.Persons making recordings are requested not to put undue restrictions on the material produced so that itcan be reused and edited by all local people and organisations on a non-commercial basis.Representation:Ward Councillors may be contacted directly to represent your views to the Council: (details via the websitewww.lambeth.gov.uk)

AGENDAPLEASE NOTE THAT THE ORDER OF THE AGENDA MAY BE CHANGED AT THE MEETING1. Declaration of Pecuniary InterestsPageNos.Under Standing Order 4.4, where any councillor has a DisclosablePecuniary Interest (as defined in the Members’ Code of Conduct (para. 4))in any matter to be considered at a meeting of the Council, a committee,sub-committee or joint committee, they must withdraw from the meetingroom during the whole of the consideration of that matter and must notparticipate in any vote on that matter unless a dispensation has beenobtained from the Monitoring Officer.2. Minutes 1 - 6To approve and sign the minutes of the previous meeting held on 25 March2015.3. Work Programme and Action Monitoring 7 - 104. ALMO Update 11 - 625. Head of Internal Audit and Counter Fraud Annual Report 2014/15 63 - 986. Draft Annual Governance Statement 99 - 1267. Procurement Update 127 - 1368. Corporate Complaints Digest 137 - 1649. Annual External Audit Report - Grant Certifications 2013/14 165 - 17610. Draft Statement of Accounts 177 - 264

This page is intentionally left blank

Page 1Agenda Item 2CCORPORATE COMMITTEEWednesday 25 March 2015 at 7.00 pmMINUTESPRESENT:APOLOGIES:Councillor Mary Atkins, Councillor Tim Briggs, Councillor AdrianGarden (Chair) and Councillor Neil SabharwalCouncillor Iain SimpsonALSO PRESENT:Actionrequired by1. DECLARATION OF PECUNIARY INTERESTS2. MINUTESRESOLVED: That the minutes of the previous meeting held on 22 January2015 be agreed as a correct record of proceedings.3. CORPORATE COMMITTEE ACTION MONITORING AND WORKPROGRAMME(Report 137/14-15)The Committee received a verbal update on PACCA TMO.RESOLVED: That the report be noted.4. 2014/15 STATEMENT OF ACCOUNTS - THE ANNUAL AUDIT PLANAND PREPARATORY ACTIVITY(Report 169/14-15)Representatives from Deloittes gave a brief overview of the report andhighlighted some of the emerging risks and also advised that there was nochange to the scope of the audit.In response to questions, representatives from Deloittes confirmed that: There would be a focused approach looking at the Value for Moneyelements. A new risk was identified in relation to the accounting for the non-

Page 2current assets used by local authority schools. This was more atechnical accounting entry and no disputes were envisaged whenthis process began.They needed to look at one area of income and Grants were theobvious choice as there was a wide ranging scope of activity anddiffering monetary amounts in this area.The Oracle implementation also posed some risks going forward,however the project board and officers were regularly reviewingand working to reduce and manage those risks.RESOLVED: That the report be noted.5. ALMO 6 MONTHLY UPDATE(Report 170/14-15)Lambeth Living’s Head of Finance Patrick Pedder and Lynette Peters fromthe Council’s Client Team introduced the report and in response toquestions they advised that: A due diligence review was commissioned by the Council to look atLambeth Living in detail before the reintegration and that was dueto be completed in May 2015. Two additional audits had also been commissioned by the Councilfollowing whistle blowing allegations relating to a contractor andconcerns relating to another repairs contract. The Head of InternalAudit and Counter Fraud advised that both reports had beenissued in final form earlier that day and that a summary of thefindings of both reviews, which raised a number of issues andconcerns, would be provided to the Committee in the normalmanner. As part of the Council’s continuous monitoring programme housingrents and housing repairs were rated as “amber” and wouldcontinue to be regularly monitored. PwC the internal auditors for Lambeth Living had noted that anumber of recommendations (from the audit) had been closed,however the views and concerns of the Committee were a notedthat Lambeth Living would not be able to close all of therecommendations before the integration.Lynette Peters from the Council’s client team advised that more issueshad been uncovered recently and they were not convinced as yet that allthe recommendations would be completed and that work would need to becarried over post reintegration.Members were concerned about the issues raised and asked that furtherinformation and a report on progress of the reintegration be presented atthe next meeting.RESOLVED: That the note be reported.6. PAY POLICY(Report 163/14-15)In response to questions the Assistant Director for HR Strategy andOrganisational Development advised that:

Page 3It was a requirement for Local Authorities to publish the pay policystatement.The report did not contain statistics for agency workers, thatinformation could be provided but would be historic rather thancurrent. This information would be collated and shared withCommittee Members, who asked that information on the highestpaid agency/consultants be circulated to them.There was some work currently underway working with ourcontractors to ensure that the London Living Wage and the LivingWage were being paid to their staff. This would be covered in theprocurement report due in July.RESOLVED: To approve the pay policy statement7. CORPORATE RISK REGISTERIn response to questions Members were advised that: There were no specific risks relating to the pension fund andStatement of Account risks were fed into the Corporate Healthcategory. The “Parking” risk was due to the changes in parking rules andreduction in income.The Committee were pleased with the report but asked that relevantofficers and departments were invited to the meeting where this report wasto be presented.RESOLVED: That the report be noted.8. AUDIT AND INVESTIGATIONS UPDATE(Report 171/14-15)In response to questions, officers said that: The School which received a Critical risk rating had not carried outa bank reconciliation since the beginning of the financial year andits bank mandate was out of date following changes in financepersonnel. The Employees element of the Schools auditing programmeincluded assessing whether Disclosure and Barring Service (DBS)checks had been carried out before all employees started or thatrisk assessments had been completed when waiting for a DBScheck Non-invoiced expenditure related to petty cash andpurchase card transactions along with staff reimbursements for adhoc purchases.. When working within tenancy fraud the aim was to recover theasset. In some cases unlawful profits and money recovered underthe Proceeds of Crime Act were returned to us. There has been significant progress with the work carried outagainst the Internal Audit Work Plan for 2014/15.o 61% (52) of reviews have had final reports issued;o 18% (15) of reviews are at draft report stage and we areawaiting management responses;o 18% (15) of audit assignments are either at fieldworkcomplete or work-in-progress stage.It was noted that the Internal Audit and Counter Fraud team were

Page 4demonstrating its value by meeting or exceeding all of its annual targetsfor 2014/15.RESOLVED:That the report be noted.It was noted that the Internal Audit and Counter Fraud team weredemonstrating its value by meeting or exceeding all of its annual targetsfor 2014/15.9. INTERNAL AUDIT AND COUNTER FRAUD WORK PLANS 2015/16(Report 172/14-15)In response to questions, officers said that: There were various pieces of auditing work being carried outacross the organisation, part of the planning process was to ensurethat there was no duplication in that work. Working with other boroughs as part of the Cross CouncilAssurance Service (CCAS) meant that there were areas to deliverefficiencies due to combining planning and delivery processes. Leaseholder services were being looked at regularly as it was partof the continuous auditing programme.RESOLVED: That the Internal Audit Work Plan and the Counter FraudWork Plan be approved.10. ANNUAL REPORT OF CORPORATE COMMITTEE (FOR COUNCIL)(Report 173/14-15)RESOLVED: That the Corporate Committee Annual Report berecommended to Full Council for approval.11. SETTING UP OF PENSION BOARDRESOLVED:(1) That the proposed new governance arrangements concerning theLambeth Pension Fund be approved.(2) That the setting up of a Pensions Board to be incorporated into theConstitution of the London Borough of Lambeth in accordance withthe delegation given by Council at its meeting on 28 th January2015 be approved.12. LAMBETH PENSION FUND - INVESTMENT STRATEGY REVIEW ANDOPTIONS 2015Exclusion of the press and public and summary of part II proceedingsMOVED by the Chair and:RESOLVED:That under section 100A-H of the Local Government Act 1872, the pressand public be excluded from the remainder of the meeting on the groundsthat, for the item of business summarised below, it was likely that exemptinformation, as defined by Section 1001 an Schedule 12a of the Local

Page 5Government Act 1972 and as specified by reference to the appropriateparagraph thereof, would be disclosed to them:3. Information relating to the financial or business affairs of any particularperson including the authority holding that informationRESOLVED:1) The exempt report be noted and approved.2) The Responsible Investment Policy be approved.3) The Statement of Investment Policy be approved.13. PENSION FUND INVESTMENT PERFORMANCE REVIEW QUARTERTO DECEMBER 2014RESOLVED: That the report be noted.14. PENSION FUND MANAGER PERFORMANCE REVIEW QUARTER TODECEMBER 2014Exclusion of the press and public and summary of part II proceedingsMOVED by the Chair and:RESOLVED:That under section 100A-H of the Local Government Act 1872, the pressand public be excluded from the remainder of the meeting on the groundsthat, for the item of business summarised below, it was likely that exemptinformation, as defined by Section 1001 an Schedule 12a of the LocalGovernment Act 1972 and as specified by reference to the appropriateparagraph thereof, would be disclosed to them:3. Information relating to the financial or business affairs of any particularperson including the authority holding that informationThe meeting ended at 8.55 pmCHAIRCORPORATE COMMITTEEThursday 9 July 2015Date of Despatch: Thursday 2 April 2015Contact for Enquiries: Wayne ChandaiTel: 020 7926 0029Fax: (020) 7926 2361E-mail: wchandai@lambeth.gov.ukWeb: www.lambeth.gov.ukThe action column is for officers' use only and does not form a part of the formalrecord.


Corporate Committee Work Programme 2014/159 July 2015Lead Officer/ Author Report Title CommentsRachel Wilsher Procurement UpdateStephen Pollock Corporate Complaints Digest 6 monthly updateNeil Wightman Lambeth Living Update Include details on structure, plans, risksTim O’ConnorJames RimmingtonAnnual External Audit Report – Grant CertificationsAnnual Governance StatementDavid Hughes Head of Internal Audit and Counter Fraud Annual Report 2014/15Democratic ServicesWork Programme and Action MonitoringPage 7Agenda Item 3

Corporate Committee Work Programme 2014/1524 September 2015Lead Officer/ Author Report Title CommentsDunevia Ogwuda Children’s Social Care Annual Complaints Report: Report to also include:a. benchmarking data for the information onpercentage of complaintsresponded to on time in the next report tothe Committee.b. black and minority ethnic (BME) monitoringas part of the report.Clement Guerin Adult Social Care Annual Complaints Report Report to also include: Member EnquiriesChristina Thompson Update on the reintegration of Lambeth Living Report on closure and reintegration progressJames Rimmington Annual Governance Statement 2014/15 Report to also include: Annual RIPA ReportTim HarlockStatement of Accounts and Annual Pension Fund AccountsJames Rimmington Corporate Risk RegisterDavid Hughes Audit and Investigations UpdateDavid Hughes Review of Effectiveness To be included in Audit update?James Rimmington Risk Management Strategy and Policy 2014/17 To include referral of risks to ScrutinyDemocratic Services Work Programme and Action MonitoringPage 8

Corporate Committee Work Programme 2014/153 December 2015Lead Officer/ Author Report Title CommentsDavid HughesAudit and Investigations UpdateTim HarlockStatement of Accounts – Auditors ReportRisk Management Report on Children’s Social CareDemocratic Services Work Programme and Action MonitoringNeil WightmanLambeth Living Reintegration Update21 January 2016Lead Officer/ Author Report Title CommentsStephen Pollock Corporate Complaints 6 monthly updateTim HarlockChristina ThompsonDavid HughesDavid HughesReview of Annual Statement of Accounts – Response to AnnualAudit LetterApproval of Tax Base and National Non-Domestic Rate AllocationAudit and Investigations UpdateInternal Audit and Counter Fraud Strategy 2016/17 and Review ofCounter Fraud PolicySetting the priorities and identifyingresources/approach to address priorities in thefollowing year’s work plans. Includes: counter fraud,bribery, money laundering and whistleblowing policiesPage 9

Corporate Committee Work Programme 2014/1514 April 2016Lead Officer/ Author Report Title CommentsDavid HughesAudit and Investigations UpdateDavid Hughes Internal Audit and Counter Fraud Plans 2016/17David HughesTim HarlockSteve ShermaJames RimmingtonDemocratic ServicesCorporate Committee Annual Report (for Council)External Audit Plans in Respect of 2015/16 AccountsPay PolicyCorporate Risk RegisterWork Programme and Action MonitoringPage 10

Page 11Agenda Item 4bCorporate Committee9 July 2015ALMO update since last Corporate CommitteeWards: AllReport authorised by:Strategic Director CommissioningHelen Charlesworth-MayContact for queriespmarsh@lambeth.gov.ukPauline Marsh, Client Manager 020 7926 7734Report SummaryThis report forms part of the Council’s commitment to provide CorporateCommittee with an update on the management of risk identified within LambethLiving. It is also an opportunity for Lambeth Living to update on audit activitiessince last reported in March 2015.In part this report is intended to discharge the Council’s duty to ensure that goodgovernance arrangements are in place and working well in Lambeth Living.This report also seeks to reassure Corporate Committee that where risks exist,Lambeth Living have plans in place post re-integration that will address theCouncil concerns.Finance SummaryAny costs associated with the content of this report is limited to and accounted forby Lambeth Living.Recommendations1. To note the content of the report, current status of risks as reported byLambeth Living, and the actions being taken by Lambeth Living to addressthe recommendations of internal auditors PwC.2. To note that the Council commissioned audits are now finalised and haveaction plans in place.3. To note an action plan will be developed in response to the finalised duediligence report.

Page 121.0 Context1.1 This report follows on from the March 2015 report, as requested byCorporate Committee.1.2 Lambeth Living’s Audit and Resource Committee (ARC) update includes asummary of its audit tracker and notes that the final ARC meeting will be on29 July 2015. This will be to approve and sign-off the accounts prior to thelast Lambeth Living Board meeting, ‘Lambeth Living CC Report - ALMOupdate 22.05.15’ see Appendix 1.1.3 As reported in March 2015 to Corporate Committee, the re-integration ofLambeth Living back into the Council is progressing satisfactorily andremains on target for 26 June 2015.2.0 Proposal and Reasons2.1 The following sets out Lambeth Living’s audit activities since the lastupdate report in March 2015.2.2 Lambeth Living have provided a summary of key Audit and ResourceCommittee activities to date in their update report attached as appendix 1.2.3 Lambeth Living’s Audit and Resource Committee continues to meetregularly each quarter. Their main purpose is to make sure agreedactions are implemented and report progress on openrecommendations from various audits carried out by internalauditors. There has been one quarterly meeting since the last reporton 16 April 2015. The final Audit and Resource Committee meetingis scheduled for 29 July 2015 prior to the last Lambeth Living Boardmeeting where the Board will approve and sign off the annualaccounts before standing down.3.0 Audit update3.1 Lambeth Living Commissioned Internal Audits3.1.1 The five main reviews reported in the March 2015 CorporateCommittee report are now complete. These reviews are listed in the PwCreport ‘Lambeth Living Internal Audit Progress Report – April 2015’ ,Appendix 2, which provides an overview of progress against the 2014/15Internal Audit Plan with the associated risk grading.The five reviews are listed below against the risk rating:‘high risk’ rating Key Finance Systems‘low risk’ rating

Page 13 Performance and planning – PMO [ProgrammeManagement Office] Performance and planning – performance monitoring IT Oracle 12 Complaints System3.1.2 Although a risk rating has not been confirmed for the WelfareReform review as yet, a clearance meeting was held withmanagement to discuss the findings.3.1.3 Lambeth Living’s ‘Lambeth Living Internal Audit Report 2014/15 KFSFINAL–March 2015’, Appendix 3, is a high rated risk report. LambethLiving have stated that the reason for the high risk rating was “dueto controls around BACS processing undertaken by the Council onbehalf of Lambeth Living”. It should be noted that internal audit workconducted for the Council on the old system, this being during thedevelopment and implementation of the new system with the newsystem going live in August 2014, has not identified any high riskissues in respect of the key financial controls on the system.3.1.4 Further investigation of this particular issue regarding the BACS filewith the Council officers responsible for this aspect of the systemidentified that the system control had not changed from the old to thenew system, other than reports were now being producedelectronically rather than in paper form, which altered the means bywhich evidence of checks undertaken could be demonstrated.3.1.5 Following further correspondence between Council officers andLambeth Living’s internal auditors, further enhancements to theexisting process, including the retention of evidence to demonstratechecks being undertaken, were agreed, confirmed as appropriateand implemented.3.1.6 PwC are scheduled to return to Lambeth Living in June 2015 toreport on the outstanding audit actions as part of the audit ‘follow-up’process. They will be reporting on the close down of the actions priorto re-integration.3.1.7 Lambeth Living continue to use BDO as their external auditor for2014/15, whilst PwC remain as their internal auditor.For full details of the summary of activities reported by Lambeth Living seeAppendix 1.3.2 Lambeth Council Commissioned Internal Audits3.2.1 As reported to Corporate Committee in March 2015, the Councilcommissioned a review of Lambeth Living’s key functions prior to reintegrationas part of the Council’s due diligence. This evaluation willprovide the Council with an assessment of the support required in

Page 14the initial stage of re-integration. It will also highlight where futureresources may be needed. As a reminder for Corporate Committee,this assessment commenced in December 2014 and covers keyfunctions of Finance, Lambeth Living contracts, Lambeth PartneringContracts Home Ownership and Organisational Behaviour andCulture.3.2.2 This review is now complete and a draft report has been issuedwhich the Council is meeting with PwC to finalise in June. Followingthis, an action plan will be put in place to ensure that all supportneeds and required actions are picked up and monitored post reintegrationbased on the final report. The project re-integration boardreceived a presentation from PwC regarding their initial findings on11 May 2015.3.2.3 The re-integration project board and officers group have beenoverseeing the process which is on track to successfully re-integratehousing management back into the Council on 26 June 2015. TheCouncil provided an update report to Cabinet on 13 April 2015 whichprovided details of the co-production exercise conducted on thefuture model of Lambeth Council’s Housing Management service.Neil Wightman commenced his role on 4 May 2015 as DeliveryDirector for Housing Management and will lead the service goingforward.3.2.4 In addition to the due diligence work, the Council has commissionedtwo other audit reviews:1. Lambeth Living Procurement –review of a contract termination:The purpose of this review was to confirm whether LambethLiving followed the Council’s policies and appropriatedelegations in removing the services from one contractor andtransferring the contract to another contractor.2. Repairs contract (which arose from issues aroundwhistle blowing raised at an Employment Tribunal where theCouncil was not a named party):The purpose of this review was to confirm that the controlsand processes in place over management of the repairscontract by Lambeth Living were appropriately designed andoperating effectively.3.2.5 For both of the above reviews the Council has now received the finalreports, which had been the subject of clearance with both Councilofficers and senior management within Lambeth Living. Thedetermination of further actions required from the reviews and themonitoring of progress against those actions is being conductedthrough the clienting arrangements between the Council andLambeth Living and is being factored into the reintegration process.3.2.6 Reactive Repairs contract audit review

Page 15The overall risk rating provided for this audit was that it representeda High Risk. Actions were agreed with Lambeth Living’s seniormanagement to address the following findings made by PwC.Discrepancies between the KPIs defined in the contract, theannual Task Order and those which are monitored as part ofregular reporting.The contractor was able to input the works completion date forjobs, but there was no check of whether this was accurate.Lambeth Living had not asked for a list of subcontractors beingused by the main contractor and have not requested evidence ofhow the contractor quality assures their work and ensures termsand conditions and service requirements are complied with.Roles and responsibilities of the Strategic Contract Manager, theAuthorised Officer, Area Asset Managers and TechnicalManagers were not consistently understood across theorganisation.The risks on the 2014/15 Central Area Task Order risk registerhad not been rated for inherent or residual risk and 2 risks did notinclude a frequency for review. The 2014/15 Central Area TaskOrder risk register was identical to the 2013/14 Task Order.No centralised log recording of contract variations wasmaintained.No Strategic Core Group meetings were held for 8 months.No evidence was found of an Operational Plan being reviewed ordiscussed at meetings (this is a contractual requirement).A significant number of exceptions were identified in theapplication of post inspection controls during the period tested. Inaddition, there was no regular monitoring of how often postinspectionsare performed.No formal process in place for assigning or reviewing systemaccess, with users able to raise and approve works orderswithout any secondary authorisation.3.2.7 Lambeth Living Procurement contract termination audit reviewThis audit as mentioned under 3.2.4 was to confirm that Councilpolicies were followed and adhered to when terminating a contractbeing managed by Lambeth Living on the Council’s behalf whichwas subsequently awarded to another contractor..

Page 16A number of key issues throughout the process were identified bythe review which focussed on the appropriateness of the actionstaken and justification for decisions made; the authority toundertake such actions; governance and oversight of thedecisions taken; the commissioning and application of legaladvice and the risks associated with the decisions taken; the lackof consultation with the Council on decisions being made.The review contained a number of recommendations. At the timeof writing the report, some of the recommendations have alreadybeen implemented and Council officers are considering furtheractions in light of the report’s findings. A Senior Council Officer isnow working in Lambeth Living overseeing the strategic directionof the Lambeth Partnering Contracts (LPC).3.2.8 As reported at last Corporate Committee, the 3 Audits relating to thedelivery of the Decent Homes programme are still being carried out,as required by the Greater London Authority (GLA). The Council iscurrently awaiting completion of the Deloittes element of the GLAaudit before forwarding to the GLA. The full claim of £52m for2014/2015 has been submitted. An additional £23m has beenawarded for 2015/2016. The GLA have requested independenttechnical surveys be carried out each quarter, in order to draw downfunding. Decent Homes Standard funding is conditional on the GLAbeing satisfied with the outcome of the Audits.3.3 Lambeth Council’s continuous auditing3.3.1 Regarding the Council’s Continuous Auditing programme in respectof systems managed by Lambeth Living, two systems within theprogramme managed by Lambeth Living include; housing rents andhousing repairs. Table 1 below is an extract from the report toCorporate Committee July 2015, giving the rating for these twosystems for Period 2 2014/15 (up to February 2015).SystemOverall riskclassification2014/15Rating P22014/15Rating P12014/15Overall riskclassification2013/14Direction of Travel2013/14 to 2014/15Housing Rents Medium • A• A• Medium • Housing Repairs Medium • R• A• Medium • Table 1 – Period 2 ratings3.3.2 The table above shows that Housing Repairs has moved fromAmber to Red in 2014/15 while the overall risk rating remains atMedium risk for the year as a whole.3.3.3 Housing Rents has remained at Amber for the two periods audited in2014/15 and has an overall Medium risk rating which is unchangedfrom 2013/14.

Page 173.3.5 As mentioned above, in addition to the planned audit work coveredby the Council’s Internal Audit Work Plan 2014/15, Council officershave also commissioned a due diligence review to assist with there-integration process.3.4 Lambeth Living are committed to closing all open recommendations aheadof re-integration in June 2015 and members seek assurance that all openrecommendations will be closed prior to re-integration.3.5 Lambeth Living has assured they are addressing and implementingresolutions, particularly those rated as ‘high’. In terms of the open health& safety, S20 and Contract Management recommendations the majority ofthese are expected to be closed by PwC on their return in June 2015, withany remaining open being part of an on-going action plan to address theissues. The KFS open recommendations Lambeth Living state areexpected to be resolved on re-integration. Post re-integration the Councilwill undertake follow-up work as part of the implementation review which iswithin the Internal Audit Plan for 2015/16.4.0 ALMO/Commissioning risk register4.1 In January 2015 the Client and Lambeth Living agreed a total of 11 risks ofwhich 1 is classed as a ’high’ and 9 are classed as ‘medium’.4.2 The high risk is the same one as reported to Corporate Committee in March2015 and is around the delivery of the Capital Programme over the next 4years (2015/16, 2016/17, 2017/18) and the need to review the programmeagainst investment need and resources. Lambeth Living are undertaking anumber of surveys to ensure funding matches affordability over the durationof the programme.These surveys are due to be completed in October2015.4.3 The risk around the decision to re-integrate Lambeth Living into the Councilremains on the risk register as medium. However it has been agreed toremove this risk as of 28 May 2015. Post re-integration the Council willhave a new Board made up of senior Council officers and the CabinetMember for Housing to oversee the closure of Lambeth Living.4.4 Post the general election on 7 May 2015 a further risk has been identifiedwhich increases the number to 12. This risk has been deemed high andrelates to the new government manifesto pledge on extending the RTB tohousing associations tenants and the sale of higher value empty properties.4.5 Risks and mitigations are jointly reviewed and updated by the Client andLambeth Living as part of the quarterly Client monitoring arrangements.Full details of the agreed risks are contained in ‘Lambeth Living RiskRegister’, see Appendix 4.5.0 Finance Comments

Page 185.1 The recommendations of this report are for noting only and do not give riseto an additional capital or revenue financial implication.5.2 As this is an update report on the ALMO’s internal audit processes there isno direct financial implication arising for LBL. Any costs associated with thecontent of this report is limited to and accounted for by Lambeth Living.6.0 Legal and Democracy6.1 Regulation 4 of the Accounts and Audit (England) Regulations 2011provides that the Council:(a)(b)Is responsible for ensuring that its financial management is adequateand effective and that it has a sound system of internal control whichfacilitates the effective exercise of the Council’s functions and whichincludes arrangements for the management of risk; andShall conduct a review at least once a year of the effectiveness of itssystem of internal control and shall publish with its statement ofaccounts a statement of internal control, nprepared in accordancewith proper practices.6.2 There are no additional comments from a Democratic Services perspective.7.0 Consultation and Co-operation7.1 Not applicable8.0 Risk Management8.1 Failure to complete the agreed work plans and ensure that the headlineissues and open recommendations are addressed may impact adverselyon the Council’s governance, risk and control processes.9.0 Equalities Impact Assessment9.1 Not applicable10.0 Community Safety10.1 None11.0 Organisational Implication11.1 Not applicable12.0 Timetable for implementation12.1 None

Page 19Audit TrailConsultationName/PositionHelen Charlesworth-MayStrategic DirectorRachel SharpeCommissioning DirectorMandy GreenAssociate DirectorSu GomerLead CommissionerLynette PetersLead CommissionerGreg CarsonLegal ServicesMaria BurtonDemocratic ServicesHamant BharadiaHead of FinanceCouncillor MatthewBennettDavid HughesHead of Internal Audit andCounter FraudChristina ThompsonDirector of IntegratedSupportExternalPatrick PedderHead of FinanceLambeth cluster/division or partnerCommissioningDatesentDatereceivedComments in para.Commissioning 05.06.15 10.06.15 Recommendations,3.2.4, 4.4Commissioning 05.06.15 08.06.15 Summary,Sub-section 3.1,Section 4.0Commissioning 02.06.15 10.06.15 Sub-section 3.2throughoutCommissioning 02.06.15 08.06.15 ThroughoutIntegrated Support,EnablingCorporate Affairs,EnablingIntegrated Support,EnablingCabinet Member forHousingCorporate Affairs,EnablingCorporate Affairs,EnablingLambeth Living 10.06.1505.06.15 08.06.15 Cleared10.06.15 16.06.15 Throughout05.06.15 08.06.15 3.2.802.06.15 11.06.15 Section 3.005.06.15 09.06.15 Section 3.0Report HistoryReport Deadline 26.06.15Date final report sent 22.06.15Report No 38/15-16Part II Exempt from Disclosure/ Noconfidential accompanying report?Key decision reportNoBackground Information Corporate Committee meeting 25.03.15 Item 4: ALMO 6Monthly UpdateAppendicesAppendix 1 - Lambeth Living CC Report – ALMO update22.05.16Appendix 2 - Lambeth Living Internal Audit ProgressReport - April 2015Appendix 3 - Lambeth Living Internal Audit Report2014/15 KFS FINAL – March 2015Appendix 4 - Lambeth Living Risk Register


Page 21Agenda itemMeetingSMT/ LBL Corporate CommitteeDate 1st July 2015ALMO 6 Month update of the Audit & Resources CommitteeForInformationand DecisionPrepared by:Title:Phone:Patrick PedderHead of Finance020 7926 8265ExecutiveSummaryAs part of the on-going programme Corporate Committee requests a regular 6monthly update report regarding the management of risks identified by the ALMO’saudit committee: This report is an opportunity for Lambeth Living to update on auditactivities sine last reported on 25th March 2015.The Lambeth Living (LL) Audit & Resources committee have met once on the 16 thApril 2015 since the last report to the Corporate Committee in March 2015. The finalAudit and Resources Committee will be on 29 th July prior to the last board meetingto approve and sign off the annual accounts before the board steps down.Lambeth Living still continues to use the services of BDO as their external auditor for2014/15 and PWC who are continuing in the role of internal auditor in order tocomplete the internal audit programme for 2014/15.The following is a summary of the main issues which the Committee have discussedat the meetings: -PWC Internal Audit Plan 2014/15: PWC have completed the Internal Audit Plan for2014/15. There were a total of 5 reviews undertaken into the new customercomplaints system, policy and performance, welfare reform, the impact of theCouncil’s implementation of Oracle 12, and a reduced review of the key financialsystems. The work has now been concluded and with exception of the key financialsystems which came out as “high risk” the other reviews were rated as “low risk”.The issue around the “high risk” rating for key financial systems was due to controlsaround BACS processing undertaken by the Council on behalf of Lambeth Living.PWC Follow up work on the outstanding actions (audit tracker):The Committee was presented with a report on the outstanding actions as part of theaudit follow up process. PWC are due to come back into Lambeth Living in June andreport on the close down of the audit actions before re-integration back into theCouncil. As at the end of June PWC have reported that 80% of the actions havebeen closed down and 11 actions will be carried forward post re-integration. Thesemainly relate to recent internal audits undertaken. A final report will be going to theAudit and Resources Committee on the 29 th July as part of the closure process.These mainly relate to Medium and Low risk actions which require more time toconclude and will be picked up as part of the overall re-integration project plan.Council Commissioned Internal Audits;The Council have commissioned a review into LL prior to re-integration (DueDiligence). This is a substantial piece of work which commenced in December 2014and covers 5 chapters/areas. This exercise will cover Review of financialinformation, Lambeth partnering contracts and expenditure controls, Review ofLambeth Living contracts, Leasehold services and Organisational behavior &$iyakwpmq pages 1 of 2

Page 22Culture. The review is largely completed and the Council needs to consider theactions post re-integration which is now being considered by the re-integrationboard.The Council has now received the final reports into the responsive repairs contractorand the procurement of responsive repairs contractor in the South Area. LambethLiving commented on these draft reports previously so this is a matter for theCouncil to consider as part of the re-integration of the service back-in-house.Value for Money: - The Committee has received third and final report regarding theprogress being made on the LL VFM Strategy.ALMO Shared Risk Register: In January the Council and Lambeth Living agreed atotal of 11 including one that covers leasehold issues. 9 of these have beenclassified as medium risk. The risk around the capital programme delivery stillremains as “high” risk relating for 2015/16, 2016/17 and 2017/18. This risk relates tothe funding of the programme going forward due to the financial constraints underthe HRA Business Plan and the availability of resources to fund the programme andhas commissioned Lambeth Living to undertake surveys of the remaining propertiesto inform the funding that would be available for the ensuing years.The other risk is classified as “medium” risk and relates to the implementation ofOracle 12. Lambeth Living has been continuing to suffer the effects of theimplementation with regard to payments to suppliers and sub-contractors and thishas caused a number of issues around payments to contractors which hasgenerated dissatisfaction from suppliers. The oracle implementation project boardhas acknowledged that there were a number of issues around phase 1 of projectwhich could not be delivered and have therefore carried them forward into phase 2of the project.The risk in relation to the decision to reintegrate LL into the Council has remained at“medium” risk as the LL board has continued to remain and will stay on until July toapprove the Accounts for 2014/15 however it is acknowledged there could be areduction in performance through loss of key personnel as we approach integration.RecommendationThe Corporate Committee is asked to note the update from Lambeth Living.$iyakwpmq pages 2 of 2

Lambeth LivingInternal Audit ProgressReport to Audit CommitteeInternal AuditApril 2015Page 23

Summary of workThis progress report to Lambeth Living’s Audit and Resources Committee contains two elements: An overview of progress against the 2014/15 Internal Audit plan; and A reminder of the grading system used in our reports.Overview of progressThe table below sets out progress with respect to our 2014/15 programme for the year:Review Status Fieldwork dates Audit Committee RatingService charge (agreed uponprocedures)Complete. w/c 18 August 2014 January 2015N/a – Agreed UponProceduresFollow-up review Complete. w/c 20 October 2014 January 2015 N/a – Rating Not GivenPerformance and planning –programme management officePerformance and planning –performance monitoringComplete w/c 12 January 2015 April 2015 LowComplete w/c 12 January 2015 April 2015 LowPage 24Key finance systems Complete. w/c 19 January 2015 April 2015 HighIT Oracle 12 Complete. w/c 2 February 2015 April 2015 LowComplaints system Complete. w/c 26 January 2015 April 2015 LowWelfare reformA clearance meeting has been held withmanagement to discuss initial findings.The report is in the process of being drafted.w/c 9 February 2015 April 2015 TBCInternal Audit progress reportPwC 1

Basis of our classificationsIndividual finding ratingsFinding ratingAssessment rationaleCritical A finding that could have a: Critical impact on operational performance; or Material monetary or financial statement impact; or Critical breach in laws and regulations that could result in material fines or consequences; or Critical impact on the reputation or brand of the organisation which could threaten its future viability.High A finding that could have a: Significant impact on operational performance; or Significant monetary or financial statement impact; or Significant breach in laws and regulations resulting in significant fines and consequences; or Significant impact on the reputation or brand of the organisation.Page 25Medium A finding that could have a: Moderate impact on operational performance; or Moderate monetary or financial statement impact; or Moderate breach in laws and regulations resulting in fines and consequences; or Moderate impact on the reputation or brand of the organisation.Low A finding that could have a: Minor impact on the organisation’s operational performance; or Minor monetary or financial statement impact; or Minor breach in laws and regulations with limited consequences; or Minor impact on the reputation of the organisation.Internal Audit progress reportPwC 2

This document has been prepared for the intended recipients only. To the extent permitted by law, PricewaterhouseCoopers LLP does not accept or assume any liability, responsibility or duty of care for any use of or reliance on this document by anyone, other than (i) the intended recipient to theextent agreed in the relevant contract for the matter to which this document relates (if any), or (ii) as expressly agreed by PricewaterhouseCoopers LLP at its sole discretion in writing in advance.Page 26In the event that, pursuant to a request which Lambeth Living Limited has received under the Freedom of Information Act 2000 or the Environmental InformationRegulations 2004 (as the same may be amended or re-enacted from time to time) or any subordinate legislation made thereunder (collectively, the “Legislation”), LambethLiving Limited is required to disclose any information contained in this document, it will notify PwC promptly and will consult with PwC prior to disclosing such document.Lambeth Living Limited agrees to pay due regard to any representations which PwC may make in connection with such disclosure and to apply any relevant exemptionswhich may exist under the Legislation to this document and other related documents. If, following consultation with PwC, Lambeth Living Limited discloses any this documentor any part thereof, it shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the information is reproduced in full in any copiesdisclosed.This document has been prepared only for Lambeth Living Limited and solely for the purpose and on the terms agreed with Lambeth Living Limited in our agreement dated 6August 2014. We accept no liability (including for negligence) to anyone else in connection with this document, and it may not be provided to anyone else.© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP (a limited liability partnership in the UnitedKingdom), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

www.pwc.co.ukPage 27Internal AuditReport 2014/2015Key Financial SystemsFINALMarch 2015Lambeth LivingLimited

Internal AuditReport 2014/2015Page 28FINALContents1. Executive summary 12. Background and scope 33. Detailed current year findings 4Appendix 1. Basis of our classifications 17Appendix 2. Terms of Reference 19Appendix 3. Limitations and responsibilities 22Distribution ListFor action:Patrick Pedder – Head of FinanceCandice Cupid – Finance ManagerSteve Davies – Head of Human Resources and Organisational DevelopmentShida Ashrafi – Head of Human Resources Operations, London Borough ofLambethFor information:Audit and Resources Committee membersTerry Gallagher – Chief ExecutiveThis report has been prepared by PwC in accordance with our engagement letter dated 6 August 2014.At the request of Lambeth Living Limited, PwC’s internal audit methodology has not been followed whenreviewing general ledger and bank reconciliations and therefore we may not have identified all findings thatwould have been raised in a full scope review using PwC’s methodology. This is further explained in Appendix 2of our report.Our work and deliverables are not designed or intended to comply with the International Auditing andAssurance Standards Board (IAASB), International Framework for Assurance Engagements (IFAE) andInternational Standard on Assurance Engagements (ISAE) 3000.Internal audit report forLambeth Living Limited PwC Contents

Internal AuditReport 2014/2015FINALPage 291. Executive summaryReportclassificationTrendTotal number of findingsCritical High Medium Low AdvisoryControlimplementation- - 1 - -High riskThe number andseverity of findingshas increased fromthe 2013/14 reviewwhich was rated aslow risk. Furtherexplanation isprovided in thesummary below.Control design - 1 - - -Operatingeffectiveness- - 2 3 2Total - 1 3 3 2Headlines / summary of findings:This report sets out the findings from our work undertaken in January and February 2015 to review theimplementation, design and operating effectiveness of key controls in relation to key financial systems. Ourwork covers the period from 1 April 2014 to 21 January 2015.Lambeth Living Limited (“Lambeth Living”) is reliant on the London Borough of Lambeth (“the Council”) forthe operation of many controls. This is because Lambeth Living uses a shared version of the Oracle generalledger system and key elements of system are the responsibility of the Council.In August 2014, Lambeth Living migrated from Oracle 11i to Oracle 12. As a result of the change in systems,there have been changes in key processes including: changes to Lambeth Living’s accounts payable process; achange in payroll system from Cyborg to Oracle 12; and changes to the way in which payroll is posted to thegeneral ledger.However, since the migration in August 2014, Lambeth Living has been experiencing difficulties in obtainingkey reports from the Council. This includes a listing of open purchase orders and a listing of purchase orderswhich have generated accruals. This has meant that key controls in place prior to the migration have not beenable to continue operating effectively, resulting in the downward trend from the 2013/14 Key Financial Systemsreview. Further context on the difficulties that Lambeth Living has faced since the migration have beenprovided by management in the section on the next page.This report has been classified as high risk. We identified nine findings, one of which has been rated as highrisk, three as medium risk, three as low risk and two as advisory.The high risk finding relates to the following area:Payments made post migration to Oracle 12 – the list of payments to be made via the BACS paymentsystem can be altered before payment. No checks are made of the final list of payments to ensure allpayments are valid.There is a risk that loss through error or misappropriation is not prevented if these checks are notmade. See finding 1The medium risk findings relate to the performance of reconciliations, communication with the payroll teamand payroll processing. The low risk findings relate to the processing of journals and purchasing controls beforeand after the implementation of Oracle 12. Full details of these findings can be found in section 3 of the report.Internal audit report forLambeth Living Limited PwC 1

Internal AuditReport 2014/2015Page 30FINALWe would like to thank Patrick Pedder (Head of Finance), Candice Cupid (Finance Manager), Shida Ashrafi(Head of Human Resource Operations), Steve Davies (Head of Human Resources and OrganisationalDevelopment) and their teams for their assistance during the review.Management commentsLambeth Living along with five other boroughs migrated its general ledger system from Oracle 11i to Oracle 12.This implementation resulted in a change in the controls of the Accounts Payable system, the use ofcommitment accounting, payroll journals being posted directly to the ledgers and the implementation of theOracle Business Intelligence reporting tool.Lambeth Living in collaboration with the Council have managed the critical risks of ensuring contractors andemployees are being paid in a timely manner and that management accounts are being issued on a monthlybasisOracle 12 system issues and delays from the Council have resulted in a delay in the performance of monthlybalance sheet reconciliations. Whilst these are factors outside the control of Lambeth Living, mitigating actionssuch as a weekly review of the bank account have been put in place. Bank and payroll reconciliations up toDecember 2014 have now been received from the Council.Internal audit report forLambeth Living Limited PwC 2

Internal AuditReport 2014/2015FINALPage 312. Background and scopeBackgroundKey financial controls form an essential part of Lambeth Living’s internal control environment to enablemanagement to effectively control the accounting function.The processes that we focused on for the financial year 2014/15 are as follows (having liaised with LambethLiving’s external auditors):journals;accounts payable;payroll;bank (limited to walkthrough testing); andreconciliations (limited to walkthrough testing).During 2014/15, the Oracle general ledger system has been upgraded from Oracle 11i to Oracle 12. Themigration took place in August 2014. The transition period started in mid-July 2014, when Oracle 11i ceased tobe used, and finished on 4 August 2014, when the Oracle 12 was brought online.We have considered the migration between systems as part of a specific Oracle 12 review.Scope and limitations of scopeWe have reviewed the key controls in place relating to the key financial systems specified in the Terms ofReference in Appendix 2 from 1 April 2014 to 21 January 2015 to ensure that these controls are designed andoperate effectively during the period under review. We have only reviewed the sub processes detailed in theTerms of Reference in Appendix 2.As agreed with management, we performed walkthroughs of the general ledger and bank reconciliations subprocessesto verify that controls have been implemented. However, we did not perform tests to assess theoperating effectiveness of these controls.The Council was unable to run a report detailing the people who had changed hours or grade since August 2014from the new payroll system, Oracle 12. Therefore, we were unable to perform testing to test the operatingeffectiveness of controls in place to approve these changes.This review was dependent upon information provided by the staff interviewed throughout the course of thereview, not all oral representations have been validated to supporting evidence.Findings were relevant at the time of testing. Additional remediation work subsequently undertaken bymanagement was not further reviewed.Internal audit report forLambeth Living Limited PwC 3

Internal AuditReport 2014/2015Page 32FINAL3. Detailed current year findingsFinding1) Payments made post-migration to Oracle 12 – control designThe process for making payments is handled by the Council’s Exchequer Services team. This team extracts thelist of payments from Oracle 12 and manually transfers this list of payments to the BACS payments system.We noted the following control design deficiency:The list extracted from Oracle 12 can be altered before it is transferred to the BACS payment system.Since the migration, neither Lambeth Living nor the Council perform a further review of paymentsmade within the three working day period in which payments can be recalled. This is because paymentruns now take place daily, whereas they previously occurred twice per week, resulting in a constraint incapacity to conduct the checks.We examined a sample of 20 payment runs which took place between the Oracle 12 migration and 21 January2015 and we found that, in all cases, the amount paid out agreed to the amount generated in Oracle 12.ImplicationsInvalid or inaccurate payments may be made if files relating to payment runs can be altered and no furtherchecks are made before processing.Action planFinding rating Agreed action Responsible person / titleHigh riskThe finance team should review payments madeto ensure that they relate to valid payments andLambeth Living should request that the Councilensures that payments are reviewed for validityprior to payment being made.Candice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 1Management commentsThe Council has the following controls in place in relation to payment runs:The BACS run is generated by Oracle and the BACS file is automatically placed on a server.Only three payments officers in Exchequer Team have access to this server. One of these offices placesthe file in C-Series, the system which is used to send the BACS payments information to the bank.Nobody in the business has access to this fileInternal audit report forLambeth Living Limited PwC 4

Internal AuditReport 2014/2015FINALPage 33Finding2) Reconciliations post-migration – control implementationReconciliations are carried out monthly on balance sheet accounts to ensure that financial reporting iscomplete, valid and accurate. Reconciliations are carried out on control accounts and Lambeth Living’s bankaccounts. Lambeth Living is responsible for all reconciliations, other than the payroll (until December 2014)and bank reconciliations, which are prepared by the Council for Lambeth Living to review.After the migration to Oracle 12 in August 2014, payroll is now posted directly to Lambeth Living’s generalledger and accruals are generated when a member of staff receipts a purchase order.We conducted walkthrough testing to ensure that reconciliations had taken place after the migration. Weidentified the following control deficiencies:Council controlled reconciliationsBank reconciliations had not been received from the Council since the migration took place, when weconducted our review. These have since been received for the period until the end of December 2014.Payroll reconciliations had not been completed by the Council to the satisfaction of Lambeth Living’sfinance team at the time of our review. These have since been completed up to January 2015 by theCouncil and Lambeth Living.Lambeth Living controlled reconciliationsThree balance sheet general ledger codes had not been reconciled since the migration, namely;o 132210 – inter/intra receivables;o 235210 – inter/intra payables; ando 235300 – accruals.Upon investigation, we ascertained that:No bank reconciliations had been completed because the cash manager module of Oracle 12 wasattempting to reconcile bank transactions to the wrong general ledger code. The correct general ledgercode was the one where cash transactions were being posted. This was due to an error in the setup ofOracle 12 by the Council. The Council team responsible for bank reconciliations confirmed this wasresolved in December 2014 and reconciliations were then performed for the intervening period.All differences had not been explained on the payroll reconciliations. Lambeth Living has sinceestablished the reasons for the differences and approved the reconciliations.Lambeth Living’s finance team were not able to explain the use of the general ledger codes 133210 and235210, because no legacy general ledger codes were mapped to these two codes. When we discussedthese balances, the balance on each of these codes was below £25k. Some of the entries on generalledger code 133210 have been identified as relating to the recording of payroll costs.For general ledger code 235300, the accruals balances could not be reconciled because Lambeth Livingcould not obtain a report of the amounts accrued on receipted purchase orders at a point in time fromthe Council. Lambeth Living confirmed that, as at the end of February 2015, they had now obtained therelevant report and were working on the reconciliation.ImplicationsFinancial reporting may be inaccurate if the balances held on balance sheet GL codes are not reconciled todetailed listings regularly.Loss through error or misappropriation may not be detected promptly if reconciliations are not carried outregularly.Internal audit report forLambeth Living Limited PwC 5

Internal AuditReport 2014/2015Page 34FINALAction plan2) Reconciliations post-migration – control implementation (continued)Finding rating Agreed action Responsible person / titleMedium riskManagement commentsThe finance team should ensure reconciliationsare performed for the affected balance sheetgeneral ledger accounts to cover the period sincethe migration to Oracle 12.Going forward, the finance team should performreconciliations for all balance sheet generalledger codes monthly.The finance team should continue to press theCouncil for access to all required reports, andescalate if necessary.Bank reconciliations should be obtained from theCouncil by the finance team and reviewed by theFinance Manager.Candice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 2There were issues with the initial set up of Oracle 12, which meant bank reconciliations could not be performeduntil this was fixed. Journal entries for bank transactions were back-dated to allow the bank and payrollreconciliations for the period July 2014 to November 2014 to be performed in January 2015.The Council has retained responsibility for performing bank reconciliations. However, Lambeth Living will nowperform payroll reconciliations.Bank reconciliations from the Council have not yet been received for the months of January and February.Lambeth Living will continue to chase. Lambeth Living is in the process of performing the other balance sheetreconciliations.Internal audit report forLambeth Living Limited PwC 6

Internal AuditReport 2014/2015FINALPage 35FindingStarters3) Communication with payroll – operating effectivenessBefore recruiting a new member of staff, an essential expenditure authorisation (“EEA”) form is required to becompleted and authorised by the Head of Human Resources and the appropriate Director. An appointmentproforma is then sent to the Council’s payroll team to add the starter to the payroll system.We examined the records held for a sample of 20 new starters to ensure that an EEA form had been completedand that the employee was correctly added to the payroll system. We noted the following operating effectivenessissues:1/20 employees did not have a completed and authorised EEA form. This was because the employeewas re-employed less than one month after they had left. The manager decided to re-employ themwithout completing an EEA form.1/20 employees was added to payroll more than one month after they started. This was because therewas a delay between the employee starting and the communication of paperwork to the payroll team.Management were unable to provide a reason for this delay.1/20 employees was underpaid in the first month they were employed. This was corrected the followingmonth, after payroll was informed of the correct starting pay band for the employee.LeaversWhen a member of staff leaves Lambeth Living, the Council’s payroll team should be notified promptly of themember of staff leaving.We examined the records held for a sample of 20 leavers to ensure that the removal from the payroll systemwas done promptly. We noted the following operating effectiveness issue:2/20 leavers were overpaid because the Council’s payroll team were not informed by Lambeth Livingthat the employee had left Lambeth Living’s employment. The total amount overpaid was £4,441.34and invoices have been requested to recover these overpayments. Management are currently takingsteps to ensure this overpayment is recovered.Review of payrollEach month, Lambeth Living compares net pay for each employee with the previous month’s net pay andobtains explanations for all movements of greater than 20%.We examined the comparisons performed for a sample of 2 months between April 2014 and January 2015 toensure that the comparisons had been performed. We noted the following operating effectiveness issue:For 2/2 months, no explanations were provided. On these two reconciliations, 161 differences of greaterthan 20% were identified with the value of the differences being £361,363. Lambeth Living was unableto resolve the differences as Lambeth Living was unable to obtain information from the Council’spayroll team despite repeated attempts.ImplicationsLambeth Living may recruit staff who are not required if EEA forms are not completed and approved.Lambeth Living may over pay staff who leave if they do not notify payroll of a leaver promptly.Lambeth Living may not identify fraud or error in payroll payments if they do not obtain explanations forunusual movement in payments made.Internal audit report forLambeth Living Limited PwC 7

Internal AuditReport 2014/2015Page 36FINALAction plan3) Communication with payroll – operating effectiveness (continued)Finding rating Agreed action Responsible people / titleMedium riskManagement should remind teams of the need toensure that all staff recruitments have beenapproved through the EEA process.Management should remind teams of the need tocomplete paperwork on time and ensure thatleavers are notified to the Council’s payroll teampromptly.Management should ensure that checks forleavers are made as part of the budgetmonitoring process.Steve Davies, Head of HumanResources and OrganisationalDevelopmentCandice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 3Management commentsThe three proposed actions, above, are agreed.Requests for explanations of payroll variances are sent through to the payroll support services and HRdepartment. However, responses are not received. In the meantime, Finance agrees starters and leavers to thelist of starters and leavers.Internal audit report forLambeth Living Limited PwC 8

Internal AuditReport 2014/2015FINALPage 374) Payroll processing – operating effectivenessFindingStartersThe Council’s payroll team is responsible for adding starters correctly to payroll, based on the informationprovided by Lambeth Living.We examined the records held for a sample of 20 new starters that the employee was correctly added to thepayroll system. We noted the following operating effectiveness issue: 1/20 employees was overpaid. This was because the employee was paid at the rates applicable from 1January 2015 for the period from 22 December 2014 to 31 December 2014. This was because of adecision made by the Council’s payroll team to avoid having to make multiple manual adjustments.LeaversWhen a member of staff leaves Lambeth Living, the Council’s payroll team check any annual leave remainingand then calculate the employee’s final payment.We examined the records held for a sample of 20 leavers to ensure that the check of annual leave has takenplace and that the leaver’s final pay was calculated correctly. We noted the following operating effectivenessissues:2/2o leavers were underpaid annual leave payments which they were entitled to receive. In the firstcase, the Council’s payroll team calculated annual leave due as being less than that stated in thecompromise agreement. In the second case, the annual leave due was notified and calculated after theemployee’s final salary was paid. At the time of the review, neither of these former employees hadreceived an additional payment for these amounts. Annual leave requests are now processed using aself-service function which ensures that the Council’s payroll team have access to up to date annualleave records.1/20 leavers was overpaid. This was because the request to pay 7 hours additional salary due to flexihoursnot being taken was treated as a request to pay 7 days. Management is currently taking steps toensure this overpayment is recovered.ImplicationsLambeth Living may be exposed to additional liabilities if payments made are incorrect.Lambeth Living may overpay staff if incorrect calculations are not identified.Internal audit report forLambeth Living Limited PwC 9

Internal AuditReport 2014/2015Page 38FINAL4) Payroll processing – operating effectiveness (continued)Action planFinding rating Agreed action Responsible person / titleMedium riskManagement commentsFinal payments should not be made until annualleave has been checked by the Payroll team.If there is a dispute over annual leave to be paid,this should be escalated to Lambeth Livingmanagement to be resolved.Lambeth Living should be required to approveany changes in rates enacted prior to their agreedimplementation date.Shida Ashrafi, Head of HumanResources Operations, LondonBorough of LambethTarget date31 May 2015Reference numberKFS 14/15 4The decision made in relation to changes in rates was applicable to all new starters effective from 22ndDecember onwards and was made by the Council’s payroll team. Had the Council’s payroll team chosen not toallow the system to calculate pay, then they would have had to make two manual calculations; one for theperiod 22nd December to the 31st December on the old rates and then another for the period from 1st Januaryto the 31st January.An invoice has been raised on Oracle 12 for the recovery of the overpayment made to the leaver.Internal audit report forLambeth Living Limited PwC 10

Internal AuditReport 2014/2015FINALPage 395) Purchasing after the implementation of Oracle 12 – operatingeffectivenessFindingFollowing the migration to using Oracle 12 in August 2014, the process for approving invoices changed. Invoicesare now approved for payment provided there is a valid, authorised purchase order and a member of staff hasrecorded that the goods or services have been received. In addition, the finance team may record the receipt ofgoods or services on behalf of the team who ordered the goods or services.We noted the following control design deficiencies:There were no reviews of open purchase orders during the period under review. This review isperformed to ensure that purchase orders which are not required are closed promptly and not left openindefinitely. Upon investigation, we found that Lambeth Living had been unable to obtain this reportdue to issues with the reporting function of Oracle 12. These issues have now been resolved and reportsare now issued to budget holders to review on a monthly basis.We also examined a sample of 25 payments made through the payables ledger between the Oracle 12 migrationand 21 January 2015. 21 of these invoice payments required purchase orders and receipting approval beforepayment could be made. We noted the following operating effectiveness issues:2/21 invoices were released for payment by the Council’s accounts payable team without receiptingapproval. These were invoices initially recorded on Oracle 11i but not approved for payment. They werereleased for payment following the migration.1/21 invoices was receipted by a member of the finance team based on approval from the team receivingthe goods or services. However, evidence of the approval could not be provided.ImplicationsPayments may be made for goods or services not required or received if open purchase orders are not reviewedand closed.Payments may be made for goods or services not received if receipt is recorded by the finance team withoutapproval from the team which ordered the goods or services.Action planFinding rating Agreed action Responsible person / titleLow riskThe finance team should ensure that no invoicesare released for payment by the Council withoutreceipting approval.The finance team should continue to ask budgetholders to review open purchase order reports ona monthly basis. Any purchase orders which areno longer required should be closed.The finance team should retain anycorrespondence from other areas of LambethLiving when they record the receipt of goods orservices.Candice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 5Internal audit report forLambeth Living Limited PwC 11

Internal AuditReport 2014/2015Page 40FINAL5) Purchasing after the implementation of Oracle 12 – operatingeffectiveness (continued)Management commentsWith the implementation of Oracle 12 Lambeth Living no longer has access to Cash Manager. Cash Manager isrequired to report on cash in transit transactions which includes payments to suppliers.Invoices paid by the Council without receipting approval related to invoices migrated from Oracle 11i to Oracle12. There is no risk of invoices being paid without receipting approval for invoices processed solely in Oracle 12because the system will not allow invoices to be paid without receipting approval.The R12 open PO report was unstable and unreliable when the Oracle Business Intelligence reportingfunctionality was initially implemented. The report has since stabilised, is reliable and is now being distributed.Internal audit report forLambeth Living Limited PwC 12

Internal AuditReport 2014/2015FINALPage 416) Journals – operating effectivenessFindingJournals are input to the general ledger by one member of the finance team before being reviewed by anothermember. It is then posted to the general ledger by a third member of the finance team.We tested a sample of 20 journals to ensure that this process had been followed and noted the followingoperating effectiveness issues:1/20 journals was reviewed after it was posted to the general ledger because the journal’s approver wason annual leave.1/20 journals was signed as reviewed before it was signed as input to the GL.For 2/20 journals, we were unable to confirm the date the review before posting took place because thereview date was not recorded on the approval slip.In all cases, there was segregation of duties between the requesting and approval of the journals once approvaltook place.ImplicationsAccounting records maybe inaccurate or incomplete leading to inappropriate financial reporting.Loss through error or misappropriation of assets may not be detected promptly.Action planFinding rating Agreed action Responsible person / titleLow riskThe finance team should ensure all journals arereviewed prior to posting and that the date ofreview is recorded accurately.Candice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 6Management commentsThe journals signed as being approved after annual leave were in reality approved by the person who posted thejournal. Moving forward, the journals would be reviewed by a member of the Management Accounting teambefore being posted in the absence of colleagues in the Financial Transaction team.Internal audit report forLambeth Living Limited PwC 13

Internal AuditReport 2014/2015Page 42FINAL7) Purchasing before Oracle 12’s implementation – operating effectivenessFindingOpen purchase order reportsPrior to the migration to Oracle 12, a report listing all open purchase orders was sent to managers that staffclose purchase orders which were no longer needed.We selected a sample of two months between April 2014 and July 2014 and examined email correspondence toconfirm that these reports had been sent out. We noted the following operating effectiveness issue:In 1/2 months, no open purchase order report was sent out for review.Upon investigation, this was because an exercise had taken place to close all open purchase orders which werenot needed before year end. This was done at a time when Lambeth Living had expected to migrate betweenOracle 11i and Oracle 12. When the migration was delayed, management decided not to continue sending thesereports until the migration took place.Cut-over periodDuring the period when Lambeth Living’s did not have access to Oracle 11i or Oracle 12, known as the “cut-overperiod”, a process was put in place to allow CHAPS payments to be made to pay invoices which required urgentpayment. This process was used to make eight payments. Those invoices paid were then to be uploaded toOracle to ensure that duplicate payments could not be made.We examined a sample of the two payments made during the cut-over period to verify that the invoice had beenincluded on Oracle 12 to prevent duplicate payments. We noted the following control operating effectivenessissue:1/2 invoices paid with value £6,624 had not been uploaded to Oracle 12. When brought tomanagement’s attention, they requested that the invoice was added to the payables ledger andconfirmed no duplicate payment had been made. Management were unable to confirm why this was notrecorded on the ledger.ImplicationsPayments may be made for goods or services not required or received if open purchase orders are not reviewedand closed.Duplicate payments may be made if invoices paid during the cut-over period are not recorded on Oracle 12.Internal audit report forLambeth Living Limited PwC 14

Internal AuditReport 2014/2015FINALPage 437) Purchasing before Oracle 12’s implementation – operating effectiveness(continued)Action planFinding rating Agreed action Responsible person / titleLow riskManagement commentsLambeth Living should ensure that all invoicespaid during the cut-over period are recorded onthe general ledger.Candice Cupid, Finance ManagerTarget date31 May 2015Reference numberKFS 14/15 7Invoices not loaded onto the payables ledger would have been highlighted as not being posted through theperformance of the bank reconciliation. The delay in the bank reconciliations meant that this was not noticed.Internal audit report forLambeth Living Limited PwC 15

Internal AuditReport 2014/2015Page 44FINAL8) Purchasing requisition forms – operating effectivenessFindingPrior to a purchase order being raised, a purchase requisition form should be raised by a member of thebusiness unit and approved by the Business Unit Manager.As part of our testing of invoices paid between 1 April 2014 and 21 January 2015, we reviewed 47 purchaserequisition forms.We noted that:2/47 purchase requisition forms were requested and authorised by the same individual. However, thepurchase order for the goods purchased was approved by a separate member of staff.RecommendationIt is good practice that a purchase requisition form should be completed and authorised by different membersof staff and forms should not be processed without this review taking place.9) Approval of purchase orders – operating effectivenessFindingPurchase orders require approval in line with the scheme of delegation which requires Heads of Service, ormore senior members of staff, to approve purchase orders in excess of £50,000.As part of our testing of invoices paid between 1 April 2014 and 21 January 2015, we reviewed 41 purchaserequisition forms.We noted that:34/41 purchase orders were approved by the Head of Finance. Only 3 of these purchase orders were inexcess of £50,000.Therefore, whilst this is in line with Lambeth Living’s scheme of delegation, a significant amount of theauthorising of purchase orders are centred on the Head of Finance. This time could be more effectively used.RecommendationFinancial responsibility should be encouraged to stretch wider than the core finance team as denoted in thescheme of delegation, allowing senior members of staff to effectively use their time.Internal audit report forLambeth Living Limited PwC 16

Internal AuditReport 2014/2015FINALPage 45Appendix 1. Basis of ourclassificationsIndividual finding ratingsFindingratingAssessment rationaleCritical A finding that could have a:High A finding that could have a:Critical impact on operational performance; orCritical monetary or financial statement impact; orCritical breach in laws and regulations that could result in material fines or consequences; orCritical impact on the reputation or brand of the organisation which could threaten its futureviability.Significant impact on operational performance; orSignificant monetary or financial statement impact; orSignificant breach in laws and regulations resulting in significant fines and consequences; orSignificant impact on the reputation or brand of the organisation.Medium A finding that could have a: Moderate impact on operational performance; orModerate monetary or financial statement impact; orModerate breach in laws and regulations resulting in fines and consequences; orModerate impact on the reputation or brand of the organisation.Low A finding that could have a: Minor impact on the organisation’s operational performance; orMinor monetary or financial statement impact; orMinor breach in laws and regulations with limited consequences; orMinor impact on the reputation of the organisation.AdvisoryA finding that does not have a risk impact but has been raised to highlight areas of inefficiencies orgood practice.Internal audit report forLambeth Living Limited PwC 17

Internal AuditReport 2014/2015Page 46FINALReport classificationsThe report classification is determined by allocating points to each of the findings included in the reportFindings ratingCriticalHighMediumLowPoints40 points per finding10 points per finding3 points per finding1 point per findingReport classificationPointsLow risk6 points or lessMedium risk7– 15 pointsHigh risk16– 39 pointsCritical risk40 points and overInternal audit report forLambeth Living Limited PwC 18

Internal AuditReport 2014/2015FINALPage 47Appendix 2. Terms of ReferenceTerms of reference – Key Financial SystemsTo: Terry Gallagher – Lambeth LivingFrom: Nicholas Haigney – PwCThis review is being undertaken as part of the 2014/2015 internal audit plan approved by the Audit andResources Committee.BackgroundPrevious internal audit reviews into the key financial systems have noted progressive improvements, with theprevious year’s report rated as low risk. As a result, we intend to focus the review on the most significantfinance processes. We shall liaise with Lambeth Living Limited’s (“Lambeth Living”) external auditors to ensurewe create efficiencies in providing assurance for Lambeth Living across key financial controls.These financial controls form an essential part of Lambeth Living’s internal control environment to enablemanagement to effectively control the accounting function.The processes that internal audit will focus on for the financial year 2014/15 are as follows:journalsaccounts payablepayrollbank (limited to walkthrough testing)reconciliations (limited to walkthrough testing)During 2014/15, the Oracle system has been upgraded from Oracle 11i to Oracle 12. The transition took place inthe summer of 2014, with a transition period starting in mid-July 2014, when Oracle 11i ceased to be used, andfinishing on 4 August 2014, when the Oracle 12 was brought online. We will consider the transition betweensystems as part of a specific Oracle 12 review.ScopeWe will review the design and operating effectiveness of key controls in place relating to the financial systems inplace during the period 1 April 2014 to the date the fieldwork occurs, which is scheduled for January 2015 asper the agreed timetable.The sub-processes and related control objectives included in this review are:Sub-processObjectivesReconciliations Control accounts (namely debtors control account,creditors control account, sundry external revenuecontrol account, sundry external debt control accountand those relating to VAT and payroll) are reviewed andreconciled regularly so as to ensure accurate, completeand valid financial reporting.Bank Cash held in bank accounts is reconciled to cashbalances per the general ledger (and reconciling itemscleared promptly).Journals Journals are appropriately reviewed and authorised.Internal audit report forLambeth Living Limited PwC 19

Internal AuditReport 2014/2015Page 48FINALAccounts payable Invoices are only paid if they have been appropriatelyauthorised, are accurate, correspond to a valid order andgoods / services have been received by Lambeth Living. Payments to suppliers are appropriately authorised, areaccurate and pertain to valid invoices or charges andsuppliers.Payroll Only valid employees are added to the payroll system. Leavers are promptly removed. Amendments and deductions are applied correctly andpromptly actioned. Payruns are valid, complete and accurate.Limitations of scopeWe will review the above controls to ensure controls are designed and operating effectively for the subprocessesindicated above.As agreed with management, we will perform a walkthrough of the bank and reconciliations sub-processes toverify that controls have been implemented. However, we will not perform tests to assess the operatingeffectiveness of these controls.The review is dependent upon information provided by the staff interviewed throughout the course of thereview.Audit approachOur audit approach is as follows:Obtain an understanding of the key financial systems through discussions with key personnel, review ofsystems documentation and walkthrough testsIdentify the key risks of the sub-processes under reviewEvaluate the design of the controls in place to address the key risksTest the operating effectiveness of the key controls.Internal audit report forLambeth Living Limited PwC 20

Internal AuditReport 2014/2015FINALPage 49Internal audit teamName Title Role Contact detailsNicholas Haigney Director Engagement Leader nicholas.haigney@uk.pwc.com020 7213 5613Charles Martin Manager Engagement Manager charles.martin@uk.pwc.com07732 864 402David Hagger Senior Associate Audit Supervisor david.j.hagger@uk.pwc.com07756 028 236Joshua Williams Associate Auditor joshua.n.williams@uk.pwc.com020 7804 2572Key contacts – Lambeth LivingName Title Role Contact detailsTerry Gallagher Chief Executive Audit Liaison andResponsible Directortgallagher@lambethliving.org.ukPatrick Pedder Head of Finance Audit Owner ppedder@lambethliving.org.ukCandice Cupid Finance Manager Audit Liaison ccupid@lambethliving.org.ukTimetableFieldwork start 12 January 2015Fieldwork completed 16 January 2015Draft report to client 30 January 2015Response from client 6 February 2015Final report to client 13 February 2015Agreed timescales are subject to the following assumptions: All relevant documentation, including source data, reports and procedures, will be made available to uspromptly on request Staff and management will make reasonable time available for interviews and will respond promptly tofollow-up questions or requests for documentation.Internal audit report forLambeth Living Limited PwC 21

Internal AuditReport 2014/2015Page 50FINALAppendix 3. Limitations andresponsibilitiesLimitations inherent to the internal auditor’s workWe have undertaken the review of name of the review, subject to the limitations outlined below.Internal controlInternal control systems, no matter how well designed and operated, are affected by inherent limitations. Theseinclude the possibility of poor judgment in decision-making, human error, control processes being deliberatelycircumvented by employees and others, management overriding controls and the occurrence of unforeseeablecircumstances.Future periodsOur assessment of controls is for the period specified only. Historic evaluation of effectiveness is not relevant tofuture periods due to the risk that:the design of controls may become inadequate because of changes in operating environment, law,regulation or other; orthe degree of compliance with policies and procedures may deteriorate.Responsibilities of management and internal auditorsIt is management’s responsibility to develop and maintain sound systems of risk management, internal controland governance and for the prevention and detection of irregularities and fraud. Internal audit work should notbe seen as a substitute for management’s responsibilities for the design and operation of these systems.We endeavour to plan our work so that we have a reasonable expectation of detecting significant controlweaknesses and, if detected, we shall carry out additional work directed towards identification of consequentfraud or other irregularities. However, internal audit procedures alone, even when carried out with dueprofessional care, do not guarantee that fraud will be detected.Accordingly, our examinations as internal auditors should not be relied upon solely to disclose fraud,defalcations or other irregularities which may exist.Internal audit report forLambeth Living Limited PwC 22

Page 51

Page 52In the event that, pursuant to a request which Lambeth Living Limited has received under the Freedom of Information Act2000 or the Environmental Information Regulations 2004 (as the same may be amended or re-enacted from time to time)or any subordinate legislation made thereunder (collectively, the “Legislation”), Lambeth Living Limited is required todisclose any information contained in this document, it will notify PwC promptly and will consult with PwC prior todisclosing such document. Lambeth Living Limited agrees to pay due regard to any representations which PwC maymake in connection with such disclosure and to apply any relevant exemptions which may exist under the Legislation tothis document and other related documents. If, following consultation with PwC, Lambeth Living Limited discloses anythis document or any part thereof, it shall ensure that any disclaimer which PwC has included or may subsequently wishto include in the information is reproduced in full in any copies disclosed.This document has been prepared only for Lambeth Living Limited and solely for the purpose and on the terms agreedwith Lambeth Living Limited in our agreement dated 6 August 2014. We accept no liability (including for negligence) toanyone else in connection with this document, and it may not be provided to anyone else.© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP(a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers InternationalLimited, each member firm of which is a separate legal entity.

Lambeth LivingDate Printed: 22-May-15Page 53Risk registerRisk RefLL0023Control RefLL0023/001DescriptionFinancial ThreatFinancial and performance management underminedCause(s): Legacy control weaknessesEffect(s): Uncertainity in Management Control ProceduresReview Date: 6-Jul-2015Risk Owner: Terry GallagherControl MeasuresCurrent delegated powers have been in place since the ALMO's go live datein July 2008 (85.00% complete)Details: This risk was originated on the Strategic Risk register to reflect the factthe Housing Service had a history of poor controls and that these risks needed tobe mitigated once the ALMO was established as this required a separation fromLBL. On the run into Reintegration there is a case for arguing that this riskbecomes obsolete as the ALMO ends its agreement and the service is absorbedback into Council structures so the Board will be invited to discuss and endorsethis proposal.However it is right that the risk or a related one will be picked up under the Councilstructures to reflect the need for an analogous risk of ensuring that the controlsassurance on finance and performance are well managed under the new HousingManagement Services.The Board can take comfort from the fact that all of the audit tracking work will becontinues into and inherited by LBL; they can also place reliance upon the raft ofPWC Due Diligence audits that have been commissioned since managementactions are being identified and will be picked up once assigned under the newstructures.Board are invited to close this risk down.Risk ScoresCurrentMedium8TargetMedium8Control OwnerTerry GallagherReview Date: 6-Jul-2015Risk RefLL0030DescriptionReputational ThreatCapital Programme delivery does not match the programme / budget in 2014 / 2015.Risk ScoresCurrentLow4Cause(s): The difficulties in delivering the programme that were experienced in 2012 / 2013reoccur in 2014 / 2015 due to under-performance by the main contractors, procurement obstaclesor insufficient programme management.Effect(s): There is now a programme in place and it is recommended that this risk is formallywithdrawn.TargetLow4Control RefReview Date: 20-Jun-2015Risk Owner: Terry GallagherControl MeasuresControl OwnerCreated by Risk and InsurancePage 1 of 9

Lambeth LivingDate Printed: 22-May-15Page 54Risk registerRisk RefLL0031DescriptionFinancial ThreatFailure to comply with the Regulatory Reform Order (2005) regarding Fire RiskCause(s): The span of responsibility across 33,000 homes is significant and requires activemanagement. Responsible, trained staff and significant remedial works that will necessarily taketime to implement.Effect(s): Non-compliance are serious legal breaches and attendant risk to residents, staff andproperty.Review Date: 6-Jul-2015Risk Owner: Terry GallagherRisk ScoresCurrentMedium8TargetMedium8Control RefLL0031/001Control MeasuresA full Health and Safety team has been established within Lambeth Living(75.00% complete)Details: This team has the requisite professional skills, training and qualification toensure that Lambeth Living complies with this Order.There has been substantial progress in developing a Fire Risk Assessmentdatabase. There has been significant training of operational staff and relatedbodies, such as Tenant Management Organisations (TMOs) to ensure vigilanceand discharge of management responsibilities. There has been and continues tobe a programme of remedial works to the fabric of the estates when required on arisk-based programme.The in year programme will be completed as scheduled. All properties have a firerisk assessment.There is an on going programme for re assessment which will incorporateregarding the risk of properties. Risk Grading determines the subsequent reviewperiod.Control OwnerTerry GallagherReview Date: 6-Jul-2015Created by Risk and InsurancePage 2 of 9

Lambeth LivingDate Printed: 22-May-15Page 55Risk registerRisk RefLL0033DescriptionManagement ThreatFurther Welfare Reform changes makes rent income collection more difficult because itaccentuates poverty.Cause(s): Housing Benefit reforms will be the first of several legislative changes that will severelyprejudice the financial circumstances of residents.Effect(s): Financial hardship may well mean that residents struggle to pay rent & service charges.We may collect less cash & incur lots of extra costs managing debts. It could also create hardship& tensions which produces much more social problems so we may see increased instances ofanti-social behaviour. The new Government’s proposal to raise the benefit gap will mean morehouseholds reliant on welfare benefit, unable to pay their rent.Review Date: 6-Jul-2015Risk Owner: Cedric BostonRisk ScoresCurrentMedium12TargetLow4Control RefLL0033/001Control MeasuresSecure processes to be implemented & monitored to ensure that benefitscontinue to be received (80.00% complete)Details: Secure processes and initiatives to be implemented & monitored toensure that households are enabled to pay their rent and keep rent loss to aminimum (80.00% complete)Details: There are 1800 households affected by the Size Criteria. This is 700 lessthan the initial cohort of 2500. The reduction is due in part to the work conductedby our Welfare Team. They were recently shortlisted for two national awards.Many of our support and control measures proved successful last year and weexceeded the 99% rent collection target. Among other things we received around£600k of DHP even though the overall budget was reduced and under morepressure; Rental Exchange was agreed by TC to help tenants secure better valuecredit services; the workwise funding bid was a success and the initiative wentwell. Almost 60 households were supported into work; the percentage of tenantson Direct Debit continued to increase. It is now 8% from 4% in 2012. In additionthe first five bedroom tax households were evicted.However the target reduction in size criteria households for 15/16 is 200 and thisreflects the fact that it will become harder to persuade them to downsize or makeup for the shortfall in rent. There is a further reduction in DHP from £1.6m to £1.2;the Government is proposing to reduce the benefit cap to £23k which could lead toan increase of 65 (currently 45) in the households affected. The worst casescenario is this could increase bad debts by £300k. Also Universal credit for newapplicants started in February.Control OwnerCedric BostonThis year we will continue to work closely with other sections of the Council andother key stakeholders to support all households affected by welfare reform.Moreover the successful measures used last year will continue to be employed.We have started well with rent collection in the first month 4% higher than April lastyear. In addition we are exploring some new potential solutions including:• Write off historical debts using the Write off policy• Set Aside (ongoing CAP amount) using Bad Debt Provision• Estate work initiatives with the Estate Pride team• Forward planning for Universal Credit• 75 people in employment through workwiseReview Date: 6-Jul-2015Created by Risk and InsurancePage 3 of 9

Lambeth LivingDate Printed: 22-May-15Page 56Risk registerRisk RefLL0034Control RefLL0034/001DescriptionReputational ThreatImproving Resident satisfaction with the Repairs Service.Cause(s): Repairs performance by the Partnering Contracts continues to fail to deliver theperformance levels.Effect(s): Contractors’ performance is below the required standards.Review Date: 6-Jul-2015Risk Owner: Cedric BostonControl MeasuresActive Contract Management via Core Group meetings and day-to-dayoperational contact to secure best value for money (75.00% complete)Details: We have agreed with the Council a set of KPIs that we believe will enableus to manage repairs contractor performance more effectively.We have launched a planned maintenance programme and we are hoping therewill be budgetary provision to sustain this next year. The focus of spend will be oninternal and external improvements to the common parts as well as works toimprove the estate environment.A major initiative has been the piloting of a more customer friendly post inspectionservices. This involves the Solutions Team offering customers an immediate sitevisit by a surveyor when a service failure is reported, eliminating blind postinspections that many customers find inconvenient and intrusive.We will also reduce the average end-to-end completion time for responsive repairsto 13 days in quarter one to 11.5 days in quarter 4 of 2015/16. About 25 of repairsare P4s. This means the contractor has 28 days to complete them. This timeperiod is unpopular with customers and we are working with the contractors to shiftmore p4s to other categories where they will be completed sooner.The new Opti-time system is due to be implemented and this will make repairsappointments more efficient. Through the actions described above and otherinitiatives, to drive improvements in the in the delivery of the repairs service,including:a. 95 per cent of appointments made and keptb. 90 per cent tenant satisfaction with repairs service, and 90 per cent satisfactionwith the quality of the repairc. 85 per cent of repairs right first timed. Proportion of repairs overdue maintained below one per cent of all repairsRisk ScoresCurrentMedium12TargetLow4Control OwnerCedric BostonReview Date: 6-Jul-2015Created by Risk and InsurancePage 4 of 9

Lambeth LivingDate Printed: 22-May-15Page 57Risk registerRisk RefLL0035DescriptionFinancial ThreatLPC Contractor at risk of going into liquidation or administrationCause(s): Downturn of the construction industry and general market conditions. The move to asingle Repairs contractor on the South means that LL/LBL are now reliant upon a single supplier.This inevitably brings with it additional risks and this is being actively managed. For this reason therisk increased from a low to a medium by the Audit and Resources Committee rating for decisionat LL Board.Effect(s): Inability to deliver the responsive repairs service and the capital programme.Review Date: 6-Jul-2015Risk Owner: Cedric BostonRisk ScoresCurrentMedium8TargetLow4Control RefControl MeasuresControl OwnerLL0035/001 Local Partnership Contractors (LPC) (50.00% complete) Cedric BostonDetails: Continue to monitor supply chain to ensure that we have as much warningas possible of any potential issues. The procurement of the new LHS frameworkintroduces additional assurances, with financial appraisals of supply chainpartners. Reports continue to provide regular checks on the financial resilience ofsuppliers.There are currently 10 LPC contractors. PWC are currently undertaking a duediligence exercise which should help to resolve any issues prior tore-integration and the Council are considering re-procuring some of thosecontracts in the future.We are procuring for a new area Contractor for the South with a completion date ofFebruary next year.We are considering enders for consultants to benchmark the LPC contractors toenable us to assess VFM and whether to exercise the provision to extend thecontracts for a further three years.We are monitoring the market and the indications are the industry is picking up.There is a growing level of work available especially in London and this reducesthe risk of our contractors going out of business.-Review Date: 6-Jul-2015Created by Risk and InsurancePage 5 of 9

Lambeth LivingDate Printed: 22-May-15Page 58Risk registerRisk RefLL0037DescriptionFinancial ThreatMajor Works billing. Leaseholders will be billed up to £70m over the next four years astheir contribution to the cost of the works under the Lambeth Housing Standard. Lambethhas a poor record for Major Works income recovery from leaseholders and in the past ithas had to write off large sums of money.Cause(s): The main reasons money has been written off in the past were a failure to comply withSection 20 requirements; an inability to demonstrate compliance with Section 20; taking too longto bill or expedite Section 20 debt recovery; and confusion caused by the politicisation of ServiceCharge recovery. The new Task and Finish working group has produced recommendations that LLneeds to respond to and manage whilst working collaboratively with the relevant stakeholders toimprove communications and transparency and demonstrate value for money and enhance theefficiency of the billing and its subsequent collection.Effect(s): Service charge monies recovered from leaseholders is one of the income streams tofund the Lambeth Housing Standard programme. The Council relies on maximum recovery fromleaseholders to fund future work under the Lambeth Housing Standard.Risk ScoresCurrentMedium12TargetLow4Review Date: 6-Jul-2015Risk Owner: Cedric BostonControl RefControl MeasuresControl OwnerLL0037/001 Major Works Billing (75.00% complete) Cedric BostonDetails: The revised procedures for undertaking major works have gone live. Theyare intended to improve the communication with and information to leaseholders.The new processes were endorsed by the Council and the Task and Finish Group.They contain control measures to reduce the risks both of non compliance anddisputes with customers.We have done all the preparation for interim billing and nearly all of the T&F groupactions are done and waiting for the Leaseholders appointed expert to verify theiroperation. The various letters and information sheets for leaseholders have beenimproved and all of the key standard letters should shortly get the crystal mark.The IT system to automate major works billing is completed and running. It shouldmake the process more resilient going forward. Lastly the process for billingcompleted schemes is quicker. We have sent out bills for all but one schemedating prior to 12/13 and half of the 12/13 schemes have been billed. Finally theOracle switch over to Northgate was completed in April 2015.Review Date: 6-Jul-2015Created by Risk and InsurancePage 6 of 9

Lambeth LivingDate Printed: 22-May-15Page 59Risk registerRisk RefLL0038DescriptionFinancial ThreatThe Councils Estate Regeneration Proposals and Programme have been underdevelopment for some time but have also been delayed. Their impact on the LHS MajorWorks programme has been difficult to track and there is a significant risk that manyestates which would originally have been invested in under this programme will nowrequire significant expenditure pending the decision or commencement of thoseRegeneration programmes.Cause(s): The estates which were potentially to be covered under the Regeneration programmemay now need intermediate or “Meanwhile” works to ensure they meet the basic standardsrequired to make them wind and water-tight. The extent of these works needs to be assessed andsurveys are in hand to help with thisEffect(s): The additional works may well need to be designed into the Lambeth HousingStandard (LHS) Some of this work will be to sustain those estates until the Regenerationprogramme can be confirmed and delivered. This will increase pressure on the logistics of deliveryof LHS. It will also compete for scarce funds within the budget and resources available. And lastlyit will bring a risk of less effective value for money if we invest in elements whose life will becurtailed by remodelling. This in turn will require some trade off in the amounts that can berecovered from Leaseholders. This will be addressed as part of the capital programme budgetsbut may generate some impact on revenue repairs. The intention is to minimise the associated riskfrom Disrepair claims.Risk ScoresCurrentMedium12TargetMedium8Review Date: 6-Jul-2015Risk Owner: Terry GallagherControl RefControl MeasuresControl OwnerLL0038/001 Survey affected estates (30.00% complete) Terry GallagherDetails: Survey affected estates and assess the potential costs of meanwhile ormore extensive capital works. Assess this against the headroom achieved to datein overall affordability of the programme. Revise the Asset Management Strategicmodel to look at the scenarios and consult with the Council and affected Estatesonce proposals for Regeneration are decided by LBL Cabinet.The Cabinet paper in December included 6 schemes as part of Phase 1 and 2 forregeneration however meanwhile works need to be factored into the programmefor those schemes not included in phase 1 and 2.The Council and LL are looking to reassess the regeneration programme withinthe Capital programme, offset against the scheme costs.Review Date: 19-Aug-2015Created by Risk and InsurancePage 7 of 9

Lambeth LivingDate Printed: 22-May-15Page 60Risk registerRisk RefLL0039DescriptionManagement Threat (for Corporate Health)Decision to reintegrate LL into the Council destabilises the Governance of Housing andperformance deterioratesCause(s): The decision not to extend the management agreement by two years as expected, andopt instead to reintegrate LL into a new Housing Service within LBL could lead to a crisis ofgovernance.Effect(s): The Board are legally responsible for the stewardship of LL and there could be a risk ofresignations across the Board which could undermine its ability to effectively oversee the deliveryof service and the full discharge of its duties including its sub-committees. The announcementcould also destabilise leadership and management across LL if key senior personnel seek to leavethe business early or are head-hunted. This will be challenging to manage given the uncertainty ofthe future for the housing services under a new council structure.Re-Integration will take place on 24th June - it is therefore recommended that this risk is formallywithdrawn.Risk ScoresCurrentMedium12TargetLow4Review Date: 20-Jun-2015Risk Owner: Terry GallagherControl RefControl MeasuresControl OwnerRisk RefDescriptionRisk ScoresLL0040Financial Threat (for Corporate Health)System upgrade across Lambeth council continues to cause disruption to internal andexternal customers.Cause(s): The system implementation continues to create issues for internal and externalcustomers.Effect(s): A number of the reconciliations had to be completed manually in order to progress theyear end accounts. The performance of OBIEE has been abysmal during March and April howeverit appears to be been rectified over the last week when there were a number of system outages.There is still concern about the number of basic reports which should be standard reports from thesystem and this is causing a great deal of frustration.Review Date: 18-Aug-2015Risk Owner: Patrick PedderCurrentMedium6TargetLow4Control RefControl MeasuresControl OwnerLL0040/001 Phase 2 (80.00% complete) Patrick PedderDetails: The Oracle project board have acknowledged that they were a number ofissues around Phase 1 implementation that have been carried forward as part ofthe Phase 2 of the project and the ELS team are working on ensuring that supportis provided across the business to ensure that there is a resolution to theremaining problems. This may have implications and increase the risk ratingaround the Key Financial Systems review carried out by PWC in January.There are still a number of reconciliations outstanding from Corporate finance,particularly bank recs which are important to close the accounts.Review Date: 19-Aug-2015Created by Risk and InsurancePage 8 of 9

Lambeth LivingDate Printed: 22-May-15Page 61Risk registerRisk RefLL0041Control RefDescriptionFinancial Threat (for Corporate Health)Capital Programme delivery for 2015/16, 2016/17, 2017/18Cause(s): Lack of available resources to meet 2015/16, 2016/17 and 2017/18 programmes.Effect(s): LL are undertaking a number of surveys to match the affordability of the capitalprogramme over the ensuing years and these should be completed by October 2015.Review Date: 6-Jul-2015Risk Owner: Terry GallagherControl MeasuresRisk ScoresCurrentHigh24TargetMedium8Control OwnerLL0041/001 The Capital programme is being reviewed (20.00% complete) Terry GallagherDetails: LL are undertaking a number of surveys to match the affordability of thecapital programme over the ensuing years and these should be completed byOctober 2015.Review Date: 6-Jul-2015Risk RefLL0042DescriptionFinancial ThreatNew Government manifesto pledges on RTB and Voids sales will undermine the viability ofthe Housing Revenue Account (HRA) and associated Business Plan.Cause(s): The new administration have committed to requiring sales on higher value emptyproperties to help fund the Home Ownership agenda.Effect(s): This will reduce the supply/stock available for LBL to house its most needy. IT is likelythat these will be by definition the most sought after and needed properties. This will reduce therental income, allow us to house fewer from the waiting list and displace demand onto temporaryaccommodation and B&B.Review Date: 22-Sep-2015Risk Owner: Neil WightmanRisk ScoresCurrentHigh16TargetMedium8Control RefLL0042/001Control MeasuresAnalysis of the Void turnover to assess the potential impact and rate ofattrition in the first instance. Work with other teams (5.00% complete)Review Date: 22-Sep-2015Control OwnerNeil WightmanCreated by Risk and InsurancePage 9 of 9


Page 63Agenda Item 5Corporate Committee9 July 2015Internal Audit and Counter Fraud Annual Report 2014/15Wards:Report Authorised by:Portfolio:Contact for enquiries:AllGuy Ware, Strategic Director, EnablingCouncillor Paul McGlone, Deputy Leader - Finance andInvestmentdhughes@lambeth.gov.ukDavid Hughes, Head of Internal Audit and Counter Fraud,Enabling, 020 7926 9892Report summaryThis report provides members with a summary of the internal audit, investigations and counterfraud work completed in 2014/15 and contains the annual opinion which the Head of InternalAudit is required to provide on the effectiveness of the Council’s risk, control and governanceprocesses. The report contains the outcome of audit reviews completed and for investigationscompleted by the Council’s investigation teams. The report also contains the outcome of thepeer review undertaken on the Internal Audit service as required under the Public SectorInternal Audit Standards.Finance summaryThe report does not give rise to any additional capital or revenue financial implications. Actionsto ensure compliance with relevant legislation and Council policies will be undertaken within theexisting budgets.Recommendations(1) To receive and consider the attached annual assurance report.(2) To note the Head of Internal Audit’s opinion that, for 2014/15, while weaknesses in thecontrol environment identified in specific areas and systems were not pervasive, majorimprovements are required to improve the adequacy and effectiveness of governance, riskmanagement and control, based on the critical and high risk audit reviews completedduring the year and other internal and external assurance sources available.(3) To commend investigating officers on the good outcomes achieved from proactive andreactive investigations and counter fraud activity, the successes achieved in utilisingexternal funding to work with partner organisations.

Page 641. Context1.1 The Corporate Committee in discharging its ‘audit committee’ role is responsible forconsidering the Head of Internal Audit’s annual report and opinion, and a summary ofinternal audit and counter fraud activity (actual and proposed) and the level of assuranceit can give over the Council’s corporate governance arrangements.1.2 This report provides assurance over the Council’s control environment which supportsand enables the delivery of the community plan 2013-16, council policies, compliancewith the Accounts and Audit Regulations 2011 and conformance with the Public SectorInternal Audit Standards.2. Proposal and Reasons2.1 The core purpose of the Internal Audit and Counter Fraud Service is to provideindependent assurance over the operation of the Council’s governance, risk and controlenvironment and to assist management in reducing losses from waste, fraud and errorthrough a range of proactive and reactive internal audit and counter fraud activities.2.2 The Council’s Head of Internal Audit and Counter Fraud is required, under the Accountsand Audit Regulations 2011, to prepare an annual assurance report on the effectivenessof the council’s risk, control and governance processes. The annual assurance report isalso one of the key constituents of the Council’s Annual Governance Statement.2.3 Internal auditors give assurance to all levels of management and to members about theefficiency and effectiveness of operations, compliance with laws and regulations,accuracy and reliability of management reporting, and the safeguarding of assets andinterests. Internal audit fulfils this role by undertaking a range of reviews which criticallyevaluate the Council’s internal control framework. Where necessary, Internal Auditmakes recommendations to improve governance, risk and control arrangements andseeks to introduce best practice within and across the council where appropriate.2.4 The Head of Internal Audit and Counter Fraud also has responsibility for the Council’scounter fraud arrangements, which include the investigation of benefit, housing andinternal fraud. Dedicated resources to deal with insurance and parking fraud are alsolocated in the Risk and Insurance Team in Corporate Affairs (Enabling) and ParkingServices within the Delivery cluster respectively.2.5 The detailed Annual Report 2014/15 (see Appendix 1) which accompanies this reportprovides members with a consolidated report which summarises the key themes andfindings from the internal audit and counter fraud work completed during 2014/15.2.6 The Head of Internal Audit and Counter Fraud’s opinion on the overall adequacy andeffectiveness of the council’s risk management systems and internal controlenvironment, including any qualifications to that opinion, together with the reasons forthe qualification, is set out on the following page:2.7 In my opinion for 2013/14 I identified that the Council had maintained an adequatecontrol environment. However, there were some risk that the system would fail to meetmanagement’s objectives; the organisation needed to improve the adequacy andeffectiveness of governance, risk management and control arrangements as itembedded the new organisational structure and cooperative commissioning approachand delivered further significant savings.

Page 65In the context of my annual opinion for 2013/14 and using the PSIAS standard opiniontypes, our work during 2014/15 has identified that there are some major weaknesses inthe framework of governance, risk management and control and non-compliance withcontrols which put the achievement of organisational objectives at risk. This is based ona number of reviews undertaken in specific areas through the year, although it is notedthat we have undertaken other reviews where we have identified good controls andgovernance arrangements in place. This means that there are key areas of focus formanagement to address over the coming months where low levels of assurance havebeen obtained. It is noted that while the number of critical risk reviews has increasedfrom the previous year, a key factor in the overall opinion, the proportion of high riskreviews has reduced from the previous year. While we have experienced difficulties inclosing off some reviews with management we have also seen an overall improvementin management’s performance in implementing previously agreed actions for prior yearreviews, particularly for high risk items.It is recognised that a key focus for the incoming Chief Executive who joined the Councilin March 2015 is to improve the organisation’s effectiveness through changes instructure, officer and member governance, management oversight and performancemanagement arrangements. A number of measures have already been put in place orare due to be implemented shortly which will strengthen governance, accountability andmanagement oversight across the Council to drive through the required improvements.As a result of the above, it is my opinion for 2014/15 that major improvements arerequired to improve the adequacy and effectiveness of governance, riskmanagement and control.I have reached this conclusion because:We have identified a number of high and medium risk rated weaknesses inindividual assignments which we believe are significant in aggregate to the overallquality of the internal control system; and;We have issued three critical risk rated reports, however these are not pervasive tothe system of internal control, with a number of reviews receiving positiveassurance ratings due to good controls and governance arrangements being inplace and improvements noted in the implementation of previously agreed actions.2.8 The full Annual Report is contained in Appendix 1 and Section 3: Summary of Findingsand Section 4: Key Themes summarise the nature of our findings and key themesemerging from our work and which underpin this opinion. A summary has been includedbelow but Sections 3 and 4 should be read in full to understand our final Opinion.Governance, Accountability and Roles and ResponsibilitiesThere is a lack of clarity surrounding governance arrangements, accountability,associated roles and responsibilities. We raised this as an issue in the 2013/14opinion and this continues to be a recurrent theme across our 2014/15 reviews.Council structures have been formalised but these have not been consistentlyembedded across the Council and in several instances we have found that oversightarrangements have not operating as effectively as possible.

Page 66Assurance from other sourcesWe embed the three lines of defence into all of our Internal Audit work and takeassurance from third party sources to provide our Opinion. During 2014/15 we foundsome matters arising from three third parties (Ofsted, HMI Probation and ExternalAudit) which identified some significant control failings which have impacted ouroverall Opinion. This included Ofsted rating Children’s Services as ‘Inadequate’, aHMI Probation report that although noting some improvements since the lastinspection in 2011 it still rated the Youth Offending Service as “poor performing” andexternal audit highlighting some concerns over the accuracy timeliness of billing toleaseholders. In 2014, Lambeth entered formal monitoring by the ICO because ofpoor performance responding to FOIs. There has been significant improvement inthis area during the last year – performance is markedly improved and the backloghas been reduced to an acceptable level and the ICO has ceased formal monitoring.New financial systemsOracle R12 went live on 04/08/14. The transition to a new financial systemrepresents a significant change for an organisation due to the importance ofaccurate, reliable management information (to underpin decision making), changesto business processes and controls as well as the dependencies of other controls onthe system.Our three reviews of Oracle have identified some weaknesses concerningsegregation of duties, system access and system configuration which need to beaddressed. The implementation of the new system has also identified issues wherecontrols have failed due to behavioural and cultural issues where goods receiptingand the procurement of contracts have not been undertaken in accordance withexisting or revised requirements.Continuous Auditing and MonitoringThis is a key indicator of the strength of the control environment. Our latest reporthas identified that overall the control environment is stable but there is someevidence of deterioration with 5 of 15 systems declining this period. This is partly theresult of changes to working practices and also changes to teams leading to a lossof knowledge.High and Critical Risk Audit ReportsWe have issued 3 critical risk and 10 high risk reports this year. These are notpervasive to the entire control environment but are significant in aggregate. Inaddition, two schools audits were determined to represent critical risk and four werehigh risk.Implementation of recommendationsTimely implementation of recommendations is an indicator of the strength of anorganisation’s control environment. There has been an improvement in theimplementation of high risk recommendations identified through our planned followup work. However, where we have revisited previously areas we have seen that anumber of medium and lower risks have not been implemented following previouscross-cutting reviews. For example: all issues raised in our 2013/14 review ofManagement Information were re-raised in 2014/15; non-performance ofreconciliations has been raised in the last 3 periods of Continuous Auditing andMonitoring (covering a period of 16 months); and our Governance review identified anumber of outstanding recommendations from 2013/14 reports on OrganisationalCapability and Workforce Planning, Budget Monitoring and Risk Management..

Page 67OtherRisk management, in particular completion and use of risk registers was aconsistent theme across our audits including (but not limited to) Public Health,Looked After Children, Commercial Properties, and Capital Assets – Transfer ofUse. The Council’s risk appetite has not been updated in the year as recommendedin our 2013/14 review despite the efforts of Risk Management in trying to progressthis.Our reviews of two large repairs contracts managed by Lambeth Living on theCouncil’s behalf identified weaknesses in the contract management andprocurement practices employed by the Council’s ALMO (Arm’s LengthManagement Organisation). In particular, ensuring these processes extract value formoney and that contract management practices are invoked fully to managesignificant contractors.Good practiceOur opinion also considers good practice identified for example improvedperformance across Schools and Projects & programmes and low risk reportsissued for Schools Admissions and Data Quality – Published Data. The Councilalso retained its Public Services Network (PSN) accreditation which evaluated the ITinfrastructure security arrangements. The Council continues to invest in fraudprevention and fraud detection, which is borne out in the improved outcomesachieved by the Counter Fraud Team over the past year.Peer Review of Internal Audit2.9 Under pan-London arrangements agreed in 2013, a peer review of the Council’s InternalAudit service against the PSIAS was conducted in March 2015 by the London Boroughof Hackney. The review found that Internal Audit ‘fully conforms’ to the PSIAS in 12 ofthe 17 areas assessed, with minor improvements being suggested in the remaining fiveareas which were assessed as ‘generally conforms’. The overall assessment concludedthat the Internal Audit service ‘generally conforms’ to the PSIAS, with no areas of nonconformancebeing identified. Actions are already being put in place to address thesuggested enhancements identified.3. Finance3.1 The report does not give rise to any additional capital or revenue financial implications.Actions to ensure compliance with relevant legislation and Council policies will beundertaken within the existing budgets.4. Legal and Democracy4.1 Regulation 4 of the Accounts and Audit Regulations 2011 (which are made in exercise ofthe powers conferred by section 27 of the Audit Commission Act 1998(1) and section134(6) of the Greater London Authority Act 1999(2)) sets out the Council’s responsibilityfor ensuring that its financial management is adequate and effective and that it has asound system of internal control which facilitates the effective exercise of the Council’sfunctions, and which includes arrangements for the management of risk. Regulation 4also requires the Council to conduct a review at least once a year of the effectiveness ofits system of internal control.4.2 Regulation 6 requires the Council to undertake an adequate and effective internal auditof its accounting records and of its system of internal control in accordance with the

Page 68proper practices in relation to internal control. The Council must also conduct, at leastonce in each financial year, a review of the effectiveness of its internal audit. Thefindings of such review must be considered as part of the consideration of the system ofinternal control referred to in paragraph 4.1 above. The Council has delegated thedischarge of this function to Corporate Committee.4.3 No additional comments from Democratic Services.5. Consultation and co-production5.1 Consultation with Lambeth officers and members was conducted in drafting the InternalAudit and Counter Fraud Work Plans and a draft of the Annual Report was presented tothe officers’ Financial Management Group for consideration.6. Risk management6.1 An inadequate and operationally ineffective internal control system can have an adverseimpact on the Council’s risk management processes and wider corporate governanceand, therefore, on the quality of services for residents.6.2 With regard to Risk Management, the Public Sector Internal Audit Standards requireInternal Audit to evaluate the effectiveness and contribute to the improvement of riskmanagement processes.7. Equalities impact assessment7.1 Not applicable.8. Community safety8.1 Not applicable.9. Organisational implications9.1 EnvironmentalNone.9.2 Staffing and accommodationNone.9.3 ProcurementNone.9.4 HealthNone.10. Timetable for implementation10.1 Not applicable.

Audit trailConsultationName/PositionLambethcluster/division orpartnerDate SentDateReceivedComments inpara:Guy Ware, Strategic Director Enabling 26.06.15 26.06.15 ThroughoutMark Hynes, Director Corporate Affairs, 26.06.15 30.06.15 ThroughoutEnablingAlison McKane, Head of Integrated Support, 26.06.15 26.06.15 4.0Legal ServicesEnablingChristina Thompson, Director Integrated Support, 26.06.15EnablingNana Amoa-Buahin, Director HR and OD,Cooperative BusinessDevelopment26.06.15Steve Sherman, AssistantDirectorMaria Burton, DemocraticServicesMartin Crump, SeniorAccountantHR and OD,Cooperative BusinessDevelopment26.06.15Corporate Affairs 26.06.15 29.06.15 4.0Integrated BusinessSupport – FinancialPlanning &ManagementPage 6926.06.15 29.06.15 3.0Sean Harriss Chief Executive 26.06.15Councillor Paul McGlone Deputy Leader andCabinet Member forFinance & Investment26.06.15 29.06.15Report historyOriginal discussion with Cabinet Member N/AReport deadline 26.06.15Date final report sent 30.06.15Report no. 44/15-16Part II Exempt from Disclosure/confidential Noaccompanying report?Key decision reportNoDate first appeared on forward planNot applicableKey decision reasonsNot a key decisionBackground informationInternal Audit and Counter Fraud Strategy,approved on 2 April 2014AppendicesInternal Audit Work Plan 2014/15,approved on 2 April 2014Counter Fraud Work Plan 2014/15,approved on 2 April 20141. Internal Audit and Counter Fraud AnnualReport 2014/15


Appendix 1Page 71London Boroughof LambethInternal Audit and Counter FraudAnnual Report 2014-2015

Page 72ContentsINTRODUCTION .................................................................................................................................. 11. EXECUTIVE SUMMARY ............................................................................................................. 22. HEAD OF INTERNAL AUDIT’S ANNUAL OPINION ................................................................... 33. SUMMARY OF INTERNAL AUDIT FINDINGS............................................................................ 54. KEY THEMES AND FINDINGS ................................................................................................... 6Internal Audit - key themes ........................................................................................................................................... 6Implementation of internal audit recommendations .................................................................................................... 12Counter Fraud Activity ................................................................................................................................................ 13ANNEX 1: DETAILED ANALYSIS INTERNAL AUDIT REVIEWS 2014/15 ........................................ 18ANNEX 2: REPORT CLASSIFICATIONS .......................................................................................... 24

IntroductionPage 73Purpose of this reportThis report summarises the work that the Internal Audit and Counter Fraud Service has undertaken during the financialyear 2014/15 and the key themes - strengths and weaknesses - that we have identified across the Council. The reportcontains the overall assessment of the Council’s control environment in the form of the Head of Internal Audit’s AnnualOpinion for 2014/15. It also highlights how responsive management are at implementing recommendations that havebeen made as a result of our work and the successful outcomes achieved by the Council’s fraud investigation teams.Report structureDuring the rest of this report we have set out the results of the work performed by the Internal Audit and Counter FraudService as follows:Internal Audit – a summary of Internal Audit work carried out in 2014/15, including key themes identified, an analysis ofreport ratings and priority of recommendations and service summaries showing an overview of audit work done in eachdepartment and key findings.Counter Fraud – a summary of the counter fraud work carried out in 2014/15 by the Internal Audit and Counter FraudService, along with the Insurance and Parking investigation teams, including key outcomes for the Council.In this report, we have drawn on the findings and assessments included in all of the reports issued, including those that,at this time, remain in draft. It should, therefore, be noted that the comments made in respect of any draft reports are stillsubject to management response.1

Page 741. Executive SummaryOverview of work performedInternal AuditThis report outlines the internal audit work we have carried out for the year ended 31 March 2015.The Public Sector Internal Audit Standards (PSIAS) require the Head of Internal Audit to provide an annual opinion,based upon and limited to the work performed, on the overall adequacy and effectiveness of the organisation’s frameworkof governance, risk management and control (i.e. the organisation’s system of internal control). This is achieved througha risk-based plan of work, agreed with management and approved by the Corporate Committee, which should provide areasonable level of assurance, subject to the inherent limitations described below. The opinion does not imply thatInternal Audit has reviewed all risks relating to the organisation.The Council’s Corporate Committee agreed the internal audit plan for 2014/15 on 2 April 2014. We have worked withsenior management throughout the year to ensure that the audit reviews actually undertaken continue to represent afocus on high risk areas, in the light of new and ongoing developments, both internally and externally, impacting on theCouncil. As a result of the regular and ongoing dialogue with management, some changes were agreed to the Planduring the year, with changes being reported to Corporate Committee through the year. Some projects have been addedto or removed from the Plan, others have been consolidated or split into separate elements, and the timing of a number ofothers has been changed to accommodate new items. The changes to the plan are summarised in the table below.OriginalplanReviewsdeferred to2015/16Reviewsno longerrequiredAdditionsto the planTotalSystems covered by the ContinuousAuditing and Monitoring programme15 - - - 15Schools audits/themed reviews 23 - 1 24Risk-based audits/grant claims 54 (16) (10) 13 41Reports not at final stage as at2013/14 Annual Report19 19Total 111 (16) (10) 14 99For 2014/15, 99% of the reviews covered in the Annual Internal Audit Plan have been completed (excluding those thathave been cancelled or deferred), with good practice being that 90% of an audit plan should be delivered. A number ofreviews have been deferred (16 reviews) in the year due to long term absence within the in house team and 10 reviewshave been cancelled either due to assurance being gathered from other sources or the audit no longer beingrelevant/required by management. Of the reviews completed, a final report has been issued for 92% of the reviews, withthe remaining being closed out with management at draft report stage.Counter FraudThe Counter Fraud work programme for 2014/15 focused on the provision of a value for money service ensuring thatchallenging targets were achieved. The Counter Fraud Team focused on the following areas:Recovering Council properties which have been fraudulently obtained or sublet in partnership with Lambeth Livingand registered social housing providers managing properties within the borough;Working with registered social housing providers managing properties within the borough to investigate and recoversublet properties;Identifying fraudulent benefits overpayments for recovery and sanctioning/prosecuting offenders; andInvestigating allegations of fraud from internal sources and allegations made under the whistleblowing provisions;Coordinating the Council’s participation in and delivery of the National Fraud Initiative;Embedding a dedicated Counter Fraud officer in the multi-disciplinary No Recourse to Public Funds (NRPF) teamand working in partnership with four other boroughs in tackling NRPF fraud and ineligibilityIdentifying and working on cases which will lead to Proceeds of Crime Act and civil recovery of assets obtainedthrough fraud; and,Reviewing and updating the Council’s Counter Fraud policies for approval by Corporate Committee and raiseawareness of the policies and role of staff/managers in preventing and reporting fraud.2

Page 752. Head of Internal Audit’s Annual OpinionI am satisfied that sufficient internal audit work has been undertaken to allow an opinion to be given as to the adequacyand effectiveness of governance, risk management and control. In giving this opinion, it should be noted that assurancecan never be absolute and represents an assessment of risks to be addressed. The most that the internal audit servicecan provide is reasonable assurance that there are no major weaknesses in the system of internal control.Basis of opinionMy opinion is based on:All audits undertaken during the year.Any follow up action taken in respect of audits from previous periods.Any significant recommendations not accepted by management and the resulting risks.The effects of any significant changes in the organisation’s objectives or systems.Any reliance that is being placed upon third party assurances, such as those from OfSTED, and control weaknessesidentified through External Audit procedures.In a change to previous years, the annual audit opinion is now being developed in line with the standard opinion typespromoted by the Public Sector Internal Audit Standards (which are set out in Annex 3).OpinionIn my opinion for 2013/14 I identified that the Council had maintained an adequate control environment. However,there were some risk that the system would fail to meet management’s objectives; the organisation needed to improvethe adequacy and effectiveness of governance, risk management and control arrangements as it embedded the neworganisational structure and cooperative commissioning approach and delivered further significant savings. In thiscontext, and using the PSIAS standard opinion types, our work during 2014/15 has identified that there are some majorweaknesses in the framework of governance, risk management and control and non-compliance with controls whichput the achievement of organisational objectives at risk. This is based on a number of reviews undertaken in specificareas through the year, although it is noted that we have undertaken other reviews where we have identified goodcontrols and governance arrangements in place. This means that there are key areas of focus for management toaddress over the coming months where low levels of assurance have been obtained. It is noted that while the numberof critical risk reviews has increased from the previous year, a key factor in the overall opinion, the proportion of highrisk reviews has reduced from the previous year. While we have experienced difficulties in closing off some reviewswith management we have also seen an overall improvement in management’s performance in implementingpreviously agreed actions for prior year reviews, particularly for high risk items.It is recognised that a key focus for the incoming Chief Executive who joined the Council in March 2015 is to improvethe organisation’s effectiveness through changes in structure, officer and member governance, management oversightand performance management arrangements. A number of measures have already been put in place or are due to beimplemented shortly which will strengthen governance, accountability and management oversight across the Council todrive through the required improvements.As a result of the above, it is my opinion for 2014/15 that major improvements are required to improve theadequacy and effectiveness of governance, risk management and control.I have reached this conclusion because:We have identified a number of high and medium risk rated weaknesses in individual assignments which webelieve are significant in aggregate to the overall quality of the internal control system; andWe have issued three critical risk rated reports, however these are not pervasive to the system of internalcontrol, with a number of reviews receiving positive assurance ratings due to good controls and governancearrangements being in place and improvements noted in the implementation of previously agreed actions.Please see Section 3: Summary of Findings and Section 4: Key Themes which summarise the nature of our findingsand key themes emerging from our work and which underpin this opinion. A summary has been included below butSections 3 and 4 should be read in full to understand our final Opinion.3

Page 76Governance, Accountability and Roles and ResponsibilitiesThere is a lack of clarity surrounding governance arrangements, accountability, associated roles and responsibilities.We raised this as an issue in the 2013/14 opinion and this continues to be a recurrent theme across our 2014/15reviews. Council structures have been formalised but these have not been consistently embedded across the Counciland in several instances we have found that oversight arrangements have not operating as effectively as possible.Assurance from other sourcesWe embed the three lines of defence into all of our Internal Audit work and take assurance from third party sources toprovide our Opinion. During 2014/15 we found some matters arising from three third parties (Ofsted, HMI Probationand External Audit) which identified some significant control failings which have impacted our overall Opinion. Thisincluded Ofsted rating Children’s Services as ‘Inadequate’, a HMI Probation report that although noting someimprovements since the last inspection in 2011 it still rated the Youth Offending Service as “poor performing” andexternal audit highlighting some concerns over the accuracy timeliness of billing to leaseholders. In 2014, Lambethentered formal monitoring by the ICO because of poor performance responding to FOIs. There has been significantimprovement in this area during the last year – performance is markedly improved and the backlog has been reducedto an acceptable level and the ICO has ceased formal monitoring.New financial systemsOracle R12 went live on 04/08/14. The transition to a new financial system represents a significant change for anorganisation due to the importance of accurate, reliable management information (to underpin decision making),changes to business processes and controls as well as the dependencies of other controls on the system.Our three reviews of Oracle have identified some weaknesses concerning segregation of duties, system access andsystem configuration which need to be addressed. The implementation of the new system has also identified issueswhere controls have failed due to behavioural and cultural issues where goods receipting and the procurement ofcontracts have not been undertaken in accordance with existing or revised requirements.Continuous Auditing and MonitoringThis is a key indicator of the strength of the control environment. Our latest report has identified that overall the controlenvironment is stable but there is some evidence of deterioration with five of 15 systems declining this period. This ispartly the result of changes to working practices and also changes to teams leading to a loss of knowledge.High and Critical Risk Audit ReportsWe have issued three critical risk and 10 high risk reports this year. These are not pervasive to the entire controlenvironment but are significant in aggregate. In addition, two schools audits were determined to represent critical riskand four were high risk.Implementation of recommendationsTimely implementation of recommendations is an indicator of the strength of an organisation’s control environment.There has been an improvement in the implementation of high risk recommendations identified through our plannedfollow up work. However, where we have revisited previously areas we have seen that a number of medium and lowerrisks have not been implemented following previous cross-cutting reviews. For example: all issues raised in our2013/14 review of Management Information were re-raised in 2014/15; non-performance of reconciliations has beenraised in the last 3 periods of Continuous Auditing and Monitoring (covering a period of 16 months); and ourGovernance review identified a number of outstanding recommendations from 2013/14 reports on OrganisationalCapability and Workforce Planning, Budget Monitoring and Risk Management.OtherRisk management, in particular completion and use of risk registers was a consistent theme across our auditsincluding (but not limited to) Public Health, Looked After Children, Commercial Properties, and Capital Assets –Transfer of Use. The Council’s risk appetite has not been updated in the year as recommended in our 2013/14 reviewdespite the efforts of Risk Management in trying to progress this.Our reviews of two large repairs contracts managed by Lambeth Living on the Council’s behalf identified weaknessesin the contract management and procurement practices employed by the Council’s ALMO (Arm’s Length ManagementOrganisation). In particular, ensuring these processes extract value for money and that contract management practicesare invoked fully to manage significant contractors.Good practiceOur opinion also considers good practice identified for example improved performance across Schools and Projects &programmes and low risk reports issued for Schools Admissions and Data Quality – Published Data. The Council alsoretained its Public Services Network (PSN) accreditation which evaluated the IT infrastructure security arrangements.The Council continues to invest in fraud prevention and fraud detection, which is borne out in the improved outcomesachieved by the Counter Fraud Team over the past year.4

Page 773. Summary of Internal Audit findingsDuring the year we have continued to focus on ensuring appropriate coverage of core systems and systems identified asHigh risk in the Annual Internal Audit Plan, along with a range of reviews to provide assurance over key programmes andprojects across the Council.The table below summarises the report classifications for the risk-based audits undertaken in 2014/15, excluding schoolsaudits and systems covered by the Continuous Auditing and Monitoring programme, which are shown separately in thisreport on page 9. This table shows that the proportion of Critical and High Risk reports has reduced slightly to 42% in2014/15 compared to 45% in 2013/14, although three reviews have been identified as Critical risk in 2014/15. Theproportion of Medium Risk reports and Low Risk reports is consistent with the previous year.Number of Reviews (excluding Schools and Continuous Audit)Report classification 2014/15 2013/14 2012/13Low Risk 3 10% 4 11% 3 13%Medium Risk 15 48% 17 45% 9 39%High Risk 10 32% 16 42% 10 43%Critical Risk 3 10% 1 3% 1 5%Subtotal 31 38 23Programme/ProjectAssurance Diagnostic Scores7 9 -Grant Claims certified 7 6 -No Risk Rating and Advisory 13 12 10Projects in progress 1 1 8Total 59 66 41Priority of recommendationsAt the time of writing we have made a total of 181 audit recommendations in our reports (both draft and finalised),excluding schools (2013/14: 191 recommendations), of which 15% were classified as Critical or High risk (2013/14: 25%).In Section 4 we have set out the key themes and findings identified during our audit work for 2014/15.Detail of the report ratings and priority of recommendations for each audit can be found at Annex 1.5

Page 784. Key Themes and FindingsInternal Audit – Executive SummaryThe Council has gone through a significant change during 2014/15, including: The implementation of an upgrade to the finance system, Oracle R12;Ongoing embedding of revised operational structures;Changes to delivery mechanisms under the Cooperative Council strategy; andResponding to continued financial pressures (and associated savings requirements) across local government.On the whole the core internal control environment has remained stable in the period but this level of change anduncertainty has led to some deterioration across the organisation this period. This is demonstrated through a number ofkey themes and findings which have emerged across out internal audit work. These themes and findings underpin theoverall Opinion and have been set out below.Governance, Accountability and Roles and ResponsibilitiesOne of the key themes contributing to our Opinion is the lack of clarity surrounding governance arrangements,accountability and associated roles and responsibilities. We raised this as an issue in our 2013/14 annual opinion andthis continues to be a recurrent theme across our 2014/15 audit programme.Although the Council has formalised its revised structure, this has not consistently been embedded across theCouncil and in several instances we have found that oversight arrangements have not operating as effectively aspossible. For example:Capital Assets – Transfer of Use – This review identified that the Council’s oversight responsibilities for assetstransferred to third parties are unclear. Roles and responsibilities have not been defined and it is not always clear howthese are aligned to formal terms and conditions. This has resulted in inconsistent interpretation of the Council’s healthand safety and maintenance responsibilities.Adult Social Care - Social Work within Integrated Health Teams– We found roles and responsibilities for theCommissioning and Delivery clusters in relation to the partnership with South London and Maudsley NHS Trust (SLAM)are not clear and the Council’s role concerning performance management and shaping the partnership has not beendetermined and established.Contract Reviews – It is a cluster responsibility to ensure that contracts with a value exceeding £500k are beingcontract managements effectively. Our review found that oversight arrangements of this process are unclear; we wereunable to establish how cluster-review is escalated to a high level and there does not appear to be a process for ongoingoversight and monitoring of strategically significant contracts. Given the level of external spend with third parties, andincreased financial pressures, it is vital the Council monitors contracts effectively to maximise efficiencies, ensure valuefor money and enable processes to be as effective as possible.Looked after Children – We did not see any evidence of how performance monitoring, in particular under-performance,is being used to drive improvements and ensure the service is operating as effectively as possible. Furthermore, issuesand action arising from audits performed by the Quality Assurance team were not retained and there was no record ofplanned actions to rectify these. Both of these areas were cited as key failings as part of an “inadequate” Ofsted reportreleased after our fieldwork we performed.Continuous Auditing and Monitoring – Our most recent continuous auditing and monitoring report over key financialsystems found an increase in the number of control design issues and operating effectiveness issues i.e. where controlswere no longer in place or were not working as designed. A frequent reason cited for this was because it was not anindividual’s or department’s responsibility and in some instances we could not locate the owner for this control e.g.reconciliation between Housing Benefits and Housing Rents system.It is vital that lines of responsibility and accountability are clear, both during the transition and as part of business-asusual.This needs to include an effective framework for providing assurance (often referred to as the three lines ofdefence) to senior management, Members and citizens: service management, corporate/senior managementoversight and independent assurance provided by Internal Audit.Assurance from other sourcesAs noted above, we embed the three lines of defence into all of our Internal Audit work, as part of this we haveperformed an Assurance Mapping exercise so that we can seek to place reliance on other forms of assurance wherepossible: this ensures we focus our resources on areas which have most exposure to give the Council an efficientand effective audit plan.6

Page 79In compiling this Annual Report, I have taken account of other sources of assurance in arriving at my overall opinionfor 2014/15. These sources include, but are not limited to: the draft Annual Governance Statement compiled by theRisk Manager with assistance from officers across the Council and in consultation with senior management; reportsby officers to Corporate Committee and other member groups on matters including pensions and treasurymanagement, risk management, human resources, health and safety and complaints; reports issued by externalregulators such as Ofsted; integrated performance management that combines management information includingperformance, finance, risk, stakeholder feedback; reports by other external bodies regarding the Council’s system ofinternal control such as the ISA260 report issued by External Audit.During 2014/15 we found some matters arising from three third party assurances which have impacted our overallOpinion.OfstedOfsted’s February 2015 inspection of Children’s Services awarded an overall opinion of “inadequate”. Theinspection noted: “widespread or serious failures in the delivery of services for looked after children which resultin their welfare not being safeguarded and promoted. Leaders and managers have not been able to demonstratesufficient understanding of failures and have been ineffective in prioritising, challenging and makingimprovements in relation to looked after children services.” As noted above, we identified some of these failingsin our 2014/15 review of Looked After Children.External AuditThe Council received an unqualified audit opinion for 2013/14; however, some significant control weaknesseswere highlighted in their External Audit Report concerning the billing of Section 20 charges to leaseholders. Thisincluded the potential overstatement of balances and untimely invoicing. This is consistent with the findings fromour review of S.20 Leaseholders.The External Auditors also identified capacity issues within the Council’s finance team that undermined theCouncil’s ability to meet key deadlines such as certifying the accounts in accordance with the timescales set byAccounts and Audit Regulations. Management have focused on improving performance and progress towardscompletion of the 2014/15 accounts.HMI ProbationIn 2011, the Lambeth YOS was inspected by HMI Probation. The review identified the YOS at Lambeth as ‘poorperforming’ and issued a set of eight recommendations to improve the service going forward.A review performed in the current year by HMI Probation found the service was again “poor performing” althoughnoted some improvement. This is consistent with the findings of a follow up audit performed in the year that foundidentified issues with case assessments and case documentation.Other findingsSome other key findings arising from our audit work, which have contributed to our Opinion are:oooPhysical Information Security – a review of three core buildings identified a range of practice from critical tomedium risk, with a number of issues being identified including physical access controls not operatingeffectively, sensitive information and records not being stored securely, confidential waste not being treatedappropriately.Risk management – risk management, in particular completion and use of risk registers was a consistenttheme across our audits including (but not limited to Public Health, Looked After Children, CommercialProperties, and Capital Assets – Transfer of Use).In particular, our reviews of Commercial Properties and Capital Assets - Transfer of Use both identified issuesaround how the Council manages the risks arising from transfers of property to third parties and highlightedissues around commercial decision making and the completeness and accuracy of the Council’s underlyingproperty records. This could also impact the accuracy of Council’s financial statements.Contract management – our reviews of two large repairs contracts managed by Lambeth Living on theCouncil’s behalf identified weaknesses in the contract management and procurement practices employed bythe Council’s Arm’s Length Management Organisation. In particular, ensuring these processes extract value formoney and that contract management practices are invoked fully to manage significant contractors.7

Page 80oImplementation of recommendations – timely implementation of recommendations is an indicator of thestrength of an organisations control environment. There has been an improvement in the implementation ofhigh risk recommendations. However, where we have revisited previously audited areas as part of our2014/15 audits we have seen that a number of medium and lower risks that have not been implemented. Forexample: Management Information – all issues raised in 2014/15 were also raised in our 2013/14 report. Governance (and performance) – the Council overall is compliant with CIPFA’s good practice but we foundsome areas for improvement regarding Organisational Capability and Workforce Planning, BudgetMonitoring, Risk Management and Governance which were also raised in 2013/14. Continuous Auditing and Monitoring – Lack of performance of reconciliations has been raised as an issuefor the last 3 periods.New financial systemsOracle R12 went live on 04/08/14. The transition to a new financial system represents a significant change for anorganisation due to the importance of accurate, reliable and appropriate information, changes to business processesand controls as well as the dependencies of other controls on the system.We have not identified significant weaknesses in the system but the following items which have been considered informing our opinion.During our review of JPB Controls Assessment, we ran a high level analysis on user access design, based onthe responsibilities. We found responsibilities that may be able to access abilities within other Councils.Our Segregation of Duties review (draft) identified some further violations across business processes. Webelieve management should implement a plan to review these as well as to re-review those already covered inthis report. Management should document any mitigating control points with clear lines of responsibilities. Aninformed decision can then be made as to the materiality of the risk and its treatment.Our Hierarchies report (draft at time of writing) identified that there are no well-defined change controlprocedures being followed for changes related to approval hierarchy components. We also noted that theaverage time for requisition approval is 1.7 days. This does not suggest that the average requisition is subject tolong approval times but we did however 32 requisitions with an approval time of over 30 days which should beinvestigated by management. These had a total value of £11.5m.Continuous Auditing and Monitoring (CAM)CAM is the process of ongoing testing of key controls to assess whether they are operating effectively, and to flagareas and report transactions that appear to circumvent control parameters. CAM uses a combination of manualtesting and data mining tools to extract data from the Council’s IT systems, using predetermined parameters to checkthat controls are operating as designed. 2014/15 was the fifth year in which we have applied continuous auditing andmonitoring. The programme now covers the following 15 systems:PayrollCouncil TaxAccounts payableNational Non-Domestic RatesAccounts receivableHousing RentsCashHousing RepairsParkingFramework FinancialsTemporary AccommodationContract MonitoringHousing BenefitsPensions AdministrationTreasury and Pension Fund ManagementCAM results are one of the key measures/indicators of the strength of the control environment. Our latest report hasidentified that overall the control environment is stable but there is some evidence of deterioration with five of 15systems declining. This is partly the result of the implementation of the new finance system – Oracle R12 – whereand partly the result of changes to teams which has led to a loss of knowledge. For example issues were identified inthe running of reports in relation to duplicate payments, retrospective purchase orders and supplier amendmentsupon the upgrade to Oracle and these controls were not embedded into working practices upon the upgradeoccurring.8

Page 81The table on the following page shows the key systems that have been audited during 2014/15, the overallclassification of those systems and a comparison to the overall classification in 2014/15.SystemOverallClassification2014/15OverallClassification2013/14Direction of Travel2013/14 to 2014/15Payroll Medium • Low • Accounts payable Medium • Medium • Accounts receivable Medium • Low • Cash Medium • Low • Parking Medium • Medium • Temporary accommodation Medium • Medium • Housing rents Medium • Medium • Housing repairs Medium • Medium • Council Tax Medium • Low • National Non-Domestic Rates Medium • Low • Housing benefits Low • Medium • Contract monitoring Medium • High • Framework Financials Medium • Medium • Pension Administration Medium • Low • Treasury and Pension Fund Management Low • Low • Key: Deteriorated Improved No ChangeHigh and Critical risk reportsAs noted on page 2 this report also considers the number of high and critical risk reports we have raised and theiroverall impact on the control environment. As part of the internal audit process we work with management todetermine agreed actions to alleviate the control weaknesses identified. A summary of the key issues arising from theHigh and Critical risk reports has been presented as follows:ReportKey issues affecting the OpinionCapital Assets:Transfer of Use(Critical ••)Adult SocialCare: SocialWork inIntegratedHealth Teams(Critical ••)Asset transfers to the community have occurred through the Children’s Services Early Adopterprogramme as well as through the Communities team within Commissioning. Transfers havenot been coordinated using a consistent methodology and there is no evidence todemonstrate sharing knowledge or best practice between the two streams. There is limitedoverarching guidance in place to ensure all required controls are considered and in place;Annual health and safety audits and quarterly monitoring were not consistently performed inaccordance with requirements and there was no evidence of significant health and safetyissues being followed up; andMaintenance work identified prior to the handover of asset or structural issues are theresponsibility of the Council. There is a backlog of required maintenance and there have beensignificant delays in performing required works.This review was highlighted as an area of concern by management and the scope of thereview was tailored around this.The Section 75 (S75) agreement is the basis of the partnership between Lambeth Council (theCouncil) and South London and Maudsley NHS Trust (SLAM) to provide mental healthservices to adults in the borough. We noted that there is currently no up to date, signed S75agreement in place;No performance information on mental health services has been reported to the Council bySLAM for 2014/15. There are no targets in place for mental health and performance is notreported to management;Council staff “made available” to SLAM and work in integrated teams within SLAM are notformally seconded to SLAM and there is no formal agreement that sets out disclaimers. Ifthere were an issue with the work performed by a Council member of staff working at SLAM itis unclear whether the Council or SLAM would be legally responsible; and9

Page 82PhysicalInformationSecurity (draft)(Critical ••)CommercialProperties(High •)Contractmanagement(High •)Foster CarerRecruitment(High •)RepairsContract (LL)(High •)Public Health(High •)Section 20-Consultationwith tenants(High •)TMO reviews(Roupell Park,Cowley,WalthamEstate, HollandRise) (High •)Partnership meetings have not taken place in accordance with requirements to ensure there issufficient oversight of the partnership.A review of three core buildings identified a range of practice from critical to medium risk, witha number of issues being identified including physical access controls not operatingeffectively, sensitive information and records not being stored securely, confidential waste notbeing treated appropriately.The Council performs property management services for a small proportion of the portfolio,mainly relating to properties rented out to voluntary and community organisations. Propertiesrented out to third parties did not have an underlying rental agreement outlining the rentalamounts and the agreed use of the property and in certain instances the Council is chargingbelow market rent but there is no documented rationale or justification to support this decision.Council records with regards to commercial properties are not up to date and not reconciled tothe accounting fixed asset register. This means there is a lack of consistency in underlyingrecords maintained and could lead to inaccuracies in the financial statements.Supporting evidence was not obtained to verify performance information produced bysuppliers for any of the contracts sampled. Without this validation check, there is a risk thatdata sent by contractors is inaccurate or incomplete meaning that performance reporting isunreliable or that data is manipulated by contractors to avoid possibly penalty payments forpoor performanceVetting checks need to be performed prior to an individual being recruited as a foster carer.These checks are largely determined by Department for Education (DfE) statutoryrequirements. Evidence to demonstrate the performance of required vetting checks andongoing statutory checks was not consistently retained.There are discrepancies between the KPIs defined in the contract, the annual Task Order andthose which are monitored as part of regular reporting. The current process also allows thecontractor to input the works completion date onto the system but there is no check of whetherthis is accurate which could mean that performance information is not accurate.Our review identified a lack of clarity around internal governance arrangements, structures,roles and responsibilities in light of the transfer of functions into the Council. This makes itdifficult to understand how public health is being managed on a day-to-day basis and wherekey decisions are being made.No invoices have been raised by the Home Ownership team for Section 20 qualifying worksundertaken in either 2012/13 or 2013/14. This is because the Home Ownership team have notreceived information relating to the costs incurred for Section 20 work from Property Services.Without this information the Home Ownership team are unable to calculate an accurate finalaccount to each leaseholder, including full details of payment options available.Various issues identified upon considering the design and operating effectiveness of controlsaround policy and procedure notes, recruitment processes, repairs and maintenanceprocedures, procurement management, cash handling and the follow up of prior periodrecommendations.Good PracticeThe following areas of good practice have also been considered in forming our Opinion.Governance (and performance) - our review identified 5 out of 17 areas as being fully compliant with the bestpractice set out in CIPFA’s “Delivering Good Governance in Local Authorities”, with suggested improvementsbeing made other areas and no areas identified as being non-compliant.10

Page 83Low risk reports were issued in relation to Schools Admissions and Data Quality - Published Data.There has been an improvement in the Schools audits performed in the year with a decrease in the proportion offindings classified as Critical or High risk reducing from 24% in 2013/14 to 11% in 2014/15.Both of our project and programme management reviews (Customer Access and Your New Town Hall) showan improved score.A framework of integrated assurance reporting has been introduced in 2014/15 which has embedded financial,performance, risk management and audit information within management reporting. This facilitates a more holisticpresentation of the assurance position and enables senior management and members to focus on key areas ofconcern.The Council retained its Public Services Network (PSN) accreditation which evaluated IT infrastructure securityarrangements.Conformance with standardsAs Head of Internal Audit I can confirm that the Internal Audit Service, which comprises the In House Internal Audit teamand our external provider, PwC, has carried out an assessment to ensure that the Internal Audit Service is effective whencompared against the standards set by the Chartered Institute of Public Finance and Accountancy. I undertake periodicreviews of the quality of internal audit work completed and also review all draft and final reports issued. In delivering theInternal Audit Service, in planning, conducting and reporting on reviews and in compiling this Annual Report, we havedone this in conformance with the requirements of the Public Sector Internal Audit Standards (PSIAS), published by theInstitute of Internal Auditors, which came into effect on 1 April 2013 and the subsequent Local Government ApplicationNote in respect of PSIAS published by CIPFA.. Under pan-London arrangements agreed in 2013, a peer review of theCouncil’s Internal Audit service against the PSIAS was conducted in March 2015 by the London Borough of Hackney.The review found that Internal Audit ‘fully conforms’ to the PSIAS in 12 of the 17 areas assessed, with minorimprovements being suggested in the remaining five areas which were assessed as ‘generally conforms’. The overallassessment concluded that the Internal Audit service ‘generally conforms’ to the PSIAS, with no areas of nonconformancebeing identified. Actions are already being put in place to address the suggested enhancements identified.Schools auditsDuring 2014/15 we undertook 22 school audits, nine more than the previous year. Our work involved carrying out targetedinternal audit testing to assess the adequacy and effectiveness of financial management and other risk assessed subprocesseswithin each school visited. Our review was based on CIPFA guidance regarding schools audits, and aligns tothe areas covered by the Schools Financial Value Standard.Schools Overall Report Classification:The following trend table provides an overview of the direction of travel for a 3-year period:Number of reviewsReport classification 2014/15 2013/14 2012/13Low Risk 8 36% - - 1 8%Medium Risk 8 36% 6 46% 6 50%High Risk 4 18% 7 54% 4 34%Critical Risk 2 10% - - 1 8%Total 22 13 12One of the two critical risk reports is based on a critical risk finding and a high risk finding; the other report is based onfour high risk findings.Schools Recommendation AnalysisWe made a total of 140 audit recommendations for schools (2013/14: 113 recommendations, 2012/13: 127recommendations); of which 11% were classified as Critical or High risk (2013/14: 24%, 2012/13: 13%). A further 19advisory recommendations were made and in 149 instances no exceptions were identified, with the majority of thesebeing in combined assurance areas: Budgetary Control (Schools Finance), Health & Safety, Risk Management and Data11

Page 84Protection. A number of no exceptions were recorded in areas tested by Internal Audit: Inventory, Employees (Payroll)and Invoiced Expenditure the main areas.There has been a decrease in the percentage of High risk findings from the previous year. Controls around employeeappointments, payments for goods and services, contract management and approval are currently the main areas ofconcern.A summary report will be issued to all schools summarising the findings of the individual reviews and the actions whichgoverning bodies should take to ensure that controls in these areas are appropriate and effective. This is an importantaspect of our work as it gives governing bodies and school management teams the opportunity to review and improvetheir existing arrangements prior to audit and improve the level of assurance they are likely to receive.The schools audit programme and approach have been reviewed and it is intended that 25 schools will be audited peryear from 2015/16 onwards utilising the same total audit days allocated to schools in the previous year. This will ensurethat each school is audited within a three year cycle.Implementation of internal audit recommendationsA programme of implementation reviews was carried out in 2014/15 to assess the implementation of Critical and Highpriority audit recommendations. The table below shows the number of recommendations reviewed by the in-house auditteam and the percentage of those which are evidenced as being implemented/partially implemented or not implemented,by level of risk.TotalRecs reviewedRecsImplemented%Recspartiallyimplemented%Recs notimplementedCritical Risk 2 2 100% (100%) 0 0% (0%) 0 0 (0%)High Risk 48 38 79% (62%) 8 17% (36%) 2 4% (2%)Medium Risk 161 138 86% (57%) 19 12% (37%) 4 2% (5%)Low Risk 92 80 87% (92%) 8 9% (8%) 4 4% (0%)Totals 303 258 85% (63%) 35 12% (34%) 10 3% (3%)* Comparative percentage figures are provided in brackets for 2013/14 implementation reviews reported in theprevious year’s annual report.Based on the data in the table above, overall, management has implemented or partially implemented 97% (same as2013/14) of all recommendations reviewed with only 3% having not been implemented. There has been an improvementin the proportion of recommendations fully implemented (up from 63% to 85%). It is crucial that High Priorityrecommendations are implemented promptly if the Council is to improve its overall control environment and therefore weare pleased to note this level of performance has been maintained during 2014/15. No instances were found wheremanagement stated that they had implemented a recommendation but were not able to evidence this.%12

Page 85Counter Fraud ActivityThe Council continues to invest appropriate resources into the prevention and detection of fraud and in pursuing thosecommitting fraud against to Council to recover money and assets lost through fraud and profits made by fraudstersthrough their unlawful activities. As a result, the improved outcomes for 2014/15 over the previous year in bothpreventing and detecting fraud demonstrate the value and necessity of the investment made in counter fraud activitywhen the Council has reduced resources to provide services to citizens and significant savings to deliver in the future.The Counter Fraud Team that deals with local taxation, housing and internal fraud, along with the teams investigatingparking and insurance fraud, have had a successful year and have once again demonstrated the value that they bring toLambeth. This is apparent when we take into account that the teams have identified £4,653,243.59 from overpaymentsand savings, an increase on 2013-14 of more than 50%. In addition, a total of 48 individuals were given official warnings,31 persons found to have been engaged in fraudulent activity have been sanctioned and a further 69 were prosecuted.The deterrent effect of this activity should not be underestimated.The investigation of benefit fraud transferred from Lambeth to the DWP Single Fraud Investigation Service (SFIS) on1 February 2015. Lambeth retains responsibility for the investigation of council tax support fraud.Successes and OutcomesThe following table contains details of successful outcomes by the Counter Fraud Team, along with the work undertakenby the Insurance Investigators and the Parking Investigations Team:Housing FraudRecommendations for Recovery 139Properties Recovered 93Estimated saving from RecoveriesProsecutions Secured 7RTB discounts prevented 10£1.674mValue of RTB discounts prevented £987,700Benefit FraudProsecutions 17Sanctions (cautions and administrative penalties) 30Value of fraudulent overpayments identified £977,544Internal FraudInvestigation reports issued 37Dismissals/contract terminations 2Resignations taken after investigation 1Written warnings issued 1Management action 3No further action 3Criminal prosecution (third party) 2Advisory/proactive reviews 12Prospective candidate not selected 1Investigations pending outcome 12Insurance FraudFraudulent insurance claims prevented 24Value of fraudulent claims prevented £566,00013

Page 86Parking FraudBlue Badges recovered 64Estimated annual saving £448,000Successful prosecutions 52Cautions issued 1The Counter Fraud Team has had a successful year in spite of the challenges surrounding the transfer of the benefitinvestigations function to SFIS. The team still managed exceed the targets set for benefit fraud by securing sanctions orprosecuting 47 offenders and identifying almost £1m in fraudulent overpayments. Internal Audit and Counter Fraud (IACF)also recovered 93 social housing tenancies and completed 37 internal investigations.Housing FraudHousing fraud is the most resource intensive function carried out by the fraud team in Lambeth, as it is in many otherLondon boroughs. Councils have recognised the need to invest in tenancy investigations given the widespread incidenceof tenancy fraud, particularly in the London area where the differential between social housing rents and those in theprivate rented sector is greatest.Lambeth was at the forefront of this change in focus introducing a tenancy fraud team more than ten years ago. The Cutthe Queue project commenced in October 2011 when Lambeth took the decision to provide more resources to tackle withtenancy fraud. The project ran through until March 2013 was a great success resulting in 83 property recoveries. The endof the project saw an increase in funding from the Housing Revenue Account to support a larger core team of tenancyinvestigation officers.The core team has dealt with all reactive referrals during 2014-15, in addition to carrying out proactive exercises intosubletting of Lambeth stock and right to buy applications.A significant development in recent months was the introduction of the Prevention of Social Housing Fraud Act 2013, on15 October 2013. This makes subletting a criminal offence and allows councils to prosecute those found to be sublettingtheir property on or after 15 October 2013. Unlawful profit orders can also be applied to those who are found to havesublet their tenancies for a profit. During 2014-15 IACF prosecuted 7 persons that had committed tenancy fraud; threeinvolving right to buy applications and another four that had sublet their properties. Of these cases only one wasprosecuted under the new legislation as the others involved offences prior to October 2013. IACF is currently pursuing anumber of cases where proceedings under the Prevention of Social Housing Fraud Act will be taken.Case StudyA recent completed investigation saw a former tenant who had fraudulently purchased her Lambeth property jailed. JudyThomas bought a property in Heath Road from Lambeth council under the right to buy scheme in 2003 with a discount of£38,000. However, it became apparent several years later that Thomas had not been resident at the Heath Road propertyat the time of the purchase. In order to support her claim that she wasn’t liable for the council tax arrears, Thomas hadprovided evidence including copies of a tenancy agreement and bank statements showing rent being received for theHeath Road property proving that she had been renting out the property since 2001. This invalidated the right to buy asshe was not resident in the property when the purchase was made and was therefore in breach of her tenancy.The case was referred to the Lambeth Counter Fraud Team to investigate who were able to establish that Thomas hadbeen living with her husband in Ilford since 1994. As Thomas had been subletting the property her declaration that thiswas her principal home was proven to be false and consequently the case was referred to the council’s legal team forcriminal prosecution. She was sentenced on 15 December 2014 to 18 months in prison. Legal Services is currently takingaction against Thomas under Proceeds of Crime legislation in order to recover the criminal benefit she has obtained.14

Page 87DCLG FundingIn early 2013 Lambeth secured funding of £200,000 providing two dedicated officers to carry out investigations on behalfof housing associations over the period from June 2013 to March 2015. During the project IACF worked with the followingfive housing associations: Amicus Horizon, Family Mosaic, Hyde, Notting Hill and Peabody.During the period IACF seconded tenancy officers from both Notting Hill Housing and Amicus Horizon to work asinvestigation officers, enabling them to transfer the skills learned from Lambeth investigation officers to their colleagueswhen returning to their substantive posts.As a result of the project IACF has to date recovered a total of 40 properties on behalf of the housing associations. Inaddition, there are 30 cases that have been recommended for recovery and are being dealt with by the housingassociations and a further 16 live investigations. IACF anticipates that the target to recover 70 properties set at thecommencement of the project will be exceeded once all live cases have been completed.The case referred to previously that was prosecuted under the Prevention of Social Housing Fraud Act originated fromthis project and demonstrates joint working between IACF, Lambeth Legal Services and Amicus Horizon.Case studyOwen Simms, a tenant of Amicus Horizon, sublet his property in March 2014. The person he sublet the property tocontacted Amicus when, after only a week in the property, he discovered that it was a social housing property and notowned by Simms as he had been led to believe. IACF, working in partnership with Amicus Horizon, investigated the caseand obtained sufficient evidence to prosecute Simms. The case was prosecuted by Lambeth Legal Services and on 18November 2014 Simms was sentenced in his absence. He was fined £1,100 and ordered to pay costs of £500.Right to BuyThe right to buy (RTB) maximum discount has increased significantly in recent years, from £38,000 to £102,700. This hasproved to be extremely beneficial to tenants that wish to purchase their home, but has also been seen as an incentive forfraudsters to obtain a significant discount when purchasing a property that they have no entitlement to purchase.IACF has worked closely with the RTB Team in preventing ten applications from going ahead and recovering threeproperties in the process. IACF also prosecuted three persons for RTB fraud.Case studyIn one case, Dr Enamuna Enobakhare applied to purchase a Lambeth property on the Heath Road estate under RTB witha discount of £100,000. The case was referred to IACF as there were concerns that Enobakhare was subletting theproperty. IACF established that he was actually living in Romford at a property owned by his wife, was registered to votethere and was also registered there with the NHS, insurance companies, various government agencies and his employer.Enobakhare claimed he was living the Lambeth address and was therefore entitled to purchase it as a discount under theRTB scheme. However, he was interviewed under caution by Lambeth officers and the weight of evidence against him ledto his right to buy claim being refused. When the case was heard in the civil court he was ordered to give up the Lambethtenancy and pay costs of £7,321.Lambeth then instigated criminal proceedings against Enobakhare. In court he admitted failing to disclose to the Councilthat he was not living at the Lambeth property. He was convicted at Blackfriars Crown Court on 6 February 2015 and wassentenced to carry out 80 hours of unpaid work and ordered to pay costs of £3,000 and a victim surcharge of £60.15

Page 88Benefit FraudThe benefit fraud function within IACF had a very successful year, despite extremely limited resources and having benefitinvestigations transferred to SFIS on 1 February 2015. The team secured 30 sanctions and 17 prosecutions and identified£977,544 in fraudulent overpayments in the process.Case studiesIn one case investigated jointly with DWP, Antoine Audon was prosecuted for failing to declare significant levels of incomefrom his successful career as a DJ. He was found guilty of fraudulently obtaining benefits from both DWP and Lambeth inexcess of £40,000 and was sentenced to 9 months in custody.In another case prosecuted by the Crown Prosecution Service, Maria Lucas was found to have claimed benefits in herlate mother’s name. Lucas failed to report that her mother had passed away and claimed benefits from DWP andLambeth in her name. She fraudulently claimed in excess of £25,000 from Lambeth in housing and council tax benefits.On 7 October 2014 she was sentenced 12 months in custody for offences against Lambeth and DWP.The case involving Diane Ashley and Rudolph Pink was finally resolved in March 2015, three years after conviction. Thecase had been featured previously on the BBC TV series, Saints and Scroungers. Diane Ashley and Rudolph Pink failedto declare they were a married couple and lived together whilst claiming benefits separately, each claiming that the otherwas their landlord. They also failed to declare ownership of several properties in the South East. They were bothconvicted of benefit fraud totalling £125,000 and were convicted in April 2012. Pink was sentenced to 10 months incustody whilst Ashley was given a suspended sentence.In March 2015 the Council secured, under Proceeds of Crime legislation, a total order including confiscation,compensation and costs of over £229,500. Through this the Council is due to receive a confiscation payment of around£35,000 which has to be paid by the defendants within the next 12 months.PublicityAll prosecutions deemed suitable are given appropriate publicity via the Communications Team.In addition to previous instances of working with the BBC on Saints and Scroungers, IACF has been working in recentmonths with two other forthcoming BBC productions. Britain on the Fiddle is a prime-time production that should betelevised later in the year and will feature benefit investigations carried out by IACF officers. IACF has also worked withanother production company who are making a BBC programme dedicated to tenancy fraud. The yet to be named seriesis likely to be on our screens in a daytime slot later in the year and will feature several Lambeth cases.Internal FraudThe Internal Fraud officers at Lambeth have successfully investigated all allegations received. In addition, the SeniorInvestigator on the team who is accredited as a financial investigator has worked on several financial investigationsacross IACF, Planning and Trading Standards.A recent investigation carried out by the Internal Fraud Team has highlighted a long term, high value fraud. A datamatching exercise linked an employee’s details with self-directed support payments. A lengthy and complex investigationwas conducted and established that an estimated £280,000 in public funds had been misappropriated. This relates to justone care package paid out in respect of one Lambeth family. Details have recently been referred for Lambeth LegalServices to consider bringing criminal charges. Subsequently, IACF has launched further investigations into 3 more carepackages where fraud is suspected.Payments of self-directed support are often significant in value and, where such large amounts of money is available;there is always the potential for fraud. IACF are liaising with management to ensure that correct processes are in place toensure that payments are made appropriately and all suspicions of fraud referred to IACF.16

Page 89Seconded Police OfficerLambeth has utilised the services of a seconded police officer since 2006. The current officer has been working within theInternal Audit and Counter Fraud Service since January 2011. This arrangement continues to be a great success. Overthe past 12 months the officer has led on or assisted in the conclusion of cases which have resulted in fraud, savings andrecoverable assets in excess of £469,000 being identified and recovery action planned or in progress, along with therecovery of 7 social housing properties. Current cases in which the officer is working on involve potential fraud, lossesand savings in excess of £562,000 and have led or are likely to lead to the recovery of 8 Council housing properties(estimated annual saving of £142,000, based on previous Audit Commission assessment).MOPAC FundingIACF has had a member of their team working closely with Lambeth’s Tackling Gang Violence Team since May 2013; aproject funded by the Mayor’s Office for Policing and Crime. The officer has been involved in various exercises with theteam in addition to carrying out numerous investigations in support of Police investigations into criminal activity by gangmembers. The project has been further extended into 2015-16 with the IACF officer continuing to carry out workexclusively for the Gang Violence Reduction Team and working colleagues from the Metropolitan Police.Insurance FraudThe insurance fraud function has successfully prevented 24 claims with a value of £566,000. This demonstrates the valueof the service, which has two dedicated investigators carrying out investigations into potentially fraudulent claims.Case studyOne case involved a claimant by the name of Barry Upfold who alleged that he had tripped on a damaged pavement inLambeth and suffered a knee injury. At the time there was insufficient evidence to deny the claim and Lambeth settledwith a payment of £16,350.At a later date information came to light that Upfold had made a similar claim to Croydon using a different solicitor. Hewas arrested by the seconded police officer and subsequently charged with two counts of fraud. He was found guilty oftwo counts of fraud at Inner London Crown Court and on 22 September 2014 was sentenced to 11 months imprisonmentsuspended for two years. Upfold was fined £1,000 and ordered to pay Lambeth compensation of £2,500.Parking FraudThe Parking Investigations function has successfully prosecuted 52 offenders whilst warning or cautioning 49 otherswhere prosecution wasn’t deemed to be the most appropriate course of action.Case studyOne successful prosecution involved a person who was found to be using an expired blue badge on 9 April 2014. Avehicle was found to be parking in a disabled bay in Gresham Road whilst displaying an expired badge. The badge hadexpired on 22 December 2013. The badge was registered to Marion Morris. Ms Morris was invited to attend interviews butfailed to attend. She was convicted in her absence; fined £1,200 and ordered to pay costs of £316 and a victim surchargeof £20.17

Annex 1: Detailed analysis internal audit reviews 2014/15Deteriorated Improved No ChangeProject Progress ReportclassificationCROSS CUTTINGDirection of TravelRecommendationsC H M L AdvisoryBudget Monitoring Final • Medium N/A – our previous review was Advisory - - 4 1 -Contract reviews Final • High risk Deteriorated - 1 5 1 -Review of Matrix system Final • Medium N/A – no previous review performed - - 4 - -Quality of Management Information Final • Medium No change - - 2 - -Data Quality – published data Final • Low N/A – no previous review performed - - - 3 -Capital Programme – Additional plan item Final • Medium N/A – no previous review performed - - 3 2 -Capital Assets – Transfer of Use Draft •• Critical N/A – no previous review performed - 3 5 - -Governance (and Performance) Final • Advisory N/A - management letter - - - - -Target Operating ModelDeferred to15/16N/A - deferredN/A – deferred to follow on from the Governancereview- - - - -Page 90Data Quality – Performance IndicatorsDeferred to15/16N/A - deferred N/A - deferred - - - - -Creative Commissioning – managing risks and opportunities Cancelled N/A -cancelledCitizen Engagement Cancelled N/A -cancelledRisk Management Cancelled N/A -cancelledFinance Structure Cancelled N/A -cancelledCasework Management Cancelled N/A -cancelledTotal FM Contract Cancelled N/A -cancelled18N/A – this review was cancelled as this area wasreviewed as part of our review of CommissioningN/A – this review was cancelled as elements wereincluded in Governance and performanceN/A – this review was cancelled at request ofmanagementN/A – this review was cancelled at request ofmanagement and replaced with the CapitalProgramme reviewN/A – this review was cancelled at request ofmanagementN/A – this review was cancelled as an independentthird party was commissioned by the Council toreview this contract- - - - -- - - - -- - - - -- - - - -- - - - -- - - - -

Project Progress ReportclassificationEthical Governance Cancelled N/A -cancelledCORE PROCESS REVIEWSDirection of TravelN/A – this review was cancelled as elements wereincluded in Governance and performanceRecommendationsC H M L Advisory- - - - -Looked after Children and Payments under Section 17 Final • Medium N/A – no previous review performed - - 4 1 -Commercial Properties Final • High N/A – no previous review performed - 2 3 1 -Foster Carer recruitment Final • High N/A – no previous review performed - 2 4 - -School Admissions Final • Low risk N/A – no previous review performed - - 1 2 -Changes in local taxation arrangements Final • Medium N/A – no previous review performed - - 3 1 -Youth Offending Service Follow Up – Additional plan item Final • Medium Improved, one high risk finding remaining - 1 1 - -Validation of profit-share agreement on development– Additional plan itemFinal • Advisory N/A – no previous review performed - - - - -Contract termination (LL) – Additional plan item Final • Advisory N/A – no previous review performed - - - - -Repairs contract (LL) – Additional plan item Final • High N/A – no previous review performed - 1 8 3 -TMO Health Check – Angell Town RMO – Additional plan item Final • Medium Improved - 1 1 1 -No Recourse to Public Funds Final • Advisory N/A – IACF input into project team. Review ofcontrols being conducted in 2015/16.- - - - -Page 91S106 Agreements/ Community Infrastructure Levy (CIL) Final • Medium N/A – no previous review performed - - 4 1 -Social Work in Integrated Health Teams Draft •• Critical N/A – no previous review performed - 4 2 - -Better Care FundIntegration project (Adult Social Care)Health and SafetyCar Parking (Permits)Planning ApplicationsDeferred to15/16Deferred to15/16Deferred to15/16Deferred to15/16Deferred to15/16N/A - deferred N/A – deferred - - - - -N/A - deferred N/A – deferred - - - - -N/A - deferred N/A – deferred - - - - -N/A - deferred N/A – deferred - - - - -N/A - deferred N/A - deferred - - - - -19

Project Progress ReportclassificationDirection of TravelRecommendationsC H M L AdvisoryCommercial waste/Trade waste/recycling reviewLondon Permit SchemeAccessible transportPROJECT AND PROGRAMME MANAGEMENTDeferred to15/16Deferred to15/16Deferred to15/16N/A - deferred N/A - deferred - - - - -N/A - deferred N/A - deferred - - - - -N/A - deferred N/A - deferred - - - - -Customer Access Final 3.0 Improved - - - - -Your New Town Hall Final 2.9 Improved - - - - -Organisational DevelopmentFieldwork inprogressN/A – inprogressN/A – fieldwork is in progress - - - - -Programme & Project Management (PPM): Overarching report Deferred N/A - deferred N/A – to be consolidated with 15/16 reviews - - - - -PPM: Focused reviews of high risk areas Cancelled N/A -cancelledKEY FINANCIAL SYSTEMSContinuousauditing &monitoringprogramme20N/A –assurance being obtained through ongoingprogramme of PPM reviews- - - - -PayrollTwo reports Medium 21 control design Improvements were made during thefor the year:year.Accounts payable MediumPeriod 1Accounts receivable (Apr-Sep Medium 2014) andCashPeriod 2 (OctMedium Parking 2014-Feb Medium 2015) – finalTemporary accommodation reports Medium Housing rents issued Medium Housing repairs Medium Council Tax Medium Non-Domestic Rates Medium Housing benefits Low Contract monitoring Medium Framework Financials Medium Pension Administration Medium Treasury and Pension Fund Management Low Page 92

Project Progress ReportclassificationIT AUDITSDirection of TravelRecommendationsC H M L AdvisoryOracle- Segregation of Duties Draft • Advisory N/A – no previous review performed - - - - -Oracle Hierarchies review Draft • Advisory N/A – no previous review performed - - - - -Oracle R12 JPB Controls Assessment – Additional plan item Final • Advisory N/A – no previous review performed - - 10 9 -Oracle – Post Implementation Review and Lessons Learnt Cancelled N/A -cancelledOracle – GRC module Cancelled N/A -cancelledN/A – cancelled as sufficient assurance gained fromother Oracle reviewsN/A – cancelled as sufficient assurance gained fromother Oracle reviews- - - - -- - - - -Systems – IT General ControlsDeferred to15/16SCHOOLSN/A - deferred N/A – deferred - - - - -Holmewood Nursery School and Tree House Children's Centre Final • Low risk N/A - - 1 4 -Maytree Nursery School and Children's Centre Final • Low risk N/A - - 1 3 3Triangle Nursery School Final • Medium N/A - - 3 3 -Elm Wood Primary School Final • Medium N/A - - 4 3 -Hill Mead Primary School Final • Low risk N/A - - 2 4 -Page 93St. Andrew's CE Primary School Final •• Critical N/A - 4 3 3 -St. Jude's CE Primary School Final • Medium N/A - - 3 3 1St. Mary's RC Primary School Final • Medium N/A - 1 2 1 2Vauxhall Primary School Final • Low risk N/A - - 2 3 1Christ Church Streatham CE Primary School Final • Medium N/A - 1 2 3 1Crown Lane Primary School Final • Medium N/A - - 4 2 1Henry Fawcett Primary School Final • Low risk N/A - - 1 5 -Julian's Primary School - West Norwood site Final • High N/A - 1 3 7 -St. Luke's CE Primary School Final • Low risk N/A - - 1 4 -St. Mark's CE Primary School Final • Medium N/A - - 3 3 121

Project Progress ReportclassificationDirection of TravelRecommendationsC H M L AdvisoryArchbishop Tenison's School Final • High N/A - 2 - 6 2Bishop Thomas Grant RC School Final • Low risk N/A - - 2 2 -St. Gabriel's College Final • High N/A - 2 6 1 2Lilian Baylis Technology School Final • Medium N/A - 1 2 1 3London Nautical School Final •• Critical N/A 1 1 3 5 -Norwood School Final • High N/A - 1 4 3 1The Elmgreen School Final • Low risk N/A - - 1 3 1Schools Survey: Extremism and Radicalisation Final • Advisory N/A - - - - -Schools 2014/15 Summary Report Final • Advisory See Schools Audits section in main report - - - - -OTHER REVIEWSCommunity Currency in Action – September 2014 – Additionalplan itemCommunity Currency in Action – March 2014 – Additional planitemCommunity Currency in Action – May 2015 – Additional planitemFinal N/a Grant claim certified – no issues - - - - -Final N/a Grant claim certified – no issues - - - - -Final N/a Grant claim certified – no issues - - - - -Page 94Troubled Families Funding Q1 Final N/a Grant claim certified – no issues - - - - -Troubled Families Funding Q2 Final N/a Grant claim certified – no issues - - - - -Troubled Families Funding Q3 Final N/a Grant claim certified – no issues - - - - -Troubled Families Funding Q4 Final N/a Grant claim certified – no issues - - - - -Assurance Mapping – Additional plan item Final N/A Used to inform the 2015/16 Internal Audit Plan - - - - -Lambeth Living Due Diligence – Additional plan item Final • Advisory N/A – advisory support - - - - -Waste Contract – Additional plan item Final • Advisory N/A – advisory support - - - - -Integrated Reporting Final • Advisory N/A - Management information report - - - - -Corporate health reviewsDeferred to15/16N/a - deferred N/A – deferred - - - - -22

Project Progress ReportclassificationDirection of TravelRecommendationsC H M L AdvisoryInformation/ Records Management – Physical InformationSecurity reviewDraft •• Critical Issues arising in previous reviews identified againthrough this review1 1 1 - -Local Asset RegistersPenalties & FinesDeferred to15/16Deferred to15/16TBC TBC - - - - -TBC N/a – first review of this area - - - - -Reviews carried forward from 2013/14 (not at Final Report stage in the Annual Report for 2013/14)Temporary Accommodation Final • Medium N/A – no previous review performed - 3 2 -Section 20 – Consultation with Tenants Final • High N/A – no previous review performed - 2 3 4 -Public Health Final • High N/A – no previous review performed - 1 4 - -Portable Storage Media Final • Medium N/A – no previous review performed - - 4 1 -Change Management Final • Medium N/A – no previous review performed - - 3 3 -Procurement Final • Medium N/A – no previous review performed - - 3 1 -Commissioning Final • Advisory N/A – no previous review performed - - - - -Organisational Capability and Workforce Planning Final • Medium N/A – no previous review performed - - 5 - -TMO Health Check – Wellington Mills Final • Medium No change - - 3 4 -Page 95TMO Health Check – Roupell Park Final • High Improved - 3 2 1 -TMO Health Check – Cowley Final • High Deteriorated - 2 2 2 -TMO Health Check – Blenheim Gardens Final • Low Improved - - 1 3 -TMO Health Check – Waltham Estate Final • High Improved - 1 5 1 -TMO Health Check – Holland Rise Final • High Deteriorated - 2 2 - -Housing Capital Programme (Project and Programme review) Final 2.6 N/a – no previous review performed - - - - -Support Services Review (Project and Programme review) Final 2.1 N/a – no previous review performed - - - - -Customer Access (Project and Programme review) Final 2.7 N/a – no previous review performed - - - - -Organisational Development Plan (Project and Programme review) Final 1.9 N/a – no previous review performed - - - - -Vauxhall Nine Elms Battersea (Project and Programme review) Final 2.2 N/a – no previous review performed - - - - -TOTAL 1 40 154 48 1923

Page 96Annex 2: Report classificationsFor each review undertaken (excluding schools) the overall report classification is determined using a points-basedsystem which is set out below. This approach allocates points for individual audit findings based on the risk rating ofthose findings as follows:Findings RatingCritical ••Points40 points per findingHigh • 10 points per findingMedium • 3 points per findingLow • 1 point per findingThe total number of points for the findings identified determines the overall report classification. The four classificationsare equivalent to the four assurance levels that were used up to 2011/12, when they were replaced with the current reportclassifications from 2012/13. The table below shows the report classifications used from 2011/12 onwards and theequivalent assurance level used in the past.Report Classification Points Equivalent Assurance Level up to 2011/12•Low risk•Medium risk•High risk••Critical risk6 points or less High Assurance7– 15 points Moderate Assurance16– 39 points Limited Assurance40 points and over No AssuranceThe table on the following page is also included in all audit reports to assist management in understanding the level andnature of each risk associated with the findings in the report.

Page 97Key to Individual Finding RatingsFinding RatingAssessment rationaleCritical••A finding that could have a:Critical impact on operational performance; orCritical monetary or financial statement impact; orCritical breach in laws and regulations that could result in material fines or consequences; orCritical impact on the reputation or brand of the organisation which could threaten its futureviability.High•Medium•Low•A finding that could have a:Significant impact on operational performance; orSignificant monetary or financial statement impact; orSignificant breach in laws and regulations resulting in significant fines and consequences; orSignificant impact on the reputation or brand of the organisation.A finding that could have a:Moderate impact on operational performance; orModerate monetary or financial statement impact; orModerate breach in laws and regulations resulting in fines and consequences; orModerate impact on the reputation or brand of the organisation.A finding that could have a:Minor impact on the organisation’s operational performance; orMinor monetary or financial statement impact; orMinor breach in laws and regulations with limited consequences; orMinor impact on the reputation of the organisation.AdvisoryA finding that does not have a risk impact but has been raised to highlight areas of inefficiencies orgood practice.

Page 98Annex 3: Public Sector Internal AuditStandards – annual opinion categoriesType of opinionWhen to use this type of opinionAdequate andeffectivegenerally only low risk rated weaknesses found in individual assignments; andnone of the individual assignment reports have an overall report classification of eitherhigh or critical risk.Improvementrequiredmedium risk rated weaknesses identified in individual assignments that are notsignificant in aggregate to the system of internal control; and/orhigh risk rated weaknesses identified in individual assignments that are isolated tospecific systems or processes; andnone of the individual assignment reports have an overall classification of critical risk.Major improvementrequiredmedium risk rated weaknesses identified in individual assignments that are significantin aggregate but discrete parts of the system of internal control remain unaffected;and/orhigh risk rated weaknesses identified in individual assignments that are significant inaggregate but discrete parts of the system of internal control remain unaffected;and/orcritical risk rated weaknesses identified in individual assignments that are notpervasive to the system of internal control; anda minority of the individual assignment reports may have an overall reportclassification of either high or critical risk.Unsatisfactory high risk rated weaknesses identified in individual assignments that in aggregate arepervasive to the system of internal control; and/or critical risk rated weaknesses identified in individual assignments that are pervasive tothe system of internal control; and/or more than a minority of the individual assignment reports have an overall reportclassification of either high or critical risk.Disclaimer opinion An opinion cannot be issued where insufficient internal audit work has beencompleted. In these situations, it should be concluded (in a disclaimer opinion) thatinsufficient work has been undertaken to form an opinion.

Page 99Agenda Item 6Corporate Committee9 th July 2015 meetingDraft Annual Governance Statement 2014/15All WardsReport authorised by: Strategic Director Enabling Guy WareContact for enquiresJames Rimmington, Risk Manager020 7926 3013 Jrimmington@lambeth.gov.ukReport summaryThe council is required to produce an Annual Governance Statement (AGS), which is astatutory reported public statement, and will be included within the statement ofaccounts for 2014/15. The AGS summarises the key processes the council uses todeliver systems of control, governance and assurance across its functions. In order tomake the AGS more practical, it is reported in a new format for 2014/15.Summary of financial implicationsNo new funds are being sought and the preparation of the statement will be met fromwithin the existing resources of the Corporate Affairs sub cluster.Recommendations(1) Review the draft AGS (appendix 1) and consider any additional assurances/contentrequired prior to its finalisation and sign off in September.(2) Note the 2014/15 significant governance issue and comments against previousyears issues displayed at the end of the AGS at appendix 1.(3) Note that Corporate Management Team (CMT) are working through the actions forimprovement and an update on progress will be included within the final AGS inSeptember.

Page 100Draft Annual Governance Statement 2014/151.0 Context1.1 The Corporate Committee in discharging its ‘audit committee’ role, is responsiblefor oversight of the council’s corporate governance arrangements.2.0 Draft Annual Governance Statement2.1 Regulation 4 of the Accounts and Audit Regulations (2011) requires auditedbodies to conduct a review at least once a year of the effectiveness of itsfunctions and publish an Annual Governance Statement (AGS) alongside theAnnual Statement of Accounts.2.2 The AGS summarises the key processes the council uses to deliver goodsystems of control, governance and assurance across its functions. A selectionof the processes included in the AGS are risk management, performancemanagement, internal audit, financial management and officer and memberdevelopment.2.3 Responsibility lies with management, especially senior management in providingchallenge and oversight of the council’s governance arrangements. The mostsenior officer and the most senior member have joint responsibility as signatoriesfor the accuracy of the final AGS.2.4 The AGS as per Appendix 1 has been prepared to facilitate critical analysis andreview prior to its finalisation and submission to the External Auditor.2.5 The preparation of the draft documents was coordinated by the council’s RiskManager in consultation with key stakeholders. As mentioned in the reportsummary, the AGS is presented in an updated format for 2014/15, it is hoped thismakes the document more useable.2.6 2014/15 was a year of continued change across the council. The physicalstructure of the organisation bedded down into business clusters, and a numberof significant projects including One Oracle, Your new Townhall, and thereintegration of housing services significantly progressed throughout the year.2.7 Given the complex and varied nature of the services and functions the councilprovides to citizens, and the change environment in which it has continued tooperate in over the past 12 months, governance structures have been more fluidthan in previous years. This has presented a considerable challenge to theorganisation in maintaining and demonstrating good standards of governance.However, in order todo so, the council has and will continueto focus on and abideby the following six core principles of Corporate Governance:1. Focussing on the purpose of the council and on outcomes for the communityand creating and implementing a vision for the area2. Members and Officers working together to achieve a common purpose withclearly defined functions and roles3. Promoting values for the authority and demonstrating the values of goodgovernance through upholding high standards of conduct and behaviour4. Taking informed and transparent decisions which are subject to effectivescrutiny and risk management2

Page 1015. Developing the capacity and capability of members and officers to beeffective6. Engaging with local people and other stakeholders to ensure robust publicaccountability2.8 In addition to the publication of Annual Governance Statements, the council hasan approved Code of Corporate Governance in place, which is consistent withthe principles of the CIPFA/SOLACE Framework “Delivering Good Governancein Local Government”. The Code of Corporate Governance is attached atappendix 2.2.9 In December 2012, CIPFA issued briefing notes on the subjects of reviewing theAGS and Delivering Good Governance in Local Government. The followingextracts are taken from the briefing notes:The Audit Committee’s role in Corporate GovernanceThe audit committee has an on-going role in delivering good governance. Everytime it reviews an audit report (internal or external) or holds an officer to accountfor his or her action (or inaction), it is helping to deliver good governance. Inrelation to the Annual Governance Statement itself, the audit committee shouldtake a robust and challenging approach, ensuring that:The statement reflects the organisation and is an honest self-assessment.Members should review evidence and challenge it where they believe it tobe inaccurate or incomplete.They have sufficient assurance from enough separate parts of theorganisation (this is known as ‘triangulation’ in audit circles) to beconfident that, where controls and governance are deemed to be good,they are good and, where weaknesses are identified, the statementcontains an accurate assessment of those weaknesses.The statement itself is well written and would be understood by someonewith no knowledge of your organisation. In other words, it should be inplain English, with no jargon and it should include sufficient explanations.The action plan addresses all identified problem areas, including thoseidentified in previous years where actions remain incomplete. Actionsshould be SMART (specific, meaningful, allocated, realistic and timely).2.10 Risk management and governance challenges Local authorities are changingthe way in which they operate and undertake service provision.Public servicesare delivered directly, through partnerships and collaboration and throughcommissioning. Shared services and partnership boards have come intoexistence. The introduction of new structures and ways of working providechallenges for managing risk, ensuring transparency and demonstratingaccountability.2.11 Good governance enables an authority to pursue its vision effectively as well asunderpinning that vision with control and the management of risk. A one-size-fitsallapproach to governance is inappropriate. Local governance arrangementsmust be proportionate to the risks and are acknowledged as the responsibility ofeach local authority in its area of operation.3

Page 1023.0 Finance comments3.1 Whilst there are no specific capital or revenue financial implications arising as aresult of this report, the council has a number of significant corporate risks that itis managing. Should any of these threats materialise there would be anassociated financial burden for the council, therefore there is an onus for allcouncil staff and Members to ensure that risk management becomes a proactivetool and that mitigating actions are identified, managed, monitored and deliveredto ensure that risks do not materialise.4.0 Legal and Democracy4.1 Regulation 4 of the Accounts and Audit Regulations 2011 requires the council toconduct a review at least once a year of the effectiveness of its system of internalcontrol. The Council has delegated the discharge of this function to CorporateCommittee. Following the review, the Committee must approve an annualgovernance statement, prepared in accordance with proper practices in relationto internal control.5.0 Consultation and co-production5.1 Extensive consultation has been carried out with each cluster leadership teamduring the production of the Annual Governance Statement, a full list ofconsultees is shown at end of report.6.0 Risk management6.1 The preparation of the AGS will be explicitly linked to the risk managementframework within the authority. One of the key principles of good governance is“taking informed, transparent decisions and managing risk”. Strong governanceshould minimise officer distraction from key corporate objectives and communityoutcomes as a result of governance failure(s).7.0 Equalities impact assessment7.1 No formal Equality Impact Assessment has been undertaken, as the report doesnot have a significant impact in relation to the general duties under theEqualities Act 2010.8.0 Community safety implications8.1 None9.0 Organisational Implications9.1 Environmental -none9.2 Staffing and accommodation -none9.3 Procurement - none9.4 Health – none4

Page 10310 Timetable for implementationAudit TrailThe final AGS will be submitted again to Corporate Committee, following theexternal auditor’s assessment, at the September (2015) meeting.Name of consultee Directorate or Organisation Date sent toconsulteeFor consultationDateresponsereceivedfromconsultee*Directors network All Council directors 10/06/15Democratic Services Corporate Affairs 10/06/15 15/06/15Martin Crump Integrated Support 10/06/15 15/06/15Legal Services Integrated Support 10/06/15 15/06/15For information 10/06/15Sean Harriss Chief Executive 10/06/15 25/06/15Guy Ware Strategic director Enabling 10/06/15 25/06/15Sue Foster Strategic director Delivery 10/06/15Helen Charlesworth- Strategic director Commissioning 10/06/15MayCllr Peck Leader of the Council 30/06/15Commentsappear inreport para:ThroughoutCllr McGlone Deputy leader of the Council 30/06/15 29/06/15Cllr Garden Chair, Corporate Committee 30/06/15Cllr Atkins Corporate Committee 30/06/15Cllr Briggs Corporate Committee 30/06/15Cllr Holborn Corporate Committee 30/06/15Cllr Holland Corporate Committee 30/06/15Cllr Sabharwal Corporate Committee 30/06/15Cllr Simpson Corporate Committee 30/06/15Cllr Wilson Corporate Committee 30/06/15*Date response received from consultee include the dates the AGS was discussed and signedoff at each Cluster Leadership Team meetings.Report historyOriginal discussion with Cabinet MemberN/AReport deadline 26/06/15Date final report sent 30/06/15Report no. 45/15-16Part II Exempt from Disclosure/confidentialNoaccompanying report?Key decision reportNoDate first appeared on forward planN/AKey decision reasonsNot a key decisionBackground informationStatement of accounts 14/15, Annual audit opinionand outcome of reviews 14/15Appendices1) Draft Annual Governance Statement2014/152) Local Code of Corporate Governance5


Page 105London Borough of LambethAnnual Governance StatementDRAFT FOR CLEARANCE2014/2015

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Introduction by Sean HarrissChief ExecutiveGood governance is about running things properly. It is the means by which thecouncil shows it is taking decisions for the good of the people of our area in anequitable and open way. It recognises the standards of behaviour that support gooddecision-making: collective and individual integrity, openness and honesty. It is thefoundation for the delivery of good quality services and fundamental to showingthat public money is well spent.From the review, assessment and monitoring work undertaken and the ongoingwork of internal audit we have reached the opinion that there is a need forimprovement in the Council’s governance and control processes. A key focus for me isto improve the organisation’s effectiveness through changes in structure, officer andmember governance arrangements, management oversight and performancemanagement arrangements.A number of measures have already been put in place or are due to be implementedshortly which will strengthen governance, accountability and management oversightacross the Council to drive through the required improvements.We confirm, to the best of our knowledge and belief, that this statement providesan accurate and fair view.SIGNATURE requiredSean HarrissChief ExecutiveLambeth CouncilWhat is Corporate Governance?Corporate governance generally refers to the processes by which organisations aredirected, controlled, led and held to account.The council’s governance arrangements aim to ensure that it sets and meets its objectivesand responsibilities in a lawful, timely, open, inclusive and honest manner and that itspublic money and resources are safeguarded, properly accounted for and usedeconomically, efficiently and effectively.The council’s governance framework comprises the systems, processes, cultures andvalues by which the council is directed and controlled, and through which it accounts to,engages with and leads the local community. The framework brings together an underlyingset of legislative requirements, good practice principles and management processes.The council has approved and adopted a local Code of Corporate Governance, which isconsistent with the principles of the CIPFA/SOLACE framework Delivering GoodGovernance in Local Government and conforms to the financial managementarrangements of the CIPFA Statement on the Role of the Chief Financial Officer in LocalGovernment (2010). A copy of the code can be found on the Lambeth website.Page 106

Annual Governance StatementAnnual Governance Statement 2014/15 Annual Governance Statement 2014/15How do we know our arrangements are working?Lambeth Council has responsibility for conducting, at least annually, a review of theeffectiveness of its governance framework including the system of internal control. Tomonitor the effectiveness of the council’s corporate governance systems, assurances onthe governance framework as shown in the diagram below are provided to, and challengedby, committees or scrutiny panels as appropriate.Each year we review the council’s corporate governance processes, systems and theassurances on the Governance Framework, to create the Annual Governance Statement.This is achieved by undertaking a review of the council’s compliance with its Code ofCorporate Governance, consulting with the Corporate Leadership Teams, governanceofficers, and also reflecting on the work of internal and external audit and other inspectionbodies completed during the year. The issues identified during the review are highlightedin the significant issues section at the end of this statement.Looking forward it will be essential for all parts of the governance framework tomake sure that the council’s decision making and administration remain robust,transparent and subject to appropriate oversight and scrutiny.Lambeth’s Governance FrameworkThis Annual Governance Statement builds upon those of previous years and records anysignificant governance issues that need to be addressed over the coming year. It summarisesthe key governance framework which has been in place for the year ended 31 March 2015and up to the date of approval of the Statement of Accounts.During 2013/14 a number of structural changes were made to the organisation (movingfrom five departments to four business clusters) to facilitate the introduction of cooperativecommissioning as the council’s default way of working. 2014/15 saw a number of changes tothe council’s internal governance to reflect the organisation’s focus on outcomes and thecentral role of Members (namely the establishment of Outcome Panels, collaborativeofficer/member panels focussed on priority outcome areas).During 2014/15 the council commissioned an internal audit review of its governance as wellas undertaking an overarching internal review of governance, performance, resourceallocation and the strategic approach to change (the Programme Management Office). Therecommendations of these reviews will lead to further improvements to the governanceframework in 2015/16.Page 107Code of Corporate GovernanceAssurance Required Upon• Delivery of council’s aims andobjectives / Leadership direction• Services are delivered economically,efficiently and effectively• Management of risk• Effectiveness of internal controls• Democratic engagement and publicaccountability• Budget and financial managementarrangements• Roles and responsibilities of Membersand Officers• Standards of conduct and behaviour• Compliance with laws and regulations,internal policies and procedures• Action plans dealing with significantissues are approved, actioned andreported uponSource of Assurance• Constitution (incl. statutory officers, schemeof delegation, financial management &procurement rules)• Audit Committee• Independent external sources• Scrutiny function• Council, Cabinet & Panels• Cabinet Procurement Committee• Medium Term Financial Plan• Complaints system• Internal & external audit• HR policies & procedures• Whistleblowing & other counter fraudarrangements• Risk management framework• Performance management system• Performance Challenge sessions• Codes of conduct• Corporate Leadership Team• Peer reviewsAssurances Received• Statement of accounts• External audit reports• Internal audit reports• Local Government Ombudsman report• Electoral Commission report• Report of the Independent RemunerationPanel• Interception of CommunicationsCommissioner (ICC) report• Socitm (Society of Information TechnologyManagement) reports• Scrutiny reviews• Annual Audit Committee and ScrutinyCommittee reviews• Effectiveness of Internal Audit review• Review of Compliance with Code ofCorporate Governance• Performance reviews & appraisals• Performance Challenge Sessions• Management and member assurancesAreas to focus on• Manage budgets and monitorachievement of savings• Achieve effective transition in lightof changes to structures and seniormanagers• Improve the Scrutiny Function• Review and update Code ofCorporate Governance• Undertake contract management• Monitor effectiveness ofpartnerships• Formally evaluate benefits gainedfrom all major programmes andprojects

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Head of Internal Audit Annual OpinionI am satisfied that sufficient internal audit work has been undertaken to allow an opinionto be given as to the adequacy and effectiveness of governance, risk management andcontrol. In giving this opinion, it should be noted that assurance can never be absolute andrepresents an assessment of risks to be addressed. The most that the internal auditservice can provide is reasonable assurance that there are no major weaknesses in thesystem of internal control.Our opinion is based on: All audits undertaken during the year. Any follow up action taken in respect of audits from previous periods. Any significant recommendations not accepted by management and the resulting risks. The effects of any significant changes in the organisation’s objectives or systems. Any reliance that is being placed upon third party assurances, such as those fromOfsted, and control weaknesses identified through External Audit procedures. In a change to previous years, the annual audit opinion is now being developed in linewith the standard opinion types promoted by the Public Sector Internal AuditStandards.The 2013/14 Annual Audit Opinion stated that the council had maintained an adequatecontrol environment. However, there was some risk that the system would fail to meetmanagement’s objectives; the organisation needed to improve the adequacy andeffectiveness of governance, risk management and control arrangements as it embeddedthe new organisational structure and cooperative commissioning approach and deliveredfurther significant savings. In this context, and using the PSIAS standard opinion types, ourwork during 2014/15 has identified that there are some major weaknesses in theframework of governance, risk management and control and non-compliance withcontrols which put the achievement of organisational objectives at risk. This is based on anumber of reviews undertaken in specific areas through the year, although it is noted thatwe have undertaken other reviews where we have identified good controls andgovernance arrangements in place. This means that there are key areas of focus formanagement to address over the coming months where low levels of assurance havebeen obtained. It is noted that while the number of critical risk reviews has increased fromthe previous year, a key factor in the overall opinion, the proportion of high risk reviewshas reduced from the previous year. While we have experienced difficulties in closing offsome reviews with management we have also seen an overall improvement inmanagement’s performance in implementing previously agreed actions for prior yearreviews, particularly for high risk items.It is recognised that a key focus for the incoming Chief Executive who joined the councilin March 2015 is to improve the organisation’s effectiveness through changes instructure, officer and member governance arrangements, management oversight andperformance management arrangements. A number of measures have already been putin place or are due to be implemented shortly which will strengthen governance,accountability and management oversight across the council to drive through therequired improvements.As a result of the above, it is my opinion for 2014/15 that major improvements arerequired to improve the adequacy and effectiveness of governance, risk managementand control.This conclusion has been reached because:We have identified a number of high and medium risk rated weaknesses inindividual assignments which we believe are significant in aggregate to theoverall quality of the internal control system; andWe have issued three critical risk rated reports, however these are notpervasive to the system of internal control, with a number of reviews receivingpositive assurance ratings due to good controls and governance arrangementsbeing in place and improvements noted in the implementation of previouslyagreed actions.Governance, Accountability and Roles and Responsibilities There is a lack of clarity surrounding governance arrangements, accountability andassociated roles and responsibilities. We raised this as an issue in our 2013/14 opinionand this continues to be a recurrent theme across our 2014/15 reviews. Councilstructures have been formalised but these have not been consistently embeddedacross the council and in several instances we have found that oversightarrangements have not been operating as effectively as possible.Page 108

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Assurance from other sources We embed the three lines of defence into all of our Internal Audit work and takeassurance from third party sources to provide our Opinion. During 2014/15 we foundsome matters arising from three third parties (Ofsted, HMI Probation and ExternalAudit) which identified some significant control failings which have impacted ouroverall Opinion. This included Ofsted rating Children’s Services as ‘Inadequate’, a HMIProbation report that although noting some improvements since the last inspection in2011 it still rated the Youth Offending Service as “poor performing” and external audithighlighting some concerns over the accuracy/timeliness of billing to leaseholders. In2014, Lambeth entered formal monitoring by the ICO because of poor performanceresponding to FOIs. There has been significant improvement in this area during the lastyear – performance is markedly improved and the backlog has been reduced to anacceptable level and the ICO has ceased formal monitoring.Implementation recommendations Timely implementation of recommendations is an indicator of the strength of anorganisation’s control environment. There has been an improvement in theimplementation of high risk recommendations identified through our planned follow upwork. However, where we have revisited previously areas we have seen that a numberof medium and lower risks have not been implemented following previous cross-cuttingreviews. For example: all issues raised in our 2013/4 review of ManagementInformation were re-raised in 2014/15; non-performance of reconciliations has beenraised in the last 3 periods of Continuous Auditing and Monitoring (covering a period of16 months); and our Governance review identified a number of outstandingrecommendations from 2013/4 reports on Organisational Capability and WorkforcePlanning, Budget Monitoring and Risk Management.New financial systems Oracle R12 went live on 04/08/14. The transition to a new financial system represents asignificant change for an organisation due to the importance of accurate, reliablemanagement information (to underpin decision making), changes to business processesand controls as well as the dependencies of other controls on the system. Our three reviews of Oracle have identified some weaknesses concerning segregationof duties, system access and system configuration which need to be addressed. Theimplementation of the new system has also identified issues where controls have faileddue to behavioural and cultural issues where goods receipting and the procurement ofcontracts have not been undertaken in accordance with existing or revisedrequirements.Continuous Auditing and Monitoring This is a key indicator of the strength of the control environment. Our latest report hasidentified that overall the control environment is stable but there is some evidence ofdeterioration with 5 of 15 systems declining this period. This is partly the result ofchanges to working practices and also changes to teams leading to a loss of knowledge.High and Critical Risk Audit Reports We have issued 3 critical risk and 10 high risk reports this year. These are not pervasiveto the entire control environment but are significant in aggregate. In addition, twoschools audits were determined to represent critical risk and four were high risk.Other Risk management, in particular completion and use of risk registers was a consistenttheme across our audits including (but not limited to) Public Health, Looked AfterChildren, Commercial Properties, and Capital Assets – Transfer of Use. The council’srisk appetite has not been updated in the year as recommended in our 2013/14review despite the efforts of Risk Management in trying to progress this. Our reviews of two large repairs contracts managed by Lambeth Living on thecouncil’s behalf identified weaknesses in the contract management and procurementpractices employed by the council’s ALMO (Arm’s Length Management Organisation).In particular, ensuring these processes extract value for money and that contractmanagement practices are invoked fully to manage significant contractors.Good practice Our opinion also considers good practice identified,for example improved performance across Schoolsand Projects & programmes and low risk reportsissued for Schools Admissions and Data Quality –Published Data. The council also retained its PublicServices Network (PSN) accreditation which evaluatedthe IT infrastructure security arrangements. Thecouncil continues to invest in fraud prevention andfraud detection, which is borne out in the improvedoutcomes achieved by the Counter Fraud Team overthe past year.Page 109

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15The Community PlanThe council’s Community Plan 2013-16 was agreed by Cabinet in April 2013. This sets outthe council’s aspirations for the borough and includes our community outcomesframework. It also confirms the council’s commitment to cooperative commissioning, anapproach agreed by Council in November 2012.The council has supported the promotion of the CommunityPlan by focusing on communicating the narrative of theorganisation through the ‘Do the Right Thing’ campaign. Thiscovers the major priorities around health, safety, clean andgreen, jobs and housing. We are using various methodsincluding social media, posters, street stalls and walkabouts.We have communicated the Community Plan and complemented this with othercommunications around our vision and the way we want to work, including promotingspecific change programmes in support of our transformation. Our campaigns and the workto develop the thinking behind the Cooperative Council have been promoted by articles andinterviews with national and regional media. Also a special budget section in our LambethTalk magazine has spoken of performance achievements and shown where public money hasbeen spent, and its impact.The Community Plan, in particular the outcomes framework, identifies where we want tomake the biggest difference and provides the focus for all activity delivered by the council.This ensures that Members and officers have a clear and shared understanding of what thecouncil is trying to achieve within a context of significantly reduced resources across thepublic sector. The changes to the council’s Constitution and establishment of OutcomePanels have enabled Cabinet Members to take on a commissioning role, providing directionand oversight in their portfolios for the cooperative commissioning cycle.A clear example of this has been through the work of Outcome Panels in our resourceallocation process. The three panels were introduced to lead the work of commissioningand delivering our 13 community outcomes under three priority areas - CommunityWellbeing (CW), Neighbourhoods, Environment & Sustainability (NES) and Housing, Jobs &Investment (HJI). The panels also agreed the resources that were needed to achieve thecommunity outcomes. The substantive outputs of that work were considered by Cabinet inDecember 2014 and subsequently included in the February 2015 budget report.Integrated Assurance ReportingIntegrated Assurance may be described as a co-ordinated approach by all assuranceproviders to efficiently and effectively provide a comprehensive assurance position onthe council’s internal controls and risk environment. During the latter part of 2013,audit, risk, performance and finance colleagues worked on a framework to implementan Integrated Assurance approach across the council’s functions. Although still evolvingin format, an initial report was presented to Operations Board in the summer of 2014reflecting on 2013/14, and further reports covering 2014/15 are timetabled.The Integrated Assurance approach embraces the council’s cooperative behaviours ofownership and leading and engaging, and encourages and enables managers to takeownership of the assurance provided on their areas of responsibility. Subsequently, theyare able to challenge potentially excessive review or poor assurance ratings.By agreeing to a co-ordinated approach, assurance activities will focus on key riskexposures, thus minimising disruptions. Fewer resources will be required to produceassurance data reports as these may be available via a specialist function such ascorporate Risk Management team.The ConstitutionThe London Borough of Lambeth’s Constitution sets out how the council operates andhow decisions are made. This includes a great deal of detail about committees, theirpowers and procedures, financial processes, rules of procedure and legal matters. Thecouncil has regularly reviewed and matched its governance structures and processes tocouncil-wide priorities, to ensure the principles of good governance are appliedthroughout the council.All changes to the constitution are reviewed by legal and then submitted to theConstitution Working Group (CWG). The CWG is an informal body made of seniorpoliticians and officers from across the council and is chaired by the Chief Whip. The CWGmeet regularly throughout the year to review the constitution and give the councilconfidence that its constitution remains robust, up to date and compliant with all relevantlegal requirements.Page 110

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15The Council - How it worksThe council comprises of 63 councillors from different parties, all councillors aredemocratically accountable to the residents of their Wards. The overriding duty ofcouncillors is to the whole community, but they have a special duty to their constituents,including those who did not vote for them. There are a wide range of decisions thatneed to be taken to ensure the effective running of the council, most decisions of anoperational nature will be taken by officers. However more significant decisions of astrategic nature, or those with financial implications in excess of £500k, or those havinga significant community impact will either be taken by councillors collectively, forexample at a full Council meeting, Cabinet or a committee or in certain circumstances byindividual cabinet members.Overview and ScrutinyOverview and Scrutiny is a key part of the democratic process of the council. It monitorsthe policy decisions of the Cabinet and has a key role in advising on the development ofcouncil policy. It also looks at broader issues affecting Lambeth.Overview and Scrutiny is the council’s single overarching scrutiny committee. Thecommittee is responsible for scrutinising the whole range of the council’s functions andresponsibilities, as well as other public service providers’ work and its impact on thelocal community. The committee holds the statutory responsibilities for health scrutinyand for crime and disorder scrutiny. TheOverview and Scrutiny Committee canestablish scrutiny ‘commissions’ toundertake reviews of specific matters.Scrutiny is used to hold public-serviceproviders in Lambeth to account andhelp improve the public services in thearea. Effective scrutiny improvesaccountability, ensures transparency ofdecision-making, contributes to serviceimprovement and acts as a 'check andbalance' on decision-makers.“The governanceframework is there toencourage the efficientuse of resources andequally to requireaccountability for thestewardship of thoseresources”.(Sir Adrian Cadbury)Member and Officer DevelopmentLambeth is also actively engaged with colleaguesthrough the London Member Development Network,which the Head of Democratic Services and Scrutinycontinues to chair. Members of key committees, such asthe scrutiny committee and its panels, have receivedspecialised training in order to equip them to carry outtheir duties. Support and information is also provided toopposition parties when they seek to put forwardalternative budgets.The Constitution outlines the officer and member code of conduct. The council’smonitoring officer oversees all member code of conduct issues with the IndependentPerson where necessary. We are in the process of formalising member developmentsupport within Democratic Services as part of the revised structure.In 2014, the council worked with Members, officers and residents to devise abehavioural framework to support the Cooperative Council. 13 behaviours werecreated, five of which are core to all roles at the council. The behaviours define the typeand level of conduct required of officers, when dealing with stakeholders and deliveringa service to citizens. The behaviours are measured throughout the employee lifecycle,including recruitment and performance management.Learning and development support is reviewed regularly to ensure that it is bothrelevant and effective. The support ranges from induction and on-boarding, throughdevelopment into the role, succession planning and personal development and includessupport for statutory roles such as social care, housing, benefits and democraticservices. Due to budget restraints the council has adopted a blended approach tolearning, resulting in some courses being offered as an e-learning module rather thanclassroom based training. This reduces the amount of resources required to administerand deliver training, and also enables staff to undertake courses at a time and locationsuitable for them.Page 111

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Lambeth Council Structure 2014/15Compliance with laws and regulationsUnder the general duty set out in the Equality Act 2010 the council must have dueregard to the need to eliminate unlawful discrimination, harassment andvictimisation; to advance equality of opportunity; and to foster good communityrelations. The council Equalities Objectives are set out in the Community Plan andwere defined through consultation with citizens. This demonstrates that we do notsee equalities as being an add-on to our activities, but at the heart of what we do. Allnew and revised policies and projects must complete an Equalities ImpactAssessment to demonstrate they have considered the impact on citizens and anymitigation needed to reduce negative impacts. In addition to the nine protectedcharacteristics enshrined in law, the council also considers equality impacts in relation tohealth, socio-economic status and English as a second language. In February 2015 theLGA rated Lambeth Council’s equality practice as ‘excellent’. This is the highest level inthe Equalities Framework for Local Government.The council has a clear two stage process for handling complaints. This is supported bythe Corporate Complaints Policy. The Policy sets out clear guidance on logging, handlingand monitoring complaints at all stages of the complaints process and for externalenquiries from the Local Government Ombudsman. The aim of the complaints process isto drive service improvement across the council by highlighting good practice andidentifying lessons learnt from complaints.Page 112The Corporate CommitteeThe Corporate Committee performs the ‘audit committee’ role through its oversightand monitoring of council corporate governance activities including internal audit,counter fraud, external audit, financial performance and reporting, risk managementand whistleblowing. Its terms of reference, structure, composition and workprogramme have been developed with reference to the CIPFA Position Statement andpublished guidance Audit Committees – Practical Guidance for Local Authorities andPolice (2013), the requirements of the Public Sector Internal Audit Standards (2013)and the CIPFA Toolkit for Local Authority Audit Committees (2006). The local code ofcorporate governance is submitted to Corporate Committee.The council also has a clear process for managing Freedom of Information and DataProtection requests. The aim of the process is to promote transparency across theorganisation and deliver an efficient approach to handling requests. The process issupported by Directors (who are responsible for signing off requests); challenge isprovided by the Corporate Complaints Unit and Legal Services; monitoring is carried outby the Complaints and Information Requests Board, which highlights and sharesgood practice and the Operations Board have strategic oversight, receiving regular sixmonthlyperformance reports on compliance with the Information Acts. Support andguidance is available to officers across the council via documentation on the intranetand desk-based teaching provided by the Corporate Complaints Unit. There is animmediate challenge in the coming year through the reintegration of Lambeth Living.We need to make sure that the good practice from both organisations is properly sharedand applied.

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Managing Key RisksThe council’s risk management process is implemented across Clusters, Business Units andprojects.On a quarterly basis each Cluster and Sub-Cluster reviews their risk registers, with keyoutcomes discussed and challenged at Leadership Teams and Operations Board.Annually each cluster is encouraged to undertake a full risk review in line with theirobjectives set at their service and financial planning meetings and key corporate risksare reported to Corporate Committee.This reporting format ensures that the council’s risk management framework remainsembedded and the reporting of risks remains fluid across the organisation.2014/15 Example identified risks:RiskFailure of all or part of the ICTinfrastructure, with associatedbusiness system failures.Failure to manage significantreductions in national and regionalincome streams.Loss of expertise to deliver counciloutcomes.Unable to meet the expectationsof all stakeholders regarding thedelivery of services.Government’s welfare reforms willnegatively impact on vulnerablefamilies within the borough andincrease child poverty.Mitigation and response to this riskBackup Data Centre is fully implemented as is a separateDisaster Recovery solution, meaning the previous single pointof failure has been eliminated and if a failure were to occurthe plan is in place to respond.Successful budget process has identified savings options tobalance the budget for the next two years, giving theopportunity to address longer-term solutions for the council'sresponse to continued public sector austerity.Primary controls for this risk involve the development andimplementation of robust strategies to retain a skilled andmotivated workforce. Examples of strategic actions includetalent management and succession planning, identification oftop talent and business critical posts, and recruitment &retention strategy.Ongoing open dialogue with all stakeholders including regularassessment of progress against outcome and objectives.Over the past three years the council has worked on a numberof initiatives to help reduce this risk. Measures in place include:Financial resilience strategy, regular cross-working with welfarereform working groups, implementation of poverty strategy,action planning, and constant monitoring of impacts on serviceusers.(Further information on risk reporting can be found within the risk management strategy2014-17).The council’s risk management policy and the risk management strategy are reviewedand refreshed annually. Both items are approved by the Operations Board andCorporate Committee and are also published on the council’s website. Regular reportingof strategic, major operational and major project risks takes place on a quarterly basisacross all council Clusters.The council will be updating its risk appetite statement for 2015/16. The currentappetite statement states that the council seeks to identify, assess and respond to allstrategic risks that may affect the achievement of community and service planoutcomes, adopting a response based on the nature of the risk. Risks may be toleratedwhere there are sufficient assurances that they have been properly identified, assessedand will be appropriately managed.The council’s key risk data is included within the Integrated Assurance (IA) reports, whichwere reported to Cluster Leadership Teams for Q2, Q3 and Q4 14/15. The IA reportsbring together the different perspectives of complaints, finance, performance, risk andaudit into a combined view to provide insights and assurance across the 13 communityoutcomes.Information from the Integrated Assurance exception reports contributes to the contentof the Annual Governance Statement.ResilienceLambeth has fully implemented the provisions of the Civil Contingencies Act 2004 as a`First Responder’. This means that we constantly plan and are able to respond to anycivil emergency alongside the emergency services and partners. We also have a strongbusiness continuity strategy and plan – to ensure that the council and its more criticalservices are able to work `business as usual’ in a crisis. We train Cabinet and SeniorOfficers once yearly during a major exercise to ensure that key staff and elected officialscan operate in a state of readiness. Additionally we review business continuity planswith clusters and our partners to provide corporate reassurance that we are able to dealwith the unexpected.Page 113

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Managing the risk of fraudThe council is committed to tackling fraud, abuse and other forms of malpractice and,therefore, it has a range of counter fraud policies and a whistleblowing procedure inplace to enable employees to raise their concerns about such malpractice at an earlystage and in the appropriate way. Allegations are investigated independently byInternal Audit and reported regularly to the Corporate Committee. The committeeensures that the corrective action taken is robust.Managing FinancesThe council has continued to develop procurement with a view to securing Value forMoney (VfM) and efficiency gains where appropriate. VfM is integral to procurementactivity and the council promotes the consideration of whole life costs and Social Valuein decision making. Collaborative arrangements are progressed where appropriate todeliver increased benefit to both the council and its partners.Internal Audit and Counter Fraud (IACF) carries out several hundred investigations eachyear into fraudulent activity in areas such as: Housing, including subletting, fraudulent tenancies and right to buy Council tax support and discounts Housing benefit fraud (this was transferred to DWP in February 2015) Direct payments No recourse to public funds Fraud and corruption involving officers, members and contractorsLambeth devotes significant resources to the identification and investigation of fraud.All relevant investigation outcomes are given widespread publicity and the team hasfeatured in recent years on several BBC productions such as Saints and Scroungers.During 2014-15 IACF identified fraudulent activity with a value exceeding £4.65m.Internal AuditThe council receives a substantial amount of assurance from thework that is undertaken by its Internal Audit Service who ischarged with reviewing the adequacy of the controls that operatethroughout all areas of the council.The Internal Audit Service has been managed and delivered inaccordance with the Public Sector Internal Audit Standards(PSIAS) which were introduced in April 2013.The vision of the Lambeth administration is ‘Ambition and fairness for all’ and includesthe promise to deliver high quality services that focus on individuals' needs andrepresent value for money. Our Value for Money strategy sets out our approach toassessing, delivering and demonstrating optimum value to residents from our services.The strategy is supported by a suite of VfM tools which constitute the Value for Moneytoolkit.Chief Financial Officer and Chief Monitoring OfficerThe Strategic Director of Enabling is the council’s appointed Chief Financial Officer andthe Director of Corporate Affairs is the Chief Monitoring Officer. These are statutoryposts, responsible for delivering and overseeing the financial management andgovernance of the council. The Chief Financial Officer is a member of the CorporateManagement Team and is responsible, in conjunction with the Director of IntegratedSupport, for the provision of financial services across the council.The Chief Financial Officer and Chief Monitoring Officer have been involved inreviewing corporate governance and in preparing this corporate governance statement.They recognise that issues exist within the governance and control framework (asoutlined in Annual Audit Opinion) but are confident that these will be addressed by thechanges in structure, officer and member governance, management oversight andperformance management arrangements currently being implemented across thecouncil.Community Plan Outcomes: More jobs and sustainable growth, Communitiesfeel safer and stronger, cleaner streets and greener neighbourhoodsPage 114

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Significant Governance issues 2014/15This year has been a period of change and increasing financial pressures. Despite thischallenging environment, there have been achievements and improvement in thecouncil’s governance arrangements. Where we have identified areas for furtherimprovement (see below) we will continue to take the necessary action to implementchanges that will further develop our governance framework.significant challenge) to oversee the delivery of the PAP and a broader SingleImprovement Plan (SIP) for Children’s Services.The Children’s Services Improvement Board will play a vital role in providing assurancesto the Department for Education that the council has the leadership and capacity tomanage these changes within prescribed timeframes and transform our services forLambeth’s children and young people.Outcome of Ofsted InspectionIn 2012 the Ofsted inspected children’s services and the Lambeth Safeguarding ChildrenBoard (LSCB) and found Lambeth to be outstanding. During February to March 2015,these same functions were assessed under the new assessment framework whichresulted in the council’s services and LSCB being judged as inadequate. The inspectorsfound inconsistencies in social care practice and the organisation’s approach tocollecting and using performance data. It found serious failings relating to leadership andmanagement and an organisation and LSCB which has been seriously and detrimentallyaffected by high levels of staff turnover at all levels.Ofsted identified two areas as requiring improvement within the children’s servicesinspection. These were:children who need help and protectionexperiences and progress of care leavers.Three areas were found to be inadequate:children looked after and achieving permanenceadoption performanceleadership, management and governance.This led to an overall judgement of inadequate.The council is taking the Ofsted findings seriously. We acknowledge the failures citedand we are in the process of preparing a Priority Action Plan (PAP) which when deliveredwill achieve the significant transformation required to address Ofsted’srecommendations.The council has established a Children’s Services Improvement Board (comprising seniorcouncil representatives, politicians, partner agencies and external peers able to offerPrevious years’ significant issues update (2011-14)Significant issue 2013/14 – data security breachesFollowing the provision of detailed responses and evidence requested by theInformation Commissioner’s Office (ICO), the ICO confirmed in March 2015 that, whilethe breaches reported by the council were serious in nature, the positive action taken bythe council to minimise the risk of further occurrences, the fact that data protectiontraining was in place for all officers and that appropriate policies were in place meantthat the no enforcement notice or fine would be imposed on the council.The major piece of work undertaken to minimise the risk of future occurrences was thereview business processes across the council where sensitive personal information isbeing handled. This was completed in 2014, with assurance provided over 150 businessprocesses. Managers identified actions to enhance their existing processes andarrangements which the Internal Audit Team will be reviewing on a cyclical basis toensure that those actions have been implemented and provide assurance to the seniormanagement, the council’s Senior Information Risk Owner and Members that this is thecase.Internal Audit and ICT Services are working on a range of further guidance and amodular approach to information handling awareness (aimed at specific types ofservice). ICT Services are also reviewing the existing technology solutions available toensure officers use them most effectively to share sensitive information externally andalso looking at other solutions which can help us to further enhance our arrangements.Page 115

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Significant issue 2013/14 – Management of MemberEnquiries, Freedom of Information requests and ComplaintsIn 2014 Lambeth entered formal monitoring by the ICO because of poor performanceresponding to FOIs. There has been significant improvement in this area during the lastyear – performance is markedly improved and the backlog has been reduced to anacceptable level and the ICO has ceased formal monitoring.Actions taken included: engagement with all key stakeholders to understand the issues an extensive review of the current structures, processes, IT systems and staffresponsibilities tackling the backlog of overdue enquiries hosting a high level summit chaired by the Chief Executive to deliver key messagesabout the importance of dealing with enquiries establishing proper monitoring procedures for performance and quality establishing a monthly Board attended by key officers from across the council todiscuss important issues around enquiries and cascade key information employing a dedicated officer to lead and manage iCasework, including providingsupport and training to officers across the council.Debt Management and Savings RequirementsIn previous years, debt management and savings requirements have been significantissues for the Council. Due to ongoing work both these issues have been managed to anacceptable level during 2014/15.Living in March 2015, and is set to receive an update in July 2015. The significant issuespresented within the July report, such as they pertain to the previous AGS issues, are:The reintegration of Lambeth Living back into the council is progressing satisfactorilyand remains on target for 26 th June 2015.Lambeth Living’s Audit and Resource Committee continues to meet regularly eachquarter. Their main purpose is to make sure agreed actions are implemented and toreport progress on open recommendations from various audits carried out by internalauditors.The council commissioned a review of Lambeth Living’s key functions prior toreintegration as part of the council’s due diligence.In addition to the due diligence work, the council has commissioned two other auditreviews which are being responded to as per the reports to Corporate Committee 9 thJuly 2015.Lambeth Living ProcurementMajor repairs contractAs reported at last Corporate Committee, the three audits relating to the delivery ofthe Decent Homes programme are still being carried out, as required by the GLA. Thecouncil is currently awaiting completion of the Deloittes element of the GLA auditbefore forwarding to the GLA.Lambeth Living are committed to closing all open audit recommendations ahead ofreintegration in June 2015 and members seek assurance that all openrecommendations will be closed prior to reintegration.Lambeth Living has assured they are addressing and implementing resolutions,particularly those rated as ‘high’.Management of third party organisationsPage 116Housing works in the housing programme - value for moneyconsiderations and S20 Leaseholder IncomeFundamentally, the council’s management of these two issues now falls within theplanning for reintegration of Lambeth Living back into the council, and the associated duediligence work.Corporate Committee received a report on management of risks identified within LambethIn particular this pertained to housing-related organisations, such as Tenant ManagedOrganisations (TMOs). In the last 1-2 years the council has enhanced its clienting role to afar more robust basis and is satisfied that the general control environment is satisfactory.In point of detail, following a decision by the arbitrator in the council’s favour in January2015, properties formerly managed by PACCA TMO became the responsibility of LambethLiving.This particular issue is therefore considered closed now, and will not be reconsidered infuture years.

Annual Governance Statement 2014/15 Annual Governance Statement 2014/15Youth Offending Services (YOS) core case inspection outcomeOperating Effectiveness - Case Assessments: completion of ROSH and ASSET's on time.A recent dip sample of all court outcomes during April and May 15 has shown that wehave failed to meet the national standard in 59% of cases. In order to address this we areintroducing a new performance management framework that will strive to push thisstandard up.Operating Effectiveness - Case Management Documentation not reliableA dip sample of Asset quality has suggested that 60% of Assets were of a satisfactory orabove quality. This is reflective of the findings of the HLIP inspection report. It wouldappear that adherence to the quality assurance process in the YOS and the managerialoversight has been poor. As a result the level of support and guidance for casework staffto improve Asset quality has not been there. It is also a concern that a number of Assetsthat did pass the satisfactory quality threshold were rated at the lower end whichsuggests a further practice weakness that needs to be addressed. A clear QualityAssurance and compliance process has been introduced to drive up Asset quality andthis will be a regular feature that is reported to the YOS management board as we striveto drive up practice in this area and improve accountability and responsibility.Page 117

Page 118Signed:Leader of Lambeth CouncilChief Executive – Lambeth CouncilLambeth Town HallBrixton HillLondonSW2 1RW

Page 119Lambeth Council’sLocal Code of Corporate GovernanceIntroductionGovernance is about how local government bodies ensure that they are doing the rightthings, in the right way, for the right people, in a timely, inclusive, open, honest andaccountable manner.Lambeth Council is committed to the principles of good corporate governance identified in theCIPFA/SOLACE guidance “Delivering Good Governance in Local Government” andconfirms its on-going intentions through the adoption and monitoring and development of itsown Local Code of Corporate Governance. The Council recognises that achieving highstandards of corporate governance will encourage stakeholders to have confidence in us andwill allow the Council to undertake its Cooperative role with its community.A Lead officer has been given responsibility for:Overseeing the implementation and monitoring the operation of the Code;Reviewing the operation of the Code in practice on an annual basis;Reporting annually to the Cabinet and full Council on compliance with the Code andany changes that may be needed to ensure its effectiveness in practice;Reporting any significant revisions of the Code to stakeholders.The Chief Executive and the Leader will make an Annual Statement of Assurance, followingthe annual report to Council, giving their position on whether the corporate governancearrangements are operating effectively.This document sets out Lambeth Council’s Local Code of Corporate Governance and theprocesses for monitoring its effectiveness. The Code provides the framework for the Councilto achieve its aims and objectives.The Local Code of Corporate Governance for Lambeth can be found:on the Council’s website; orby contacting the Head of Internal Audit and Counter Fraud on 020 7926 9892 or theDirector of Corporate Affairs (Monitoring Officer) on 020 792 62209.

Page 120The role of corporate governanceCorporate governance is the way in which organisations are directed and controlled. Itdefines the distribution of rights and responsibilities among the different stakeholders andparticipants in the organisation, determines the rules and procedures for making decisions oncorporate affairs including the process through which the organisation’s objectives are set,and provides the means of attaining those objectives and monitoring performance.The Council’s Code of Practice is underpinned by the following values:I. Openness in the decision-making and management processes of local authoritiesand of the approach of individuals within them;II.III.IV.Inclusivity to ensure that all stakeholders and potential stakeholders have anopportunity to engage effectively with decision-making processes and actions oflocal authorities;Integrity based on honesty, selflessness and objectivity and high standards ofpropriety and probity in the stewardship of public funds and management of theAuthority’s affairs;Accountability whereby local authorities and the Members and staff within them,are responsible for their decisions and actions, including their stewardship of publicfunds and all aspects of performance and submit themselves to appropriateexternal scrutiny.The corporate governance principlesThe Corporate Governance framework consists of six core principles. The Council's LocalCode of Corporate Governance specifically identifies the actions to be taken in relation toeach of the six core principles. On a more practical basis, and in order to assist the reader, asingle sheet which defines the local framework by reference to key documents andcontributory processes is listed at the end of the Code.Core Principle 1 – Focussing on the purpose of the council and on outcomes for thecommunity and creating and implementing a vision for the area(a) To exercise strategic leadership by developing and communicating clearly theCouncil’s purpose and vision, and its intended outcomes for citizens and serviceusers, we will:Develop and promote the Council’s purpose and vision;Review on a regular basis the Council’s vision for its area and its implicationsfor the Council’s governance arrangements;Ensure that partnerships are underpinned by a common vision of their work thatis understood and agreed by all partner;Publish an annual report on a timely basis to communicate the Councils’activities and achievements and its financial position and performance.

Page 121(b) To ensure that users receive a high quality of service whether directly, or inpartnership, or by commissioning, we will:Decide how the quality of service for users is to be measured and make surethat the necessary information is available to review service quality effectivelyand regularly;Put in place effective arrangements to identify and deal with failure in servicedelivery.(c) To ensure that the Council makes the best use of resources and that tax payers andservice users receive excellent value for money, we will:Decide how value for money is to be measured and make sure that the Councilhas the information needed to review value for money and performanceeffectively;Measure the environmental impact of policies, plans and decisions.Core Principle 2 – Members and Officers working together to achieve a common purposewith clearly defined functions and roles(a) To ensure effective leadership throughout the Council and to be clear about“executive” and “non-executive” functions and the roles and responsibilities of thescrutiny function, we will:Set out a clear statement of the respective roles and responsibilities of theCabinet and of the Cabinet Members individually including the Council’sapproach towards putting this into practice;Set out a clear statement of the respective roles and responsibilities ofnon-executive Members, Members generally and senior officers.(b) To ensure that a constructive working relationship exists between Members andOfficers and that their respective responsibilities are carried out to a high standard,we will:Determine a scheme of delegation and reserve powers within the CouncilConstitution including a schedule of those matters specifically reserved to thefull Council and update this as required;Make the Chief Executive responsible and accountable to the Council for allaspects of operational management;Develop Protocols to ensure that the Leader and Chief Executive have ashared understanding of their respective roles and objectives;Make a senior officer, the section 151 officer, responsible to the Council forensuring that appropriate financial advice is given and for maintaining properrecords and an effective system of internal financial control;Make a senior officer, the monitoring officer, responsible to the Council forensuring that agreed procedures are followed and that all legislation iscomplied with.

Page 122(c) To ensure relationships between the Council, its partners and the public are clear sothat each knows what to expect of the other, we will:Develop Protocols to ensure effective communication between Members andofficers in their respective roles;Set out the terms and conditions for remuneration of members and officers andan effective structure for managing the process;Ensure that effective mechanisms exist to monitor service delivery;Ensure that the Council’s vision, strategic plans, priorities and targets aredeveloped robustly in consultation with the local communities and keystakeholders and that they are clearly expressed and publicised;Ensure that Members working in partnership are clear about their roles andresponsibilities, individually and collectively, both to the partnership and to theCouncil;Ensure that all those working in partnership understand clearly the legal basisof the partnership and the extent of each representative’s authority to committheir parent organisation to partnership decisions.Core Principle 3 - Promoting values for the authority and demonstrating the values of goodgovernance through upholding high standards of conduct and behaviour(a) To ensure Members and officers exercise leadership by behaving in ways thatexemplify high standards of conduct and effective governance, we will:Ensure that the Council’s leadership sets a tone for the organisation by creatinga climate of openness, support and respect;Define and publicise the standards expected in the conduct of Members andofficers and in the work of the Council including work with partners and the localcommunities;Put in place and maintain in operation arrangements to ensure that Membersand officers are not influenced by prejudice, bias or conflicts of interest whendealing with different stakeholders.(b) To ensure that the Council’s values are put into practice and remain effective, we will:Develop and maintain shared values, including leadership values, for both theCouncil and its staff which reflect public expectations and communicate theseto Members, staff, the community and partners;Put in place arrangements to ensure that systems and processes reflectappropriate ethical standards and to monitor their continuing effectiveness inpractice;Develop and maintain an effective Standards Committee;Use the Council’s shared values as a guide for decision-making and a basis fordeveloping positive and trusting relationships within the Council;Pursue a partnership vision with an agreed set of values for assessingdecision-making and actions which must be demonstrated by the partners’individual and collective behaviour;Produce an annual report of the work of the Standards Committee.

Page 123Core Principle 4 – Taking informed and transparent decisions which are subject to effectivescrutiny and risk management(a) To be rigorous and transparent about how decisions are taken and to listen and acton the outcomes of constructive Scrutiny we will:Develop and maintain an effective scrutiny function which encourages effectivechallenge and which enhances the Council’s performance overall and that oforganisations for which the Council is responsible;Develop and maintain open and effective mechanisms for documenting theevidence for decisions and for recording the criteria, rationale andconsiderations behind decisions;Put in place arrangements to safeguard Members and staff against conflicts ofinterest together with appropriate processes to maintain them in practice;Develop and maintain an effective Audit Committee (i.e. Corporate Committee)which is independent of the Cabinet and scrutiny functions and which willproduce an annual report for the Council;Make sure that effective, transparent and accessible arrangements are in placefor dealing with complaints.(b) To have good quality information, advice and support which ensure that the serviceswanted and needed by the community are delivered effectively, we will:Ensure that decision-makers in the Council and partner organisations haveinformation that is fit for purpose i.e. relevant, timely and with clear explanationsof the technical issues;Ensure that proper professional advice, on matters with financial or legalimplications, is available, recorded well in advance of decision-making andused appropriately.(c) To ensure that an effective risk management system is in place, we will:Ensure that risk management is embedded into the culture of the Council withMembers and managers recognising this is part of their respective roles;Ensure that effective arrangements for whistle-blowing are in place with accessfor Members, staff and those contracting with, or appointed by, the Council.(d) To use the Council’s legal powers for the full benefit of citizens and communities inthe Borough, we will:Recognise the limits of lawful action while striving to use Council powers for thefull benefit of the community;Comply with the specific requirements of legislation and the general dutiesplaced on local authorities by public law;Integrate the key principles of administrative law - rationality, legality andnatural justice – into the Council’s procedures and decision-making processes.

Page 124Core Principle 5 – Developing the capacity and capability of members and officers to beeffective(a) To make sure that Members and officers have the skills, knowledge, experience andresources they need to perform well in their roles, we will:Provide induction programmes tailored to individual needs and alsoopportunities for Members and officers to update their knowledge regularly;Ensure that the statutory officers (as detailed in Article 12 of the Constitution)have the necessary skills, resources and support to perform effectively;Ensure that the roles of the statutory officers are properly understood by all inthe Council.(b) To develop the capability of those with governance responsibilities and to evaluatetheir performance individually and collectively, we will:Assess the skills required by Members and officers and develop those skills toenable their roles to be performed effectively;Develop skills on a continuing basis to improve performance including theability to scrutinise and challenge and to recognise when outside expert adviceis needed;Ensure that effective arrangements are in place for reviewing the performanceof the Cabinet and individual Cabinet Members and for agreeing action plans toaddress training or development needs.(c) To encourage new talent for membership of the Council so best use can be made ofindividuals’ skills and resources in balancing continuity and renewal, we will:Ensure that effective arrangements are in place to encourage individuals fromall sections of the community to engage with, contribute to, and participate in,the Council’s work;Ensure that career structures are in place for Members and officers toencourage participation and development.Core Principle 6 – Engaging with local people and other stakeholders to ensure robustpublic accountability(a) To exercise leadership through a robust scrutiny function which effectively engageslocal people and all local stakeholders and partnerships and which developsconstructive and accountable relationships, we will:Make clear to all Members, staff and the community that we are democraticallyaccountable for this scrutiny function;Consider those institutional stakeholders to whom the Council is accountableand assess the effectiveness of the relationships and any changes required;Produce an annual report on the activity of the scrutiny function.

Page 125(b) To take an effective and planned approach to dialogue with, and accountability to,the public to ensure effective and appropriate service delivery whether directly by theCouncil, in partnership or by commissioning, we will:Ensure that clear channels of communication are in place with all sections ofthe community and other stakeholders and put in place monitoringarrangements to ensure that they operate effectively;Hold meetings in public unless there are good reasons for confidentialityEnsure that arrangements are in place to enable the Council to engage with allsections of the community effectively;The above arrangements will recognise that different sections of the communityhave different priorities and will establish processes for dealing with thesecompeting demands;Establish a clear policy on the types of issues where we will consult, or engagethe public and service users, including a feedback mechanism to demonstrateto consultees what has changed as a result of consultation;Publish an annual performance plan with information on the Council’s vision,strategy, plans and financial statements as well as information about itsoutcomes, achievements and service user satisfaction in the previous year;Ensure that the Council is open and accessible to the community, service usersand its own staff and committed to openness and transparency in its dealingsincluding partnerships subject to the protection of confidentiality wherenecessary and appropriate.(c)To make the best use of human resources by taking an active and plannedapproach to meet the Council’s responsibility to its staff, we will develop and maintaina clear policy on the means for consulting and involving staff and theirrepresentatives in decision-making


Page 127Agenda Item 7Corporate CommitteeDate of Committee: 9 July 2015Report title: Procurement UpdateWards: AllReport Authorised by: Strategic Director, Enabling: Guy WareContact for enquiries:Rwillsher@lambeth.gov.ukRachel Willsher, Head of Procurement, Enabling, 020 7926 3760Report summaryA new procurement framework was introduced in February 2014 to streamline procurementprocesses and governance with a view to it being leaner, transparent, easy to use andconsistent with the co-operative commissioning agenda. The new approach will also be moreeffective in terms of managing risk and ensuring compliance. This report updates on thesuccess of the new framework and other procurement related issues.Tweet: We’re making it quicker & easier to do business with Lambeth.Finance summaryNone arising from this report.Recommendation(1) To note progress on Procurement since implementing the new approach.

Page 1281. Context1.1 The Council spent £582,666,000 in 2014/15 with 3,482 commercial suppliers 19% arelocal organisations and 27% are small and medium sized enterprises. There are 321contracts over £100,000 on the Contract Register, 41 of which have been securedthrough frameworks or other collaborative opportunities.1.2 A new procurement framework has been introduced to streamline procurementprocesses and governance with a view to it being leaner, transparent, easy to use andconsistent with the co-operative commissioning agenda. The new approach is moreeffective in terms of managing risk and compliance.1.3 Following a report to Corporate Committee (05.02.14 – Report 288/13-14 noted), the keychanges were adopted through new Contract Standing Orders approved by the StrategicDirector of Enabling in February 2014.Move business case/options appraisal and contract management to clustermanagement responsibility Raise tender threshold to £100,000Require 3 written quotes for procurements between £5,000 and £100,000 removingprocurement forms and procurement board approvalRationalise Procurement Boards and focus input on the procurement phase of highrisk/High value procurement2. Proposal and Reasons2.1 This report updates on progress implementing the framework and summarises a rangeof other procurement issues. It also seeks to support Councillors in their role as theCommissioners of procurement activity and the eventual award of contracts.First year of new approach2.2 The Lambeth 3 year Procurement Plan has been published on the Council internet andintranet site. The plan details what the Council buys, dates for existing contracts andwhat we know about new procurements we are planning. Procurement planningsupports a joined up approach across the clusters that is strategic and planned andsupports the Council’s commitment to public transparency.2.3 The new single Procurement Board for all procurement projects over £100,000 meetsfortnightly and has considered over 170 reports to date including the London Wide HIVProgramme contracts; Wodmansterne Primary Capital Expansion; Streatham CommonCooperative management of the Rookery; Streatham, Lambeth & West NorwoodCemeteries refurbishment; Community Insurance and Lambeth Food FlagshipProgramme. The Board comprises senior officers from each cluster and considersreports at Procurement Strategy and Award. Submission a week in advance allowsprocurement to check for errors and omissions enabling the Board to provide CrossCouncil advice and support to develop successful procurement strategies and assuranceto the Council regarding high value procurement. The Board Chair no longer signsreports, instead the report author is responsible for amending the report to reflect theBoard’s comments. This speeds up approvals.

2.4 The previous procurement regime involved disproportionate time policing low valuespend. With encouragement from across the Council we have simplified the procurementrules making them lighter touch, almost self regulatory, below £100,000. Thegovernance, processes and documentation for low value procurement are nowproportionate to the risk and value and in keeping with practice in many other Councils.Formal and complex processes can also be a barrier to Small & Medium sizedEnterprises and third sector organisations bidding for Council work. Reduced regulationis balanced with transparency and regular Oracle reports; sample checking and analysisof waivers allow officers to monitor spend and identify opportunities to rationalisesuppliers; training or support needs and compliance issues. Waivers below £100,000are now registered centrally on the Contract Register.Social Value2.5 Lambeth is a cooperative council. This means working together – cooperatively – withour residents is now what we do as default. It also means applying our cooperativeapproaches and principles so that we can maximise the social value benefits (i.e. thesocial, economic and environmental benefits) that can be achieved across the Council.This means focusing on identifying and achieving outcomes that are valued bycommunities throughout our commissioning processes (not just at the stage ofprocurement or delivery) and ensuring that our activities and ways of working achievethe maximum possible impact on those outcomes. A Social Value Statement will beagreed by Cabinet later this year. In addition guidance will help Members, Officers, ourcommunity and potential providors understand our priorities and how we can gain themaximum value for the borough2.6 Lambeth is working with the Social Value Portal, an “on-line meeting place … whereBusiness comes to learn about social value; understand public sector targets; listen tocommunities and meet third sector providers in order to promote better business andnew social partnerships”. We are piloting their approach which assigns values against arange of Lambeth performance measures and allows bidders to submit their offer toallow for consistent and transparent tendering and ongoing monitoring. Testing will helpus better understand not only how we best lever social value from the council’s contractexpenditure, but also how we better recognise and strengthen social value that isalready implicit in current contracting arrangements.2.7 Example social value measures include:Page 129social – e.g. Support to be provided to improve social connectedness and reduceloneliness and isolation among vulnerable residents; andenvironmental – e.g. Reduction in carbon emissions per year compared to previouscontract (includes keeping up to date records) or Planet Mark Certification;economic – e.g. Number of supported employment opportunities for residents whoare out of work2.8 Following a Cabinet agreement on 22 October 2012 for Lambeth to become a LivingWage employer, Lambeth become accredited with the Living Wage Foundation inNovember 2012 as all Lambeth staff are paid above the London Living Wage. Toevidence Lambeth’s progress and retain our accreditation we have reviewed allcontracts over £100,000 on the Lambeth Contract Register, some are professional

services and already likely to be paying Living Wage. Of the remaining 241 contracts,85% are Living Wage compliant and officers are planning for the remainder throughagreement, variation or when next tendered. In some cases this would require additionalbudget and these will be considered on a case by case basis.2.9 The Procurement & Commissioning Outcomes Report 2010-2014 shows howcooperative commissioning and procurement contributes to council outcomes. It givesoverview of activity 2010-2014; celebrates success & offers examples for future; gives areminder of things to consider; draws from all clusters and replaces more traditionalannual report.2.10 The procurement team work with other parts of the Council and partner organisations tosupport local organisations. This has included participating in a range of businessevents; engaging with Brixton Hub; training for Tenant Management Organisations;adverts on Lambeth website and ContractsFinder and raising the tender threshold toreduce bureaucracy .Councillor’s role in ProcurementPage 1302.11 As the lead Commissioners for Lambeth, Cabinet Members are key to procurement. It isimperative that they shape projects early in the commissioning cycle as needs andresources coalesce to ensure that the best possible outcomes are achieved at theconclusion of the procurement process. This will include both the core outcome theproject sets out to deliver but also any than can be achieved through considering socialvalue. This early involvement should then carry through as a Business Case developsand, if procurement is involved, a Procurement Strategy, procurement and eventualaward, see diagram below).

Page 131Outcomes Panels are also central to the whole life cycle of commissioning from the earlyneeds analysis through procurement to ensuring strong relationships with strategicsuppliers focused on outcomes and effective risk management. All procurement projectsshould be directly linked to our medium term financial strategy, 2015/16 – 2017/18budget and £90m savings target managed through the panels. The Council needs tocommission services via procurement in smarter ways that save money / are value formoney.2.12 A task and finish group is looking at ways to simplify the council’s decision-makingincluding reviewing and improving delegated decision templates; pocket sized guidancearound decision making and innovatve use of technology to enable electronic decisionmakingto improve the quality of decisions and improve transparency.2.13 The Local Government Association has produced a Councillor’s Guide to Procurementwhich councillors may find useful. In particular there are questions around the strategicapproach to procurement and specific projects. The questions are wide ranging andalso relate to commissioning and contract management.Other updates2.14 The Government has introduced new data transparency requirements. Procurementdata is published on Lambeth’s website. We need to ensure that data we publishgenuinely assists the public in holding Lambeth to account.

2.15 The New EU Public Procurement Directive has been transposed into UK regulations andContract Standing Orders updated. Key changes includes: Competition required for Health, Social Care and Education over approx £625,000Page 132Advert and award notice for everything over £25,000 in Government website,ContractsFinder to support small and medium sized organisations accessCertain awards can be reserved to mutuals/social enterprises or to organisationswhose main aim is to support disadvantaged or disabled people into work.Tender documents to be available to suppliers when the Official Journal of theEuropean Union (OJEU) advert notice is placed Pre qualification questionnaires not permitted below £170,000Lambeth Procurement has delivered a program of training and guidance on the changes.2.16 The revised Local Government Association National Procurement Strategy published inJuly 2014 encourages all councils to engage with the delivery of outcomnes in four keyareas: making savings; supporting local economies, leadership and modernisingprocurement. A review of Lambeth’s position against the recommendations suggeststhat in many areas Lambeth is aligned with best practice; in others such as riskmanagement and supporting economies the new approach in February 2014 moved thecouncil forward and others such as Social Value and the alignmenet of procurement andcommissioning are being consolidated through the SMART Support Procurement review.2.17 The procurement team runs a range of training courses all of which include informationon the social value aspects of procurement and contract management; monthlylunchtime surgeries and a monthly procurement update.3. Finance3.1 There are no direct capital or revenue implications arising as a direct result of this report.However, streamlining of procurement processes has delivered efficiencies and enabledbetter use of officer time on high value high risk procurements.3.2 Budget holders need to ensure that there are robust processes in place within theirbusiness to ensure accountability in line with the Scheme of Delegation.4. Legal and Democracy4.1 There are no specific legal comments arising from this report save as to say that theproposed approach is open, fair and transparent and complies with EU tenderingrequirements. Legal advice will be provided as requested on individual procurementsand projects. The Contract Standing Orders are prescribed by the Strategic Director ofEnabling.4.2 No additional comments from Democratic Services5. Consultation and co-production5.1 Comprehensive stakeholder engagement took place with procurement officers;commissioning officers; legal, finance and audit officers; cluster management teams andOperations Board. This was followed by training and guidance as part of the roll out ofthe new practices staff administering the procurement processes.

5.2 Progress Reports inviting comment and discussion have been taken to various Officergroups including Operations Board and to Informal Cabinet. The content of thosereports augmented following consultation has formed the basis of this report.6. Risk management6.1 The key risks are that the Council does not get value for money from external spend orthat it is challenged for non-compliance with its internal processes or with legislation.Effective procurement planning and focus of governance and procurement professionaltime on high value/high risk projects provides mitigation against this.6.2 Internal Audit continue to provide assurance to senior management and Members onprocurement controls and the assurances being obtained by management that theprocess is operating effectively the requirements are being complied with. Internal Audithave re-aligned the current testing framework for procurement controls within theContinuous Auditing programme and will continue to include reviews of procurement andcontract management arrangements in the annual Internal Audit Plan. The outcome ofthe audits will be reported through the Audit and Investigations Update which is regularlypresented to the Committee.7. Equalities impact assessment7.1 Equality & Diversity policies are embedded in the procurement processes and EqualityImpact Assessments (EIA) are required for all procurements over £100,000. Local Smalland Medium Sized Enterprises and third sector organisations benefit from the higherincreased tender threshold as they do not need to go through a pre-qualificationquestionnaire or tender process on low value procurements. In addition lower valueopportunities are advertised on the council’s website. The new Social Value Statementand guidance which is progressing through a separate consultation and approvalsprocess also addresses equality issues. The current SMART Support Procurementreview is due to go live in September 2015 and an EIA has been completed and includedin the Business Case..8. Community safety8.1 No implications arising from this report.Page 133

9. Organisational implications9.1 EnvironmentalNo implications arising from this report. The Social Value framework builds on theCommunity Benefit checklist to ensure commissioners and procurement staff embedSocial value, including social, economic and environmental aspects in all projects.9.2 Staffing and accommodationNo implications arising from this report. These will arise through the SMART SupportProcurement review.9.3 ProcurementThis report does not relate to a specific procurement.9.4 HealthNo implications arising from this report.10. Timetable for implementationPage 134Pocket guide to decision making July 2015Social Value Workshops for Members, Officers and partners Summer 2015New procurement operating model and staff structure September 2015e-enabling of decision making December 2015Audit trailConsultationName/PositionGuy WareDavid HughesChristina ThompsonMaria MillwoodLambethcluster/division orpartnerStrategic DirectorEnablingEnabling: Head ofInternal Audit andCounter FraudEnabling: DirectorIntegrated SupportCommissioning:Director CommissioningDate SentDateReceived8/6/15 18/6/15 2.98/6/159/6/155/6/15 8/6/158/6/1523/6/15 6Anna Randle CBD: Head of Policy 8/6/15 9/6/15 2.8Nana Amoa BuahinCBD: DirectorOrganisationalDevelopment8/6/15Comments inpara:

Page 135Julian EllerbyCBD: Director8/6/15 8/6/15Communication &CampaignsMartin CrumpEnabling: Integrated 8/6/15 15/6/15 3Support – FinancialPlanning andManagementAlison McKane, Legal Enabling: Integrated 8/6/15 11/6/15 2,14, 4.1ServicesSupportMaria Burton, Democratic Enabling: Corporate 8/6/15 11/6/15 ThroughoutServicesAffairsCouncillor Paul McGlone Deputy Leader for 8/6/15 26/6/15 2.4 - 2.11Finance & InvestmentInternal Officer Board Date of meetingJoint Leadership Team 4 March 2015 ThroughoutOperations Board 10 March 2015 ThroughoutExternalN/AReport historyOriginal discussion with Cabinet Member 02.04.15Report deadline 26.06.15Date final report sent 26.06.15Report no. 43/15-16Part II Exempt from Disclosure/confidential Noaccompanying report?Key decision reportNoDate first appeared on forward planN/AKey decision reasonsN/ABackground informationAppendicesLambeth 3 year Procurement PlanProcurement & Commissioning OutcomesReport 2010-2014Local Government Association NationalProcurement StrategyLGA Councillors Guide to ProcurementContractsFinderNone.


Page 137Agenda Item 8Corporate Committee9 July 2015Report title: Corporate Complaints Digest 2014-15Wards: All WardsReport Authorised by: Strategic Director, Enabling: Guy WarePortfolio: Cabinet Member Finance and Investment: Councillor Paul McGloneContact for enquiries:spollock@lambeth.gov.ukStephen Pollock, Corporate Complaints Manager, Corporate Complaints Unit, 020 7926 9988Report summaryThis report covers the 2014-15 financial year and sets out key issues around the managementof complaints, Members Enquiries and information requests. It forms part of the regular 6-monthly reporting to Corporate Committee on these key areas of council work.The key performance highlights are: The volume of Members Enquiries has gone down by 17% and FOIs have fallen by 6%,while the volume of complaints has increased by 13%. The response rates have improved on the 2013-14 levels, although they are still belowthe corporate target. A significant number of complaints were upheld – 40% at the first stage and 22% at thesecond stage. The number of complaints escalating to the Local Government Ombudsman hasremained constant. Of the complaints investigated by the Ombudsman, 10% wereupheld.The report also focuses on the large volume areas and the areas where performance is poor:Environment, Housing, Council Tax/Benefits, and Children’s Social Care.Finance summaryThere are no financial implications as a direct result of this report.Recommendations(1) To note the contents of the report.(2) To receive a more detailed analysis of Street Care enquiries in 6 months’ time.

Page 1381. Context1.1 This report provides an overview of key performance for complaints, Members’ Enquiriesand information requests (under the Freedom of Information Act 2000 and DataProtection Act 1998) in 2014-15.1.2 Corporate Committee have previously requested more focus on the high volume areasand those areas where performance is poor. We have, therefore, focused in onEnvironment, Housing, and Council Tax/Benefits. These three areas between themaccount for 71% of all enquiries to the council. Additionally, we have focused onChildren’s Social Care where there is particularly poor performance around Freedom ofInformation requests and Subject Access Requests.2. Proposal and ReasonsThe year in focus2.1 During the year there has been a general improvement, particularly in comparison to theprevious year and we have had successes in reducing the backlog of overdue enquiries.We have seen some good examples of learning in the larger volume areas, such asEnvironment, Housing, Benefits and Council Tax but this is not sufficiently embeddedacross the organisation as a whole.2.2 The Corporate Complaints Unit (CCU) has been pushing forward a number of initiativesto assist managers to monitor their performance, including:Establishing dashboards that allow users to drill down into the root causes ofcomplaints and other enquiries;Developing the ‘Corporate Performance Framework for complaints, MembersEnquiries, Freedom of Information requests and Subject Access Requests’,which includes PIs from a quality and quantative perspective;Providing support, training and guidance on all enquiry types;Carrying out quarterly reviews of the quality of responses to complaints andMembers Enquiries.2.3 Basic monitoring of performance is not being universally carried out or, where it is beingdone, it focusses on quantity and not quality; there is too much focus on the weeklyoutstanding lists; and learning and analysis is not embedded across the wholeorganisation.Corporate Overview2.4 The following sections provide a general overview of the enquiries received in the lastyear. This is presented against each enquiry type.Members’ Enquiries2.5 The graph below shows the number of MEs received in each of the last 5 years.

Page 139Graph 1: Volume of Members Enquiries received5000400030002000100002010-11 2011-12 2012-13 2013-14 2014-152.6 There has been a 17% decrease in the number of MEs in 2014-15 compared to 2013-14. This is an area that needs further investigation but the reasons for the decreasecould include:Services providing better briefings to councillors which takes away the need foran ME in the first place;Councillors able to access services online;Closer working between services and the Contact Centre to identify enquiriesthat can be dealt with informally;Councillor dissatisfaction with the ME process means they are reluctant to submitMEs;Improved services means the need for an ME is reduced.2.7 The performance outturn for 2014-15 was 75% responded to within 10 working days.While this is still below the target of 90% of enquiries it is a significant improvement onthe previous year (when performance was 60%). This demonstrates that the changesmade to improve the Members Enquiries process in 2013-14 are now better embedded.However, the trajectory of performance was downwards. This is illustrated in Graph 2,below, which shows performance across the year. There was an upturn in performancein the final three months of the year and we need to make sure that this is sustained.Graph 2: ME performance in 2014-15100%90%80%70%60%50%40%30%20%10%0%

Page 1402.8 Graph 3, below, shows the top five service areas in terms of MEs received in 2014-15.Street Services received the most MEs with 16% of the total. These largely centredaround dumped rubbish (29%), refuse collection (19%) and street sweeping (8%).Housing Options and Housing Allocations received the next highest volume, withHighways and Benefits making up the top five. The underlying cause of these enquiriesis explored in more detail in the service focussed section later in this report.Graph 3: Top 5 service areas for volume of MEs in 2014-15500450400350300250200150100500Street Services Housing optionsand adviceHousing needsand allocationsHighwaysBenefit coreassessments2.9 As part of our work towards improving the ME process we monitor the quality ofresponses. This is done quarterly by taking a random sample of ME responses andassessing them against an agreed marking criteria. In 2014-15 we assessed 296responses (8% of the total MEs) and found that only 44% achieved a mark of 90% ofmore (90% is the standard pass mark). This suggests that while the timeliness or ourresponses is improving there is still an issue around quality. This is supported byanecdotal evidence from councillors themselves. In response to this we are reviewingthe training and guidance we provide to officers so we can improve the quality ofresponses. We would expect to see an improvement in this area when we report toCorporate Committee in 6-months time.Complaints2.10 The council has a 2-stage escalating complaints process. The first stage is dealt with bythe service that has been complained about and the second stage is investigatedindependently by the Corporate Complaints Unit. If the customer feels their complainthas not been resolved after the second stage, they can escalate their complaint to theLocal Government Ombudsman (LGO).2.11 There has been an increase of 13% in the volume of first stage complaints received inthe last year compared to 2013-14. This has continued the increase from the previousyear. The volume of complaints received in the last 5 years is set out in Graph 4, below.

Page 141Graph 4: Complaints received in 2014-1550004500400035003000250020001500100050002010-11 2011-12 2012-13 2013-14 2014-152.12 The largest increases were in Delivery (13%), particularly in Communities, Housing andEnvironment, and Enabling (22%), particularly in Business and Customer Services.These are the areas that also received the most complaints during the year, asillustrated in Graph 5, below.Graph 5: Top 5 service areas for volume of complaints in 2014-15120010008006004002000Street Services Council Tax Parking Benefit coreassessmentsHousing needsand allocations2.13 In some ways, it is not suprising that these services received the most complaintsbecause they are, with the exception of benefits and housing, universal services.2.14 On a general level, the continued increase in complaints is an issue that needs to beproperly addressed and explore the best way of dealing with these enquiries, such asdisaggregating service requests from complaints and identifying complaints that can beresolved at source.2.15 Given the high volume of enquiries received by Street Services it is proposed that wecarry out a ‘deep analysis’ of this area looking at:

Page 142Filtering out simple queries and service requests;Identifying themes and trends to feed into service improvement;Developing appropriate training and guidance;Identifying poor performing areas.2.16 As with MEs, we monitor the quality of responses to complaints by randomly samplingeach quarter. In 2014-15 we assessed 244 responses (6% of the total first stagecomplaints) and found that 39% achieved a mark of 90% of more (90% is the standardpass mark). Again, this suggests that while the timeliness or our responses is improvingthere is still an issue around quality. The review of training and guidance we provide toofficers will improve the quality of responses and we would expect to see animprovement in this area when we report to Corporate Committee in 6-months time.2.17 The performance outturn for complaints in 2014-15 was 81%. While this is still below thetarget of 90% of enquiries responded to within 20 working days it is a significantimprovement on the previous year (when performance was 72%) although the trajectoryfor the year is downwards, as illustrated in Graph 6, below.Graph 6: Complaints performance in 2014-15100%90%80%70%60%50%40%30%20%10%0%2.18 Our expectation is that complaints are resolved at the first stage and do not escalate. In2014-15 the escalation rate from the first to the second stage was 8%, which was aslight increase on the previous year when the escalation rate was 6%. Having said that,in the year there was a 63% increase in the number of second stage complaints. Graph7, below, shows the volume of second stage complaints in each of the last 5 years.

Page 143Graph 7: Second stage complaints received in 2014-155004504003503002502001501005002010-11 2011-12 2012-13 2013-14 2014-152.19 The 63% increase in second stage complaints is dramatic but not wholly unexpected.When we moved to a 2-stage complaints process in May 2013 we expected to receiveapproximately 400-450 second stage complaints. This didn’t transpire in the first yearwhen we received only 218. The volume received this year is a more realistic reflectionof the volume of complaints. Having said that, this doesn’t mean that we should simplyaccept this volume of escalated complaints. In 2015-16 we will be looking at theescalated complaints that are upheld to identify lessons we can learn because acomplaint should not be upheld at the second stage.2.20 If a complaint is properly investigated at the first stage it should not be upheld at thesecond stage. In 2014-15 22% of second stage complaints were upheld or partly upheld,the majority of which related to environment services (47% of the upheld complaints) orrelated to Council Tax/Benefits (33% of the upheld complaints). Of those escalated tothe Ombudsman, only 10% of cases were upheld.2.21 The Local Government Ombudsman (LGO) investigates complaints of maladministrationagainst local authorities and some other public bodies. A good indicator of how well weresolve complaints locally is to look at the number of complaints they investigate eachyear and the decisions they make. The volume of enquiries from the LGO in each of thelast 5 years is shown in Graph 8, below.

Page 144Graph 8: Enquiries from the Local Government Ombudsman received in 2014-151601401201008060402002010-11 2011-12 2012-13 2013-14 2014-152.22 The number of enquiries we have received from the LGO has fluctuated over the last 5years, in part, down to the changing role of the LGO during that time.2.23 A better indicator of how well our complaints process works is to look at the decisionsthe Ombudsman makes, particularly where they uphold a complaint or find fault withsomething the council has done. In 2014-15 10% of the cases investigated by theOmbudsman were upheld. This is an improvement on the previous year when 15% ofthe cases investigated by the Ombudsman were upheld. This suggests that to someextent complaints are resolved as they escalate through our complaints process – thechallenge is to get this level of achievement at the first stage.2.24 Where the Ombudsman deems there is a case of sufficient merit, she can decide topublish a public report. In 2014-15 we received one such report relating to a complaintabout school admissions. In line with the Corporate Committee terms of reference thiswas reported to committee at the time.2.25 In line with Corporate Committee’s Terms of Reference, an overview of all casesinvestigated by the Ombudsman which resulted in payment of £1000 or morecompensation is included in the appendices to this report. In 2014-15 this was twocases.Freedom of Information2.26 We saw a slight decrease in the number of requests – the first time this has happenedsince the Act was introduced in 2005. A total of 1797 requests were received in 2014-15,a drop of 6% on the previous year. Graph 8, below, shows the number of requestsreceived in each of the last 5 years.

Page 145Graph 8: Freedom of Information requests received in 2014-15250020001500100050002010-11 2011-12 2012-13 2013-14 2014-152.27 When we receive a request we categorise the person making the request – for example,as an individual, a business or a journalist. Leaving aside individuals, who accounted for62% of requests in the last year, the next largest category was ‘business’ with 13% ofthe total. Requests from business are generally where they are either touting for newbusiness or are trying to get information from the council to support their own businessneeds. Many of the requests from business relate to Procurement and Business Rates,both of whom appear in the top five service areas that received requests in 2014-15, asset out in Graph 9, below.Graph 9: Top 5 areas for FOI requests in 2014-15140120100806040200Business rates Street Services Looked afterchildrenProcurementHighways2.28 The FOIA recognises that not all information should be released and there areexepmtions that apply to some categories of information. Previously, CorporateCommittee have asked to be given an overview of the exemptions that have beenapplied. In 2014-15 we responded to 65% of cases by releasing all of the informationthat had been asked for. With the remaining 35% of cases the information was either notheld or only partly held (15%), no information was sent or it was part exempt (14%), orthe case was withdrawn and did not need a response (6%). In total, 323 individualexemptions were applied – although it should be remembered that more than oneexemption may be used in one response. The top five exemptions applied in the yearwere

Page 146 Section 21: information is readily accessible elsewhere i.e. it is already published– applied 92 times; Section 40: information contained personal data of a third party – applied 54times; Section 43: information is commercially sensitive – applied 54 times; Section 12: the work involved in meeting the request exceeds the cost limit of theFOIA – applied 45 times; Section 31: releasing the information would inhibit law enforcement – applied 42times.2.29 The target for responding to FOI requests is 85% of responses to be issued within 20working days. In 2014-15 our performance was 72%. While this is some way below thetarget it is a significant improvement on 2013-14 when performance was 45%. Month-bymonthperformance is shown in Graph 10, below.Graph 10: Freedom of Information request performance in 2014-15100%90%80%70%60%50%40%30%20%10%0%2.30 During 2014-15 the council was put under formal monitoring by the ICO because of ourpoor performance for responding to Freedom of Information requests. The ICO expectedour performance to achieve 85% or above during the three month period of themonitoring. While it is good to report that we achieved this and successfully camethrough the monitoring, it is clear from Graph 8 that we only achieved this level ofperformance during the period that we were under the formal ICO monitoring (October,November and December 2014). Indeed, beyond this period performance has begun todrop once again. We need to re-focus on performance to avoid being put under formalmonitoring by the ICO in future.2.31 The Information Commissioner has overall responsibility for Freedom of Informationrequests. If a customer is not happy with our response to their request they can refer it tothe ICO, in a similar way that customers can escalate complaints to the LGO. Afterreviewing a complaint the ICO issue a decision notice setting out his decision. In 2014-15 the ICO issued five decision notices about the council. An overview of thesedecisions is included in the appendices to this report.Subject Access Requests

Page 1472.32 The Data Protection Act 1998 allows people to access personal records the councilholds about them. These requests are known as Subject Access Requests (SARs). Thenumber of SAR requests has increased year-on-year over the last 5 years as shown inGraph 9, below.Graph 9: Subject Access Requests received in 2014-153503002502001501005002010-11 2011-12 2012-13 2013-14 2014-152.33 Because of the nature of Subject Access Requests (accessing personal information)they tend to be focused in particular areas – social care (children’s and adults), housingand requests for CCTV footage. They can be very resource-heavy enquiries, particularlyin areas where we hold significant information about an individual such as social carerecords or housing files. The Data Protection Act 1998 states that the council must havesufficient resources in place to manage requests for information.2.34 The target is to respond to 85% of Subject Access Requests within 40 calendar days.This is a target we have struggled to meet and performance in 2014-15 was 67%, downon 2013-14 when it was 70%. Graph 10, below, shows performance over the year.Graph 10: Subject Access Request Performance 2014-15100%90%80%70%60%50%40%30%20%10%0%2.35 Purely from a customer perspective, this level of performance is poor and a cause forconcern. It will certainly erode an individual’s level of confidence in the council if we arenot able to provide their personal information within a reasonable timescale, and

certainly within the 40 calendar days afforded by the Act. This is particularly so where weare being asked to provide very sensitive social care information about an individual.2.36 The issues around Children’s Social Care are explored in the sections later in this report.Service focus: EnvironmentPage 1482.37 Environment is responsible for a range of services affecting the public realm from streetsweeping and refuse collection, to sports centres and parks. It is an area that hashistorically received a large volume of enquiries, which is to be expected given theuniversal nature of the services they deliver.2.38 The Parking Service has historically received a high volume of complaints because ofthe nature of the service it delivers – people do not like to receive fines. A more detailedreview of the parking complaints indicates that customers are unhappy with the quality ofthe service, delays, and the decisions we made. We can see how this relates back to theway fines are issued in that (1) people don’t like to receive fines; (2) they do not agreewith the reason why the fine was issued or our decision not to cancel it; and (3) they feelthat we take too long to deal with their appeal. However, there is a statutory process forchallenging a Penalty Charge Notice (PCN) as well as statutory time frames forresponding to correspondence. Challenges to a PCN should not be going through thecomplaints process unless the issue relates to the behaviour of a Civil EnforcementOfficer or any other issue not related to the PCN itself. There is an independent Parkingand Traffic Appeals Service (PATAS) which deals with a motorist’s appeal if they are nothappy with our decision. This is why we find that 69% of compaints about ParkingServices are not upheld. This is supported when complaints are escalated to FinalReview (only 5 cases were upheld) and the Local Government Ombudsman (no faultfound in all cases investigated by the Ombudsman). Further guidance about when to loga parking issue as a complaint or to direct to the formal challenge process would see adrop in the volume of complaints related to the parking service.2.39 Permits was one area of Parking Services that did receive a lot of complaints during2014-15. A new system was launched that had teething problems and led to a spike incomplaints. This was partly due to the extremely high demand for the online channel forvisitor vouchers which caused some delays in fulfilment of orders. Analysis of thecomplaints was used to feed into an action plan to improve the system. This includedusing a supplier to improve the turnaround time for orders to only a few days. Thishighlights that the analysis of complaints is being used positively as a learning tool.Despite some early teething problems, 80% of customers are now applying for theirresident permits or renewing their permit online. Eighteen months ago every customerapplying for the first time would have had to visit the Service Centre or make a postalapplication.2.40 Complaints about the refuse collection service also accounted for a significant number ofenquiries – 13% of all complaints to Delivery in 2014-15.The issues in these complaintsranged from charges for new bins to the time of collection to the method of collection.Following on from this, 70% of the complaints were upheld, which is a significantnumber. We carried out analysis of these complaints with colleagues in Environment.

Page 149We found that the majority of the upheld complaints were what we classified as ‘noncomplaints’– statements of fact that were correct (and so were upheld) such as, “Youhaven’t collected my bin today”. The reason we classified them as ‘non-complaints’ wasbecause the customers didn’t necessarily want to make a formal complaint, they justwanted to let us know that their bin hadn’t been collected. Clearly they weren’t alwayshappy about this but the outcome they wanted was for their bin to be collected as soonas possible. We are, therefore, looking at a project with the Contact Centre to filter outthese ‘complaints’ at source and pass them for immediate rectification (by arranging forthe missed bin to be collected). This is a better outcome for the customer because theyget a quick resolution, and it is more efficient for the council. A similar approach is alsobeing explored around enquiries about resurfacing and minor paving work.2.41 Across MEs and complaints a lot of the enquiries are about dumped rubbish – 6% of allMEs and 4% of all complaints to Delivery. Looking at the root causes (where we capturethese for complaints), 58% of complaints were about the quality of service and 39% wereabout service failure. Analysis of these enquiries shows that the issues are aroundindividual perceptions of the issue – people see a dump that has been there for a fewdays and call the council to complain about how long it has been there – or people reporta dump and it is not cleared as quickly as they expected. In response to thesecomplaints and enquiries immediate action is being taken that includes:We are introducing a compacting bin lorry to focus on the problem areas over thenext few months. The lorry will be out and about between 2pm and 10pm eachday.We are installing discrete bins on the street for those cleaning the streets to puttheir bags into – these will start arriving during July.We are adding some temporary extra resource around enforcement so that it canbe more visible and we will be looking at how CCTV can help us take a tough linewhere we need to. This should be up and running by August.We will keep promoting our Street Champions and we are already well on ourway to getting 250 of these.2.42 On a general level, there are some good examples of where complaints have been usedto improve services in Environment. These are:Registrars – the waiting arrangements have been reviewed because of feedbackfrom complaints. Previously, people with an appointment had to wait and werenot allowed to leave the building where the Registrars is located. This has nowbeen changed so that people can leave the building.Herne Hill Controlled Parking Zone (CPZ) – lessons were learnt from the waythat the review of the Herne Hill CPZ was conducted. This was mainly around theway it was communicated, which led to lots of complaints.Trees and Highways – these services work closely together to maintain streettrees (for example, where the roots are damaging the pavements). There was abreakdown between the two services when work was carried out in BonningtonSquare which led to complaints. This has fed into the introduction of a monthly

Environment newsletter which will cover key schemes that are taking place in theward.Service Focus: HousingPage 1502.43 Complaints and MEs to Housing relate to Housing Allocations and Housing Options –18% of MEs and 7% of complaints to Delivery. The root causes of these complaints it isgenerally around delay, the quality of service, and the council’s decision. This reflectspeople’s frustration with how long they have been on the housing list without beinghoused and/or our decision to to house them. Following the complaints through, wegenerally find that they are not upheld, even where the complaint is escalated. Thereality of the situation is that there is a shortfall of affordable housing. Overall, there areabout 21,000 households on the housing list, and we receive about 3,000 newapplications a year. Each year, we allocate about 1,200 council and housing associationtenancies. This generates complaints or enquiries from councillors because people arefrustrated with their situation.2.44 High or unrealistic expectation of how quickly you will be offered a property is clearly acontributing factor to the number of complaints and MEs directed to Housing. The reality,as stated above, is that there is a chronic shortage of affordable housing. What we’vetried to do is manage the expectations around this byProviding information to councillors about the housing allocations process. Thishelps them to manage the expectations of the residents that contact them.Reviewing the information that is available on the website.Producing information leaflets for members of the public.Briefing the Contact Centre, who are often the first point of contact, and makingsure they have accurate and up-to-date information.2.45 While there were a lot of complaints in 2014-15 around Housing Options and HousingAllocations, there were other issues raised. A proportion of complaints related to themedical assessments that are carried out as part of the assessment process. Customerswere not always clear about how the assessments were done or what kind of medicalinformation we considered. We reviewed our communications and now provide a clearerexplanation of our decisions. The pre-assessment information has also been reviewed tomake it clear what information applicants will need to provide with their application andwhat type of medical information we can consider and what is outside of scope.2.46 A good example of where complaints have been used to improve the housing serviceinvolved a complaint from an ex-serviceman. As an ex-serviceman the individual had ahigh priority for housing. Unfortunately they did not provide all of the right paperwork withtheir original application and when they were asked to provide it subsequently, theydidn’t get it quickly enough. This led to delays in the property being allocated and acomplaint was made. In this case we were able to make an exception so that theapplication could be processed, and we have now include a list of the documents that wewill need to see as part of the initial letter.2.47 On a general level, complaints data has been used to feed into the following initiatives:

Page 151We are extending access to the HB system to front-line officers and areencouraging them to look for client documents on that system before requiringthe client to bring us their documents again. This will reduce footfall, waitingtimes and repeat visits to Olive Morris House (OMH).We are working on integration of services so clients will see fewer officers andhave a more seamless customer journey. It will also reduce the opportunity fordifferent and confusing messaging.We are in the process of recruiting to a number of key posts, one of which is theQuality Review Manager. Once that post is in place we will be reviewing ourinternal process of managing complaints, and also identifying any system orhuman errors so that they can be resolved. This should reduce the likelihood ofsimilar complaints.We are evaluating the viability of running a pilot scheme where clients would onlybe seen by one officer in Housing and all other services will feed into that officer.This will reduce the number of officers a client sees, reduce the likelihood ofconfused or mixed messaging, reduce the time clients are in OMH and increasethe likelihood of preventing homelessness.2.48 Comments from the Divisional Director – Communities, Housing and Environment: InJanuary 2015 an analysis of the complaints handling function was conducted forEnvironment related complaints. The nature of the work carried out in these serviceareas means that there are more complaints about services received compared to otherDelivery areas in the council.2.49 A recent restructure within CHE brought together all the complaints officers from eightdifferent service areas under one team. In the short term, by locating the teams on thesame floor has enabled them to share best practice with each other. This year the teamwill put in place a system to ensure that every complaint will be analysed after it hasbeen answered to address processes, training and contractor issues to identify the rootcause and thereby reduce the volume of repeat complaints in the area.Service Focus: Business and Customer Services2.50 After Delivery, Enabling account for the largest proportion of enquiries – 13% of MEs,29% of complaints and 31% of FOIs. The majority of these enquiries are for Businessand Customer Services and, in particular, Council Tax/Business Rates and Benefits.2.51 On a general level, it is worth highlighting the approach Business and CustomerServices take towards complaints, MEs and FOIs. It’s exemplifies a good approach tomanaging the different enquiries.The Divisional Management Team monitor performance as a standing item onthe agenda, including outcomes and issues;Team Managers sign off all complaint responses;Senior Managers sign off all ME responses;

Page 152There is a monthly client meeting with Capita (who respond to first stage CouncilTax complaints) where lessons learnt are identified and all upheld complaints arereviewed.This helps to foster a positive approach to complaints, MEs and FOIs that comes fromthe top of the service downwards. In turn, this improves the service to the customer andingrains the approach of using complaints in a positive way.2.52 In terms of the issues raised in MEs and complaints, these largely centre around BenefitAppeals and Council Tax processing. It’s worth putting this into the context of the overallservice – in terms of the number of benefit cases and council tax accounts dealt witheach year, the number of complaints is less than 1% of the total. This is a positive giventhat in both areas we are communicating unpopular decisions – that you are no longereligible for benefits or a blue badge, or that we are taking enforcement action, forexample.2.53 Some examples in 2014-15 include:There has been a lot of work done on improving the quality of writtencommunications by using nudge theory, a ‘Plain English’ approach and ConfidentConversations. This includes being very clear about the documents thatcustomers need to provide upfront and explanations of summons costs, forexample. These were two areas where complaints were received.Council Tax and Benefits have worked closely with local advice organisations,such as the Citizens Advice Bureau, to resolve issues earlier, particularly wherethere are vulnerable tenants involved. Information taken from complaints hascontributed to this work.The Customer Centre use complaints to feed into their ongoing improvementwork. Their approach is to try and resolve complaints informally at the point ofcontact.The Scanning and Indexing Team scan most of the documents that come into thedivision. An IT issue meant that scanned documents were being filed into thetest, rather than the live, system. This led to a peak in complaints about ‘lost’documents. By tracing this problem back from the complaints the problem wasidentified and resolved.The Accessible Transport Unit has used complaints to complete a review of theservice, including developing more user friendly guidance for customers.2.54 With Freedom of Information, we see a high volume of requests relating to BusinessRates. In fact, it is the highest volume of requests across the council with 7% of theoverall total. These requests are for information about business rates accounts and aremore often than not from businesses who receive commission by helping individials toreclaim credits. We now publish the most frequently requested information online whichhas massively reduced the resource impact of dealing with these requests – while therequests are still made we can quickly respond by providing a link to the website. Thishas proved highly successful in 2014-15.

2.55 Comments from the Divisional Director – Business and Customer Services: Ourcommitment to learn from each and every complaint plays a vital part in continuouslyimproving the service that we offer residents. As the report sets out, we have madeinformation much more readily available through our website and changed ourprocesses following direct feedback from our customers. Although on occasion we donot get everything right first time, for which we apologise, that is certainly our ideal andthe complaints, member enquiry and FOI process provides a rich level of customerinsight to further enhance our offer to residents.Children’s Social CarePage 1532.56 Children’s Social Care are a division within the Delivery Cluster. The focus for this reportis around the performance for FOIs and SARs.2.57 Just over 3% of all FOIs in 2014-15 related to Children’s Social Care. This was the thirdlargest area in the council. Performance in 2014-15 was 46% and we saw a continualbacklog of overdue cases, with some cases well beyond their due date. The risk here isthat this will generate complaints to the ICO, who would be very likely to consider furtherformal monitoring of the council as a result. The reasons for the poor performanceinclude:The lack of a clear process for managing FOIs, including understanding whatinformation is already made public;A lack of close monitoring of performance, particularly around outstanding cases;A lack of resources available to manage requests;2.58 Children’s Social Care receive a high volume of Subject Access Requests (SARs).Overall they accounted for the second highest volume across the council, with 29% ofthe total. Very often these requests require a lot of resources to manage and respond tobecause of the volume of records that we hold about an individual (people who were incase want to see the entire file we have on them). We therefore need to make sure thatwe have adequate resources in place to deal with them, as set out in the Data ProtectionAct 1998. In 2014-15 there was a performance issue with only 37% of SARs respondedto on time (against a target of 85%). We also saw a continual backlog of overdue cases,generally around 10 or more cases at the end of each month, with some in excess of100 days overdue.2.59 Unfortunately, there has been little or no progress on resolving the issues around FOIsand SARs in Children’s Social Care during the year. This is an area of real concerngiven the sensitivities around the information (people accessing information about whenthey were in care) and also because of the likely threat of ICO action if he were tobecome aware of the poor performance in this area. There was a suggestion thatadditional resources would be provided to help clear the backlog but this has not beendelivered. In addition to this, assurances were given about providing responses to theoldest FOI cases. Again, this has not been delivered.2.60 Comments from the Divisional Director – Children’s Social Care: This area of work haspresented a significant challenge primarily due to the volume of requests and inadequate

staffing resources to meet the demand. This work is currently undertaken by businesssupport staff in addition to their substantive roles. There is no screening or filteringundertaken by the corporate team to determine whether duplicate requests are beingmade before forwarding to Children’s Social Care. Unless additional resources aredeployed, to either the corporate team or locally within Children’s Social Care it isunlikely that performance will improve.3. Finance3.1 There are no revenue or capital implications directly arising from this report. It should,however, be noted that there are substantial costs related to the processing andmanagement of complaints, MEs, Freedom of Information requests and Data Protectionrequests, and from the payment of compensation. These costs are met from existingbudgets of the relevant service areas.4. Legal and Democracy4.1 The powers and duties of the Local Government Ombudsman are contained in the LocalGovernment Act 1974. If the Ombudsman is of the opinion that an injustice has beencaused as a result of maladministration, he shall issue a formal report and it shall be theduty of the authority to consider the report and to notify the Ombudsman of the actionthat it has taken or proposes to take, including making a compensation payment.4.2 No additional comments from Democratic Services.5. Consultation and co-production5.1 N/A6. Risk management6.1 N/A7. Equalities impact assessment7.1 N/A8. Community safety8.1 N/A9. Organisational implicationsN/A10. Timetable for implementation10.1 N/APage 154

Page 155Audit trailConsultationName/PositionGuy WareMark HynesLambethcluster/division orpartnerStrategic DirectorEnablingDirector CorporateAffairsDate SentDateReceivedComments inpara:23-06-15 26-06-15 Throughout23-06-15 25-06-15 ThroughoutMartin Crump Business Partnering 23-06-15 25-06-15 3Alison McKaneEnabling: Integrated 23-06-15 26-06-15 4SupportMaria Burton, Democratic Enabling: Corporate 29-06-15 30-06-15 4.2ServicesAffairsCouncillor Paul McGlone Deputy Leader 25-06-15Sophia SkyersDeputy Complaints 23-06-15ManagerRichard Carter FOI Co-ordinator 23-06-15Richard GodfreyDivisional Development 18-06-15 22-06-15 2.37-2.43Manager, CHECarolyn DwyerDirector, Communities,Housing and18-06-15 30-06-15 2.37-2.43,2.48-2.49EnvironmentDavid AshmoreDirector, Business and 18-06-15 19-06-15 2.50-2.55Customer ServicesRyan ReinoHead of RBCS Client 18-06-15 19-06-15ManagementTim Hillman-BrownHead of Benefits and 18-06-15 19-06-15Customer ServicesSara HagleyDeputy Head of 18-06-15 19-06-15Benefits andOperationsCath KnowlesDirector, Children’sSocial Care18-06-15 30-06-15 2.60Report historyOriginal discussion with Cabinet Member N/AReport deadline 26.06.15Date final report sent 30.06.15Report no. 46/15-16Part II Exempt from Disclosure/confidential Noaccompanying report?Key decision reportNoDate first appeared on forward planN/AKey decision reasonsN/ABackground informationN/A

Page 156Appendices Appendix 1 – compensation over £1000Appendix 2 – ICO decision noticesAppendix 3 – benchmarking information

Page 157Appendix 1: Overview of complaints investigated by the Local GovernmentOmbudsman where compensation of £1,000 or more was paid in 2014-15The Terms of Reference for Corporate Committee require us to notify the Committee of anycomplaints investigated by the Local Government Ombudsman that resulted incompensation of £1,000 or more being paid. A summary of these decisions is set out below:Reference 13 008 121, 24 th February 2015 (Upheld – maladministration and injustice):The complainant said the council failed to take the necessary steps to contact him when itremoved and destroyed his car, which was registered under a statutory off road notice(SORN) and parked in a private off-road parking space. He also complained that the councilfailed to respond to his complaints in a timely fashion, which caused further distress andinconvenience.To remedy the complaint the Ombudsman recommended that the council pay thecomplainant the value of the car, £3600. In addition, the council agreed to pay £750 for theoutrage, distress, and time and trouble the original incident caused, and an additional £250for the time and trouble caused by the poor standard of the complaint handling. A letter ofapology was also sent to the customer.The council agreed to the recommendations and they have now been completed.Reference 13 016 623, 18 th June 2014 (Upheld – maladministration and injustice): Thecomplainant said that her son had been without education since his placement at hisprevious school broke down. She says the council offered her son a place at a localcommunity school, but then unlawfully withdrew the offer after the school expressed concernat its ability to cater for his additional educational needs. The complainant says the councilfailed to apply the fair access protocol properly when it refused her son admission and, whenshe appealed against the decision to withdraw the offer of a place, the council unfairlyinfluenced the panel’s decision by introducing irrelevant evidence at the hearing.The Ombudsman found that the council was not at fault in withdrawing the offer of a place atthe community school. The council showed it would not have made an offer had it beenmade aware of the circumstances in which the child had left his previous school, and of theadditional support he needed within the classroom. The council also acted appropriately byreferring the matter to its fair access panel after it accepted the school’s request to withdrawthe offer of a place.However, the council was at fault in introducing infant class size considerations into theappeal. Infant class size regulations are only relevant when a child is refused a place in aninfant class which has reached the statutory limit of 30 pupils. This was not the case here.The council openly acknowledged the school had space to accommodate the child and itsreason for refusing admission was under the provisions of the fair access protocol. In thesecircumstances, the panel’s role was to consider whether the presenting officer had proventhat the child’s admission would be prejudicial to the school, and – if this was the case – tothen consider whether the child’s individual circumstances outweighed the prejudice to theschool.By the time the Ombudsman investigation had ended the complainant had accepted a placefor the child at another school which was higher on her list of preferences. In addition, theCorporate Complaints Digest 2014-15Appendix 1 – Compensation over £1,000

Page 158council provided £6,000 extra funding to the school to support the child. On this basis thecomplaint was closed.Corporate Complaints Digest 2014-15Appendix 1 – Compensation over £1,000

Page 159Appendix 2: Overview of decisions made by the ICO in 2014-15During 2014-15 the Information Commissioner’s Office issued five decision notices to thecouncil. A summary of these decisions is set out below:Reference F050547122, 17 th November 2014 (upheld): The complainant had requestedinformation from the council relating to the closure of the west side footway and northboundcycle lane in Vauxhall Street SE11 in connection with a development project on the westside. The Commissioner’s decision was that the council had breached section 10(1) of theFOIA in that it failed to respond to the request within 20 working days of receipt of therequest. The Commissioner did not require the council to take any steps in response to thisdecision notice as the information had already been provided to the requestor.Reference FS50536100 21 st January 2015 (upheld): The complainant had requestedcopies of correspondence relating to the development of a particular property, KeybridgeHouse, as well as information regarding plans proposed by Transport for London (TfL) forthe Kennington Green and Kennington Park sites. The council considered that the task ofcomplying with the requests meant they were manifestly unreasonable and thereforeengaged the regulation 12(4)(b) exception in the Environmental Information Regulations(EIR). With regard to the public interest test, the council found that the balance of the publicinterest favoured maintaining the exception because of the resources that would need to beexpended on complying with the requests. The Commissioner’s decision was that thecouncil had failed to support the application of regulation 12(4)(b) of the EIR. He thereforerequired the council to issue a fresh response to the requests in accordance with the EIRthat did not make reference to this exception. The council was instructed to take these stepswithin 35 calendar days of the date of the decision notice. All information was provided to therequestor.Reference: FS50558777, 17 th March 2015 (part upheld): The complainant requestedinformation on the number of employees of the council who were members of organisations“such as the Freemasons”. The council refused the request under section 12 of the Freedomof Information Act 2000 on the grounds that complying with the request would exceed theappropriate limit. The Commissioner’s decision was that council was entitled to refuse therequest under section 12 of the Act. However, it had breached section 16 of the Act by notproviding assistance on how the complainant could reduce the scope of his request so that itcame within the appropriate limit. The only outstanding issue was to provide the complainantwith reasonable assistance on how to limit the scope of his request so that it could becomplied with within the appropriate limit. The requestor modified his request and theinformation was supplied.Reference: FER0569249, 14 April 2015 (part upheld): The complainant requestedinformation regarding a development site at the garages to the rear of Wavertree Court,Wavertree Road, London (reference 10/04487/FUL). The council provided the majority of theinformation requested and advised the complainant that the reminder of the informationwhich had not been provided was either not held or was exempt from disclosure undersection 21 of the Freedom of information Act 2000 (that is was readily accessible elsewhere,such as through the Planning Portal). The Commissioner’s decision was that the council hadincorrectly handled the request under FOIA when it should have been handled as under theCorporate Complaints Digest 2014-15Appendix 2 – ICO decision notices

Page 160Environmental Information Regulations. He was satisfied that it had made available themajority of the information requested. However he found the council in breach of regulation5(1) of the EIR in relation to questions 5 and 15 of the request as it did not provideinformation it held relating to fire safety and ground contamination. As a result the councilwere required to provide additional information to satisfy the request.Reference: FS50552572, 14 April 2015 (not upheld): The complainant requestedinformation regarding a development site at the garages to the rear of Wavertree Court,Wavertree Road, London (reference 10/04487/FUL). The council initially dealt with therequest outside of the EIR and a hard copy of the information was made available for thecomplainant to collect. Following a complaint to the Commissioner that the council had failedto respond to the request the Commissioner instructed the council to issue a formalresponse under the FOIA or EIR, as appropriate. The council subsequently refused therequest under section 21 of the FOIA advising that it had already provided the informationand in any event it was reasonably accessible via other means, namely the council’sPlanning Portal. The Commissioner’s decision was that the council had incorrectly handledthe request under FOIA (it should have been EIR), however he was satisfied that it hadcomplied with regulation 5(1) of the EIR in making environmental information available onrequest. The Commissioner did not require the council to take any further steps.Corporate Complaints Digest 2014-15Appendix 2 – ICO decision notices

Page 161Appendix 3: benchmarking dataThe following graphs provide Corporate Committee with a benchmark for the volume ofenquiries received by Lambeth in comparison to similar London Boroughs. The data forFreedom of Information requests, Subject Access Requests and Members Enquiries isbased on the 2013-14 financial year. All other information is from 2014-15.Complaints100009000800070006000500040003000Stage 1Stage 2Ombudsman200010000Escalation of complaints from Stage 1 to Stage 225%20%15%10%5%0%

Page 162Upheld complaints at Stage 1 and Stage 290%80%70%60%Stage 1Stage 250%40%30%20%10%0%*Volumes for Croydon include some housing complaints**Volumes for Lambeth do not include housing complaints***Ombudsman volumes for Southwark include the Local Government Ombudsman andIndependent Housing OmbudsmanNumber of Stage 1 complaints per 10,000 population350300250200150100500Sutton Surrey CC Slough BHCC Haringey Lambeth Stevenage Southwark

Page 163Members Enquiries800070006000500040003000200010000Croydon Westminster Hackney Lambeth Southwark*Volumes for Croydon include councillor enquiries only, not MPs.**Volumes for Lambeth do not include housing enquiriesFreedom of Information25002000150010005000Subject Access Requests400350300250200150100500Islington Southwark Tower Hamlets Croydon Lambeth Westminster


Page 165Agenda Item 9Corporate CommitteeDate of Committee: 9 July 2015Annual External Audit Report – Grant Certifications 2013/14Wards: AllReport Authorised by: Director of Integrated Support: Christina ThompsonContact for enquiries:tharlock@lambeth.gov.ukTim Harlock, Head of Finance, Financial Planning & Management - 020 7926 9386Report summaryThis is the sixth annual report on the results of audit certification of grants made to Lambeth. Itcovers the sixth full year with Deloitte acting as external auditors. The report provides a highlevel overview of Lambeth's performance in relation to grant claim and return certification for theyear ending 31 March 2014 as required by the Audit Commission. Prior to 2008/09, commentson performance in respect of grant certifications were included in the External Auditor’s mainAnnual Audit Letter.Deloitte audited 2 grant claims and returns during 2014 relating to the period 2013/14.Unqualified audit opinions were provided on both of these claims. This is the first year we areaware of where no qualification letters have been issued in respect of our claims and returns.Finance summaryThere are no specific financial implications arising from this report.Recommendations(1) That Corporate Committee note the information in this report.1

Page 1661. Context1.1 Each year a set number of grant claims and returns are provided by Lambeth for auditcertification as required by the appropriate Grant Paying Bodies (e.g. governmentdepartments).1.2 This report covers Deloitte’s sixth full year as the Council’s external auditor and they arerequired to report annually on the results of their certification work to those ‘charged withgovernance’ in the local authority. The purpose of such a report is to highlight any‘errors, adjustments and qualifications arising’ in the claims and returns. The report fromDeloitte for the 2013/14 reporting period is now provided to Corporate Committee forinformation. (Attached at Appendix1.)2. Proposal and Reasons2.1 Deloitte audited 2 grant claims and returns during 2014 relating to the period 2013/14.Unqualified audit opinions were provided on both of these claims. This is the first yearwe are aware of where no qualification letters have been issued in respect of our claimsand returns. (Comparison with previous years: 2006/07 - Eight claims qualified, 2007/08- Seven claims qualified, 2008/09 - Two claims qualified, 2009/10 - One claim qualified,2010/11 – Two claims qualified, 2011/12 – One claim qualified. 2012/13 – One claimqualified.)3. Finance3.1 There are no specific financial implications arising from this report.4. Legal and Democracy4.1 Under s.29 Audit Commission Act 1998, the Commission is responsible for makingarrangements for certifying claims and returns in respect of grants or subsidies made orpaid by Central Government or a public authority to a local authority.4.2 The Corporate Committee terms of reference include provision: “to consider summariesof specific reports of internal audit, investigations and external audit reports..”5. Consultation and co-production5.1 Not applicable.6. Risk management6.1 None for the purposes of this report.7. Equalities impact assessment7.1 None for the purposes of this report.8. Community safety8.1 None for the purposes of this report.2

Page 1679. Organisational implicationsNone.10. Timetable for implementation10.1 Not applicable3

Page 168Audit trailConsultationName/PositionChristina Thompson –Director of Integrated SupportMartin CrumpAlison McKane - LegalServicesWayne Chandai - DemocraticServicesCouncillor Paul McGloneInternal Officer BoardN/AExternalN/ALambethcluster/division orpartnerEnabling: IntegratedSupportEnabling: IntegratedSupport – FinancialPlanning &ManagementEnabling: IntegratedSupportEnabling: CorporateAffairsCabinet Member:FinanceDate of meetingDate Sent17 March201516 March201516 March201518 March201518 March2015DateReceived17 March201517 March201516 March2015Comments inpara:3.14.1 & 4.2Report historyOriginal discussion with Cabinet Member N/AReport deadline 26.06.15Date final report sent 20.04.15Report no. 36/15-16Part II Exempt from Disclosure/confidential Noaccompanying report?Key decision reportNoDate first appeared on forward planN/AKey decision reasonsN/ABackground informationAudit Commission General CertificationInstructions 2009Appendices Appendix 1 – Report from Deloitte on 2013/14Grant Certifications.4

Page 169London Borough of LambethReport to the Audit Committeeon the year ended 31 March 2014Certification workFinal ReportIssued 10 March 2015

Page 170Contents1. Executive summary 12. Introduction 23. Results of our claims and returns certification work 34. Certification information 45. Responsibility statement 5

Page 1711. Executive summaryWe have pleasure in setting out in this document our key findings from our claims and returns certification work ofthe London Borough of Lambeth (“the Authority”) for the year ended 31 March 2014. This report is not intended tobe exhaustive but highlights the most significant matters that have come to our attention.CertificationdeadlinesWe have certified both claims and returns required under our contract with the AuditCommission (see Section 4 for details) for the year ended 31 March 2014. Both claims andreturns we reported on were certified by the original required deadline.Results of ourclaims andreturnscertificationworkNeither of the claims/returns were qualified prior to certification. We have summarised thenumber of errors identified and our conclusion on whether we were able to certify without aqualification letter in the table below:Claims/returnsHousing and Council TaxBenefit Subsidy (“BEN01”)Pooling of Housing CapitalReceipts (“CFB06”)Value ofclaim£Number ofcellsadjustedFinancialimpactIncrease/(Decrease) £Qualifiedin2012/13Qualifiedin2013/14269,309,050 - - YES NO12,028,419 4 31,968 NO NOFees Total fees charged in respect of the work performed on the 2 claims and returns (2013: 5)certified by Deloitte were £52,463 (2013: £67,800).Section 4 of this report sets out the fees charged on each of the 2 claims and returns wecertified.Report to the Audit Committee Final Report 1

Page 1722. IntroductionPurpose of this reportThis letter is addressed to the Audit Committee of the Authority and is intended to communicate key issues arisingfrom our 2013/14 certification work. This Letter will be published on the Authority’s website.Our responsibilitiesUnder Section 28 of the Audit Commission Act 1998, the Commission is responsible for making arrangements forcertifying claims and returns in respect of grants or subsidies made or paid by any Minister of the Crown or a PublicAuthority to a Local Authority. The Commission, rather than its appointed auditors, has the responsibility for makingcertification arrangements. The appointed auditor carries out work on individual claims as an agent of theCommission under certification arrangements made by the Commission which comprise certification instructionswhich the auditor must follow.The respective responsibilities of the audited grant paying body, authorities, the Audit Commission and appointedauditors in relation to claims and returns are set out in the ‘General Certification Instructions’ produced by the AuditCommission.Auditors presented with any claim or return that is not covered by a certification instruction should refer the matterto the Audit Commission for advice. If the Audit Commission has formally declined to make certificationarrangements for a scheme, an auditor cannot act in any capacity. However, if the Audit Commission has notformally declined to make arrangements, the auditor can decide to act as a reporting accountant.The scope of our workAuditors appointed by the Audit Commission are required to: review the information contained in a claim or return and to express a conclusion whether the claim or returnis: i) in accordance with the underlying records; or ii) is fairly stated and in accordance with the relevant termsand conditions; examine the claim or return and related accounts and records of the Local Authority in accordance with thespecific grant certification instructions; direct our work to those matters that, in the appointed auditor’s view, significantly affect the claim or return; plan and complete our work in a timely fashion so that deadlines are met; and complete the appointed auditor’s certificate, qualified as necessary, in accordance with the general guidancein the grant certification instructions.These responsibilities do not place on the appointed auditor a responsibility to either: identify every error in a claim or return; or maximise the authority’s entitlement to income under it.We would like to take this opportunity to express our appreciation for the assistance and cooperation providedduring the course of the certification procedures. Our aim is to deliver a high standard of service which makes apositive and practical contribution which supports the Authority’s own agenda. We recognise the value of yourcooperation and support.Report to the Audit Committee Final Report 2

Page 1733. Results of our claims and returnscertification workClaims and returns certified without adjustment or a qualification letterWe were able to certify the following claim/return without adjustment or a qualification letter: The Housing benefit subsidy (“BEN01”)Claims and returns certified with adjustment and without a qualification letterWe were able to certify the following claim/return with adjustments and without a qualification letter:Pooling of Housing Capital Receipts (CFB06)We noted 4 adjustments which have impacted the return by a net amount of £31,968. All 4 adjustments notedrelate to receipts from pre-April 2012 disposals. This appears to have been an error on the LOGASnet systemwhich meant these values were not saved. An amendment has been made reinstating these values.Report to the Audit Committee Final Report 3

Page 1744. Certification informationOur certification work on Authority’s claims and returns for the year ended 31 March 2014 is now complete and thetable below summarises the results of this work and our billings by claims and returns.From 2012/13 onwards, the Audit Commission has replaced the previous schedule of hourly rates with a compositeindicative fee for certification work.CertificationinstructionWithin AuditCommissionframeworkClaim/ return2014 value ofclaim(£)2014 resultsof audit work2014 auditfee (£)2013 auditfee (£)PEN05 No Teachers’ pensionreturnNNDR No National nondomesticrate returnBEN01 Yes Housing and counciltax benefits subsidyCFB06 Yes Pooling of HousingCapital ReceiptsRG31 No Black CulturalArchivesN/A N/A N/A 5,642N/A N/A N/A 5,652269,309,050 Satisfactory 47,168 48,00912,028,419 Satisfactory 5,295 4,829N/A N/A N/A 3,668TOTAL 52,463 67,800Report to the Audit Committee Final Report 4

Page 1755. Responsibility statementThe Statement of Responsibilities of grant-paying bodies, authorities, the Audit Commission and appointed auditorsin relation to claims and returns, issued by the Audit Commission, sets out the respective responsibilities of theseparties, and the limitations of our responsibilities as appointed auditors and this report is prepared on the basis of,and the grant certification procedures are carried out, in accordance with that statement.The matters raised in this report are only those that came to our attention during our certification procedures andare not necessarily a comprehensive statement of all weaknesses that exist or of all improvements that might bemade. You should assess recommendations for improvements for their full implications before they areimplemented.This report sets out those matters of interest which came to our attention during the certification procedures. Ourwork was not designed to identify all matters that may be relevant to the Members and this report is not necessarilya comprehensive statement of all weaknesses which may exist in internal control or of all improvements which maybe made.This report has been prepared for the Members, as a body, and we therefore accept responsibility to you alone forits contents. We accept no duty, responsibility or liability to any other parties, since this report has not beenprepared, and is not intended, for any other purpose.Deloitte LLPChartered AccountantsSt Albans10 March 2015Report to the Audit Committee Final Report 5

Page 176Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network ofmember firms, each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of thelegal structure of DTTL and its member firms.Deloitte LLP is the United Kingdom member firm of DTTL.© 2015 Deloitte LLP. All rights reserved.Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198.Member of Deloitte Touche Tohmatsu Limited

Page 177Agenda Item 10Corporate Committee9 July 20152014/15 Draft Statement of AccountsWards: AllReport Authorised by: Strategic Director of Enabling: Guy WarePortfolio: Deputy Leader (Finance & Investment): Councillor Paul McGlone:Contact for enquiries:tharlock@lambeth.gov.ukTim Harlock, Head of Finance – Reporting and Standards, 020 7926 9386Report summaryThe draft statement of accounts, as signed off by the Strategic Director of Enabling, is attachedas Appendix 1.Corporate Committee is being asked to review the draft annual statement of accounts prior to itsaudit. Specifically, Members are asked to consider whether there are concerns arising from thefinancial statements that need to be brought to the attention of the Strategic Director ofEnabling.In accordance with the 2011 Regulations, Corporate Committee will be asked to approve theaudited accounts at its meeting on 24 September 2015.Finance summaryThe accounts set out the Council’s income and expenditure for the year ended 31 March 2015,and its financial position as at that date. It is a key financial document, and its implications forthe council have been incorporated into the Financial Planning Report to be considered byCabinet in July. However, for this committee there are no direct financial implications inagreeing the recommendations in this report.Recommendations(1) That the Committee review the draft Statement of Accounts for 2014/15 as set out inAppendix 1 to this report.(2) That Members take such steps as they consider appropriate to satisfy themselvesthat the statements have been produced with due professional care.

Page 1781. Context1.1 The Statement of Accounts, in the detail, is backward looking in that it presents theaccounts for the year ended 31 March 2015. The information within this report forms akey foundation stone for the Financial Planning Report, where the Council’s currentfinancial position will be reported in detail, with a view to future planning.1.2 The production and approval of the Council’s accounts is an important process. Itenables stakeholders to review the Council’s financial position for the year ended 31March 2015 and the overall financial activity within the year.1.3 Members are responsible for satisfying themselves that due professional care has beentaken in the production of the draft accounts. Proposals to assist Members in fulfillingthis duty are set out in this report. However, the statutory duty of approving theStatement of Accounts doesn’t fall until September, at which time Members will havebeen informed of the opinion of external audit.2. 2014/15 Statement of Accounts2.1 The draft accounts are attached as Appendix 1 to this report.2.2 As in prior years, the Accounts have been prepared in accordance with the current Codeof Practice on Local Authority Accounting.2.3 The format of the accounts is prescribed by legislation. It can make the financialstatements difficult for the lay reader to understand. It would be impractical for officers tochange the format of the accounts to assist Members in their review, since to do sowould result in the accounts not complying with statutory requirements. However,readers of the accounts are directed in particular to the Foreword to the accounts whichgives a summary of the year’s performance.2.4 There is a considerable amount of other detail contained within the accounts, as requiredby statute. Members are of course entitled to ask such questions of officers as theyconsider necessary to satisfy themselves that the accounts have been properlyprepared, particularly with regard to their “review and challenge” role. This clearlyextends to asking officers to explain figures within the accounts.2.5 However, Members must be aware that the accounts are a relatively long document,containing a great deal of detailed financial information. It is clearly reasonable thatofficers should be able to furnish explanations on request as to the most significantfigures. Where questions arise which require more detailed responses, it may benecessary for these to be provided after the meeting.3. Finance3.1 There are no direct financial implications in agreeing the recommendations in this report.4. Legal and Democracy4.1 Regulation 8 of the Accounts and Audit (England) Regulations 2011 requires theStrategic Director of Enabling, as the responsible financial officer for the authority, by 30June, to sign and date the statement of accounts for the previous financial year and to

certify that it presents a true and fair view of the authority’s financial position and of itsincome and expenditure for that year.4.2 The Regulations require the statement of accounts to be approved by a resolution of theCouncil or a committee of the Council by 30 September in each year. As approval of theStatement of Accounts is not an executive function, the Council has arranged for thisfunction to be discharged by the Corporate Committee. At its meeting (scheduled for 24September) the Committee must:a) Consider the statement of accounts;b) Following the consideration, approve the statement of accounts by formal resolution;c) Following approval, ensure that the statement of accounts is signed and dated by theChair of the Committee.4.3 The Council must then publish (including on its website) the statement of accountstogether with any certificate, opinion, or report issued, given or made by the auditorunder section 9 of the Audit Commission Act 19984.4 Prior to the meeting in September at which the Committee is required to approve it, theresponsible financial officer must re-certify the presentation of the statement of accounts4.5 There are no additional comments from Democratic Services.5. Consultation and co-production5.1 The Statement of Accounts is a statutory document whose format is dictated by statuteand regulation.6. Risk management6.1 None for the purposes of this report.7. Equalities impact assessment7.1 None for the purposes of this report.8. Community safety8.1 Not considered for the purposes of this report.9. Organisational implications9.1 None for the purposes of this report.10. Timetable for implementationPage 17910.1 Audit of the Draft Statement of Accounts has already commenced. The next deadline isto ensure a final Statement of Accounts is signed off by the auditors in time for CorporateCommittee of 24 th September.

Page 180Audit trailConsultationName/PositionGuy WareChristine Thompson, Directorof Integrated SupportAlison McKane, Head ofLegal ServicesMaria Burton, DemocraticServicesLambethcluster/division orpartnerStrategic Director ofEnablingEnabling: IntegratedSupportEnabling: IntegratedSupportEnabling: CorporateAffairsDate SentDateReceived30/06/15 30/06/1530/06/15Comments inpara:30/06/15 30/06/15 Section 430.06.15 30.06.15 Section 4Internal Officer BoardExternalDate of meetingReport historyOriginal discussion with Cabinet Member N/AReport deadline 26.06.15Date final report sent 30.06.15Report no. 47/15-16Part II Exempt from Disclosure/confidential Noaccompanying report?Key decision reportNoDate first appeared on forward planN/AKey decision reasonsN/ABackground informationAppendices.The Statement of Accounts is drawn up byreference to the Code of Practice on LocalAuthority Accounting, issued by the CharteredInstitute of Public Finance and AccountancyAppendix 1:The 2014/15 Statement of Accounts

Page 1812014/2015DraftStatement of Accounts

Page 182PREFACEWelcome to Lambeth Council’s Statement of AccountsLambeth Council is always seeking to improve, and this includes how we present information to thepublic and stakeholders to facilitate engagement and improve our commitment to ‘open government’.So I am pleased, for the first time, to personally put in a few words into this preface to the Council’sannual Statement of Accounts for the financial year ended 31 st March 2015.I would welcome any comments or suggestions from residents to help us develop and improve ourcommitment to transparency.We are facing difficult times in local government. By 2016/17 Lambeth will have lost 50% of its coregovernment funding compared to 2010/11, and this general trend of shrinking funding can be expected tocontinue for some years yet. But we are committed to achieving ambition and fairness in everything we do.In Lambeth we are determined to focus on what we are able to achieve with the resources we have left, andwe will not solely be driven by cuts we have to make.Taken together with the impacts of the government’s welfare reform programme and its impact on ourvulnerable residents, and the changing needs and expectations from residents generally, this is clearly a timeof unprecedented challenge for local government. However, I hope that through working closely with ourcommunities, and by means of finding creative and innovative solutions, we will be able to continue ourcommitment to make a real and positive difference to the lives of all in the borough.This document provides some of the detail as to how we have performed, in particular from afinancial perspective, for the year 2014/15, and I would like to thank all the finance staff who havecontributed to its completion.Councillor Paul McGloneDeputy Leader (Finance and Investment)June 20152

Page 183EXPLANATORY FOREWORDThe Council’s Statement of Accounts for the year 2014/15 has been prepared in accordance with theAccounts and Audit Regulations 2011 and the Code of Practice on Local Authority Accounting in theUnited Kingdom issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) for2014/15. The code incorporates relevant accounting standards, including International FinancialReporting Standards, International Public Sector Accounting Standards and Generally AcceptedAccounting Practice (UK).The accounts comprise the following: -Review by Chief Finance Officer 4Statement of Responsibilities for the Statement of Accounts 15Page(s)Independent Auditor’s Report to London Borough of Lambeth 16 - 18Main Financial Statements- Comprehensive Income and Expenditure Statement 19sets out income and expenditure on services, corporate income and expenditureand other comprehensive income and expenditure- Movement in Reserves Statement 20 - 21summarises the differences between the outturn on the Comprehensive Incomeand Expenditure Account and the movement on the General Fund Balance, andpresents movements in reserves- Balance Sheet 22sets out the assets and liabilities of the Council on the 31 March 2015- Cash Flow Statement 23shows the movements in cash held by the Council's funds for 2014/15,excluding the Pension Fund and Trust Funds- Notes to the Accounts 24 - 59provide a more detailed analysis of the entries in the statementsSupplementary Financial Statements- Housing Revenue Account Income and Expenditure Account & Notes 60 - 62show details of income and expenditure relating to Council Housing- Collection Fund & Notes 63 - 64show the receipt of Council Tax, Business Rates and Government Grants,which are then used to finance services provided by the Council and theGreater London Authority- Pension Fund Accounts and Notes 65 - 82show the contributions to the Fund, the benefits paid from it and the financialposition as at 31 March 2015.Glossary of Terms 83 - 84Group AccountsThe Council wholly owned an arm’s length management organisation (Lambeth Living Ltd) as atMarch 31, 2015, which managed its housing stock. However it is the Council’s view that there is norequirement to prepare group accounts because Lambeth Living was acting as an agent of theCouncil, having no material assets of its own, and earning no material income other than themanagement fee that the Council paid it. Thus, any group accounts would not be significantlydifferent from those of the single entity. Lambeth Living has been brought back in-house as of 26 thJune 2015.3

REVIEW BY THE CHIEF FINANCE OFFICERIntroductionPage 184The presentation of the formal accounts for the Council is an opportunity to not only take aretrospective look at financial performance over the last 12 months, but more importantly from astrategic perspective, to review that performance in the light of wider considerations. For severalyears now, public services have been dealing with reductions in funding, and those reductions havebeen felt most acutely by local government, and so are germane to understanding how financiallyresilient the Council is, and how well the Council is managing to adapt to the new paradigm.We have already, and we will continue to, face cuts in core government funding of about 50% oversix years. At the same time, we have maintained a commitment to residents to keep our council taxas low as possible.60%Cumulative Cut to Core Funding since 2010/1150%40%30%20%10%0%*Estimated from pro rata share of local government cuts.Financial StrategyWe need to ensure that we use the resources we have as effectively as possible. This meanseverything we do must be focused on achieving the outcomes set out in the Community Plan. OurFinancial Management Strategy sets out our approach to this. In summary, the key priorities for ourfinancial management are:Tackling the fundamental change in business and function that funding reductions of 50% over sixyears and rising demand pressures must necessarily entail by becoming a cooperative council. Aspart of this approach, we are developing our financial planning processes with the community toensure we allocate our resources most effectively (both revenue and capital) to deliver the outcomesset out in the Community Plan and away from lower priority activities.Seeking to minimise dependence on central government funding by maximising income from othersources including regional and international funding and maximising opportunities arising frompolicies such as the New Homes Bonus and Community Infrastructure Levy.4

Page 185Maximising the potential income and expenditure opportunities from a shared service approach withother local authorities, and partnerships with other public sector organisations and social enterprisesif they contribute to the outcomes set out in this plan.The ChallengeHowever, it must be recognised that for local government generally, we are in a “once-in-ageneration”period of financial challenge. Following the recent general election, we can expectfurther reductions in funding from central government, and for this austerity to continue well into themedium term.The profound adaptations required of local government will not be achieved without considerableeffort in an ever more complex environment of increasing demand and rising expectations. TheCouncil has recently received an inadequate Ofsted rating for Children’s Services; the opinion of theHead of Internal Audit in his annual review is that the organisation needed to improve the adequacyand effectiveness of governance, risk management and control arrangements. His work has identifiedthat there are some major weaknesses in the framework of governance, risk management andcontrol, and non-compliance with controls which put the achievement of organisational objectives atrisk.Both of the above verdicts demonstrate the inherent operational risks in a rapidly changingorganisation, as it grapples with significant challenges.In conclusion, for Lambeth Council to realise its ambitions will require financial management to meetthese testing circumstances, and enhanced discipline in order to progress strategic and operationalchange at the requisite speed.A number of measures have already been put in place or are due to be implemented shortly whichwill strengthen governance, accountability and management oversight across the Council to drivethrough the required improvements.Some highlightsDespite recognising the challenging financial and operational environment in its broadest sense,Lambeth Council has maintained its determination to deliver innovative projects and make a realdifference.You can see our ambition reflected in the incredible regeneration going on in Lambeth. In the lastthree years we have opened new leisure centres in Norwood, Clapham and Streatham. Also In thelast year we have been instrumental in the opening of the Black Cultural Archives in Brixton.The first phase of the “Meanwhile on Pope’s Road” project, now called Pop Brixton opened in May2015. The Council has provided its land for free until at least October 2017 and levered in over £1mof private investment to build and fit out the scheme. Over 85% of current tenants either live or werepreviously based in Lambeth and all tenants will both volunteer to support the local community andlook to recruit locally too. Later phases include an events space, subsidised retail, commercial andcommunity space and a co-working space, which will house the Impact Hub Brixton, utilising HighStreet Fund grant. In June last year (2014) a major project aiming to improve the lives of thousandsof babies and young children in Lambeth secured £38m of funding. The grant from the Big LotteryFund was given to the Lambeth Early Action Partnership (LEAP) to carry out the innovative workwhich focuses on the prevention of developmental problems during pregnancy and in children’s earlyyears.5

Page 186Our young people are achieving their best ever school results and we are narrowing gaps inperformance so that all young people have an equal chance to succeed. Local employment isgrowing and we are focusing our efforts on making a difference to the groups that are furthest fromthe employment market. Crime, in particular burglary, is down; our work to combat violence againstwomen and girls is nationally recognised.In February (2015) we announced that Lambeth had turned around every one of its troubled families,with more than a thousand households back on track with the help of a special Lambeth Councilteam set up to tackle unemployment, crime and social problems across the borough.We are supporting more vulnerable people to live at home and outside of residential and nursing carethan ever before and we have made great strides in preventing people from becoming homeless.859 new affordable housing units were delivered last year, and in March (2015) twenty two formerlysquatted two-bedroom flats were made available at council rent levels in Rushcroft Road, Brixtonafter a thorough refurbishment.The council tax collection rate is at the highest level ever achieved, at 95%, up from 94.7%previously.We are also challenging ourselves to think differently. The Young Lambeth Cooperative is a newbody that oversees with our residents many of the services and buildings we use for young people inthe borough. This is about resources being genuinely directed by the people that care and use theseservices. Our model of cooperative commissioning is putting local people at the heart of decisionsand is leading to new and better solutions.We have seen all our major parks achieve green flag status and our amazing Country Show attractsover a 100,000 people every year.6

Page 187Significant Finance DevelopmentsRetention of Business Rates, and Council Tax Support (CTS)With the localisation of £33.6m of business rate revenue in 2013/14 (£36.1m in 2014/15), which waspreviously returned to the Treasury, and the replacement of Council Tax Benefit by localised supportschemes a significant level of risk has been transferred to Local Government. Furthermore, CouncilTax Benefit became incorporated within Lambeth’s financial settlement and is now subject to thesame annual cuts.Although business rate revenue grew from 2013/14 to 2014/15, there is some uncertainty regardingprojections in the near future, due to the re-development of the Shell Centre and the Enterprise Zone.The Council’s share of the business rates provision against appeals (total £22m) is £6.5m. This is asignificant source of risk as the time between the appeal and the actual crystallisation of the loss tothe Collection Fund can be many years. Not all of 2005 appeals had been finalised at the time of thedraft Statement of Accounts.Social Care & HealthLocal government continues to deepen integration with Health, bringing additional risks and rewards.This integration can be seen with the additional responsibilities attached to Public Health and theBetter Care Fund.Lambeth gained Public Health statutory obligations on April 1st 2013 to improve the health ofresidents and reduce local health inequalities. The Public Health Grant (£26.5m with an additional£1.4m from the CCG) funds such activities as sexual health provision in the community.The Government has recently decided to cut the Public Health Grant in-year. Lambeth’s share isanticipated to be approximately £2m. It has not however cut responsibilities and demand for servicescontinue to grow.These responsibilities will be expanded by a Children Social Care element of £4.6m for the first timein 2015/16. Lambeth and Southwark share a Director of Public Health, Dr. Ruth Wallis, and she leadsa small team supporting the Council, Clinical Commissioning Groups and Health and WellbeingBoards in meeting their statutory duties.Furthermore, the total value of Lambeth’s 2014/15 share of what will become the Better Care Fund isapproximately £10.5m with an additional £11.5m in 2015/16.. The funding is to support the joining upof Health and Social Care services around the needs of elderly and vulnerable patients so they canrecuperate at home, rather than in hospitals.Pension Fund Revaluation and Pension LiabilityThe triennial valuation of the Pension Fund took place in 2013 (where funding levels improvedmarginally to 72.6%). Following this, we introduced a new approach which sets investment strategyat the same time as considering its funding strategy and contribution plan, basing all three on asophisticated risk-based model to reduce and eliminate the deficit.As a result of the approach, contribution rates and investment strategy were considered in tandem,balancing risk with the need for stability. The Council, as the largest employer in the Fund (99% ofthe total Fund), achieved more stability and a reduction in expenditure over a three-year period. Thecontribution rates came into effect on 01 April 2014 and will remain in place until the next valuationi.e. 31 March 2016 with new rates effective on 01 April 2017.Within the Fund, total assets grew from £1.032bn to £1.135bn, up 10%, as a result of this investmentstrategy.7

Page 188The net pension liability of the Council is broader than that of the Pension Fund, because it includesliabilities relating to Lambeth Living employees and those with pensions managed by the LPFA. Thisoverall liability has grown from £592m to £768m; however, this is the result of a change in theactuarial assumptions, rather than underlying performance of the Fund’s investments, which hasactually improved. Please see Note 1, Note 26 and the Pension Fund accounts themselves on p65for more details.ReservesReservesBalance at31/03/2013MovementIn YearBalance at31/03/2014MovementIn YearBalance at31/03/2015£’000 £’000 £’000 £’000 £'000General Fund Balance (24,666) (201) (24,867) 1,284 (23,583)General Fund Earmarked Reserves (68,039) 709 (67,330) 4,376 (62,954)General Fund Total (92,705) 508 (92,197) 5,660 (86,537)HRA Balances (9,996) 2,153 (7,843) (2,194) (10,037)HRA Earmarked Reserves (11,151) (12,084) (23,235) (3,277) (26,512)HRA Total (21,147) (9,931) (31,078) (5,471) (36,549)Council Total (113,852) (9,423) (123,275) 189 (123,086)Overall, earmarked General Fund reserves have fallen over the last two years, from £68.0m as at 31March 2013, to £67.3m in 2014, and finally, with a larger fall to £63.0m in 2015. Taken together withthe fall in GF balances from £24.7m to £23.6m over the same period, it is broadly reflective of thepressures falling on the authority’s finances. It should also be noted that a contribution of £2.4m fromGF balances is built into the 2015/16 budget.Over the next few years, the planned use of reserves to manage risks, meet the costs oftransformation, and provide funding for investment will be key to the success of the authority.In the Housing Revenue Account (HRA), which is ring-fenced from the General Fund, there is muchless dependency on revenue grants from government, and thus its finances are more resilient at thistime. It has therefore been possible to increase reserves from £11.2m as at 31 March 2013 to£26.5m in 2015, in readiness for investment in better quality housing.8

Investment Projects within LambethThis section is intended to provide a broader overview of investment activity within the borough, but itshould be understood that projects may be multi-phased, and not all phases will be approved andfinalised for the go-ahead at this stage.The following significant projects have been underway during 2014/15:BrixtonFuture Brixton: the Future Brixton programme is a major Council-led regeneration programme,including Brixton Central, Your New Town Hall and Somerleyton Road. The overall programmeshould see substantial investment in the town centre and the delivery of 750 new homes. Discussionshave now begun with stakeholders towards the implementation of the first phase of works.Somerleyton Road: this is a £115m mixed-use scheme which includes the proposed relocation ofthe Ovalhouse Theatre. Design for this project is well advanced with a detailed planning applicationfor the entire site due to be submitted at the end of August 2016. The latest scheme consists of 302homes, a new theatre and a range of commercial and non-commercial uses.Your New Town Hall is the major development of a 2.5 acre site in the heart of Brixton. It will see thecurrent town hall carefully restored and improved with better spaces for the whole communityincluding an area to support local businesses. It will deliver 194 new homes, create a number ofconstruction jobs and apprenticeships for local people.Waterloo (Bishop’s)Regeneration of Waterloo: the Council has supported the attracting of significant activity fromprivate development and central government in the Waterloo area, including redevelopment of Shell,Elizabeth House and Doon Street, Waterloo station Master Plan and potential extension of theBakerloo line and the extension of Jubilee Gardens.North LambethRegeneration of the Vauxhall and Nine Elms areas: the Council has granted planning permission formost major development in this area.Work continues on redevelopment of the Albert Embankmentwith Damien Hirst scheduled to open his gallery in the early summerThe Transport Works Act for the Northern Line Extension was approved on the 13th October 2014and construction has commenced. Completion is due 2020.NorwoodRegeneration of the West Norwood and Tulse Hill area: Lambeth continues to support opportunityfor new development and is progressing plans for West Norwood Library and Nettlefold Hall tobecome the first cinema in the area with improved library facility. Also, West Norwood Fire Station isbeing progressed to provide a nursery and new residential accommodation. The removal of theTulse Hill gyratory is to commence this year, with the Council providing £2m towards TfL’s £5mfunding of the project.StockwellPage 189Regeneration of the Stockwell CLIP area: the Council is finalising the Stockwell CLIP, which wouldbe the first of seven CLIP strategies to be produced borough wide. The first draft should be presentedin July, following a period of engagement of the local community stakeholders: Stockwell Partnershipand the Vassal and Coldharbour Forum. This engagement process has secured the list ofregeneration project priorities that the local people would wish to see in their areas, funded by theNeighbourhood CIL that would come forward.9

Page 190Myatt’s Field North estate regeneration: This PFI scheme commenced in May 2012 and is part-waythrough a 5 year construction and refurbishment programme. The project has already delivered 172refurbished homes and over half of the planned 808 new build homes. To date, 238 (85%) of thecouncil properties have been re-provided together with 154 (for sale) and 114 (shared ownership)new properties handed over.Various Other SchemesPrimary and Secondary expansion – a total of £57m is included within the CIP for the next 3 years2015/16 – 2017/18 to fund the expansion of Primary and Secondary schools, providing 2,415 newPrimary places (equivalent to 11.5 new forms of entry) and feasibility & design planning for futureSecondary expansion.Special Educational Needs expansion – a total of £11m is included within the CIP for the next 3years 2015/16 – 2017/18 to fund SEN expansion and to bring places back into the Borough.Highways – as mentioned above, the Highways Investment Programme resurfaced 125 streets (54footways and 71 carriageways) covering 41 miles in total during 2014/15.Affordable Housing investment. – the Council is exploring a number of different strategies tomaximise the delivery of new affordable homes within the borough. The council has negotiated viaS106 agreements to deliver a number of new homes at council rent levels.Sources of Funding for the Capital Investment ProgrammeOver the next three years the financing arrangements confirmed for the Capital InvestmentProgramme are as follows:Funding SourceTotal 3 Year CIP(2015/16 to 2017/18)£000's %Grants 64,787 20%Developers’ contributions 22,112 7%Borrowing 136,196 42%Major Repairs Reserve (HRA) 47,680 15%Contributions from leaseholders 10,000 3%Proceeds from disposals of assets 45,685 14%Earmarked reserves/revenue 1,332 0%Total 327,792 100%BorrowingThe Council has not undertaken any new long-term borrowing from external sources, and the sumtotal stands at £412.7m, the same as throughout 2013/14.However, throughout this document there are references to “borrowing” for financing purposes, andthis is where for 2014/15 the HRA has borrowed internally from the General Fund. This will continueinto the future, but will be subject to further review as appropriate.It should also be noted that the Council holds long-term creditors of £105.7m which relate toarrangements for service concessions (finance leases or PFI), most of which is paid for by PFI grantsreceived from central government.10

Page 191HRA Self-FinancingHRA Self-Financing was introduced in 2012/2013. Lambeth continues to invest in its housing stockby way of the Lambeth Housing Standard (LHS). The following investments have been made so far,2013/14: £91.1m2014/15: £102.3m. 2015/16: £120mThe Authority is assessing the remaining requirements, as set out in the original LHS investment of£490mThe HRA is constrained by both its debt cap and also its ability to service and afford any newborrowing it undertakes. The HRA 30 Year Business Plan indicates that the affordability of increasedborrowing is the more immediate pressure. Low inflations directly affect rental increases and hencethe rental income generated by the Authority. Consideration will need to be given to a future rentpolicy, which aligns with the 30 year business plan, in order to maintain and service the HousingPorfolio.11

Summary of Financial Performance in the Year2014/15 continued to be another year of difficult expenditure pressures to manage in the GeneralFund after applying savings of £25.4m against annual budgets, and throughout the year managementreporting of overspend pressures stayed consistently high for services (at about £7-10m), which wasmitigated by underspends on corporately held budgets.2014/15 Revenue Outturn – General FundPage 192The 2014/15 General Fund budget was £314.8m and incorporated savings of £25.4m compared tothe previous year. The overall outturn position was an overspend of £1.3m. However, below this toplevelfigure, it should be noted that there was an overspend in Services of £7.3m, which was offset byan underspend in corporate items of £6.0m. The outturn by department is as below:DepartmentAnnual Budget(final)AdjustedOutturn14/15Overspend/(underspend13/14Overspend/(underspend)£000's £000's £000's £000'sCommissioning 20,972 21,535 563 (445)Delivery 354,943 361,621 6,678 6,259Enabling 31,216 30,020 (1,196) (3,764)Co-operative BusinessDevelopment4,211 5,520 1,309 1,073Departmental sub-total 411,341 418,696 7,354 3,123No Recourse to Public Funds 4,425 4,401 (23) 839Services sub-total 415,766 423,097 7,331 3,962Corporate Items (100,936) (106,976) (6,040) (4,170)Total - General Fund 314,830 316,121 1,291 (208)A summary of the variances to budget is set out below.The Commissioning outturn of £0.6m overspend is mostly attributable to the Communities servicegroup, where Leisure Services has recognised backdated VAT liabilities, and in overspends againststaffing budgets.The Delivery overspend of £6.7m, is principally due to the following areas:Children’s Social Care – there was an overspend of £5.9m due to overspends on staffing,placements, legal costs and unaccompanied asylum seeker children;Temporary Accommodation – there was an overspend of £3.1m, mostly attributable to thefact that the number of households in nightly paid accommodation has nearly doubled.Securing a supply of accommodation in sufficient volumes within the limits of thegovernment’s subsidy level continues to present difficulties;Libraries – there was an overspend of £1.7m due primarily to the need to top-up the provisionto cover potential costs relating to single status pay; andCommunities, Housing & Environment – after excluding Housing and Property Services thereis an underspend of £4.7m, partially offsetting the above pressures, relating primarily to theWaste & Streetcare, Street Management and Parking services.12

The Enabling underspend of £1.2m is due to vacancies, and a higher rebate than budgeted onagency staff, since numbers have increased while awaiting restructuring. However, within thisgeneral underspend, there was an overspend of £1.1m incurred on Housing Benefits.The Co-operative Business Development overspend of £1.3m was largely due to a shortfall on theincome budgets in the Events team, including the Country Show not fully covering its costs, andoverspends in the Co-operative Transition service.Corporate Items and movements in reserves has a net underspend of £6.0m as a result of lower thanexpected contract inflation, and lower salaries inflation (as the increase only applied from January2015 without backdating), and other contingencies that weren’t fully required in 2014/15..2014/15 Revenue Outturn – Housing Revenue AccountThe Housing Revenue Account gave a balanced outturn after adjusting for contributions toearmarked reserves. The HRA balances now stand at £10m together with total earmarked reservesof £26.5m, up from £23.2m – the net movement is accounted for by the top-up of £3.3m to the PFIsmoothing reserve (which forms part of the financial model for this project). However, in-year £12.3mof reserves have been utilised to help fund housing capital works, with a year-end contribution of£11.5m arising from revenue underspends.2014/15 Capital OutturnPage 193The capital investment budget after an in-year adjustment was £211.3m, against which the finalexpenditure was £178.3m, representing 84% of planned amount.Capital Spend 2014/15 by Outcome Panel (£'000s)24,13225,1213,617Community WellbeingEnablingHousing, Jobs andInvestment125,456Neighbourhoods,Environment andSustainabilityKey outcomes achieved through the investment included:Refurbishment of 5,302 properties to achieve Decent Homes standard (£96.9m);Progress in expansion and enhancement of 7 Primary Schools partly funded by the TargetedBasic Needs Grant (£17.9m);Resurfacing of 125 streets (54 footways and 71 carriageways) covering 41 miles in total(£12.4m);Streetscape works including Clapham Old Town, Lower Marsh, Van Gogh Walk and BinfieldRoad. (£4.4m)There were a number of variances across the programme due to project management and deliveryissues which are being addressed by the Capital Delivery Group. Underspend occurred in projectsmainly in the following areas:13

Page 194Improvement of social care provision: there was a delay in starting on site of the CoburgCrescent project owing to an extended feasibility process.Expansion and Enhancement of Primary Schools: the targeted basic needs programme is aseven school programme jointly funded by DfE/EFA and Lambeth. There were a number ofdelays related to the delivery of this programme arising mainly from the changes in theconstruction market. The DfE is providing £19.8 million of funding, and will ultimately deliver1,820 primary school places and 45 places for pupils with Special Educational Needs.Investment in Libraries: some delays to the delivery of this programme have occurred aslegal negotiations and consultation on the nature of the works have taken longer thananticipated. Some projects are also on hold pending the outcome of the consultation on theCulture 2020 proposals.Housing Development Projects (HRA and GF): the Council is investing £5m pa for 5 years ina broad programme both to improve the housing conditions for residents in existing councilstock and provide new affordable homes (including new homes at council rent levels). Theprojects are still at an early stage, and hence little expenditure has been incurred yet.2014/15 Financing the Capital Investment ProgrammeThis expenditure, as detailed above, was financed from £81.6m of grant monies, £46.3m of internalreserves and revenue contributions (including via the Major Repairs Reserve), £34.9m of proceedsfrom the disposal of Council assets, £11.0m from internal borrowing, and £4.6m from developers’contributions (commonly referred to as “s106 agreements”).Guy WareStrategic Director – Enabling14

Page 195STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTSThe Authority’s ResponsibilitiesThe Authority is required to:make arrangements for the proper administration of its financial affairs and to secure that one of its officers has theresponsibility for the administration of those affairs (section 151 of the Local Government Act 1972). In this authority,the Strategic Director - Enabling is the Section 151 Officer;manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; andapprove the statement of accounts.The Authority is responsible for the maintenance and integrity of the Authority and financial information included on theAuthority’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial informationdiffers from legislation in other jurisdictions.The Chief Financial Officer’s ResponsibilitiesThe Chief Financial Officer (CFO) is responsible for the preparation of the Authority’s statement of accounts which, interms of CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (the Code), isrequired to present fairly the financial position of the Authority at the accounting date and its income and expenditure forthe year ended 31 March 2015.In preparing this statement of accounts, the CFO has:selected suitable accounting policies and then applied them consistently;made judgements and estimates that were reasonable and prudent; andcomplied with the local authority Code.The CFO has also:kept proper accounting records which were up to date; andtaken reasonable steps for the prevention and detection of fraud and other irregularities.Certification of the Chief Financial OfficerI hereby certify that the statement of accounts presents a true and fair view of the financial position of the Authority at theaccounting date and its income and expenditure for the year ended 31 March 2015.Guy Ware 30 June 2015Strategic Director – EnablingChief Financial OfficerLondon Borough of Lambeth15

Page 196Independent Auditor’s Report to the Members of the London Borough of LambethThis page is kept Blank till the Independent Auditor’s Judgement is Complete16

Page 197This page is kept Blank till the Independent Auditor’s Judgement is Complete17

Page 198This page is kept Blank till the Independent Auditor’s Judgement is Complete18

Page 199COMPREHENSIVE INCOME AND EXPENDITURE STATEMENTThis statement shows the accounting cost in the year of providing services in accordance with generally accepted accountingpractices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance withregulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.Year Ended 31 March 2015 Year Ended 31 March 2014NotesGrossExpenditureGross IncomeNetExpenditureGrossExpenditureGrossIncomeNetExpenditure£’000 £’000 £’000 £’000 £’000 £’000Central services to the public 10,823 (5,639) 5,184 20,742 (5,983) 14,759Cultural and Related Services 25,305 (4,399) 20,906 27,273 (5,990) 21,283Environmental and RegulatoryServices43,237 (7,030) 36,208 44,936 (6,151) 38,785Planning Services 13,356 (7,819) 5,537 12,071 (5,340) 6,730Children’s and Education Service 477,699 (273,881) 203,818 388,874 (275,446) 113,428Highways and transport services 55,045 (29,980) 25,065 34,618 (28,966) 5,652Local authority housing (HRA) –(reversal of revaluation loss)/revaluation loss on dwellingsLocal authority housing (HRA) -other(102,675) 0 (102,675) (92,623) 0 (92,623)141,723 (186,111) (44,388) 138,890 (180,019) (41,129)Housing services (Non HRA) 323,854 (287,786) 36,068 303,900 (297,909) 5,991Adult social care 108,253 (21,424) 86,829 138,624 (22,990) 115,635Public health 30,317 (31,890) (1,573) 29,960 (31,467) (1,507)Corporate and democratic core 3,731 (12) 3,496 1,884 (3,829) (1,945)Non distributed costs – other 9,938 0 9,938 45 0 45COST OF SERVICES 1,140,608 (855,970) 284,637 1,049,194 (864,089) 185,105Levies 3,844 3,926Payments to the GovernmentHousing Capital Receipts Pool(Gains)/losses on the Disposal ofNon-Current AssetsAdjustment for schools transferringto academy status2,998 4,965(15,311) (42,831)44 0Other income 97 73Other Operating(Income)/ExpenditureInterest Payable and SimilarCharges - otherNet interest on the net pensionsliability(8,327) (33,866)32,138 29,97725,662 28,317Investment Interest income (1,623) (2,586)Financing and InvestmentIncome and ExpenditureTaxation and Non-Specific GrantIncome(SURPLUS) OR DEFICIT ONPROVISION OF SERVICESLoss / (Gain) on revaluation ofnon-current assetsActuarial losses / (gains) onpension assets / liabilitiesOther Comprehensive (Income)and Expenditure56,177 55,70812c (415,564) (414,139)(83,077) (207,372)31 (232,470) (53,072)31 170,883 (55,645)(61,587) (108,717)TOTAL COMPREHENSIVEINCOME AND EXPENDITURE(144,683) (316,089)19

MOVEMENT IN RESERVES STATEMENTThe statement shows the movement in the year on the different reserves held by the authority, analysed into ‘usable reserves’ (that is those that can be applied to fund expenditure or reduce localtaxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the authority’s services, more details of which are shown in theComprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account forcouncil tax setting and dwellings rent setting purposes. The Net Increase /Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing RevenueAccount Balance before any discretionary transfers to or from earmarked reserves undertaken by the council.The first two tables provide movements on individual usable reserves (for 2013/14 and 2014/15) with one column for all of the unusable reserves.2014/15GeneralFundBalanceGeneralFundEarmarkedReservesHousingRevenueAccountHRAEarmarkedReservesLMSBalancesCapitalReceiptsReserveMajorRepairsReserve(Capital)CapitalGrantsUnappliedTotalUsableReservesTotalUnusableReservesTotalAuthorityReserves£’000 £’000 £'000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000Balance at 31 March 2014 brought forward (24,874) (67,329) (7,843) (23,236) (18,644) (76,094) (3,127) (46,481) (267,628) (1,216,069) (1,483,697)Movement in reserves during 2014/15(Surplus) or deficit on the provision of services 122,352 0 (205,428) 0 0 0 0 0 (83,075) 0 0Other Comprehensive Income and Expenditure 0 0 0 0 0 0 0 0 0 (61,587) (61,587)Total Comprehensive Income and Expenditure(CIES Pg 18-19)Adjustments between accounting basis & fundingbasis under regulations (Note 31)122,352 0 (205,428) 0 0 0 0 0 (83,075) (61,587) (144,662)(118,506) 0 199,960 0 0 50,320 3,001 (6,789) (127,986) (127,986) 0Page 200Net (Increase)/Decrease before Transfers toEarmarked Reserves3,847 0 (5,468) 0 0 50,320 3,001 (6,789) 44,911 (189,573) (144,662)Transfer to/from Other Reserves (Note 30c) 1,820 0 0 0 (1,820) 0 0 0 0 0 0Transfers to/from Earmarked Reserves(Note 30c)(4,375) 4,375 3,275 (3,275) 0 0 0 0 0 0 0(Increase)/Decrease in 2014/15 1,292 4,375 (2,193) (3,275) (1,820) 50,320 3,001 (6,789) 44,911 (189,573) (144,662)Balance at 31 March 2015 carried forward (23,583) (62,954) (10,036) (26,511) (20,464) (25,774) (126) (53,270) (222,719) (1,405,642) (1,628,361)20

2013/14GeneralFundBalanceGeneralFundEarmarkedReservesHousingRevenueAccountHRAEarmarkedReservesLMSBalancesCapitalReceiptsReserveMajorRepairsReserve(Capital)CapitalGrantsUnappliedTotalUsableReservesTotalUnusableReservesTotalAuthorityReserves£’000 £’000 £'000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000Balance at 31 March 2013 brought forward (24,666) (68,039) (9,996) (11,151) (15,689) (53,916) (13,468) (44,944) (241,869) (925,745) (1,167,608)Movement in reserves during 2013/14(Surplus) or deficit on the provision of services (18,046) 0 (189,324) 0 0 0 0 0 (207,370) 0 (207,370)Other Comprehensive Income and Expenditure 0 0 0 0 0 0 0 0 0 (108,719) (108,719)Total Comprehensive Income and Expenditure(CIES Pg 18-19)(18,046) 0 (189,324) 0 0 0 0 0 (207,370) (108,719) (316,089)Adjustments between accounting basis & fundingbasis under regulations (Note 31)Net (Increase)/Decrease before Transfers toEarmarked Reserves15,593 0 179,392 0 0 (22,178) 10,341 (1,537) 181,605 (181,605) 0(2,453) 0 (9,932) 0 0 (22,178) 10,341 (1,537) (25,759) (290,324) (316,089)Transfer to/from Other Reserves (Note 30c) 2,955 0 1,996 (1,996) (2,955) 0 0 0 0 0 0Page 201Transfers to/from Earmarked Reserves(Note 30c)(710) 710 10,089 (10,089) 0 0 0 0 0 0 0(Increase)/Decrease in 2013/14 (208) 710 2,153 (12,085) (2,955) (22,178) 10,341 (1,537) (25,759) (290,324) (316,089)Balance at 31 March 2014 carried forward (24,874) (67,329) (7,843) (23,236) (18,644) (76,094) (3,127) (46,481) (267,628) (1,216,069) (1,483,697)21

Page 202BALANCE SHEETThe Balance Sheet shows the value of the assets and liabilities held by the Council. The Council’s net assets (assets lessliabilities) are matched by the reserves it holds. These reserves are shown in two categories – usable and unusable. Usablereserves may be used to provide services subject to statutory limitations and the need to maintain prudent levels of reserves forfinancial stability. Unusable reserves cannot be used to fund Council services.Notes 31 March 2015 31 March 2014£’000 £’000Property, Plant & Equipment 14a 2,734,797 2,438,488Heritage Assets 1,083 1,068Intangible Assets 14b 6,320 4,342Long-Term Investments 15d 5,048 13,035Long-Term Debtors 410 425LONG TERM ASSETS 2,747,658 2,457,358Inventories 28 5Short Term Debtors 16 172,755 123,094Short Term Investments 15a 152,454 249,173Cash and Cash Equivalents 35 92,651 71,255CURRENT ASSETS 417,888 443,527Bank overdraft (Cash and Cash Equivalents) 35 (247) (58,734)Short Term Borrowing 15a (9,719) (9,013)Short Term Creditors 17 (170,521) (176,559)Provisions 23 (15,412) (10,248)Grants Receipts in Advance - Revenue 18 (11,770) (10,422)Grants Receipts in Advance - Capital 19 (34,153) (18,975)CURRENT LIABILITIES (241,822) (283,951)Long Term Creditors 15a (105,753) (79,200)Provisions 23 (2,623) (2,610)Long Term Borrowing 15a (412,717) (412,718)Other Long Term Liabilities - IAS19 Pension Liability 26 (767,901) (591,901)Grants Receipts in Advance - Capital 19 (6,369) (14,186)LONG TERM LIABILITIES (1,295,363) (1,100,615)NET ASSETS 1,628,361 1,516,319Total usable reserves 30 (222,719) (267,628)Total unusable reserves 31 (1,405,642) (1,248,691)TOTAL RESERVES (1,628,361) (1,516,319)22

Page 203CASH FLOW STATEMENTThe Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. Thestatement shows how the authority generates and uses cash and cash equivalents by classifying cash flows as operating, investingand financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which theoperations of the authority are funded by way of taxation and grant income or from the recipients of services provided by theauthority. Investing activities represent the extent to which cash outflows have been made for resources which are intended tocontribute to the authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims onfuture cash flows by providers of capital (ie borrowing) to the authority.Year Ended 31 March Notes 2015 2014£’000 £’000Net (surplus) or deficit on the provision of services (83,077) (207,372)Adjustments to net surplus or deficit on the provision of services for non cash movements (66,891) (1,328)Adjustments for items included in the net surplus or deficit on the provision of services thatare investing and financing activities136,321 136,760Net cash flows from Operating Activities (13,647) (71,940)Investing Activities 32 (63,062) 101,378Financing Activities 33 (3,173) 2,613Net (increase) or decrease in cash and cash equivalents (79,883) 32,051Cash and cash equivalents at the beginning of the reporting period (12,521) (44,572)Cash and cash equivalents at the end of the reporting period 35 (92,404) (12,521)Adjustment of Net (Surplus) on Provision of Services 2014/15 2013/14£’000 £’000 £’000 £’000Net (Surplus) or Deficit on the Provision of Services (83,077) (207,372)Adjust net surplus or deficit on the provision of services for non cash movementsDepreciation and amortisation (53,506) (43,398)Impairment and downward valuations (14,276) 79,613( Increase )/Decrease in Creditors 11,500 (35,347)Increase/ (Decrease) in Debtors 17,286 23,153(Decrease)/Increase in Inventories 23 5Accumulated Balances of Schools transferred to Academy Status 44 0Other adjustments (176) 89Non Cash PFI expenditure (2,206) (4,191)Adjustments for effective interest rates (1,580)Pension Liability 5,118 (776)Contributions to/(from) Provisions (5,177) (2,702)Carrying amount of non-current assets sold (property plant and equipment,investment property and intangible assets)(27,683) (16,194)(69,053) (1,328)Adjust for items included in the net surplus or deficit on the provision of services thatare investing or financing activitiesCapital Grants credited to surplus or deficit on the provision of services 93,031 77,051Proceeds from the sale of property plant and equipment, investment property andintangible assets43,290 59,709136,321 136,760Net Cash Flows from Operating Activities (15,809) (71,940)23

NOTES TO THE ACCOUNTS (GENERAL)1. Statement of Accounting PoliciesA. Basis of PreparationThe Accounts and Audit (England) Regulations 2011 require the Council to prepare a Statement of Accounts for eachfinancial year in accordance with proper accounting practices. For 2014/15, these proper accounting practices principallycomprise:Page 204the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (the Code)the Service Reporting Code of Practice 2014/15 (SeRCOP)the Local Authorities (Capital Finance and Accounting)(England) Regulations 2003 (SI 2003 No 3146, as amended)(the 2003 Regs)The Statement of Accounts has been prepared using the going concern and accruals bases. Activity is accounted for in theyear that it takes place, not simply when cash payments are made or received. In particular:- Revenue from the sale of goods is recognised when the Authority transfers the significant risks and rewards of ownershipto the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to theAuthority.- Revenue from the provision of services is recognised when the Authority can measure reliably the percentage ofcompletion of the transaction and it is probable that economic benefits or service potential associated with the transactionwill flow to the Authority.- Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies arereceived and their consumption, they are carried as inventories on the Balance Sheet.- Expenses in relation to services received (including services provided by employees) are recorded as expenditure whenthe services are received rather than when payments are made. Where revenue and expenditure have been recognised butcash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Wheredebts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that mightnot be collected.The historical cost convention has been applied, modified by the fair valuation of the following material categories of noncurrentassets and certain financial instruments:Class of AssetsProperty, Plant and Equipment: DwellingsProperty, Plant and Equipment: Other Land andBuildingsPensions AssetsValuation BasisExisting use value for social housingExisting use valueFair values based on the following: quoted securities – current bid price unquoted securities – professional estimate unitised securities – current bid price property – market value.The Statement of Accounts has been adjusted to reflect events after 31 March 2015 and before the date the Statement wasauthorised for issue (date awaited) only where the events provide evidence of conditions that existed at 31 March.B. Adjustments Between Accounting Basis and Funding BasisThe resources available to the Council in any financial year and the expenses that are charged against those resources arespecified by statute (the Local Government Act 2003 and the 2003 Regulations). Where the statutory provisions differ fromthe accruals basis used in the Comprehensive Income and Expenditure Statement, adjustments to the accounting treatmentare made in the Movement in Reserves Statement so that usable reserves reflect the funding available at the year-end.Unusable reserves are created to manage the timing differences between the accounting and funding bases. The materialadjustments are:Expense Accounting Basis in CIES Funding Basis in MiRS Adjustment AccountProperty, Plant andEquipmentDepreciation andrevaluation/impairment lossesAnnual contribution fromrevenue towards the reduction inits overall borrowing requirementequal to either an amountCapital Adjustment AccountIntangible Assets Amortisation and impairment Capital Adjustment AccountInvestment Properties Movements in fair value calculated on a prudent basisdetermined by the authority inCapital Adjustment Accountaccordance with statutoryExpenditure incurred in 2014/15 guidanceCapital Adjustment AccountRevenue ExpenditureFunded from Capitalunder Statute24

Page 205Expense Accounting Basis in CIES Funding Basis in MiRS Adjustment AccountCapital Grants andContributionsNon-Current AssetDisposalsFinancial InstrumentsPensions CostsGrants that becameunconditional in 2014/15 or werereceived in 2014/15 withoutconditionsGain or loss based on saleproceeds less carrying amountof asset (net of costs ofdisposal)Premiums payable anddiscounts receivable on theearly repayment of borrowing in2014/15Movements in pensions assetsand liabilities (see Policy 10)being the aggregate of servicecosts, net interest costs andactuarial gains and losses.Council Tax Accrued income from 2014/15billsBusiness Rates Accrued income from 2014/15billsHoliday PayC. Financial InstrumentsProjected cost of untaken leaveentitlements at 31 March 2015No creditNo charge or credit in respect ofcarrying amount. The salesproceeds are taken to theCapital Receipts Reserve.Deferred debits and credits ofpremiums and discounts fromearlier years in accordance withthe 2003 RegsEmployer’s pensionscontributions payable and directpayments made by the Councilto pensioners for 2014/15Demand on the Collection Fundfor 2014/15 plus share ofestimated surplus at 31 March2014Precept from the CollectionFund for 2014/15No chargeCapital Grants Unapplied Reserve(amounts unapplied at 31 March2015)Capital Adjustment Account (otheramounts)Capital Adjustment Account(carrying amount)Capital Receipts Reserve (saleproceeds and costs of disposal)Deferred Capital ReceiptsReserve (where sale proceedshave yet to be received)Financial Instruments AdjustmentAccountPensions ReserveCollection Fund AdjustmentAccountCollection Fund AdjustmentAccountAccumulated AbsencesAdjustment AccountFinancial instruments are recognised on the Balance Sheet when the Council becomes a party to their contractualprovisions and are initially measured at fair value.Financial assets are classified into two types: loans and receivables and available-for-sale assets. During the current andprior year, the Council held only loans and receivables – these are assets that have fixed or determinable payments but arenot quoted in an active market.Loans and receivables and financial liabilities are carried at their amortised cost. Annual debits and credits to the Financingand Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement (CIES) for interestpayable and receivable are based on the carrying amount of the instrument, multiplied by its effective rate. For all theinstruments that the Council holds, this means that the amount presented in the Balance Sheet is the outstanding principalrepayable or receivable (plus accrued interest); and interest debited/credited to the CIES is the amount payable for the yearaccording to the instrument agreement.Changes in the fair value of financial assets that have fixed or determinable payments and are not quoted in an activemarket (loans and receivables) are not recognised in the Balance Sheet as they arise but are debited or credited to theFinancing and Investment Income and Expenditure line in the CIES when the instrument matures or is sold. However,where loans and receivables become impaired because of a likelihood arising from a past event that payments due underthe contract will not be made, the carrying amount of the instrument is written down in the Balance Sheet to the presentvalue of the revised future cash flows discounted at the original effective interest rate and the loss is debited to the relevantservice (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the CIES.D. Government Grants and ContributionsWhether paid on account, by instalments or in arrears, government grants and third party contributions and donations arerecognised as due to the Council when there is reasonable assurance that:the Council will comply with any conditions attached to the payments, andthe grants or contributions will be receivedAmounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement untilthe Council has satisfied any conditions attached to the grant or contribution that would require repayment if not met.Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset in theform of the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits orservice potential must be returned to the transferor.25

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheetas creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributablerevenue grants and contributions) or Taxation and Non-specific Grant Income and Expenditure (non-ringfenced revenuegrants and all capital grants) in the CIES.E. Intangible AssetsExpenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result ofpast events (eg software licences) is capitalised when it is expected that future economic benefits or service potential willflow from the intangible asset to the Council.Intangible assets are measured at cost.The amount of an intangible asset to be amortised is amortised over its useful life to the relevant service line(s) in theComprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that itmight be impaired – any losses recognised are posted to the relevant service line(s) in the CIES. Any gain or loss arising onthe disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the CIES.F. LeasesLeases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewardsincidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified asoperating leases.Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment areaccounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.Property, plant and equipment held by the Council under finance leases is recognised on the Balance Sheet at thecommencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum leasepayments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Premiums paid onentry into a lease are applied to writing down the lease liability. Subsequent payments are apportioned between:a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liabilityfinancing charges and contingent rents (debited to the Financing and Investment Income and Expenditure line in theComprehensive Income and Expenditure Statement).Rentals paid by the Council under operating leases are charged to the CIES as an expense of the services benefitting fromuse of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even ifthis does not match the pattern of payments.Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written outof the Balance Sheet as a disposal, with the gain/loss attributable to the difference between the carrying amount of the assetand the Council’s net investment in the lease being credited/debited to the Other Operating Expenditure line in the CIES.The net investment in the lease is recognised as a lease asset in the Balance Sheet, net of any premium paid. Leaserentals receivable are apportioned between:a credit for the disposal of the interest in the property – applied to write down the lease assetfinance income (credited to the Financing and Investment Income and Expenditure line in the CIES).Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in theBalance Sheet. Rental income is credited to the Other Operating Expenditure line in the CIES. Credits are made on astraight-line basis over the life of the lease, even if this does not match the pattern of payments.G. Overheads and Support ServicesThe costs of overheads and support services are charged to those that benefit from the supply or service in accordance withthe costing principles of SeRCOP. The total absorption costing principle is used – the full cost of overheads and supportservices is shared between users in proportion to the benefits received, with the exception of:Corporate and Democratic Core – costs relating to the Council’s status as a multifunctional, democratic organisation.Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losseschargeable on Assets Held for Sale.H. Post-Employment BenefitsEmployees of the Council are members of four separate pension schemes:Page 206The NHS Pensions Scheme, administered by NHS PensionsThe Teachers’ Pension Scheme, administered by Capita Teachers’ Pensions on behalf of the Department forEducation (DfE).The Local Government Pensions Scheme, administered by the London Borough of Lambeth.The Local Government Pensions Scheme, administered by the London Pension Fund Authority.The NHS and Teacher’s Schemes provide defined benefits to members. However, Scheme arrangements mean thatliabilities for these benefits cannot be attributed to the Council. The Schemes are therefore accounted for as if they were26

defined contribution schemes and no liability for future payments of benefits is recognised in the Balance Sheet. TheChildren’s and Education Services and Public Health lines in the Comprehensive Income and Expenditure Statement ischarged respectively with the employer’s contributions payable to Teachers’ and NHS Pensions in the year.The Local Government Pension Scheme is accounted for as a defined benefits scheme:the liabilities of the Lambeth and London Pension Funds attributable to the Council are included in the Balance Sheeton an actuarial basis using the projected unit methodliabilities are discounted to their value at current prices using a discount rate of 3.2% (4.3% in 2013/14) which is basedon the indicative rate of return available on a basket of AA-rated bonds with long terms to maturity (the iBoxx AA ratedover 15 year corporate bond index)the assets of the Lambeth and London Pension Funds attributable to the Council are included in the Balance Sheet attheir fair value as set out in Policy A.The change in the net pension liability is analysed into the following components:Service cost comprising:o current service cost – allocated in the Comprehensive Income and Expenditure Statement (CIES) to the services forwhich the employees workedo past service cost – debited to the Surplus or Deficit on the Provision of Services in the CIES as part of NonDistributed Costso net interest on the net defined benefit liability – charged to the Financing and Investment Income and Expenditureline of the CIESRemeasurements comprising:o the return on plan assets – excluding amounts included in net interest on the net defined benefit liability (asset) –charged to the Pensions Reserve as Other Comprehensive Income and Expenditureo actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided withassumptions made at the last actuarial valuation or because the actuaries have updated their assumptions –charged to the Pensions Reserve as Other Comprehensive Income and Expenditurecontributions paid to the Lambeth pension fund – not accounted for as an expense in the CIESI. Property, Plant and EquipmentExpenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accrualsbasis, provided that it is probable that the future economic benefits or service potential associated with the item will flow tothe Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’spotential to deliver future economic benefits or service potential (ie repairs and maintenance) is charged as an expensewhen it is incurred.Assets are initially measured at cost, comprising:the purchase priceany costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating inthe manner intended by managementCertain categories of Property, Plant and Equipment are measured subsequently at fair value – see Policy A for details.Other assets (infrastructure, community assets and assets under construction) are carried at depreciated historical cost.Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount isnot materially different from their fair value at the year-end, but as a minimum every five years. Increases in valuations arematched by credits to the Revaluation Reserve to recognise unrealised gains.Where decreases in value are identified, they are accounted for by:Page 207where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the assetis written down against that balance (up to the amount of the accumulated gains)where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset iswritten down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formalimplementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.Assets are assessed at each year-end as to whether there is any indication that items may be impaired. Where indicationsexist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and,where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Whereimpairment losses are identified, they are accounted for in the same way as revaluation losses.Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciableamounts over their useful lives. An exception is made for assets without a determinable finite useful life (ie freehold land andcertain Community Assets) and assets that are not yet available for use (ie assets under construction).27

Page 208Useful Economic LivesAsset CategoryCouncil DwellingsOther Land & BuildingsVehicles & IT equipmentPlant, furniture & equipmentCommercial properties & surplus assetsInfrastructureCommunity assetsHeritage assetsIntangible assetsUseful Economic Life60 Years40 Years4 Years10 Years40 to 60 Years10 – 40 years depending on type of infrastructure asset10 – 100 years depending on type of community asset10 – 100 years depending on type of heritage assetAmortised over 4 yearsThe periods over which assets are depreciated are determined by the valuer on an asset by asset basis and range from twoto 999 years. In the absence of such a determination the useful lives in the table above apply.Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to thetotal cost of the item, the components are depreciated separately.When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property,Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the CIES against anyreceipts arising from the disposal as a gain or loss on disposal.J. Private Finance Initiative and Similar ContractsAs the Council is deemed to control the services that are provided under its PFI contracts, and as ownership of theproperty, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the assetsused are recognised on the Balance Sheet as part of Property, Plant and Equipment.The original recognition of these assets at fair value was balanced by the recognition of a liability for amounts due to thescheme operator to pay for the capital investment.The amounts payable to the PFI operators each year are analysed into five elements:fair value of the services received during the year – debited to the relevant service in the Comprehensive Income andExpenditure Statement (CIES)finance cost –debited to the Financing and Investment Income and Expenditure line in the CIEScontingent rent – debited to the Financing and Investment Income and Expenditure line in the CIESpayment towards liability – applied to write down the Balance Sheet liability towards the PFI operatorlifecycle replacement costs – proportion of the amounts payable is posted to the Balance Sheet as a prepayment andthen recognised as additions to Property, Plant and Equipment when the relevant works are eventually carried outK. ProvisionsProvisions are charged as an expense to the appropriate service line in the Comprehensive Income and ExpenditureStatement where an event has taken place that gives the Council a legal or constructive obligation that probably requiressettlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount ofthe obligation. Provisions are charged as the best estimate at the balance sheet date of the expenditure required tosettle the obligation, taking into account relevant risks and uncertainties.L. Termination BenefitsTermination benefits are charged on an accruals basis to the appropriate service (or to the Non Distributed Costs line inthe Comprehensive Income and Expenditure Statement where they relate to pensions enhancements) at the earlier ofwhen the Council can no longer withdraw the offer of those benefits or when the Council recognises costs for arestructuring.M. Changes in Accounting PoliciesPrior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes inaccounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do notgive rise to a prior period adjustment.Changes in accounting policies are only made when required by proper accounting practices or the change provides morereliable or relevant information about the effect of transactions, other events and conditions on the Authority’s financialposition or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) byadjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.CIPFA has clarified accounting for school assets. Previously, the Council had not treated foundation school assets as part ofthe Group Boundary, even when it had consolidated the rest of their accounts, in-line with Government regulation. However,after reviewing the situation, it was determined that as the Board of Governors own the Assets and the school itself isconsolidated, removing the double count of the transactions, that the Assets should also be consolidated. It was reasonableto assume that the Governors would not deny access to the school facility. The Council does not consolidate Academies as28

they are consolidated via the Department of Education. It also does not consolidate the assets of Diocese schools as thereis always a possibility that the school might be used for another purpose, however unlikely, whereas the Board of Governorsexist for the sole purpose of supporting the school and protecting the school assets and children’s welfare. This meant anincrease in the 2013/14 and 2014/15 Property, Plant & Equipment Balances of £32.6m.N. Cash and cash equivalentsCash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not morethan 24 hours. Cash equivalents are highly liquid investments that mature in [specified period, no more than three months] orless from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change invalue. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment orother purposes.In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand andform an integral part of the Authority’s cash management.O. ReservesThe Authority sets aside specific amounts as reserves for future policy purposes or to cover contingencies Reserves arecreated by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. Whenexpenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against theSurplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve isthen appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no netcharge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for noncurrentassets, financial instruments, retirement and employee benefits and do not represent usable resources for theAuthority – these reserves are explained in the relevant policies.P. RoundingIt is not the Council’s policy to adjust for immaterial cross-casting differences between the main statements and disclosurenotes.2. Critical Judgements and AssumptionsThe Statement of Accounts contains estimated figures that are based on assumptions made by the Council or relevantprofessionals engaged by the Council, such as actuaries, about the future. Estimates are made taking into account historicalexperience, current trends, professional advice and other relevant factors. However, because balances cannot bedetermined with certainty, actual results could be materially different from the assumptions and estimates.Items in the Council’s Balance Sheet at 31 March 2015 for which there is a risk of material adjustment in the forthcomingfinancial year include pensions liabilities, property, plant and equipment valuations, insurance provisions and bad debtprovisions.Critical judgements made in the Statement of Accounts are:Future of Local GovernmentThere is a high degree of uncertainty about future levels of funding for local government. However, the Council hasdetermined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impairedas a result of a need to close facilities and reduce levels of service provision.Bad Debt ProvisionsUnless, there are compelling reasons for an alternative method, total collectible income is calculated by applying the averagecollection rates of aged debt on a year by year basis to the last 6 years of arrears. The difference between debt andcollectible income becomes the amount of bad debt provision required.Provisions and Contingent LiabilitiesThe rules in IAS 37: Provisions, Contingent Liabilities and Contingent Assets, determine whether a provision or contingentliability should be recognised in the accounts. The interpretation of the rules is particularly challenging with respect to legalcases as a judgement needs to be made as to the outcome of litigation. The experience of the Council’s internal legalfunction is utilised to determine how current legal cases are likely to conclude and the possible financial impact of theoutcome of the case. The largest single element of Provisions is that which relates to the Insurance Fund, explained furtherbelow.Insurance FundThe Council holds a fund of £13m in total to act as a means to self-insurance. This is split between a consideration of £5.5mheld in provisions to deal with post-1992 claims, which are deemed to be more robustly understood and quantifiable, and areserve of £7.5m to deal with pre-1992 claims, which is based more on judgement as to a reasonable level to hold. Thesefigures are informed by an actuarial valuation of liabilities, which showed a total fund requirement of £14m (13/14 £16m).Restructures and RedundanciesPage 209The Council has plans to make further savings in 2015/16 and beyond. A provision has not been made because aconstructive obligation did not exist at 31 March 2015 as the Council had not communicated its decision to those affected in29

sufficient detail. Instead, the Council has set aside a prudent earmarked reserve intended to cover the future impact ofdecisions taken in 2015/16 regarding the future size and structure of the organisation.Property valuationsProperties are subject to full valuation by a qualified valuer under a rolling programme at least once every five years. Wherethere has been significant works carried out to the asset during the year, the asset is subject to a full valuation on completionof those works. At the balance sheet date, all assets with carrying value over £1 million are subject to a further desktopvaluation. The valuation in 2014/15 was conducted by our new external valuer, Wilks Head and Eve LLP.Service ConcessionsThe Council is deemed to control the services provided under the following PFI agreements. The accounting policies for PFIschemes and similar contracts have been applied to the arrangements and the assets recognised as Property Plant andEquipment on the Council’s Balance sheet. The values are shown below: - Myatt’s Field North (£31m) Norwood Health and Leisure Centre (£14.4m) Lilian Baylis School (£8.2m) Waste Management (£5.6m) Lambeth Lighting (£12.3m)Group AccountsThe Council has considered the relationships it has with other entities, and has determined that Group Accounts do not needto be produced because, where the Council has control over other entities, the effect of preparing Group Accounts would notbe material on the financial statements.Pensions LiabilitiesEstimation of the net liability to pay pensions depends on a number of complex judgements agreed with the Council’sactuaries, Hymans Robertson LLP.The sensitivities regarding the principal assumptions used to measure the pension liability in respect of the Lambeth schemeare set out in the table below:Approx. increase to pension liabilityApprox. increase to monetary amountLPFA Lambeth LPFA Lambeth% % £’000 £’0001 year increase in member life expectancy 3 3 2,619 55,1570.5% increase in salary increase rate

NOTES TO THE COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT (CIES)3. Amounts Reported for Resource Allocation Decisions (Segment Reporting)The analysis of income and expenditure by service on the face of the CIES is that specified by the Service Reporting Code ofPractice. However, decisions about resource allocation are taken by the Council’s Cabinet on the basis of budget reports analysedacross departments. For the purpose of the initial budget and reports during the year, these reports are prepared on a differentbasis from the accounting policies used in the financial statements. In particular:no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excessof the balance on the Revaluation Reserve and amortisation are charged to services in the CIES)the cost of retirement benefits is based on cash flows (payment of employer’s pension contributions) rather than currentservice cost of benefits accrued in the yearHowever in the outturn report, the department analysis for the General Fund is reported using the same accounting policies used toprepare the financial statements, except that expenditure includes a charge for appropriation of schools’ net surpluses to anearmarked reserve. General Fund cash limits are adjusted in that report to reflect in full the effect of converting to the accountingpolicies used in the financial statements so that the conversion has no impact on the departments’ performance against their cashlimits. HRA amounts are not converted.The income and expenditure of the Council’s departments and other groupings reported separately are recorded in the budgetreports for the year are set out below. Other groupings are expenditure where there is no recourse to public funds (NRPF) andcertain corporate items where budgets are not delegated to departments (Corporate Items).3a. Departmental Income and Expenditure2014/15Fees, Charges &Other ServiceIncomeCommissioningDeliveryEnablingNRPFCorporateItemsTotalGeneralFundHRATotalCouncil£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000(7,869) (108,743) (21,284) (904) (1) 0 (138,301) (177,547) (316,348)Government Grants (27,437) (251,909) (269,354) 0 0 0 (548,700) (7,729) (556,429)Total Income (35,306) (360,652) (290,638) (904) (1) 0 (687,501) (185,276) (872,777)Employee Expenses 6,764 251,109 33,816 6,531 634 0 298,854 3,194 302,048Other ServiceExpensesSupport ServiceRecharges51,576 446,575 317,440 5,952 3,666 0 825,390 169,655 995,045(1,678) 24,604 (30,598) (6,060) 101 0 (13,631) 12,390 (1,241)Total Expenditure 56,842 722,288 320,658 6,423 4,401 0 1,110,613 185.239 1,295,852Net Expenditure 21,536 361,636 30,020 5,519 4,400 0 423,112 (37) 423,0752013/14Fees, Charges &Other ServiceIncomeBusinessDevelopmentCommissioningDeliveryEnablingBusinessDevelopmentNRPFCorporateItemsTotalGeneralFundHRATotalCouncil£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000(10,594) (94,638) (20,579) (823) 0 (5,273) (131,907) (172,323) (304,230)Government Grants (29,443) (253,125) (274,773) (32) 0 0 (557,373) (7,729) (565,102)Total Income (40,037) (347,763) (295,352) (855) 0 (5,273) (689,280) (180,052) (869,332)Employee Expenses 8,314 243,809 37,688 6,407 400 1,677 298,295 7,302 305,597Other ServiceExpensesSupport ServiceRechargesPage 21159,032 336,225 319,245 4,785 5,259 (240) 724,306 163,171 887,4776,069 48,103 (62,148) (10,334) 84 0 (18,226) 9,735 (8,491)Total Expenditure 73,415 628,137 294,785 858 5,743 1,437 1,004,375 180,208 1,184,583Net Expenditure 33,378 280,374 (567) 3 5,743 (3,836) 315,095 156 315,2503b. Reconciliation of Departmental Income & Expenditure to Cost of Services in the CIESThis reconciliation shows how the figures in the analysis of directorate income and expenditure relate to the amounts included in theCIES.2014/15 2013/14£’000 £’000Net expenditure in the Directorate Analysis 423,075 315,251Less: Amounts included in Directorate Analysis but not in Cost of Services (20,188) (134,645)Add: Amounts not reported to management but included in Cost of Services (121,384) 4,499Cost of Services in CIES 284,638 185,10531

Page 2123c. Reconciliation to Subjective AnalysisThis reconciliation shows how the figures in the analysis of directorate income and expenditure relate to a subjective analysis ofthe Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.2014/15Fees, Charges &Other ServiceIncomeCustomer and ClientReceiptsDirectorateAnalysisAnalysisin DetailHRAStatutoryMitigationItemsAmountsincludedin CIESbut belowNet CostofServicesAmts notReportedto Mgt,but incl'din Cost ofServicesDiffbetweenAmtreported onAccounting& StatutoryBasisCost ofServicesCorporateAmounts£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000(303,337) 303,337 0 0 0 0 0 0 00 (299,542) 0 0 0 0 (299,542) 97 (299,445)TotalInterest &Investment IncomeMiscellaneous andCollection FundestimatesGovernmentGrants & CTIncome0 (1,623) 0 1,623 0 0 0 (1,623) (1,623)0 (2,172) 0 2,172 0 0 0 0 0(556,429) 556,429 0 0 0 0 0 0 0Government Grants 0 (556,429) 0 0 0 0 (566,429) 0 (556,429)Capital Grants andContributionsNon-SpecificGovernment GrantsIncome from CouncilTaxNon–domestic ratesredistribution0 0 0 0 0 0 0 (81,894) (81,894)0 0 0 0 0 0 0 (22,759) (22,759)0 0 0 0 0 0 0 (93,507) (93,507)0 0 0 0 0 0 0 (217,403) (217,403)Total Income (859,766) 0 0 3,795 0 0 (855,971) (417,090) (1,273,061)EmployeeExpensesOther ServiceExpenditureOther ServiceExpensesSupport ServiceRechargesDepreciation,Amortisation &Impairment302,049 645 (645) 0 6,893 0 308,942 0 308,942928,032 (982,032) 0 0 859 0 0 0 8600 955,463 (43,255) 0 0 0 912,207 0 912,207(1,240) 0 0 0 (2,752) 0 (3,992) 0 (3,992)0 76 (77,484) 0 0 0 (77,408) 0 (77,408)Interest Payments 0 20,139 0 (20,139) 0 0 0 32,138 32,138Levies 0 3,844 0 (3,844) 0 0 0 3,844 3,844LMS Adjustment 0 1,865 0 0 0 (1,865) 0 0 0Net Interest on theNet PensionsLiabilityPayments toHousing CapitalReceipts Pool(Gain) or Loss onDisposal of FixedAssets0 0 0 0 0 0 0 25,662 25,6620 0 0 0 0 0 0 2,998 2,9980 0 0 (23,983) 0 0 0 (15,311) (15,311)Total expenditure 1,282,841 0 (121,384) (23,983) 5,000 1,865) 1,140,608 49,331 1,189,939(Surplus) or Deficiton the Provision ofServices423,075 0 (121,384) (20,188) 5,000 (1,865) 284,637 (367,759) (83,121)32

Page 2132013/14Fees, Charges &Other ServiceIncome*Customer and ClientReceiptsDirectorateAnalysisAnalysisin DetailHRAStatutoryMitigationItemsAmountsincludedin CIESbut belowNet CostOfServicesAmts notReportedto Mgt,but incl'din Cost ofServicesDiffbetweenAmtreported onAccounting& StatutoryBasisCost ofServicesCorporateAmounts£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000(304,230) 304,230 0 0 0 0 0 0 00 (298,895) 0 0 0 0 (298,895) 73 (298,822)TotalInterest &Investment IncomeMiscellaneous andCollection FundestimatesGovernmentGrants & CTIncome0 (2,586) 0 2,586 0 0 0 (2,586) (2,586)0 (2,749) 0 2,749 0 0 0 0 (0)(565,106) 565,106 0 0 0 0 0 0 0Government Grants 0 (565,106) 0 (88) 0 0 (565,194) 0 (565,194)Capital Grants andContributionsNon-SpecificGovernment GrantsIncome from CouncilTaxNon–domestic ratesredistribution0 0 0 0 0 0 0 (64,462) (64,462)0 0 0 0 0 0 0 (20,336) (20,336)0 0 0 0 0 0 0 (87,578) (87,578)0 0 0 0 0 0 0 (241,942) (241,942)Total Income (869,336) 0 0 5,247 0 0 (864,089) (416,831) (1,280,920)Employee Expenses 305,599 386 (386) 0 (1,502) 0 304,097 0 304,097Other ServiceExpenditureOther ServiceExpensesSupport ServiceRechargesDepreciation,Amortisation &Impairment887,480 (887,480) 0 0 0 0 0 0 00 862,473 (45,337) 0 2,018 0 819,153 0 819,153(8,492) 0 0 0 6,947 0 (1,545) 0 (1,545)0 (749) (71,761) 0 0 0 (72,510) 0 (72,510)Interest Payments 0 18,480 0 (18,480) 0 0 0 29,977 29,977Levies 0 3,926 0 (3,926) 0 0 0 3,926 3,926LMS Adjustment 0 2,959 0 0 0 (2,959) 0 0 0Pensions interestcost less return onassetsPayments toHousing CapitalReceipts Pool(Gain) or Loss onDisposal of FixedAssets0 0 0 0 0 0 0 28,317 28,3170 0 0 0 0 0 0 4,965 4,9650 0 0 0 0 0 0 (42,831) (42,831)Total expenditure 1,184,587 0 (117,484) (22,407) 7,458 (2,959) 1,049,194 24,355 1,073,549(Surplus) or deficiton the provision ofServices315,251 0 (117,484) (17,160) 7,458 (2,959) 185,105 (392,477) (207,372)33

Page 2144. Material Items of Income and ExpenseRevaluation Loss and ImpairmentIn 2014/15 there was a net reversal of a revaluation loss of £102.7m in 2014/15 recorded in the HRA as a result of uplift inproperty values. In 2013/14 there was a similar net reversal of revaluation loss of £92.6m for identical reasons.5. Parking Places Revenue AccountSurpluses made on the Parking Places Revenue Account must only be used on defined transport schemes, unless deficitshave been incurred in the previous four financial years, in which case the contributions made by the General Fund can berecovered. Parking income has been generated from on and off street parking, permits and enforcement activities.2014/15 2013/14£’000 £’000Income (25,547) (24,680)Expenditure 17,371 18,105(Surplus)/Deficit for the year (8,177) (6,575)Use of SurplusRevenue Contribution to Capital 2,500 2,500Road Safety 170 170Other Highways Expenditure 3,647 1,064Structural Maintenance inc. Footways & Carriageways 1,018 1,079Transport Planning 604 1,453Aids to Movement, Furniture & Fittings 23 23Other Contributions to Transport Related Works 308 3078,270 6,868(Surplus) / Deficit for year 93 2936. Building Operations Trading AccountCertain activities performed by the Building Control Unit are charged for, such as providing general advice and liaising withother statutory authorities. The table shows the total cost of operating the building control unit divided between thechargeable and non-chargeable activities.Expenditure2014/15 2013/14Non-Non-ChargeableTotal ChargeableTotalChargeableChargeable£’000 £’000 £’000 £’000 £’000 £’000Employees 392 168 560 401 172 573Premises 1 1 2 0 0 0Transport 2 1 3 1 0 1Supplies & Services 20 9 29 186 80 266Third Party Payments 0 0 0 0 0 0Central & Support Charges 148 63 211 160 69 229Income563 242 805 748 321 1,069Building Regulations Charges (656) 0 (656) (847) 0 (847)(Surplus)/Deficit for the Year (93) 242 149 (99) 321 2227. ALMO – Arm’s Length Management OrganisationsLambeth Living Ltd (LL), a company limited by guarantee and wholly owned by the Council, was established on 1 July2008 with responsibility for managing the Council’s housing stock. The properties managed by the ALMO remain within theHousing Revenue Account (HRA). Budgets for maintenance of housing stock and capital schemes are delegated to theALMO acting as agent for the Council. The management fee paid to Lambeth Living Ltd in 2014/15 was £23,843,041(£23,683,700 in 2013/14). Upon creation of the ALMO, a number of staff were transferred from the Council, and the Councilundertook to guarantee the funding shortfall, if any, accrued in relation to pension benefits up to the day that the transferoccurred. In line with the IAS 19 report produced by the actuary for Lambeth Living the value of this guarantee included inthe Balance Sheet as at 31 March 2015 is £8m (£4m as at 31 March 2014).34

Page 215The Council is of the view that there is no requirement to incorporate LL’s accounts in group accounts because it acts as anagent of the Council, having no material fixed assets of its own, and earning no material income other than the managementfee that the Council pays it. Thus, any group accounts would not be significantly different from those of the single entityaccounts.8. Members’ Allowances2014/15 2013/14£’000 £’000Members’ Allowances 1,157 1,140Travel Allowance/Subsistence* 0 11,157 1,1419a. Officers’ RemunerationName and TitleYearSalary,Fees &AllowancesExpenseAllowancesTotalRemunerationexclemployers’pensioncontributionsEmployers’pensioncontributionsElectionPayment(inclpension)Total Remunerationincl employers’pensioncontributions£ £ £ £ £ £Derrick Anderson 1 14/15 207,543 0 207,543 24,327 1,000 231,870Chief Executive 13/14 193,075 33 193,108 32,437 1,000 226,544Mike Suarez 2Executive Director –Finance & Resources13/14 50,730 0 50,730 8,523 0 59,253Guy Ware 3 14/15 155,190 0 155,190 26,072 0 181,262Strategic Director,Enabling13/14 136,589 74 136,664 22,947 0 159,611Deborah Jones 4Executive Director –Children & Young13/14 69,337 84 69,421 11,719 0 81,139People’s ServiceJoan Cleary 5 ExecutiveDirector – Adult & 13/14 78,597 0 78,597 0 0 78,597Community ServicesHelen Charlesworth-May14/15 152,190 0 152,190 25,568 0 177,758Strategic Director -Commissioning13/14 136,589 21 136,610 22,947 0 159,557Susan Foster 14/15 152,579 0 152,579 25,568 0 177,758Executive Director –Housing, Regeneration & 13/14 152,579 0 152,579 25,568 0 178,147EnvironmentDr. Ruth Wallis 6 14/15 150,577 0 150,577 19,329 0 169,906Joint Health ExecutiveDirector -Lambeth and 13/14 150,577 0 150,577 19,329 0 169,906SouthwarkCraig Tunstall 7 14/15 199,589 0 199,589 24,006 0 223,595Federation of Kingswood& Elmwood PrimarySchools and Children’sCentres13/14 269,635 0 269,635 36,609 0 306,2431.Derrick Anderson left the Council in December 2014. New Chief Executive started on the 1 st April 2015.2. Mike Suarez resigned as Executive Director – Finance & Resources on 31 July 2013.3. Guy Ware joined 2 September 2013 replacing Mike Suarez who had an annualised salary of £152,190. The figures include his earning in aprevious Lambeth post before appointment. Guy Ware acted up as Chief Executive up till March 20154. Deborah Jones resigned as Executive Director – Children & Young People’s Service on 15 September 2013.5. Joan Cleary resigned as Executive Director – Adult & Community Services on 31 October 2013.6. Ruth Wallis joined the Council on 1 April 2014. The post is shared equally with LB Southwark, and the Council's share of total remuneration andcontribution to the pension fund is £75,289 and £9,665 respectively. This is based on information Lambeth obtained from Southwark.7. Craig Tunstall is included, despite being a school employee, due to the nature of schools that are not academies nor free schools falling withinthe Group Boundaries of local government. These group boundaries are defined by regulation and interpreted by Chartered Institute of PublicFinance & Accountancy (CIPFA).35

Page 2169b. Remuneration Details – Higher EarnersThe remuneration of the Council’s other employees receiving £50,000 or more, excluding pension contributions, is shownbelow in bands of £5,000.Number of employeesRemuneration band 2014/15 2013/14£50,000 - £54,999 206 164£55,000 - £59,999 104 107£60,000 - £64,999 56 49£65,000 - £69,999 34 37£70,000 - £74,999 28 37£75,000 - £79,999 24 18£80,000 - £84,999 14 16£85,000 - £89,999 14 8£90,000 - £94,999 8 4£95,000 - £99,999 4 10£100,000 - £104,999 6 3£105,000 - £109,999 2 1£110,000 - £114,999 5 6£115,000 - £119,999 3 3£120,000 - £124,999 2 2£125,000 - £129,999 0 2£130,000 - £134,999 0 0£135,000 - £139,999 0 0£140,000 - £144,999 1 1£145,000 - £149,999 0 0£150,000 - £154,999 0 09c. Exit PackagesExiting Package cost band(including special paymentsNumber ofcompulsoryredundanciesTotal Number of Exitpackages by costbandNumber of otherDepartures agreedTotal Cost of ExitPackages in each band£ £ £2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/140 – 20,000 30 45 44 104 74 149 619,625 1,165,15420,001 – 40,000 19 6 12 21 31 27 834,379 735,26940,001 – 60,000 0 3 0 0 0 3 0 133,80360,001 – 80,000 0 0 0 0 0 0 0 080,001 – 100,000 0 0 0 0 0 0 0 0100,001 – 150,000 0 0 0 0 0 0 0 0Total cost of exit packagebefore provision49 54 56 125 105 179 1,454,003 2,034,226The total cost of £1,454,003 (£2,034,226 in 2013/14) includes £379,233 (£545,254 in 2013/14) for exit packages that havebeen agreed and charged to the authority’s Comprehensive Income and Expenditure Statement in the current year but willnot be paid until 2015/16.36

Page 21710. External Audit CostsThe Council has incurred the following costs in relation to the audit of the Statement of Accounts and the LambethPension Fund Annual Report, certification of grant claims and to non-audit services provided by the Council’sexternal auditors, Deloitte LLP:2014/15 2013/14£’000 £’000Fees with regard to external audit services carried out by the appointed auditor for the year 277 282Fees for the certification of grant claims and returns for the year 52 68Fees for the audit of the Lambeth Pension Scheme Annual Report 21 21Fees for non-audit services 0 5711. Publicity ExpenditureThe Council’s Publicity Expenditure is set out below:350 4282014/15 2013/14£’000 £’000Recruitment Advertising 907 433Other Advertising 312 4681,219 90112. Grant Income, Contributions and Taxation12a. Other Revenue Grant IncomeThe Council credited the following other revenue grants to the Comprehensive Income and Expenditure Statement in2014/15: -2014/15 2013/14£’000 £’000Education Services Grant (3,903) (3,954)Emergency Support Service - Social Fund (1,896) (1,924)New Homes Bonus & New Homes Bonus Top Slice (8,633) (7,168)Troubled Families Grant (1,945) (1,585)Grants Under £1.5m (6,383) (5,705)Sub Total Taxation and Non Specific Grant Income (22,759) (20,336)Credited to Services (Government Grants)2014/15 2013/14£’000 £’000Adult and Community Learning (2,299) (2,037)Dedicated Schools Grant (217,305) (217,757)Discretionary Housing Payments (1,698) (1,817)DWP Subsidy Administration Grant (4,065)Housing and Council Tax (Benefit and Subsidy) (265,309) (263,589)PFI Lilian Baylis PFI Project - DfE Grant (1,931) (2,440)PFI Support Grant Income - Lambeth Myatts Field North HRA PFI Project (7,729) (7,729)PFI Support Grant Income - Gracefield Gardens & Street Lighting (1,727) (1,727)Public Health Grant (26,437) (25,438)Pupil Premium (15,588) (12,425)YPLA (LSC) 6th Form Grant (5,950) (5,644)Z2. Other Government Grants - Revenue (under £1.5m) (10,456) (8,328)Z1. Other non -Government Grants - Revenue (113) (174)Grand Total (579,302) (573,506)37

12b. Capital Grants and ContributionsThe Council credited the following capital grants and contributions to the Comprehensive Income and Expenditure Statementin 2014/15: -Credited to Taxation and Non Specific Grant Income2014/15 2013/14£’000 £’000Transport for London (4,198) (5,469)Section 20 Receipts (5,403) (6,286)Standard Fund (16,950) (17,266)Outer London Fund (175) (1,856)S106 developers’ contributions (2,173) (2,935)Other Grants - Capital (under £1.5m) (805) (510)Decent Homes Backlog Funding (52,016) (30,141)Heritage Lottery Brockwell Park (175) 0Sub Total Taxation and Non Specific Grant Income (81,894) (64,463)Credited to ServicesPage 2182014/15 2013/14£’000 £’000Heritage Lottery Fund (387) (1,976)Transport for London (8) (334)Standards Fund (7,606) (9,238)S106 developers’ contributions (2,460) (474)Other Grants-Capital (under 1.5m) (676) (1,407)Credited to Services (11,137) (13,429)Total (93,031) (77,891)12c. Breakdown of Taxation and Non-Specific Grant Income2014/15 2013/14£’000 £’000Capital grants and Contributions – other (see note 12b) (81,894) (64,463)Council Tax income (93,507) (87,578)NNDR Retained Income (33,381) (32,575)Revenue Support Grant (119,880) (146,450)Top-Up grant – business rates retention scheme (64,142) (62,917)Other Non service related government grants (see note 12a) (22,759) (20,336)Taxation and Non-Specific Grant Income (415,564) (414,319)13. Related PartiesThere were no outstanding balances at the year end unless otherwise stated.Central GovernmentCentral government has effective control over the general operations of the Council – it is responsible for providing thestatutory framework within which the Council operates, provides the majority of its funding in the form of grants andprescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills and housingbenefits). Details of transactions with government departments are set out in note 12. Revenue and capital grants whichhave not yet been credited to the Comprehensive Income and Expenditure Statement are shown in notes 18 and 19 to thebalance sheet respectively. Other amounts due to or from central government at the relevant balance sheet dates areincluded in the figures in notes 16 and 17.MembersMembers of the Council have direct control over the Council’s financial and operating policies. During 2014/15 £7,246,044(£2,032,145 in 2013/14) was paid to organisations in which 16 members (5 members in 2013/14) were on the governingbody. Details of all these relationships are recorded in the Register of Members’ Interests or the List of Council’s38

Representatives on Other Bodies and Outside Organisations which are open to public inspection at Lambeth Town Hallduring office hours. Further information is available in note 8 on allowances paid to members.OfficersDuring 2014/15 the wife of Strategic Director – Enabling provided freelance training services contracted by the Councilthrough Edge for the training of Social Workers in Mental Health and was paid £1,200.Other Public BodiesPage 219In addition, the Council paid £14,207,474 (£14,724,474 in 2013/14) to Western Riverside Waste Authority in respect of wastedisposal charges and £1,754,293 (2012/13 £1,712,964) in respect of levies.Amounts due to or from other local authorities at the relevant balance sheet dates are included in the figures in notes 16 and17. The Council had deposits at 31 March 2014 with other local authorities of £85,000,000 (£63,530,000 in 2013/14) and theUK Debt Management Office of £0 (£61,000,000 in 2013/14).The Council has borrowing (including accrued interest) of £419,592,685 (£419,526,760 2013/14) with the Public Works LoanBoard (PWLB). Interest payable on these loans was £23,064,853.37 (£22,934,145 in 2013/14). The Waste Authority andPWLB are under common control of central government.The Council paid £23,843,041 (£23,683,700 in 2013/14) to Lambeth Living Ltd (a subsidiary of the Council) in respect ofmanagement fees. Further information is given in Note 7. Amounts due from Lambeth Living were £17,514,653 (£5,979,000in 2013/14) and amounts due to Lambeth Living were £6,850,849 (£3,325,000 in 2013/14).Material transactions with the Pension Fund are disclosed in the Pension Fund accounts The Fund owed the Council £7.3mas at 31 March 2015 (£11.9m as at 31 March 2014). During the year, no trustees or Council Chief Officers with directresponsibility for the Pension Fund have undertaken transactions with the Pension Fund. The Council charged the fund£1.02m for expenses incurred in administering the fund. Details are in the Pension Fund Accounts.39

Balances at 31MarchNOTES TO THE BALANCE SHEET14a. Property, Plant and EquipmentCouncil DwellingsOther Land andBuildingsVehicles, Plant,Furniture &EquipmentInfrastructureAssetsCommunityAssetsSurplus AssetsAssets UnderConstruction£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’0002014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14Cost or Valuation 1,998,860 1,586,554 557,321 606,044 81,891 75,642 185,465 178,604 13,494 10,129 5,816 24,971 11,579 61,395 2,854,426 2,543,339TotalAccumulatedDepreciation(50) (33) (5,171) (8,299) (61,107) (51,953) (52,512) (43,990) (702) (509) (88) (70) 0 0 (119,629) (104,854)Carrying Amount 1,998,810 1,586,521 552,150 597,745 20,784 23,689 132,953 134,614 12,793 9,620 5,728 24,901 11,579 61,395 2,734,797 2,438,485Owned 1,968,506 1,586,521 528,818 583,345 15,144 20,455 120,635 121,945 12,793 9,620 5,728 24,901 11,579 8,092 2,663,204 2,354,879Finance Lease 0 0 5,640 3,234 0 0 0 0 0 0 0 0 5,640 3,234PFI 30,304 0 23,332 14,400 0 0 12,317 12,669 0 0 0 0 0 53,303 65,954 80,372Carrying Amount 1,998,810 1,586,521 552,150 597,745 20,784 23,689 132,953 134,614 12,793 9,620 5,728 24,901 11,579 61,395 2,734,797 2,438,485Movements inCarrying AmountCouncil DwellingsOther Land andBuildingsVehicles, Plant,Furniture &EquipmentInfrastructureAssetsCommunity AssetsSurplus AssetsAssets UnderConstruction£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’0002014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14At 1 April 1,586,521 1,385,948 597,745 514,752 23,689 25,394 134,614 119,559 9,620 8,638 24,901 28,002 61,395 90,505 2,438,485 2,172,798TotalPage 220Reclassifications 65,011 0 1,878 86,364 0 0 0 0 4,455 0 0 0 (71,344) (86,364) 0 0Additions 102,802 93,254 7,197 11,300 6,249 5,468 18,073 22,202 3,188 1,153 0 0 21,528 59,134 191,658 192,511Revaluations 289,385 139,166 (36,103) (2,624) 0 0 0 0 (4,278) 0 (11,314) 1,769 0 0 237,689 138,311Depreciation (20,735) (17,018) (14,036) (11,292) (9,154) (7,173) (8,522) (7,147) (193) (171) (522) (474) 0 0 (53,162) (43,275)Impairments (8,042) (3,785) (315) 0 0 (11,213) 0 0 0 0 0 0 (1,880) (19,570) (5,665)Disposals andDecommissioningAssets reclassified (to)/ from Held for Sale(16,133) (11,044) (3,706) (539) 0 0 0 0 0 0 (6,442) (406) 0 0 (26,281) (11,989)0 0 (507) (216) 0 0 0 0 0 0 (895) (3,990) 0 0 (1,402) (4,206)At 31 March 1,998,809 1,586,521 552,152 597,745 20,784 23,689 132,952 134,614 12,792 9,620 5,728 24,901 11,580 61,395 2,734,797 2,438,48540

14b. Intangible AssetsThe Council accounts for its software as intangible assets to the extent that the software is not an integral part of a particularIT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets includeonly purchased licenses. The value of the licences held by the Council is immaterial, and is written off on a straight-linebasis over the estimated useful life of four years. The charge is in Cost of Services within the CIES.The movement on Intangible Asset balances during the year is as follows:2014/15 2013/14Software LicencesSoftware Licences£’000 £’000Balance at start of year: 4,342 2,107· Gross carrying amounts 8,255 5,897· Accumulated amortisation (3,913) (3,790)Net carrying amount at start of year 4,342 2,107Additions:· Purchases 2,322 2,358· Amortisation for the period (344) (123)Net carrying amount at end of year 6,320 4,342Comprising:· Gross carrying amounts 10,577 8,255· Accumulated amortisation (4,257) (3,913)Balance at end of year 6,320 4,34214c. Rolling RevaluationAll the Council’s property assets are valued annually on a desktop basis, with each asset having a full valuation at leastevery five years. Valuations are reflected as at the balance sheet date. Properties are included in the Balance Sheet as perthe Statement of Asset Valuation Principles and Guidance notes issued by the Royal Institute of Chartered Surveyors (RICS)and the Stock Valuation for Resource Accounting issued by Communities and Local Government (CLG).+14d. Capital Expenditure and Capital FinancingCapital Financing Requirement 2014/15 2013/14£'000£'000Opening Capital Financing Requirement 606,697 572,150Capital InvestmentProperty, Plant and Equipment 191,737 192,651Intangible Assets 2,322 2,358Revenue Expenditure Funded from Capital under Statute 13,416 15,954Sources of FinanceCapital Receipts Recycled 141 (125) 0Capital Receipts (34,730) (31,901)Government grants and other contributions (29,593) (42,317)Decent Homes (52,016) (30,140)Major Repairs Reserve (28,268) (35,197)S106 contributions (4,633) (3,370)Direct revenue contributions (89) (131)Sums set aside from revenue (17,918) (14,790)MRP / loans principal (16,655) (18,569)Capital Receipts set aside – regulation 23 (b) (55,476) 0Closing Capital Financing Requirement 574,670 606,697Explanation of movements in yearPage 221Increase (decrease) in underlying need to borrow (61,176) 6,791Assets acquired under PFI/PPP contracts 29,149 27,756Increase / (decrease) in Capital Financing Requirement (32,027) 34,54741

14e. Capital Commitments4231 March 2015 31 March 2014£’000 £’000Commissioning 77,464 4,186Enabling 0 4,328Delivery 59,624 29,505Total 137,088 38,019As at 31st March 2015, the authority has entered into a number of contracts for the construction of Plant, Propertyand Equipment in 2014-15 and future years budgeted to cost £137,088m. Similar commitments as at 31 March2014 were £38m (Excluding Lambeth Living presently reporting within commissioning). The major commitmentsare: Expansion of Woodmansterne Primary School £10.5m Expansion of St John’s Angell Town Primary School £8.3m Expansion of Paxton Primary School £10.3m The Somerleyton Road Affordable Housing Project £6.0m The Sheltered Housing Project £5.2m14f. Assets Held for SaleBalance outstanding at start of yearAssets newly classified as held for sale:Current2014/15 2013/14£’000 £’000· Property, Plant and Equipment 1,402 4,206Assets sold (1,402) (4,206)Balance outstanding at year-end 0 014g. Heritage AssetsHeritage assets held by the Council, principally for their contribution to knowledge or culture, comprise the following: -Historic Buildings - The Brixton Windmill, built in the 19 th century, has been restored, since 2008, to its originalcondition.Art Collection - Includes a granite sculpture and permanent oak sculptures, part of an ongoing programme ofregeneration.Water Features – Include a number of drinking fountains in need of refurbishmentMemorials – Include sculptures and statues in several Lambeth ParksThey are recognised and measured in accordance with the Council’s accounting policies on property, plant and equipment.15a. Financial InstrumentsPage 222Non-CurrentCurrent31 March 2015 2014 2015 2014£'000 £'000 £'000 £'000Bank overdraft 0 0 (247) (58,734)Rents 0 0 (6,124) (5,047)Right to buy service charges 0 0 (2,161) (2,030)Other payables 0 0 (116,154) (128,687)Short-term Borrowing – PWLB 0 0 (6,876) (6,810)Short-term Borrowing – IFRIC 12 0 0 (2,843) (2,203)Long-term Borrowing – PWLB (412,717) (412,717) 0 0Long-term creditors – IFRIC12 (105,753) (79,200) 0 0Total Financial Liabilities at Amortised Cost (518,470) (491,917) (134,405) (203,511)Rents 0 0 5,924 6,441Right to buy service charges 0 0 2,455 2,741s20 works 0 0 20,745 17,061Other receivables 0 0 94,306 46,846Pension Fund 0 0 10,513 11,913Long-term Debtors 410 426 0 0Investments 5,048 13,035 152,454 249,173Total Loans and Receivables 5,458 13,461 286,398 334,175The balance on the current category of financial liabilities does not include all elements of creditors. The reason for exclusionsis that some sections of creditors relate to statutory functions, not contractual arrangements and therefore do not meet thedefinition of a financial instrument or is deferred income.

Similarly, and for the same reason, the balance on current loans and receivables consists of short-term loans and excludessome elements of debtors. The short-term investments amount to £152.5 at 31 March 2015 and £249.1m at 31 March 2014.15b. Impairment (credit) losses on receivablesReconciliation of Allowance forCredit Account (Provision fordoubtful debts)S20 LeaseholdersRentDebtorsSundryDebtorsRTB ServicechargesParkingDebtors£’000 £’000 £’000 £’000 £’000 £’000Balance as at 31 March 2013 (3,211) (15,023) (9,610) (1,551) (7,691) (37,085)Write-offs 0 3,199 262 14 4,355 7,830Set up/Release 1,250 (1,739) (1,580) 0 (5,623) (7,692)Balance as at 31 March 2014 (1,961) (13,563) (10,928) (1,537) (8,959) (36,947)Write-offs 0 1,452 3,017 179 2,582 7,230Set up/Release 460 (2,049) (2,782) 0 (6,383) (10,754)Balance as at 31 March 2015 (1,501) (14,160) (10,693) (1,358) (12,760) (40,472)15c. Income, Expense, Gains and LossesDetails of the Council’s income and expenditure in relation to interest payable and receivable31-Mar-1531-Mar-14£’000 £’000Interest Receivable (1,735) (2,057)Interest Payable 23,065 22,934Impairment Loss on loans and receivables 10,754 7,69232,084 28,56915d. Fair Values of Assets and LiabilitiesFinancial liabilities and financial assets are carried in the Balance Sheet at amortised cost. The fair value of PWLB debt hasbeen assessed by calculating the present value of the cash flows that will take place over the remaining term of theinstruments discounted by interest rates at the balance sheet date based on PWLB redemption interest rates advised onPWLB. Where an instrument will mature in the next 12 months, the carrying amount is assumed to approximate to fair value.The fair value of trade and other receivables and payables is taken to be the invoiced or billed amount. Liabilities arisingfrom service concession arrangements and finance leases are calculated on the life of the arrangement or lease using theimplicit rate of interest in the lease. The liability is therefore assumed to be approximate to fair value. Trade and otherreceivables and payables and liabilities arising from service concession arrangements and finance leases have thereforenot been included in the table below.31 March 2015 31 March 2014CarryingCarryingFair valueamountamountFair value£’000 £’000 £’000 £’000Financial Assets – Long-term Investments 5,048 5,056 13,035 13,019Financial liabilities – PWLB debt (412,717) (727,039) (412,717) (590,377)The fair value of the liabilities is higher than the carrying amount because the Council’s portfolio of loans includes a numberof fixed rate loans where the interest rate payable is higher than the prevailing rates for similar loans at the Balance Sheetdate. This commitment to pay interest above the market increases the amount the Council would have to pay if the PWLBagreed to early repayment of the loans.15e. Nature and Extent of Risks Arising from Financial InstrumentsThe Council has put in place formal and comprehensive objectives, policies and practices, strategies and reportingarrangements for the effective management and control of its treasury activities. The procedures for risk management areset out through a legal framework based on the Local Government Act 2003, and associated regulations, which require theCouncil to comply with the CIPFA Prudential Code, the CIPFA Code of Practice on Treasury Management in the PublicServices and investment guidance issued through the Act. The Council, in complying with this framework, acknowledgesthat effective management and control of risk are the prime objectives of its treasury management activities andresponsibility for these lie clearly within the organisation. The key policy documents are available on the Council’s website.Credit riskCredit risk principally arises on deposits with bank and other financial institutions in relation to deposits. The risk is mitigatedthrough the Council’s treasury management strategy. This requires that:Page 223Deposits are made with banks and other financial institutions that have been rated by independent credit ratingagencies with a minimum score of BBB+.Deposits can be made with other institutions that have not found it necessary to maintain a credit rating e.g. certainbuilding societies and local authorities, subject to an assessment of risk that is carried out internally. Deposits tothese bodies are limited to a percentage of the asset value of the institution.Total43

No more than £20 million is held with any one institution, regardless of standing or duration, except for the Council’smain bank (NatWest) and the government DMADF facility. A range of counterparties are used to diversify andspread risk.The Council’s maximum exposure to credit risk in relation to its investments in banks and building societies cannot beassessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specificto each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet theircommitments. A risk of irrecoverability applies to all of the Council’s deposits but there was no evidence at 31 March 2015that this was likely to crystallise. Deposit protection arrangements as outlined in the Council’s Treasury ManagementStrategy will limit any losses that may arise.15f. Maximum exposure to credit risk on other financial assets, based on experience of default and uncollectability overthe last three financial years before provisions for impairment. Provisions for impairment are set out in Note 15b.Category of CustomerAmount at31.03.2015Historicalexperience ofdefaultEstimatedmaximumexposure at31.03.2015Amount at31.03.2014Historicalexperience ofdefaultEstimatedmaximumexposure at31.03.2014£’000 % £’000 £’000 % £’000Rents 20,085 11.70 2,350 20,005 13.18% 2,637Right-to-buy service charges 3,813 1.66 63 4,277 0.61% 26s20 works 22,247 6.87 1,528 19,022 9.21% 1,753Other receivables 94,087 12.68 11,933 46,846 16.66% 7,803140,232 15,874 90,150 12,219There is a specific requirement to note any changes in the Council’s exposure to risk and its approach to managing itcompared to the prior year. This has been through periodic consultation and reporting to Corporate Committee.15g. Deposits with banks and financial institutionsPage 224Deposits with banks and financial institutions 31 March 2015 31 March 2014£’000 £’000Investments with Banks 65,588 75,190Investments with Building Societies 12,000 72,000The authority has UK Banks on its lending list and the limits are set out in the Annual Treasury Strategy Report approved bythe authority. The figure above shows the maximum exposure for all banks at that date. Building Societies on thecounterparty list are ranked based on level of assets held. The list and risk is reviewed based on the market indicatorsavailable.15h. Ageing analysis of financial assets that are past due at the end of the financial year but not impairedAged Analysis of FinancialS20 leaseholderscharges*RTB serviceRents*Sundry debtAssets (excl Investments)Total2014/15 £’000 £’000 £’000 £’000 £’000Less than 1 year 5,949 3,569 56,896 2,455 68,869Over 1 year 1,449 16,918 13,901 0 32,268Total as at 31 March 2015 7,398 20,487 70,797 2,455 101,137S20 leaseholdersRTB servicecharges*Aged Analysis of FinancialAssets (excl Investments)Rents*Sundry debtTotal2013/14 £’000 £’000 £’000 £’000 £’000Less than 1 year 5,582 653 21,861 437 28,533Over 1 year 1,386 5,984 10,483 274 18,127Total as at 31 March 2014 6,968 6,637 32,344 711 46,660* The ageing of the rents and right to buy service charge debtors is prepared on a different basis with the ageing equal to theequivalent number of weeks of rental or service charge outstanding (i.e. Amounts greater than 12 months represent an equivalentof more than 12 months’ rent outstanding).Liquidity riskThe Council’s policy of maintaining sufficient liquidity to cover three months’ worth of expenditure is monitored on a weeklybasis. Additionally, it has access to instant cash accounts with its banks and ready access to borrowing from the PWLB. Ithas been able to meet its day to day commitments as they fall due and has had no need to raise funding from PWLB in thelast 5 years.44

15i. Analysis by MaturityBook Value at 31 March 2015 31 March 2014£’000 £’000Maturing in 1 to 10 years 50,799 26,461Maturing in 10 to 20 years 53,027 77,365Maturing in 20 to 30 years 40,846 40,846Maturing in 30 to 40 years 87,951 78,411Maturing in more than 40 years 180,094 189,634412,717 412,717Market riskThe Council is not exposed to any significant risks in terms of interest rate movements on its borrowing and investments. Thespread of investments takes account of prevailing and as far as possible future market forecasts from different sources of thetrend and future interest rates risks.All borrowing is with the Public Works Loan Board on a fixed term and fixed interest basis. Current market conditions are notconducive to raise finance unless it is for specific purposes. The return on investments would not cover the cost of servicingthe debt.Interest receivable on call accounts, which move in parallel with the money markets, is credited to the ComprehensiveIncome and Expenditure Statement. Based on the amount of cash held in such accounts at 31 March 2015 a 1% change ininterest rates would change the interest receivable by £0.31m.16. Short –Term Debtors by category of counterparty31 March 2015 31 March 2014Central government bodies* 40,631 25,631Other Local Authorities 28,255 9,280Public Corporations and Trading Funds 1 0National Health Service Bodies 16,925 10,536Other Entities and Individuals 86,902 77,647Total 172,755 123,09417. Short-Term Creditors by category of counterparty£'000£'00031 March 2015 31 March 2014Central government bodies* (34,863) (36,506)Other Local Authorities (16,100) (10,869)Public Corporations and Trading Funds (1,113) (2,778)National Health Service Bodies (15,896) (13,954)Other Entities and Individuals (113,320) (122,873)Total (182,292) (186,980)* Grants have been included although they appear on a separate line on the face of the Balance Sheet.18. Revenue Grants Receipts in AdvanceGovernment Grants (£500k or more)Page 225£'000£'00031 March 2015 31 March 2014Adult and Community Learning (714) 0Dedicated Schools Grant (8,775) (6,979)DoH Social Care Reform 0 (1,391)LSC - Adult & Community Learning 0 (903)S31 NDR Retail relief (527) 0Government Grants (under £500k) (590) (997)Government Grants Subtotal (10,606) (10,270)Non-Government Grants (under £500k) (39) (152)Non-Government Grants Subtotal (39) (152)Total Revenue Grant Receipts in Advance (10,645) (10,422)£'000£'00045

19. Capital Grant Receipts in AdvancePage 226The Authority has received a number of grants, contributions and donations that have yet to be recognised as income asthey have conditions attached to them that will require the monies or property to be returned to the giver if the condition is notmet. The balances at the year-end are as follows:31 March 2015 31 March 2014£'000£'000Transport for London (42) (80)s106 developers' contribution (14,071) (6,700)Standard Fund (17,720) (10,128)Other Grant (2,320) (2,067)CURRENT LIABILITIES (34,153) (18,975)s106 developers' contribution (4,861) (10,635)Standard Fund (291) (3,301)Other Grant (1,217) (250)NON-CURRENT LIABILITIES (6,369) (14,186)Total Capital Grants Receipts in Advance (40,522) (33,161)20. Dedicated Schools GrantThe Council’s expenditure on schools is funded by grant monies provided by the Department for Children, Schools andFamilies – the Dedicated Schools Grant (DSG). DSG is ring-fenced and can only be applied to meet expenditure properlyincluded in the Schools Budget. The Schools Budget has two components – one for a restricted range of services providedon an authority-wide basis and the other for the Individual Schools Budget, which is divided into a budget share for eachschool. The Council is required to account separately for overspends and underspends on the two components. Details ofthe deployment of DSG receivable for 2014/15 are as follows:2014/15 DSG46CentralExpenditureIndividual SchoolsBudgetTotal£000s £000s £000sFinal DSG for 2013/14 before Academy recoupment (50,231) (196,210) (246,442)Academy Figure recouped for 2014/15 0 27,006 27,006Total DSG after Academy recoupment for 2014/15 (50,231) (169,205) (219,436)Brought forward from 2013/14 (9,047) 2,068 (6,979)2013/14 Early Years Block Adjustment made in 2014/15 0 253 253Vat Deducted at Source 0 82 82DSG Available for the year 2014/15 (59,278) (166,801) (226,080)Carry-forward to 2014/15 advance 0 0 0Agreed Initial Budgeted Distribution 2014/15 (45,022) (175,861) (220,882)In year Adjustments 0 0 0Final budgeted distribution for 2014/15 (45,022) (175,861) (220,822)Less Actual Central expenditure 46,614 0 46,614Less Actual ISB deployed to schools 0 170,691 170,691Plus Local Authority Contribution for 2014/15 0 0 0Carried forward to 2015/16 (12,665) 3,889 (8,775)21a. Leases – Authority as Lessee(i) The Authority has one building under a Finance Lease arrangement (Olive Morris House). It is carried on theCouncil’s balance sheet as Other Land and Buildings at a value of £3,250k (2013/14 £3,250k). The Council iscommitted to making minimum lease payments comprising settlement of the long term liability and finance costs thatwill be payable while the liability remains outstanding. Total future minimum lease payments are £1,540k (2013/14£1,560k), comprising Finance Lease Liabilities of £384k and Finance Costs of £1,155k. The minimum leasepayments do not include contingent rents, which in 2014/15 totalled £153k (2013/14 £153k). Of the £1,540k,amounts payable in less than five years are immaterial.(ii) The future minimum lease payments due relating to operating lease arrangements are listed below:31 March 2015 31 March 2014£'000£'000Not later than one year 3,818 3,990Later than one year and not later than five years 12,690 14,423Later than five years 18,620 21,18235,128 39,954The leases relate to land, buildings, and vehicles, and are charged to the relevant service line in the ComprehensiveIncome and Expenditure Statement. The total expenditure in 2014/15 was £4.25m, comprising £3.99m MinimumLease Payments and £0.26m Contingent Rental.

21b. Leases – Authority as Lessor(i) The Council has leased out three properties in the borough on a finance lease (Brixton Enterprise Centre, GothicLodge and The Young Vic Theatre). The Council’s gross investment in the leases of £2.28m (£2.31m in 2013/14),represents future minimum lease payments, with no anticipated residual values at the end of the lease term(unchanged from 2013/14).The gross investment of the lease and the present value of future minimum lease payments will be received in thefollowing periods:Gross Investment in the LeaseMinimum Lease Payments31 March 2015 31 March 2014 31 March 2015 31 March 2014£'000 £'000 £'000 £'000Not later than one year 30 30 11 11Later than one year and not later than five years 119 119 36 39Later than five years 2133 2,162 117 1262,281 2,311 164 176Of the total of £2,281k, the element of unearned finance income was £1,858k, with £423k going towards repaymentof the lease debtor (£1,887k and £424k in 2013/14). There was no contingent rent corresponding to these leasearrangements.(ii) The Council’s operating leases are for the provision of community services and for economic developmentpurposes. The future minimum lease payments receivable relating to these arrangements are below:31 March 2015 31 March 2014£'000£'000Not later than one year 1,897 1,979Later than one year and not later than five years 4,652 4,504Later than five years 10,145 9,47316,694 15,956The total contingent rent relating to these arrangements in 2014/15 was £0.75m (2013/14 £0.74m).22. IFRIC 12 – Service Concession Arrangements (including PFI / PPP contracts)The council has recognised six contracts on its Balance Sheet:Page 227The Home to School contract provides transport services for children and young people with special needs being educatedin the borough. The contract runs until 2017 on the same terms. Payments in 2014/15 were £2.8m.The Waste Management contract provides services including street cleansing, waste collection and disposal, and arecycling service. The contract started in 2007 for an initial 7 years, and was extended until 2021 on the same terms. £4.2mof new assets were recognized in 2014/15. Payments in 2014/15 amounted to £17.6m.For both the above contracts, the operator is required to meet performance targets; payments made by the Council aresubject to deductions based on the operator’s performance. Pricing arrangements can be adjusted for any future changes tothe service requested by the Council. The Council is entitled, upon expiry or termination of the contract, to require the operator tosell to it any of the vehicles and other assets used in the provision of the service.Norwood Hall is a new PFI started in June 2014 and £8.8m of new asset were recognized accordingly and £0.6m ofpayments were made in 2014/15. The contract will last for 25 years and the asset will revert to Lambeth at that time. It is amulti-purpose health and leisure facility for the benefits of the community.The Lilian Baylis contract provided the rebuild of the secondary school in Kennington (which became operational in January2005), and continues to provide further investment in infrastructure and maintenance at the site. The contract runs until July2030, with payments in 2014/15 totaling £2.8m. Currently payments vary only with changes in RPIX and no other factor. Dueto the conversion of the school to an academy, there will be variations to the contract from 2015/16. The assets including themain school building will revert to the academy at the end of the contract.Lambeth Lighting Services Ltd provides replacements, upgrades and new installations of street lighting throughout theborough. Payments in 2014/15 amounted to £2.6m and the contract will run until 2031.The authority will take full ownershipof all created and refurbished lighting at the end of the contract.Myatt’s Field North Estate is being transformed by the construction of 305 new homes, refurbishment of 172 existinghomes, and the creation of new streets, play areas and green spaces. The 25 year PFI contract started in 2012, with theconstruction phase of the project lasting until March 2016. In 2014/15 the value of new assets recognised on the balancesheet was £16.2m, with a total value of £69.5m recognised since the start of the contract. Payments on this contract in2013/14 were £8.8m.357 homes will be sold; the council will retain ownership.47

22a. The value of assets held under PFI and similar contracts and an analysis of the movement in those values.Lilian BaylisNorwoodHall Waste FleetHome 2SchoolLambethLightingMyatts FieldNorth Total£'000 £'000 £'000 £'000 £'000 £'000 £'0001 April 2014 16,300 0 2,023 1,211 12,669 53,303 85,506Additions 19 8,311 4,122 0 0 18,516 31,449Reclassifications/Other 0 406 0 0 0 (6,703) -6,298Revaluations 7,496 5,198 0 0 0 (34,096) -36,394Depreciation (602) 0 (505) (1,211) (352) 0 -2,67131 March 2015 8,221 14,396 5,640 0 12,317 31,019 71,59222b. The value of outstanding liabilities resulting from PFI, finance leases and similar contracts at each Balance Sheet dateand an analysis of the movement in those valuesLilian BaylisLambethLightingPage 228NorwoodHallHome toSchoolWasteMgtMyattsFieldNorthSub-TotalFinanceLease*£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’0001 April 2013 (11,045) (10,583) 0 0 (1,592) (30,891) (54,362) (386) (54,748)Liability in year 0 0 0 (1,014) 0 (30,933) (31,947) 0 (31,947)Payments in year 242 596 0 101 1,592 2,509 5,291 0 5,29131 March 2014 (10,803) (9,986) (0) (913) 0 (59,315) (81,018) (385) (81,403)Liability in year 250 587 (8,559) 157 (3,202) (18,385) (28,904) 0 (28,904)Payments in year 0 0 0 0 144 3,272 3,168 1 3,16931 March 2015 10,553 9,400 (8,559) 757 (3,058) (74,427) (106,753) (384) (107,138)*In year lease payments are under £1,000.22c. Details of payments due to be made under PFI, finance leases and similar contracts (separated into repayments ofliability, interest and service charges) as at 31 March 2015 are set out in the table below. The disclosure requirements forPFI schemes are open to interpretation. The Council has therefore included the elements as follows: -TotalOperating Cost and Life Cycle Costs are mapped to Services.Finance costs (including lease interest & Finance Cost Contingent Rental) are mapped to InterestLong-term liabilities (lease creditor repayments) are mapped to LiabilityLilian BaylisLambeth LightingLiability Interest Service Total Liability Interest Service Total£'000 £'000 £'000 £'000 £'000 £'000 £'000 £’000Within 1 year 303 1,498 1,034 2,835 599 800 1,233 2,6322-5 years 1,723 6,135 4,210 12,068 2,437 2,738 5,362 10,5376-10 years 3,122 7,462 6,278 16,862 3,249 2,386 7,559 13,19311-15 years 5,404 7,120 6,554 19,078 2,759 866 9,597 13,22116-20 years 0 0 0 0 356 36 1,380 1,77221-25 years 0 0 0 0 0 0 0 0Total 10,553 22,214 14,437 47,204 9,400 6,826 25,130 41,536Waste ManagementMyatts Field NorthLiability Interest Service Total Liability Interest Service Total£'000 £'000 £'000 £’000 £'000 £'000 £'000 £’000Within 1 year 198 1,188 15,605 16,990 1,275 5,203 3,283 9,7622-5 years 1,879 4,019 66,419 72,317 8,896 15,564 7,707 32,1666-10 years 982 586 17,655 19,223 16,519 22,335 16,936 55,78911-15 years 0 0 0 0 18,739 16,062 24,090 58,89116-20 years 0 0 0 0 23,604 9,281 29,497 62,38221-25 years 0 0 0 0 14,045 3,046 10,171 27,262Total 3,059 5,793 99,679 108,530 83,078 71,491 91,683 246,251Home to SchoolFinance LeaseLiability Interest Service Total Liability Interest Total£'000 £'000 £'000 £’000 £'000 £'000 £’000Within 1 year 242 455 1,932 2,629 0 20 202-5 years 515 443 2,657 3,615 2 78 806-10 years 0 0 0 0 3 97 10011-15 years 0 0 0 0 4 96 10016-20 years 0 0 0 0 5 95 10021-25 years 0 0 0 0 7 93 100Total 757 898 4,589 6,244 21 479 50048

Norwood HallLiability Interest Service Total£'000 £'000 £'000 £’000Within 1 year 226 576 156 9572-5 years 996 2,345 733 4,0756-10 years 1,545 2,989 1,160 5,69311-15 years 1,778 2,863 1,174 6,41516-20 years 1,571 2361 2,806 6,73821-25 years 2,443 2,619 2,300 7,361Total 8,559 13,753 8,928 31,24023. ProvisionsDescription 31 March 201449AdditionalprovisionUtilised Released 31 March 2015£'000 £'000 £'000 £'000 £'000Contract disputes (996) 0 0 996 0CRC Provision (349) 0 349 0 0Dilapidations (340) (6) 40 0 (306)GLL VAT Provision 0 (672) 0 0 (672)Insurance fund GF (3,214) (1,337) 1,389 0 (3,162)Land Charge Claims (397) 0 57 0 (340)Provision for Appeals (3,856) (2,658) 0 0 (6,514)Single Status Provision (245) (1,414) 60 0 (1,599)Social Care Provisions 0 (479) 0 0 (479)Sub-Total GF Provisions (9,397) (6,566) 1,895 996 (13,072)Insurance fund HRA (2,287) (1,193) 1,090 0 (2,390)Litigation Provision (921) (1,645) 244 0 (2,322)URH Pension Liabiity (253) 0 0 0 (253)Sub-Total HRA Provisions (3,461) (2,838) 1,334 0 (4,965)Total Council Provisions (12,858) (9,404) 3,229 996 (18,037)All provisions are reviewed annually to ensure they are at an appropriate level. Below are further details on materialprovisions.Page 229The Insurance Fund provisions hold the balances set aside for potential liabilities in respect of insurable items forwhich the Council has elected to self-insure and for payments that fall within the insurance excesses, split betweenthe General Fund and the Housing Revenue Account. The review of insurance provisions is carried out annuallyusing an actuarial forecasting approach which is designed to review the appropriateness of the provisions andreserves for the Council's self-insured claims as at the date of the valuation. This valuation takes into account allknown and outstanding (unpaid) claims received from 1998 to date, and also makes a calculation for any incurredbut not reported claims (IBNR).Provision for Appeals was introduced alongside the business rates retention scheme. The provision is calculatedthrough applying the change in past rateable values based on successful appeals and applying this to currentoutstanding appeals, as supplied by the Valuations Office Agency, and the Council’s 30% share is shown aboveand below.The following tables analyse provisions on the basis of the profile of their use, based on our best estimates where theinformation is not known.2014/15Between one year Greater than five Balance at 31 MarchLess than one yearDescriptionand five yearsyears2015£'000 £'000 £'000 £'000Dilapidations (306) 0 0 (306)GLL VAT Provision (672) 0 0 (672)Insurance fund GF (1,686) (1,476) 0 (3,162)Land Charge Claims (340) 0 0 (340)Provision for Appeals (6,514) 0 0 (6,514)Single Status Provision (1,599) 0 0 (1,599)Social Care Provisions (479) 0 0 (479)Sub-Total GF Provisions (11,596) (1,476) 0 (13,072)Insurance Fund HRA (1,243) (1,147) 0 (2,390)Litigation Provision (2,322) 0 0 (2,322)URH Pension Liability (253) 0 0 (253)Sub-Total HRA Provisions (3,818) (1,147) 0 (4,965)Total Council Provisions (15,414) (2,623) 0 (18,037)

2013/14Between one year and Greater than five Balance at 31 MarchLess than one yearDescriptionfive yearsyears2013£'000 £'000 £'000 £'000Contract Disputes (996) 0 0 (996)CRC Scheme (349) 0 0 (349)Dilapidations (340) 0 0 (340)Insurance Fund GF (1,689) (1,399) (126) (3,214)Land Charge Claims (397) 0 0 (397)Provision for Appeals (3,856) 0 0 (3,856)Single Status Provision (245) 0 0 (245)Sub-Total GF Provisions (7,872) (1,399) (126) (9,398)Litigation Provision (921) 0 0 (921)URH Pension Liability (253) 0 0 (253)Insurance fund HRA (1,202) (995) (90) (2,287)Sub-Total HRA Provisions (2,376) (995) (90) (3,461)Total Council Provisions (10,248) (2,394) (216) (12,858)24. Contingent LiabilitiesProvision has been made for the Council’s share of the estimated financial effect of appeals made by business ratepayersagainst their rates bills. This is shown in Note 23. No provision has been made for the cost of appeals which relate toperiods prior to 31 March 2015 which have not yet been lodged as it has not been possible to quantify this amount.However, the Council’s share of the cost of such appeals is not expected to be material.25. Pensions Schemes Accounted for as Defined Contribution SchemesThe Council participates in the Teachers’ Pension Scheme and the NHS Pension Scheme, which are themselves definedbenefit schemes. These schemes are unfunded and the relevant department uses a notional fund as the basis for calculatingthe employers’ contribution paid by the employer. Valuations of the notional fund are undertaken every four years. However,these are multi employer schemes and due to the number of participating employers it is not possible to identify the Council’sshare of the underlying liabilities in the scheme attributable to its own employees with sufficient reliability for accountingpurposes, they are accounted for on the same basis as a defined contribution scheme. The Council is not liable to theschemes for any other entity’s obligations under the plan.Teachers employed by the authority are members of the Teachers’ Pension Scheme, administered by the Department forEducation. The Council contributes towards the costs by making contributions based on a percentage of members’pensionable salaries. In 2014/15 the Council paid £7.07m to the TPA (£7.54m in 2013/14), representing 14.1% ofpensionable pay (14.1% in 2013/14). The contributions due to be paid in the next financial year are estimated to be £7.07min 2015/16. For 2014/15 the Council made contributions to the NHS Pension Scheme of £26K (£54K), representing 14% ofpensionable pay.26. Defined Benefit Pension SchemesParticipation in pension schemesPage 230As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of postemploymentbenefits. Although these benefits will not actually be payable until employees retire, the Council has acommitment to make the payments for those benefits and to disclose them at the time that employees earn their futureentitlementThe Council participates in two funded defined benefit final salary schemes under the Local Government Pension Scheme(LGPS). The first is administered locally by Lambeth Pension Fund, to which most non-teaching Council employees belong.The governance of the scheme is the responsibility of the London Borough of Lambeth. The second is administered by theLondon Pensions Fund Authority (LPFA) to which most non-teaching staff employed in schools belong and the governanceof the scheme is the responsibility of the Authority. The LGPS rewards years of service with rights to retirement lump sumsand pensions based on final salaries. The Scheme also provides additional benefits for ill-health retirement, early retirementattributable to redundancy or in the interests of business efficiency and death in service. Both of these funds are part of thenational Local Government Pension Scheme (LGPS), which as of 1st April 2014, changed from being a final salary schemeto a career average scheme. The Council has also agreed to meet the pension liability relating to pre transfer service of staffwho previously transferred from the Council to Lambeth Living. This is part of a section of the LGPS administered byLambeth Pension Scheme (“Lambeth Living Transferees liability”).Discretionary post-retirement benefits on early retirement are an unfunded defined benefit arrangement, under whichliabilities are recognised when awards are made. There are no plan assets built up to meet these pension liabilities.The liabilities of the LBL Pension Fund and the LPFA Pension Fund attributable to the Council are assessed on an actuarialbasis using the projected unit credit method, an estimate of the current value of benefits payable in future years, dependenton assumptions about future mortality rates, salary levels etc. The London Borough of Lambeth and the Lambeth LivingTransferees liabilities were assessed by Hymans Robertson LLP and the LPFA liabilities were assessed by BarnettWaddingham Public Sector Consulting, both of whom are independent firms of actuaries. Council liabilities are based on thelatest full valuation of the scheme as at 31 March 2013.50

SchemeAssets2014/15 2013/14PensionsObligationsNet PensionsLiabilitySchemeAssetsPensionsObligationsNet PensionsLiability£000 £000 £000 £000 £000 £000Opening Balance at 1 April (1,065,919) 1,657,819 591,900 (989,250) 1,636,019 646,769Current Service Cost 27,342 27,342 0 21,795 21,795Past Service cost and gains/losses oncurtailments643 643 0 203 203Interest Income and Expense (45,093) 70,755 25,662 (43,918) 72,235 28,317Remeasurements• Return on Plan Assets (38,445) (19,162) (57,607) (27,511) (57,348) (84,859)• Actuarial Gains and Losses arising fromchanges in demographic assumptions0 4,795 4,795• Actuarial Gains and Losses fromchanges in Financial Assumptions228,587 228,587 (8,387) 32,891 24,504Contributions• The Council (48,826) (48,826) (49,624) 0 (49,624)• Employees (8,153) 8,153 0 (7,999) 7,999 0Payments• Retirement Grants and Pensions 58,560 (58,560) 0 60,770 (60,770) 0Closing Balance at 31 March (1,147,676) 1,915,577 767,901 (1,065,919) 1,657,819 591,900A change in any of the key assumptions can have a significant impact upon the size of the Council’s pension liabilities, whichwould require the Council during its triennial review to adjust the amount it must pay the Lambeth Pension Fund. In 2014/15,this was equivalent to 16.8% of employee pay. An increase in member life expectancy, salary and pension accumulation rateor a decrease in the real discount rate would have an impact on the Council’s liability to the Pension Fund. The biggest risksinclude larger than anticipated salary growth with the potential of strike action over pay an annual occurrence and thepossibility of the economic recovery petering out, reducing Pension Fund returns, as well as longevity assumptions, statutorychanges to the scheme and any future large scale withdrawals from the scheme.The discount rate is the amount in today’s money that is required to pay future obligations – a higher discount rate means alower requirement to meet future payments. This is why the actuaries prudently use a discount rate based on highly ratedcorporate bond yields, as a small change in these would have a very large impact upon the size of the liability, whichtaxpayers are statutorily bound to pay.The principal assumptions used by the actuaries have been:Page 231LPFALambeth2014/15 2013/14 2014/15 2013/14Longevity at 65 for current pensioners: Men 21.3 years 21.2 years 21.7 years 21.7 years Women 24.4 years 24.3 years 24.0 years 24.0 yearsLongevity at 65 for future pensioners: Men 23.6 years 23.5 years 24.3 years 24.3 years Women 26.7 years 26.5 years 26.6 years 26.6 yearsRate of increase in salaries 4.0% 4.5% 4.3% 4.6%Rate of increase in pensions(CPI) 2.2% 2.7% 2.4% 2.8%Rate for discounting scheme liabilities 3.0% 4.3% 3.2% 4.3%A sensitivity analysis of the key methodological assumptions of the actuarial valuation can be found in note 2 on page 28.The Council is responsible for 97% of the assets and liabilities of the Pension Fund, details of which can be found within thePension Fund notes from Note 60 onwards. The Council’s share of the LPFA Asset Breakdown can be found below, but itmust be remembered that the Council only represents 1% of the assets.Employer Asset Share – Bid Value 31 March 2015 31 March 2014£’000s % £’000s %Equities 28,690 43 34,159 53LDI/Cashflow matching 4,963 8 3,867 6Target Return Portfolio 19,116 29 19,335 30Infrastructure 3,276 5 2,578 4Commodities 615 1 645 1Property 1,874 3 1,934 3Cash 7,592 11 1,934 3Total 66,126 100 64,451 100While there has been a growth in the Council’s obligations, the assets have grown faster, leading to a reduction in netobligations to future pensioners. However, this is subject to the risks stated above. If Pension Fund members’ longevity wasone year greater than anticipated, there would not be any reduction in our net obligations. This demonstrates that Councilobligations are a most likely estimate, based on the best evidence that the actuaries have at March 31 st 2015. Nonetheless,51

the impact from a small change in fund returns is even greater, so it is important to recognise that this Net Obligation is aprofessional assessment by the Actuaries and not a definitive figure.The Council’s agreed strategy with the actuary is to achieve of a funding level of 100% over 20 years (March 31 st 2033).Funding levels are monitored annually and the next triennial valuation is due to be completed 31 st March 2016. Theestimated employers’ contributions for the year ending 31 March 2016 will be approximately £39,368,000. The scheme willneed to take account of the national changes to the scheme under the Public Pensions Services Act 2013. Under the Act,the Local Government Pension Scheme in England and Wales and the other main existing public service schemes may notprovide benefits in relation to service after 31 March 2014 (or service after 31 March 2015 for other main existing publicservice pension schemes in England and Wales). The Act provides for scheme regulations to be made within a commonframework, to establish new career average revalued earnings schemes to pay pensions and other benefits to certain publicservants.27. Trust FundsThe Council acts as trustee for various funds including bequests and legacies, comfort funds and individual trusts. The mainones are:Balance at 31 March 2015 Balance at 31 March 2014£’000 £’000Monies Held on behalf of adult care clients (4,120) (3,276)Monies Held on behalf of children in care (18) (18)Wellington Mills - Housing Corporative (308) (307)Others* (263) (31)Total Trust Funds (4,710) (3,632)*This figure includes estates of persons formerly in care, trade union funds and funds for prizes, outings and other activities for children incare.28. Accounting Standards Issued but not yet AdoptedPage 232The Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 has introduced a number of changes inaccounting standards that are required from 1 April 2015, as set out below. It is currently not anticipated that any of thesechanges will have a significant impact on the Council’s Statement of Accounts.IFRS 13 Fair Value Measurement – unlikely to have a major impact as Lambeth does not have material amounts ofsurplus PP+E assets that will need to be revalued to market value for 2015/16Annual Improvements to IFRSs (2011 – 2013 Cycle):o IFRS 1 First Time Adoption of IFRS: Meaning of effective IFRSs – not applicableo IFRS 3 Business Combinations: Scope exceptions for joint ventures - update of IFRS 3 to extend exclusionreferences to joint ventures to cover all joint arrangementso IFRS 13 Fair Value Measurement: Scope of paragraph 52 (portfolio exception) - extension of the ability tovalue a portfolio of financial assets and liabilities on the basis of net exposure to include contracts within2015/16 Code Appendix C the scope of IAS 39 that are not themselves financial assets or liabilitieso IAS 40 Investment Property: Clarifying the interrelationship of IFRS 3 Business Combinations and IAS 40Investment Property when classifying property as investment property or owner-occupied property–supplementary detail to assist in determining whether an acquisition is a business combination or theacquisition of assetsIFRIC 21 Levies– levy expenses should be accrued as the activity that triggers the levy is carried outNOTES TO THE MOVEMENT IN RESERVES STATEMENT29. Adjustments between Accounting Basis and Funding Basis under RegulationsThis note details the adjustments that are made to the total comprehensive income and expenditure recognised by theAuthority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisionsas being available to the Authority to meet future capital and revenue expenditure.The note is in the table overleaf.52

Page 2332014/15Adjustments to Revenue ResourcesGeneralFundBalanceHousingRevenueAccountUsable ReservesCapitalReceiptsReserveMajorRepairsReserveCapitalGrantsUnappliedUnusableReserves£000s £000s £000s £000s £000s £000sRelevantUnusableReserveAmounts by which income and expenditureincluded in the Comprehensive Income andExpenditure Statement differ fromincreases/decreases in revenue for the yearcalculated in accordance with statutoryrequirements:· Financial instruments 100 238 0 0 (338)· Pensions costs (5,763) 645 0 0 0 5,118· Council tax 2,172 0 0 0 0 (2,172)· Holiday pay 25 (22) 0 0 0 (4)Cancellation of entries included in theSurplus/Deficit on the Provision of Services inrelation to capital expenditure:· Amortisation of intangible assets (344) 0 0 0 0 344· Charges for depreciation and impairment (144,922) 77,484 0 0 0 67,438· Revenue expenditure funded from capitalunder statute(11,676) (1,740) 0 0 0 13,416· Carrying amounts of non-current assetswritten off on disposal or sale(7,595) (20,088) 0 0 0 27,683· Capital grant income 29,229 7,143 0 0 (11,261) 27,683· Movements in the value of investment propertyTransfers between Revenue and CapitalResourcesTransfer of non-current asset sale proceedsfrom revenue to the Capital Receipts Reserveand Deferred Capital Receipts Reserve1,933 41,3578 (43,290) 0 0 0Use of capital receipts for revenue purposes: 0 0 0 0 0 0· Administrative costs of non-current assetdisposals0 (297) 297 0 0 0· Payments to the Government housingreceipts pool(2,998) 0 2,998 0 0 0Posting of HRA resources from revenue to theMajor Repairs Reserve0 77,283 0 (77,283) 0 0Statutory revenue provisions for the financing ofcapital investmentCapital expenditure financed from revenuebalances11,122 5,533 0 0 0 (16,655)5,667 12,340 0 0 0 (18,007)FinancialInstrumentsAdjustmentAccountPensionsReserveCollection FundAdjustmentAccountAccumulatedAbsencesAccountCapitalAdjustmentAccountCapitalReceiptsReserveCapitalAdjustmentAccountAdjustments to Capital ResourcesRepayments of capital loans and mortgages 0 0 (16) 0 0 16 DCRRUse of the Capital Receipts Reserve to financecapital expenditure0 0 34,855 0 0 (34,855Capital Receipts set Aside – regulation 23 (b) 0 0 55,476 0 0 (55,576) CapitalApplication of S. 106 Receipts to Finance newAdjustment4,545 83 0 0 0 (4,628CapitalAccountUse of the Major Repairs Reserve to financecapital expenditure0 0 0 80,284 0 (80,284)Application of capital grants to finance capitalexpenditure0 0 0 0 4,472 (4,472)Cash payments in relation to deferred capitalreceipts0 0 0 0 0 DCRRTotal Adjustments (118,506 199,960 50,320 3,001 (6,789) (127,986)53

2013/14Adjustments to Revenue ResourcesGeneralFundBalancePage 234HousingRevenueAccountUsable ReservesCapitalReceiptsReserveMajorRepairsReserveCapitalGrantsUnappliedUnusableReserves£000s £000s £000s £000s £000s £000sRelevantUnusableReserveAmounts by which income and expenditureincluded in the Comprehensive Income andExpenditure Statement differ fromincreases/decreases in revenue for the yearcalculated in accordance with statutoryrequirements:· Financial instruments 100 345 0 0 0 (445)· Pensions costs (1,162) 386 0 0 0 776· Council tax 2,312 0 0 0 0 (2,312)· Holiday pay (102) 11 0 0 0 91Cancellation of entries included in theSurplus/Deficit on the Provision of Services inrelation to capital expenditure:0 0 0 0 0 0· Amortisation of intangible assets (123) 0 0 0 0 123· Charges for depreciation and impairment (36,173) 71,762 0 0 0 (35,588)· Revenue expenditure funded from capitalunder statute(14,869) (1,085) 0 0 0 15,954· Carrying amounts of non-current assetswritten off on disposal or sale(4,978) (11,216) 0 0 0 16,194· Capital grant income 40,935 6,290 0 0 (6,972) (40,253)· Movements in the value of investment property 0 0 0 0 0 0Transfers between Revenue and CapitalResourcesTransfer of non-current asset sale proceedsfrom revenue to the Capital Receipts Reserveand Deferred Capital Receipts Reserve10,571 49,138 (59,709) 0 0 0Use of capital receipts for revenue purposes: 0 0 0 0 0 0· Administrative costs of non-current assetdisposals(324) (360) 683 0 0 0· Payments to the Government housingreceipts pool(4,965) 0 4,965 0 0 0Posting of HRA resources from revenue to theMajor Repairs Reserve0 54,997 0 (54,997) 0 0Statutory revenue provisions for the financing ofcapital investmentCapital expenditure financed from revenuebalances13,441 5,129 0 0 0 (18,569)10,925 3,996 0 0 0 (14,921)FinancialInstrumentsAdjustmentAccountPensionsReserveCollection FundAdjustmentAccountAccumulatedAbsencesAccountCapitalAdjustmentAccountCapitalReceiptsReserveCapitalAdjustmentAccountAdjustments to Capital ResourcesRepayments of capital loans and mortgages 0 0 (19) 0 0 19Use of the Capital Receipts Reserve to financecapital expenditureUse of the Major Repairs Reserve to financecapital expenditureApplication of capital grants to finance capitalexpenditureCash payments in relation to deferred capitalreceiptsDeferredCapitalReceiptsReserve0 0 31,901 0 0 (31,901) CapitalAdjustment0 0 0 65,337 0 (65,337) Account0 0 0 0 5,434 (5,434)0 0 0 0 0 0DeferredCapitalReceiptsTotal Adjustments 15,588 179,392 (22,179) 10,340 (1,537) (181,604)54

30. Usable ReservesPage 23531 March 2015 31 March 2014£'000£'000General Fund (23,583) (24,874)LMS Balances (20,465) (18,644)Earmarked Reserves – General Fund (62,954) (67,329)Earmarked Reserves - HRA (26,512) (23,236)Housing Revenue Account (10,037) (7,843)Capital Receipts Reserve (25,773) (76,094)Capital Grants Unapplied Account (53,270) (46,481)Major Repairs Reserve (126) (3,127)Total Usable Reserves (222,719) (267,629)30a. General Fund – Used for any non-housing purpose of a revenue or capital nature.30b. LMS Balance – Ringfenced for the local management of schools2014/15 2013/14£'000£'000Balance at 1 April (18,644) (15,689)Overspent School Balances 2,312 2,225Underspent School Balances (4,295) (5,180)Adjustment for Schools becoming Academies(20,627) (18,644)Durand Junior Mixed Infant School 163 0Balance at 31 March (20,464) (18,644)30c. General Fund and Housing Revenue Account Earmarked ReservesThis note sets out the amounts set aside from the General Fund and HRA balances in earmarked reserves to providefinancing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund andHRA expenditure in 2013/14.General Fund ReservesBalance at31 March2014Transfers in Transfers outBalance at31 March2015£’000 £'000 £'000 £'000Earmarked Grants & Budget Carry-Forwards (8,799) (7,007) 4,511 (11,295)Information and Communication Technology Investment (6,487) (250) 2,291 (4,446)Insurance and Risk Management (12,915) (50) 2,457 (10,508)Property and Assets (19,729) (7,289) 6,282 (20,736)Transformation (19,400) (5,434) 8,864 (15,970)GF Sub-total (67,330) (20,030) 24,405 (62,955)Housing Revenue Account ReservesInsurance and Risk Management (6,440) (1,141) 323 (7,258)Property and Assets (16,795) (14,797) 12,340 (19,252)HRA Sub-total (23,235) (15,938) 12,663 (26,510)Council Total (90,565) (35,968) 37,068 (89,465)The Earmarked Grants and Budget Carry-Forwards reserves were created to provide funds for specific grant-fundedprojects, and to finance expenditure that has been committed to but not yet incurred at balance sheet date.The Information and Communication Technology Investment reserves serve to fund the expenditure necessary on ICTprojects as part of the Council’s continuing transformation.55

The Insurance and Risk Management reserves set aside funding to meet potential future costs that may fall to the Council.The largest single element, the Insurance Fund, at £4.2m in General Fund and £3.3m in the HRA, is intended to provide themeans to self-insurance (thus reducing the expenditure on insurance premiums).The Property and Assets reserves are intended to support investment in the Council’s assets.The Transformation reserves provide the funding to facilitate the large organisational changes that the Council isundertaking.30d. Capital Receipts Reserve – Holds proceeds from the disposal of land or other assets. Statute restricts the use ofthe proceeds to the funding of new or historical capital expenditure.2014/15 2013/14£’000 £’000Balance brought forward 1 April (76,095) (53,916)Capital receipts in year (43,290) (59,709)Use of capital receipts in yearPage 236Payment to CLG – Contribution to pooled capital receipts 2,998 4,965Disposal costs 297 683Repayment of mortgage principal (14) (19)Capital Receipts set aside – regulation 23 (a) 55,476 0Financing of capital expenditure 34,855 31,901Balance carried forward 31 March (25,773) (76,095)30e. Capital Grants Unapplied Account – Holds the grants and contributions received towards capital projects for whichthe Council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied tomeet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be appliedand/or the financial year in which this can take place.2014/15 2013/14£’000 £’000Balance brought forward 1 April (46,481) (44,944)Grants transferred to the account in year (11,261) (6,971)Grants applied to capital expenditure 4,472 5,434Balance carried forward 31 March (53,270) (46,481)30f. Major Repairs Reserve – Controls an element of the capital resources set aside for use on HRA assets or for financinghistorical capital expenditure by the HRA.2014/15 2013/14£’000 £’000Balance brought forward (3,128) (13,468)Decent Homes Funding (52,016) (30,140)Additional transfer to the Major Repairs Reserve 0 (4,745)Debits to the MRR in respect of capital expenditure 80,284 65,337Transfer from HRA equal to depreciation (25,267) (20,112)Total (127) (3,128)56

31. Unusable ReservesPage 237Adjustments between Accounting andFunding Basis 2014/15UnusableReserveOpeningBalanceOtherComprehensiveIncome andExpenditure2014/15Adjustmentsto RevenueResourcesTransfersBetweenRevenueand CapitalResourcesAdjustmentsto CapitalResourcesOtherMovements*ClosingBalance1 April 2014 (CIES) 31 March 2015RevaluationReserveFinancialInstrumentsAdjustmentAccountPensionsReserveCollection FundAdjustmentAccountAccumulatedAbsencesAccountCapitalAdjustmentAccountDeferred CapitalReceipts£000 £000 £000 £000 £000 £000 £000(246,268) (232,470) 0 0 0 13,930 (464,808)2,589 0 (338) 0 0 0 2,251591,900 170,883 5,118 0 0 0 767,901(10,979) 0 (2,172) 0 0 0 (13,151)4,279 0 (4) 0 0 0 4,276(1,557,164) 0 108,881 (34,661) (204,827) (13,930) (1,701,701(426) 0 0 0 16 0 (410)Total (1,216,069) (61,587) 111,485 (34,661) (204,811) 0 (1,405,642)UnusableReserveRevaluationReserveFinancialInstrumentsAdjustmentAccountPensionsReserveCollection FundAdjustmentAccountAccumulatedAbsencesAccountCapitalAdjustmentAccountDeferred CapitalReceiptsOpeningBalanceOtherComprehensiveIncome andExpenditure2013/14Adjustments between Accounting andFunding Basis 2013/14Adjustmentsto RevenueResourcesTransfersBetweenRevenueandCapitalResourcesAdjustmentsto CapitalResourcesOtherMovements*ClosingBalance1 April 2013 (CIES) 31 March 2014£000 £000 £000 £000 £000 £000 £000(203,558) (53,072) 0 0 0 10,362 (246,268)3,034 0 (445) 0 0 0 2,589646,769 (55,645) 776 0 0 0 591,900(8,667) 0 (2,312) 0 0 0 (10,979)4,189 0 91 0 0 0 4,279(1,367,069) 0 (3,319) (33,490) (142,925) (10,362) (1,557,164)(445) 0 0 0 19 0 (426)Total (925,749) (108,717) (5,209) (33,490) (142,906) 0 (1,216,069)Revaluation Reserve - Contains the gains made by the Authority arising from increases in the value of its Property, Plantand Equipment. The balance is reduced when assets with accumulated gains are:revalued downwards or impaired and the gains are lostused in the provision of services and the gains are consumed through depreciation, ordisposed of and the gains are realised.57

Page 238The Reserve contains only revaluation gains accumulated since 1 April 2007. Accumulated gains arising before that date areconsolidated into the balance on the Capital Adjustment Account.Pensions Reserve - Absorbs the timing differences arising from the different accounting arrangements between statutoryprovisions and accounting practice for post-employment benefits and funding benefits. The Council accounts for postemploymentbenefits in the Comprehensive Income and Expenditure Statement as benefits are earned by employees. Thebalance sheet is updated to recognise the movement in liabilities due to changes in assumptions (including inflation andlongevity) and investment returns on resources set aside to meet the cost of the employee benefits.However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions topension funds. The Pensions Reserve balance reflects the substantial shortfall between the benefits Pension Fundmembers have earned and the resources the Council set aside to meet them.The movement in balances on the Pensions Reserve are for both the Lambeth Pension Fund and Lambeth’s share of theLPFA during the year.Capital Adjustment Account - Absorbs the timing differences arising from the different arrangements for accounting for theconsumption of non-current assets and for financing the acquisition, construction or enhancement of those assets understatutory provisions.The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the datethat the Revaluation Reserve was created to hold such gains.Note 29 to the MIR provides details of the source of all the transactions posted to the Account, apart from those involving theRevaluation Reserve.Deferred Capital Receipts Reserve - Holds the gains recognised on the disposal of non-current assets but for which cashsettlement has yet to take place. Under statutory arrangements, the Council does not treat these gains as usable forfinancing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventuallytakes place, amounts are transferred to the Capital Receipts Reserve.Financial Instruments Adjustment Account - Absorbs the timing differences arising from the different arrangements foraccounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gainsper statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans.Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out ofthe General Fund Balance and Housing Revenue Account (HRA) to the Financial Instruments Adjustment Account in theMovement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance and HRA inaccordance with statutory arrangements for spreading the burden on council tax. In the Council’s case, this period is theunexpired term that was outstanding on the loans when they were redeemed (maximum of 10 years on the HRA). As aresult, the balance on the Account at 31 March 2014 will be charged to the General Fund over the next 13 years and to theHRA for the next six years.Collection Fund Adjustment Account - Manages the differences arising from the recognition of council tax and businessrates income in the Comprehensive Income and Expenditure Statement as it falls due from taxpayers compared with thestatutory arrangements for paying across amounts to the General Fund from the Collection Fund.Accumulated Absences Account - Absorbs the differences that would otherwise arise on the General Fund Balance fromaccruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from theAccount.58

NOTES TO THE CASH FLOW STATEMENT32. Investing ActivitiesPage 2392014/15 2013/14£'000£'000Purchase of property, plant and equipment, investment property and intangible assets 185,037 172,053Purchase of short-term and long-term investments 446,000 586,730Proceeds from the sale of property, plant and equipment and intangible assets (43,305) (49,186)Proceeds from short-term and long-term investments (550,530) (515,200)Other receipts from investing activities (100,264) (93,019)Net cash flows from investing activities (63,062) 101,37833. Financing Activities2014/15 2013/14£'000£'000Cash receipts of short and long-term borrowing (706) (65)Council Tax and NNDR adjustments (3,163) (2,611)Other receipts from financing activitiesCash payments for the reduction of the outstanding liabilities relating to finance leases andon-balance sheet PFI contracts694 5,291Repayments of short- and long-term borrowing 1 (1)Net cash flows from financing activities (3,173) 2,61434. Operating Activities (Interest)The cash flows for operating activities include the following items:2014/15 2013/14£'000£'000Interest received (1,799) (4,166)Interest paid 32,091 29,97735. Cash and Cash EquivalentsThe balance of Cash and Cash Equivalents is made up of the following elements:31 March 2015 31 March 2014£'000£'000Cash held by the Authority 58 35Bank current accounts in current assets 62,005 61,030Short-term deposits with banks 30,588 10,190Held within Current Assets 92,651 71,255Bank overdrafts (Held within current liabilities) (247) (58,734)Total Cash and Cash Equivalents 92,404 12,52159

HRA INCOME AND EXPENDITURE ACCOUNTPage 240The Housing Revenue Account (HRA) is a statutory statement, which summarises the transactions relating to the provision,maintenance and management of the Council’s housing stock. The Local Government and Housing Act 1989 required the ringfencing of the Account with effect from 1 April 1990, thereby prohibiting cross subsidy between the HRA and the General Fund.2014/15 2013/14Note £’000 £’000 £’000 £’000IncomeDwelling rents (135,933) (130,296)Non dwelling rents (4,094) (3,982)Charges for services and facilities (37,304) (36,604)Contributions Towards Expenditure (1,051) (1,407)PFI Credit (7,729) (7,729)Expenditure(180,018)Repairs and maintenance 28,622 32,737Supervision and management 72,924 72,780Rents, rates, taxes and other charges 12,597 10,691Depreciation of property, plant and equipment 41 25,267 20,112Impairment / Revaluation loss 41 (102,675) (92,623)Debt management expenses 109 125Increase in Bad Debt Provision 1,376 1,64638,220 45,467Net cost of HRA services included in the ComprehensiveIncome and Expenditure Statement(147,890) (134,551)HRA share of Corporate and Democratic Core 828 800Net Expenditure of HRA Services (147,062) (133,751)HRA share of the operating income and expenditureincluded in the Comprehensive Income and ExpenditureStatementInterest payable and similar charges – other 20,139 18,480Gain or Loss on disposal (20,972) (37,562)Interest and investment income (30) (62)Capital Grants and Contributions - other (57,503) (36,430)(Surplus)/Deficit for the year on HRA services (205,428) (189,324)STATEMENT OF MOVEMENT ON THE HRA BALANCE2014/15 2013/14£’000 £’000Balance on the HRA at the end of the previous year (7,843) (9,995)(Surplus) or deficit for the year on the HRA Income & Expenditure Statement (205,428) (189,324)Adjustments Between Accountancy Basis and Funding Basis under Statute 199,960 179,392Net (Increase) or Decrease before Transfers to or from Reserves (5,468) (9,932)Transfers to or (from) Reserves (see Note 30c) 3,276 12,085(Increase) or Decrease in year on the HRA (2,192) 2,152Balance on the HRA at the end of the current year (10,035) (7,843)60

NOTES TO THE HOUSING REVENUE ACCOUNT36. Analysis of the movement on the HRA balance:Page 241Items included in the HRA Income and Expenditure Statement but excluded from themovement on HRA Balance for the yearDifference between amounts charged to Income and Expenditure for amortisation ofpremiums and discounts and the charge for the year determined in accordance withstatute2014/15 2013/14£’000 £’000238 345Difference between any other item of income and expenditure determined inaccordance with the Code and determined in accordance with the Statutory HRArequirements:Impairments / Revaluation loss 102,751 91,873Capital Grants and Contributions 57,240 36,425Revenue expenditure financed by capital under statute 0 (1,085)S106 Reversal 83 5Depreciation of non-current assets (25,267) (20,112)Gain or Loss on disposal 20,972 37,562Mitigation of accumulated absences provision (22) 11Net charges made for retirement benefits in accordance with IAS 19 (829) (302)Items not included in the HRA Income and Expenditure Statement but included in theMovement on HRA Balances for the year:Capital expenditure financed from revenue balances 12,340 3,996Minimum Revenue Provision 5,533 5,129Transfer to Major Repairs Reserve 25,267 24,857Employer's contributions payable to the Lambeth Pension Fund and retirementbenefit payable direct to pensionersAdjustments Between Accountancy Basis and Funding Basis under Statute lessTransfers to or from Reserves1,474 688199,960 179,392Transfer to earmarked reserves 18,094 16,791Transfer from earmarked reserves (12,662) (4,707)Net additional amount required by statute to be (debited)/credited to the HRABalances for the year205,392 191,47637. Housing stock31 March 2015 31 March 2014Flats 20,345 20,508Houses 3,977 3,928Multi-occupied 133 142Shared ownership 0 1Total 24,455 24,57938. HRA assets31 March 15 31 March 14£’000 £’000Council dwellings 1,998,810 1,586,523Other Land & Buildings 109,620 85,098Community Assets 150 0Surplus 4,136 4,529Assets held for sale 22 0Vehicles, Plant & Equipment 1,673 6,083Assets under Construction 273 53,303Intangibles 17 0TOTAL 2,114,700 1,735,53539. Major repairs reserve – Refer to note 30f.61

Page 24240. Capital expenditure, financing and receipts2014/15 2013/14£’000 £’000HRA capital expenditureWorks to dwellings 102,802 93,261Other Land & Buildings 66 52Vehicles, Plant & Equipment 326 2,561Revenue funded from capital under statute 1,740 1,085104,934 96,958Financing of capital expenditureBorrowing 10,954 25,361Usable Capital Receipts 650 2,259Major Repairs Reserve 28,268 35,197Grants 52,722 30,145Reserves / Revenue 12,340 3,996Total 96,958Total Capital Receipts - Dwellings 104,934 (49,138)41. Depreciation and impairment2014/15 2013/14£’000 £’000Depreciation charged for the yearOperational assets- dwellings 20,731 17,014- other property 4,389 3,028Non-operational assets- dwellings 138 62- other property 9 7Total Depreciation 25,267 20,112Impairment charged for the yearOperational assets- dwellings 55,857 3,784- other property 6,172 162,030 3,785Impairment losses reversedOperational assets- dwellings (163,992) (95,658)- other property (713) (745)Non-operational assets- dwellings 0 (5)(164,708) (96,408)Net Impairment (102,675) (92,623)42. Rent arrears2014/15 2013/14£’000 £’000Arrears as at 31 March 11,543 13,015Provision for bad debts (7,756) (7,791)Collectable amount 3,787 5,22443. Vacant Possession ValueThe vacant possession value of dwellings within the HRA at 31st March 2015 was £8.054 billion which has been reduced to£2.014 billion to reflect social housing use subsidised housing. This shows the economic cost to the government of providingcouncil housing at less than market rents.44. Revenue Expenditure Funded from Capital under StatuteThere was no charge (£1,085K in 2013/14) to the HRA in accordance with the provisions of the Code. This is financed bycapital resources and accounted for by debiting the capital adjustment account and crediting the HRA balance. This is areconciling item in the Movement in Reserves Statement. The charge is included in the figure for Repairs and Maintenance.45. HRA share of contributions to the Pension ReserveThe HRA Income and Expenditure account has suffered a charge from the Pension Reserve of £829K (charge of £302k in2013/14), as per proper practice. The impact of this on the HRA balance is nullified by means of a reversing entry in theMovement in Reserves Statement.46. Capital Asset Charges Accounting Adjustment (Item 8 Debit / Credit)This is a notional charge for cost of borrowing in relation to debt.62

COLLECTION FUNDPage 243The Collection Fund is a statutory statement relating to the collection of income received from Council Tax and business rates,known as National Non-Domestic Rates (NNDR). The account shows how the income received is distributed between the Council’sGeneral Fund, Central Government and the Greater London Authority.2014/15 2013/14CouncilCouncilNNDRTotal NNDRCOLLECTION FUNDTaxTaxTotal£000 £000 £000 £000 £000 £000INCOMECouncil Tax Receivable (122,987) (122,987) (118,871) (118,871)Business Rates Receivable (122,042) (122,042) (121,784) (121,784)Transitional Payments (376) (376) (739) (739)Business Rates Supplement (3,715) (3,715) (3,886) (3,886)(126,133) (122,987) (249,120) (126,409) (118,871) (245,280)EXPENDITURELB Lambeth 36,308 85,284 121,592 33,646 81,448 115,094Central Government 60,154 60,514 56,077 56,077Greater London Assembly (GLA) 24,206 27,559 51,765 22,431 26,671 49,102Business Rates SupplementPayment to GLA 3,703 3,703 3,872 3,872Apportionment of Surplus/DeficitLB Lambeth (200) 3,324 3,124 0 2,749 2,749Central Government (334) (334) 0 0GLA (134) 1,088 954 0 911 911Charges to Collection FundWrite-offs of uncollectable amounts 743 2,774 3,517 8,748 8,748Write-ons (2,841) (2,841)Increase/(Decrease) in Bad Debt Provisions 55 (683) (628) (182) (6,146) (6,328)Increase/(Decrease) in Provision for Appeals 8,854 8,854 12,857 12,857Transitional Protection Payments Made in 2013/14 1,016 1,016 783 783Cost of Collection - Business Rates 481 481 481 481Cost of Collection - Business Rates Supplement 12 12 15 15135,224 116,505 251,729 129,980 114,381 244,361(Surplus) / Deficit) during year 9,091 (6,482) 2,609 3,571 (4,490) (919)Collection Fund (Surplus)/Deficit at 31 March 2014 3,571 (16,063) (12,492) 0 (11,573) (11,573)Collection Fund (Surplus)/Deficit at 31 March 2015 12,662 (6,482) 6,180 3,571 (16,063) (12,492)Analysed by:LB Lambeth 3,799 (16,948) (13,149) 1,071 (12,049) (10,978)Central Government 6,331 6,331 1,786 1,786Greater London Assembly (GLA) 2,532 (5,597) (3,065) 714 (4,014) (3,300)Collection Fund (Surplus)/Deficit at 31 March 2015 12,662 (22,545) (9,883) 3,571 (16,063) (12,492)SHARE OF BALANCES BETWEEN LONDON BOROUGH OF LAMBETH AND ITS PRECEPTORSThe Collection Fund Income and Expenditure Account is prepared on an accruals basis. Lambeth, as the billing agent,includes appropriate shares of the year end balances in its balance sheet and those of its preceptors. The apportionment isdetailed in the table below.COLLECTION FUNDTotal Collection Fund£’000sCentral Government£’000sLondon Borough ofLambeth £’000sGreater LondonAssembly £’000sCTAX NNDR CTAX NNDR CTAX NNDR CTAX NNDRApportionment Basis 100% 100% N/A 50% 76.20% 30% 23.80% 20%Arrears 33,442 4,062 N/A 2,031 25,477 1,219 7,964 812Bad Debt Provision (24,271) (3,583) N/A (1,791) (18,891) (1,075) (5,780) (717)Appeals Provision N/A (21,712) N/A (10,856) N/A (6,514) N/A (4,342)Overpayments & Prepayments(7,637) (7,535) N/A (3,768) (5,818) (2,261) (1,819) (1,507)(Surplus)/Deficit (22,545) 12,662 N/A 6,331 (16,948) 3,799 (5,597) 2,53263

Page 244NOTES TO THE COLLECTION FUND47. Council TaxUnder the arrangements for Council Tax, each domestic property within the Council’s area was assigned to one of eightvaluation bands based on the estimated market value at 1 April 1991. The total number of dwellings in each band is thenadjusted to account for discounts, exemptions and other expected movements in the year. The Council Tax is set for band Dproperties and the tax for other bands calculated as a proportion of the band D tax. The localization of Council Tax caused areduction of the Council Tax Requirement, as Council Tax Support now forms part of the Council’s financial settlement ratherthan an aspect of the Collection Fund, which lowered the tax base.For the year ended 31 March 2015, the band D Council Tax was set at £1,224.29 based upon a tax base of 92,170 (for2013/14, £1,228.29 based upon a tax base of 88,024) and included the £299.00 requirement of the Greater London Authority(£303.00 in 2013/14). The table below shows the calculation of the Council Tax Base for 2014/15.Valuation BandTotal no. of dwellings onvaluation listTotal equivalentdwellings afteradjustmentsRatio to Band DBand DequivalentsA 4,668 2,697 6/9 1,798B 31,906 18,707 7/9 14,550C 39,024 28,071 8/9 24,952D 29,172 22,442 9/9 22,442E 13,863 11,446 11/9 13,990F 8,609 7,550 13/9 10,907G 5,146 4,889 15/9 8,148H 610 395 18/9 790TOTALS 130,466 96,198 97,575Adjustment for collection rate (5,405)Tax base for Council Tax purposes 92,17048. National Non-Domestic Rates are set by Parliament, which specifies an amount, 48.2p in 2014/15 (47.1p in 2013/14)as the standard multiplier and 47.1p as the small business rate multiplier (46.2p in 2013/14). Subject to transitionalarrangements, businesses pay rates calculated by multiplying their rateable value by this amount. The 2014/15 NNDRincome is based upon a total rateable value for the borough of £316.1m at 31 March 2015 (£315.3m at 31 March 2014).NNDR is divided into three elements: the Revenue Service Grant (RSG), the top-up amount (as Lambeth collects less than it‘needs’) and the retained element, which is contained within the Collection Fund. The retained element is an estimate of thebilling authority collection level, so if the Council collects below that level it loses out and if it collects above it gains. Someauthorities collect more than they ‘need’ and pay a tariff, while others are subject to levies if growth is ‘disproportionate’. Theamount that the Council collects is divided between Lambeth (30%), GLA (20%) and Central Government (50%).In 2014/15, the payment is based upon the 2014/15 estimated collection and 2013/14 surplus/deficit. However, as the2014/15 NNDR1 is returned before the end of 2013/14, in 2015/16 an adjustment must be made between the actual and theestimated surplus/deficit. Every subsequent year, an adjustment figure is required, but in Year 2, only the estimatedcollection, the estimated deficit/surplus and the Appeals Provision, Transition Costs and Bad Debt Provision charges formpart of the Collection Fund. The Appeals Provision figure reflects estimated losses from businesses successfully appealingpast rates while the bad debt provision reflects the probable non-payment of rates whose debt was legitimately raised.49. Business Rate Supplements (BRS)BRS were introduced by the Business Rate Supplements Act 2009. A Business Rate Supplement is a non-exchangetransaction, and as such is accounted for under IPSAS 23 (International Public Sector Accounting Standard) Revenue fromNon-Exchange Transactions (Taxes and Transfers). Lambeth (LBL) bills its ratepayers for the Crossrail BRS. This income isnot the income of the authority and is not included in the Comprehensive Income and Expenditure Statement. Amountsdeducted from BRS income to meet administrative expenses are the authority’s income.The accounting statement shows: Amounts required by statute to be credited to the Collection Fund, i.e. income collectable in respect of BRS Amounts to be debited to the Collection Fund, i.e. payments to the Council’s BRS Account and administrative costs.64

Page 245LAMBETH PENSION FUND STATEMENT OF ACCOUNTS 2014-15FUND ACCOUNT 2014/15 2013/14Note £’000 £’000Dealing with members ,employers and others directly involved in the fundContributions 7 (54,959) (54,850)Transfer to and from other pensions funds 8 2,979 308(51,980) (54,542)Benefits 9 48,381 47,653Payments to and on account of leavers 10 132 4048,513 47,693(3,467) (6,849)Management expenses 11 3,540 3,080Returns on investmentsinvestment Income 12 (28,843) (30,518)Tax on Income 13 682 505Profit and loss on disposal of investments and changes in the marketvalue of investments15a (75,297) (47,350)Net return on investments (103,458) (77,363)Net (increase) decrease in the net assets available for benefitsduring the year.(103,207) (81,132)FUND ACCOUNT Notes 2014-15 2013-14Investment Assets 15 1,101,859 1,023,351Cash Deposits 15 28,143 5,6031,129,761 1,028,954Investment LiabilitiesBorrowings - -Current Assets 20 12,645 15,131Current Liabilities 21 (7,276) (11,922)Net assets of the fund available to fund benefits at the period end. 1,135,371 1,032,16365

NOTE 1: DESCRIPTION OF FUNDPage 246The Lambeth Pension Fund (‘the fund’) is part of the Local Government Pension Scheme and is administered by LondonBorough of Lambeth Council. The council is the reporting entity for this pension fund.The following description of the fund is a summary only. For more detail, reference should be made to the LambethPension Fund Annual Report 2014/15 and the underlying statutory powers underpinning the scheme, namely the PublicService Pensions Act 2013 and The Local Government Pension Scheme (LGPS) Regulations.a) GeneralThe scheme is governed by the Public Service Pensions Act 2013. The fund is administered in accordance with thefollowing secondary legislation: The Local Government Pension Scheme Regulations 2013 (as amended) The Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014(as amended) The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009.It is a contributory defined benefit pension scheme administered by Lambeth Council to provide pensions and otherbenefits for pensionable employees of Lambeth Council and a range of other scheduled and admitted bodies within theborough area.The fund is overseen by the Lambeth Pension Fund Committee, which is a committee of Lambeth Council.b) MembershipMembership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in thescheme or make their own personal arrangements outside the scheme.Organisations participating in the Lambeth Pension Fund include: Scheduled bodies, which are local authorities and similar bodies whose staff are automatically entitled to bemembers of the fund. Admitted bodies, which are other organisations that participate in the fund under an admission agreementbetween the fund and the relevant organisation. Admitted bodies include voluntary, charitable and similarbodies or private contractors undertaking a local authority function following outsourcing to the private sector.There are 30 employer organisations within Lambeth Pension Fund including the Lambeth council itself, as detailedbelow.Lambeth Pension Fund 31-Mar-15 31-Mar-14Number of employers with active members 23 20Number of employees in schemeLambeth council 4652 4338Other employers 587 496Total 5239 4834Number of pensionersLambeth council 6521 6448Other employers 105 77Total 6626 6525Deferred pensionersLambeth council 7722 7533Other employers 352 299Total 8074 7832c) FundingBenefits are funded by contributions and investment earnings. Contributions are made by active members of the fund inaccordance with The LGPS Regulations 2013 and range from 5.5% to 12.5% of pensionable pay for the financial yearending 31 March 2015. Employee contributions are matched by employers’ contributions which are set based on triennialactuarial funding valuations. The last such valuation was at 31 March 2013. Currently, employer contribution rates rangefrom 8.8% to 31% of pensionable pay.d) BenefitsPrior to 1 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionableservice, summarised below.66

Page 247Service pre 1 April 2008 Service post 31 March 2008Pension Each year worked is worth 1/80 x finalpensionable salary.Each year worked is worth 1/60 x finalpensionable salary.Lump sumAutomatic lump sum of 3 x salary. In addition,part of the annual pension can be exchanged fora one-off tax-free cash payment. A lump sum of£12 is paid for each £1 of pension given up.No automatic lump sum. Part of the annualpension can be exchanged for a one-offtax-free cash payment. A lump sum of £12is paid for each £1 of pension given up.From 1 April 2014, the scheme became a career average scheme, whereby members accrue benefits based on theirpensionable pay in that year at an accrual rate of 1/49th. Accrued pension is updated annually in line with the ConsumerPrices Index.There are a range of other benefits provided under the scheme including early retirement, disability pensions and deathbenefits. For more details, please refer to the Lambeth Pension Fund scheme handbook available from County Hall.NOTE 2: BASIS OF PREPARATIONThe Statement of Accounts summarises the fund’s transactions for the 2014/15 financial year and its position at year-endas at 31 March 2015. The accounts have been prepared in accordance with the Code of Practice on Local AuthorityAccounting in the United Kingdom 2014/15 which is based upon International Financial Reporting Standards (IFRS), asamended for the UK public sector.The accounts summarise the transactions of the fund and report on the net assets available to pay pension benefits. Theaccounts do not take account of obligations to pay pensions and benefits which fall due after the end of the financialyear.NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFund account – revenue recognitiona) Contribution incomeNormal contributions, both from the members and from the employer, are accounted for on an accruals basis at thepercentage rate recommended by the fund actuary in the payroll period to which they relate.Employer deficit funding contributions are accounted for on the due dates on which they are payable under the scheduleof contributions set by the scheme actuary or on receipt if earlier than the due date.Employers’ augmentation contributions and pensions strain contributions are accounted for in the period in which theliability arises.b) Transfers to and from other schemesTransfer values represent the amounts received and paid during the year for members who have either joined or left thefund during the financial year and are calculated in accordance with The Local Government Pension SchemeRegulations (see notes 8 and 10).Individual transfers in/out are accounted for when received/paid, which is normally when the member liability is acceptedor discharged.Transfers in from members wishing to use the proceeds of their additional voluntary contributions (see below) topurchase scheme benefits are accounted for on a receipts basis and are included in Transfers In (see Note 8).Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement.c) Investment incomei) Interest incomeInterest income is recognised in the fund account as it accrues, using the effective interest rate of the financial instrumentas at the date of acquisition or origination. Income includes the amortisation of any discount or premium, transactioncosts (where material) or other differences between the initial carrying amount of the instrument and its amount atmaturity calculated on an effective interest rate basis.ii) Dividend incomeDividend income is recognised on the date the shares are quoted ex-dividend. Any amount not received by the end ofthe reporting period is disclosed in the net assets statement as a current financial asset.iii) Distributions from pooled fundsDistributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reportingperiod is disclosed in the net assets statement as a current financial asset.v) Movement in the net market value of investmentsChanges in the net market value of investments (including investment properties) are recognised as income andcomprise all realised and unrealised profits/losses during the year.67

Fund account – expense itemsPage 248d) Benefits payablePensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Anyamounts due but unpaid are disclosed in the net assets statement as current liabilities.e) TaxationThe fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such isexempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Incomefrom overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverabletax is accounted for as a fund expense as it arises.f) Management expensesThe Code does not require any breakdown of pension fund administrative expenses. However, in the interests of greatertransparency, the council discloses its pension fund management expenses in accordance with the CIPFA guidanceAccounting for Local Government Pension Scheme Management Costs.Administrative expensesAll administrative expenses are accounted for on an accruals basis. All staff costs of the pension administration team arecharged direct to the fund. Associated management, accommodation and other overheads are apportioned to thisactivity and charged as expenses to the fund.Oversight and governance costsAll oversight and governance expenses are accounted for on an accruals basis. All staff costs associated withgovernance and oversight are charged direct to the fund. Associated management, accommodation and other overheadsare apportioned to this activity and charged as expenses to the fund.Investment management expensesAll investment management expenses are accounted for an accruals basis.Fees of the external investment managers and custodian are agreed in the respective mandates governing theirappointments. Broadly, these are based on the market value of the investments under their management and thereforeincrease or reduce as the value of these investments change.In addition the fund has negotiated with the following managers that an element of their fee be performance related: Blue Crest Management – Hedge Fund -Fund of Funds.The costs of the council’s in-house fund management team are charged direct to the fund and a proportion of thecouncil’s costs representing management time spent by officers on investment management is also charged to the fund.Net assets statementh) Financial assetsFinancial assets are included in the net assets statement on a fair value basis as at the reporting date. A financial assetis recognised in the net assets statement on the date the fund becomes party to the contractual acquisition of the asset.From this date any gains or losses arising from changes in the fair value of asset are recognised in the fund account.The values of investments as shown in the net assets statement have been determined as follows:i) Market-quoted investmentsThe value of an investment for which there is a readily available market price is determined by the bid market priceruling on the final day of the accounting period.ii)iii)Fixed interest securitiesFixed interest securities are recorded at net market value based on their current yields.Unquoted investmentsThe fair value of investments for which market quotations are not readily available is determined as follows:Valuations of delisted securities are based on the last sale price prior to delisting, or where subject to liquidation,the amount the council expects to receive on wind-up, less estimated realisation costs.Securities subject to takeover offer – the value of the consideration offered under the offer, less estimatedrealisation costs.Directly held investments include investments in limited partnerships, shares in unlisted companies, trusts andbonds. Other unquoted securities typically include private equity. The valuation of these pools or directly heldsecurities is undertaken by the investment manager or responsible entity and advised as a unit or security price.The valuation standards followed in these valuations adhere to industry guidelines or to standards set by theconstituent documents of the pool or the management agreement.Investments in private equity funds and unquoted listed partnerships are valued based on the fund’s share of thenet assets in the private equity fund or limited .partnership using the latest financial statements published by therespective fund managers in accordance with the guidelines set out by the British Venture Capital Association.68

iv)Page 249Pooled investment vehicles Pooled investment vehicles are valued at closing bid price if both bid and offer pricesare published; or if single priced, at the closing single price. In the case of pooled investment vehicles that areaccumulation funds, change in market value also includes income which is reinvested in the fund, net of applicablewithholding tax.i) Foreign currency transactionsDividends, interest and purchases and sales of investments in foreign currencies have been accounted for at the spotmarket rates at the date of transaction. End-of-year spot market exchange rates are used to value cash balances held inforeign currency bank accounts, market values of overseas investments and purchases and sales outstanding at the endof the reporting period.j) Cash and cash equivalentsCash comprises cash in hand and demand deposits and includes amounts held by the fund’s external managers. Cashequivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that aresubject to minimal risk of changes in value.k) Financial liabilitiesThe fund recognises financial liabilities at fair value as at the reporting date. A financial liability is recognised in the netassets statement on the date the fund becomes party to the liability. From this date any gains or losses arising fromchanges in the fair value of the liability are recognised by the fund.l) Actuarial present value of promised retirement benefitsThe actuarial present value of promised retirement benefits is assessed on a triennial basis by the scheme actuary inaccordance with the requirements of IAS 19 and relevant actuarial standardsAs permitted under the Code, the fund has opted to disclose the actuarial present value of promised retirement benefitsby way of a note to the net assets statement (Note 19).m) Additional voluntary contributionsLambeth Pension Fund provides an additional voluntary contributions (AVC) scheme for its members, the assets ofwhich are invested separately from those of the pension fund. The fund has appointed Prudential, equitable life andclerical medical as its AVC provider.AVCs are paid to the AVC provider by employers and are specifically for providing additional benefits for individualcontributors. Each AVC contributor receives an annual statement showing the amount held in their account and themovements in the year.AVCs are not included in the accounts in accordance with section 4(2) (b) of The Local Government Pension Scheme(Management and Investment of Funds) Regulations 2009 (SI 2009/3093) but are disclosed as a note only (Note 22)NOTE 4: CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIESUnquoted private equity investmentsIt is important to recognise the highly subjective nature of determining the fair value of private equity investments. Theyare inherently based on forward-looking estimates and judgements involving many factors. Unquoted private equities arevalued by the investment managers using guidelines set out by the British Venture Capital Association. The value ofunquoted private equities at 31 March 2015 was £43.2m (31 March 2014: £36.1m).Pension fund liabilityThe pension fund liability is calculated every three years by the appointed actuary, with annual updates in the interveningyears. The methodology used is in line with accepted guidelines and in accordance with IAS 19. Assumptionsunderpinning the valuations are agreed with the actuary and are summarised in Note 18. This estimate is subject tosignificant variances based on changes to the underlying assumptions.NOTE 5: ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OFESTIMATION UNCERTAINTYThe preparation of financial statements requires management to make judgements, estimates and assumptions thataffect the amounts reported for assets and liabilities at the balance sheet date and the amounts reported for therevenues and expenses during the year. Estimates and assumptions are made taking into account historical experience,current trends and other relevant factors. However, the nature of estimation means that the actual outcomes could differfrom the assumptions and estimates.The items in the net assets statement at 31 March 2015 for which there is a significant risk of material adjustment in theforthcoming financial year are as follows.69

ItemPage 250UncertaintiesEffect if actual results differ fromassumptionsActuarial present value ofpromised retirement benefitsEstimation of the net liability to paypensions depends on a number ofcomplex judgements relating to thediscount rate used, the rate at whichsalaries are projected to increase,changes in retirement ages, mortality ratesand expected returns on pension fundassets. A firm of consulting actuaries isengaged to provide the fund with expertadvice about the assumptions to beapplied.The effects on the net pension liabilityof changes in individual assumptionscan be measured. For instance, a0.5% decrease in the discount rateassumption would result in an increasein the pension liability of £169m. A0.5% increase in assumed earningsinflation would increase the value ofliabilities by approximately £166m, anda one-year increase in assumed lifeexpectancy would increase the liabilityby approximately £54m.Private equityPrivate equity investments are valued atfair value in accordance with BritishVenture Capital Association guidelines.These investments are not publically listedand as such there is a degree ofestimation involved in the valuation. Thevaluation shown as at 31 March 2014 is£43.2m.The total (called) private equityinvestment in the financial statement is£43.2m. There is a risk that thisinvestment may be under-oroverstated in the accounts.Hedge fund of fundsThe fund of funds is valued at the sum ofthe fair values provided by theadministrators of the underlying funds plusadjustments that the fund of funds'directors or independent administratorsjudge necessary. These investments arenot publically listed and as such there is adegree of estimation involved in thevaluation.The total hedge fund of funds value inthe financial statements is £104.6m.There is a risk that the investment maybe under or overstated in the accounts.The custodian reports a tolerance of+/- 5% in respect of the net assetvalues on which the hedge funds offunds valuation is based. This equatesto a tolerance of +/- £5.2m.NOTE 6: EVENTS AFTER THE REPORTING DATEThere have been no events since 31 March 2015, and up to the date when these accounts were authorised that requireany adjustments to these accounts.NOTE 7: CONTRIBUTIONS RECEIVABLECategory 2014/15 2013/14£’000 £’000Employer 45,529 45,910Members 9,431 8,940Total 54,959 54,850Authority 2014/15 2013/14£’000 £’000Schedule Bodies 54,220 54,456Admitted Bodies 466 175Community Admission body 187 157Transferee admission body 87 62Total 54,959 54,850Type 2014/15 2013/1470£’000 £’000Employees’ Normal Contribution 9,431 8,932Employers’ Normal Contribution 25,529 24,154Employers’ Deficit recovery Contribution 20,000 21,765Total 54,959 54,850

NOTE 8: TRANSFERS IN FROM OTHER PENSION FUNDS2014/15 2013/14£’000 £’000Group Transfer 0 0Individual Transfer 1,609 3,014Total 1,609 3,014NOTE 9: BENEFITS PAYABLEPage 251Authority 2014/15 2013/14£’000 £’000Pensions 41,119 39,423Commutation and Lump sum retirement benefits 6,856 7,486Lump sum death benefits 406 744Total 48,381 47,653NOTE 10: PAYMENTS TO AND ON ACCOUNT OF LEAVERS2014/15 2013/14£’000 £’000Refund to members leaving service 132 37Individual Transfers 4,588 3,322Total 4,720 3,359NOTE 11: MANAGEMENT EXPENSES712014/15 2013/14£’000 £’000Administrative Cost 999 795Investment management expenses 2,699 2,285Oversight and governance costs 20Total 3,718 3,080This analysis of the costs of managing the Lambeth Pension Fund during the period has been prepared in accordancewith CIPFA guidance.The investment management expenses above includes £539,512 (2013/14: £375,281) in respect of performance-relatedfees paid to the fund’s investment managers.In addition to these costs, indirect costs are incurred through the bid-offer spread on investments sales and purchases.These are reflected in the cost of investment acquisitions and in the proceeds from the sales of investments (see Note15a).NOTE 12: INVESTMENT INCOME2014/15 2013/14£’000 £’000Fixed interest Securities 8,771 14,890Equity dividends 4,954 4,269Private Equity income 8,866 5,996Pooled property investments 4,422 3,869Pooled investments - unit trust and other managed funds 957 922Interest on cash deposits 192 67Total 28,162 30,013NOTE 13: TAXES ON INCOME2014/15 2013/14£’000 £’000Withholding tax – equities 546 465Withholding tax – pooled 135 40Total 682 505

NOTE 14: INVESTMENT EXPENSESPage 2522014/15 2013/14£’000 £’000Management Fees 2,511 2,012Custody fees 40 41Performance monitoring fees -investment consultancy 91 124Actuarial Fees 57 109Total 2,699 2,285The total management expenses incurred for the year was £6.8m of which only £2.5m was actually remitted; theremainder was deducted in the daily pricing of the individual portfolios.NOTE 15: INVESTMENTSInvestments assets 2014/15 2013/14£’000 £’000Equities 144,908 131,007Pooled Funds 13,124 13,776Unit Trusts 799,559 729,326UK Unit Trusts - Property 101,110 113,125Private Equity 43,157 36,117Cash Instruments 27,728 6,557Cash Deposits 414 (954)Investment Income Due 427 6,115Total Value of Investments 1,130,428 1,035,069NOTE 15A: RECONCILIATION OF MOVEMENTS IN INVESTMENTSInvestmentManagersAdamsStreet01-Apr-14PurchasesSalesRealisedgain/(loss)Unrealisedgain/(loss)UnanalysedMovement31-Mar-15TotalMovement£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’00036,117 8,980 0 0 (1,940) 0 43,157 7,040Insight 287,376 14,646 (2) 0 23,836 0 325,856 38,480BaillieGifford134,036 0 0 0 26,032 0 160,068 26,032Blue Crest 28,758 0 0 0 2,135 0 30,893 2,135Invesco 111,539 0 0 0 (12,087) 0 99,452 (12,087)Majedie 150,006 83,373 (79,984) 7,324 51 0 160,770 10,764MFS 134,891 232 0 0 26,456 0 161,579 26,688PAAMCO 73,116 0 0 0 564 0 73,680 564Principal 28,025 64 (27,864) (9,762) 9,537 0 (28,025)RREEF 1,586 0 (54) (663) 789 0 1,658 72StandardLifeState street-LiquidityFund43,127 0 0 0 4,356 0 47,483 4,35624,990 0 0 0 0 24,990 24,990Cash 377 0 0 0 0 37 414 37TOTAL 1,028,954 132,286 (107,904) (3,101) 79,729 37 1,130,001 101,047Transaction costs are included in the cost of purchases and in sales proceeds. These include costs charged directly tothe Fund, such as fees, commissions, stamp duty and other fees. Transactions cost incurred during the year total £362k(£381k in 2013/14). In addition to these costs, indirect costs are incurred through the bid-offer spread on investmentswithin pooled investments.72

Page 253InvestmentManagers01-Apr-13 Purchases SalesRealisedgain/(loss)Unrealisedgain/(loss)UnanalysedMovement31-Mar-14TotalMovement£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000Adams StreetInsightBaillie Gifford36,5572,623 0 0 (3,063) 0279,787 9,175 (161)118,8560(1,425)0 0 0 15,180 0Blue Crest 28,254 0 0 0InvescoMajedieMFSPAAMCOPrincipalRREEFStandard LifeCashTOTAL93,255 18,529123,255 103,203124,715 20465,74232,843 711,41741,73210,6820 0(97,500) 16,0410 00 0 0504(245)5,0079,9727,3740 0 (4,889) 00 0 00 0 01691,3950 0 0 (10,305)957,095 133,805 (97,661) 16,041 29,979036,117 (440)287,376 7,589134,036 15,1800 28,758 504000000(10,305)111,539150,00618,28426,751134,891 10,17673,116 7,37428,025 (4,818)1,586 16943,127 1,395377 (10,305)1,028,954 71,859NOTE 15B: ANALYSIS OF INVESTMENTSAdamStreetBaillieGiffordBlueCrestUK Overseas Pooled Pooled Pooled Pooled PooledCash and TotalEquities Equities fund fund fund fund fundHedgeUK Fixed UnitPrivate cashquated quatedProperty Fund ofIncome trustsEquity InstrumentsFunds£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’0000 0 0 0 0 43,157 0 43,1570 0 0 160,068 0 0 0 0 160,0680 0 0 0 0 30,893 0 0 30,893Invesco 0 0 0 0 99,452 0 0 0 99,452Insight 0 0 325,856 0 0 0 325,856Majedie 126,562 31,470 0 0 0 0 0 2,769 160,801MFS 0 0 0 161,579 0 0 0 0 161,579PAAMCO 0 0 0 0 0 73,680 0 0 73,680Principal 0 0 0 0 0 0 0 0 0RREEF 0 0 0 0 1,658 0 0 0 1,658StandardLifeStateStreet0 0 0 47,483 0 0 0 0 47,4830 0 0 0 0 0 0 25,374 25,374TOTAL 126,562 31,470 325,856 369,130 101,110 104,573 43,157 28,143 1,130,00173

Investment Analysed by Fund ManagersPage 2542014/15 % 2013/14 %£’000 £’000Adam Street 43,157 3.8 36,117 3.5Baillie Gifford 160,068 14.2 134,036 13.0Blue Crest 30,893 2.7 28,758 2.8Invesco 99,452 8.8 111,539 10.8Insight 325,856 28.8 287,376 27.9Majedie 160,801 14.2 150,006 14.6MFS 161,579 14.3 134,891 13.1PAAMCO 73,680 6.5 73,116 7.2Principal - 28,025 2.7RREEF 1,658 0.1 1,586 0.2Standard Life 47,483 4.2 43,127 4.2State Street 25,374 2.2 377 -TOTAL 1,130,001 100.0 1,028,954 100.0NOTE 16: FINANCIAL INSTRUMENTSNOTE 16A: CLASSIFICATION OF FINANCIAL INSTRUMENTSThe following table analyses the carrying amounts of financial assets and liabilities (excluding cash) by category and netassets statement heading. No financial assets were reclassified during the accounting periodFinancial AssetsDesignated as fairvaluethroughprofit &lossLoans &Receivables2014/15 2013/14FinancialLiabilities atamortised costDesignated as fairvaluethroughprofit &lossLoans &ReceivablesFinancialLiabilities atamortised cost£’000 £’000 £’000 £’000 £’000 £’000Equities 160,770 0 0 131,007 0 0Pooled Investments 799,559 0 0 743,103 0 0Pooled propertyInvestments101,110 0 0 113,125 0 0Private Equity 43,157 0 0 36,117 0 0Cash and cash Instruments 0 37,592 0 0 14,619 0Debtors 0 458 0 0 6,115 01,104,597 38,050 1,023,352 20,734 0Financial LiabilitiesCreditors 0 0 (7,276) 0 0 (11,922)Total 1,104,597 38,050(7,276)1,023,352 20,734 (11,922)2014/15 2013/14Designated asfair valuethrough profit &lossLoans &ReceivablesFinancialLiabilities atamortisedcostDesignatedas fair valuethroughprofit & lossLoans &ReceivablesFinancialLiabilities atamortisedcost£’000 £’000 £’000 £’000 £’000 £’000Financial AssetsEquities 160,770 0 0 131,007 0 074

Pooled Investments 799,318 0 0 743,103 0 0Pooled propertyInvestments101,110 0 0 113,125 0 0Private Equity 43,157 0 0 36,117 0 0Cash and cashInstruments0 37,592 0 0 14,619 0Debtors 0 458 0 0 6,115 0Financial LiabilitiesPage 2551,104,356 38,050 1,023,352 20,734 0Creditors 0 0(7,098)0 0(11,922)Total 1,104,356 38,050(7,098)1,023,352 20,734(11,922)NOTE 16B: NET GAINS AND LOSSES ON FINANCIAL INSTRUMENTSFair value through profit and loss on financial assets was £75.1m (£47.3m 2013/14)NOTE 16C: FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIESThere is no difference between the fair value and carrying value of the financial instruments and liabilities.NOTE 16D: VALUATION OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUEThe valuation of financial instruments has been classified into three levels, according to the quality and reliability ofinformation used to determine fair values. The following table provides an analysis of the financial assets and liabilities ofthe Pension Fund grouped into levels 1 to 3, based on the level at which the fair value is observable.Values as 31 March 2015Quoted marketpriceUsingobservableinputsWith significantunobservableinputsFinancial AssetsFinancial assets at fair value through profit andlossLevel 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000Equity 160,770 0 0 160,770Unit Trust 694,987 0 104,573 799,559Property- Unit trust 0 101,110 0 101,110Private Equity 0 0 43,157 43,157Cash 24,990 24,990Total 880,747 101,110 147,730 1,129,587Values as 31 March 2014Financial AssetsFinancial assets at fair value through profit and lossQuotedmarket priceUsingobservableinputsWithsignificantunobservableinputsLevel 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000Equity 151,339 0 0 151,339Unit Trust 627,452 0 101,874 729,326Property- Unit trust 0 113,125 0 113,125Private Equity 0 0 36,117 36,117Total 778,791 113,125 137,991 1,029,90775

NOTE 17: NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTSRisk and Risk ManagementThe Fund’s primary long term risk is that the Fund’s asset will fall short of its liabilities (i.e. promised benefits payable tomembers). Therefore the aim of investment risk management is to minimise the risk of an overall reduction in the value ofthe fund and to maximise the opportunity for gains across the whole portfolio. The Fund achieves this through assetdiversification to reduce exposure to market risk (price risk, currency risk, and interest risk to ensure there is sufficientliquidity to meet the Fund’s forecast cash flows. The Council manage these investments risks as part of its overall PensionFund risk management programme.Responsibility for the fund’s risk management strategy rests with the pension fund committee. Risk management policiesare established to identify and analyse the risks faced by the council’s pensions operations. Policies are reviewed regularlyto reflect changes in activity and in market conditions.a) MarketMarket risk is the risk of loss from fluctuations in equity and commodity prices, interest and foreign exchange rates andcredit spreads. The fund is exposed to market risk from its investment activities, particularly through its equity holdings. Thelevel of risk exposure depends on market conditions, expectations of future price and yield movements and the asset mix.The objective of the fund’s risk management strategy is to identify, manage and control market risk exposure withinacceptable parameters, whilst optimising the return on risk. In general, excessive volatility in market risk is managedthrough the diversification of the portfolio in terms of geographical and industry sectors and individual securities. Tomitigate market risk, the council and its investment advisors undertake appropriate monitoring of market conditions andbenchmark analysis.The fund manages these risks in two ways:Page 256The exposure of the fund to market risk is monitored through a factor risk analysis, to ensure that risk remainswithin tolerable levelsspecific risk exposure is limited by applying risk-weighted maximum exposures to individual investments.Equity futures contracts and exchange traded option contracts on individual securities may also be used to manage marketrisk on equity investments. It is possible for over-the-counter equity derivative contracts to be used in exceptionalcircumstances to manage specific aspects of market risk.Other price riskOther price risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in marketprices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused byfactors specific to the individual instrument or its issuer or factors affecting all such instruments in the market.The fund is exposed to share and derivative price risk. This arises from investments held by the fund for which the futureprice is uncertain. All securities investments present a risk of loss of capital. Except for shares sold short, the maximum riskresulting from financial instruments is determined by the fair value of the financial instruments. Possible losses from sharessold short are unlimited.The fund’s investment managers mitigate this price risk through diversification and the selection of securities and otherfinancial instruments is monitored by the council to ensure it is within limits specified in the fund investment strategy.Other price risk – sensitivity analysisFollowing analysis of historical data and expected investment return movement during the financial year, in consultationwith the fund’s investment advisors, the council has determined that the following movements in market price risk arereasonably possible for the 2015/16 reporting period.The potential price changes disclosed below are broadly consistent with a one-standard deviation movement in the value ofthe assets. The sensitivities are consistent with the assumptions contained in the investment advisors’ most recent review.This analysis assumes that all other variables, in particular foreign currency exchange rates and interest rates, remain thesame.Had the market price of the fund investments increased/decreased the change in the net assets available to pay benefits inthe market price would have been as follows (the prior year comparator is shown below).76

Page 257Asset TypeValue as at 31Mar 15PercentageChangeValue onIncreaseValue on decrease£’000 % £’000 £’000Cash and cash equivalents 40,330Investment Portfolio assets:-40,330 40,330UK Equities 158,032 10.30% 174,310 141,755Global Equities- Unit Trust 321,647 8.96% 350,467 292,828Property - Unit Trust 101,110 3.63% 104,780 97,440Diversified Growth - Unit Trust 47,483 3.28% 49,041 45,926Hedge Fund - Unit Trust 104,573 4.20% 108,965 100,181Corporate Bond - Unit Trust 325,856 5.77% 344,658 307,054Private Equity 43,157 5.18% 45,393 40,922Investment income due and otherdebtors458-458 458Amount payable to Inland revenueAmount payable to LB LambethTotal assets available to paybenefits(21) - (21) (21)(7,254) - (7,076) (7,076)1,135,371 1,211,303 1,059,795Asset TypeValue as at31 Mar 14PercentageChangeValue onIncreaseValue ondecrease£’000 % £’000 £’000Cash and cash equivalents 14,620 0 14,620 14,620Investment Portfolio assets:UK Equities 120,001 12.26% 134,713 105,289Global Equities- Unit Trust 293,709 11.22% 326,663 260,755Property - Unit Trust 113,125 2.74% 116,225 110,025Active currency - Unit Trust 28,025 6.77% 29,922 26,128Diversified Growth - Unit Trust 43,127 4.43% 45,038 41,216Hedge Fund - Unit Trust 101,874 4.48% 106,438 97,310Corporate Bond - Unit Trust 287,373 5.31% 302,633 272,113Private Equity 36,117 5.28% 38,024 34,210Investment income due 6,115 0 6,115 6,115Amount payable to Inland revenue (9) 0 (9) (9)Amount payable to LB Lambeth (11,913) 0 (11,913) (11,913)Total assets available to pay benefits 1,032,164 1,108,468 955,860Interest rate riskThe fund invests in financial assets for the primary purpose of obtaining a return on investments. These investments aresubject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates.The fund’s interest rate risk is routinely monitored by the council and its investment advisors in accordance with the fund’srisk management strategy, including monitoring the exposure to interest rates and assessment of actual interest ratesagainst the relevant benchmarks.77

Page 258The fund’s direct exposure to interest rate movements as at 31 March 2015 and 31 March 2014 is set out below. Thesedisclosures present interest rate risk based on the underlying financial assets at fair value.Asset TypeCarrying amount asat 31 Mar 15£'000Carrying amount asat 31 Mar 15Cash and cash equivalents 27,728 6,557Cash Balances 12,602 8,062Fixed interest Securities 325,856 287,373Total 366,186 301,992£'000Interest rate risk sensitivity analysisThe council recognises that interest rates can vary and can affect both income to the fund and the carrying value of fundassets, both of which affect the value of the net assets available to pay benefits. A 100 basis point (BPS) movement ininterest rates is consistent with the level of sensitivity applied as part of the fund’s risk management strategy. The fund’sinvestment advisor has advised that long-term average rates are expected to move less than 100 basis points from oneyear to the next and experience suggests that such movements are likely.The analysis that follows assumes that all other variables, in particular exchange rates, remain constant, and shows theeffect in the year on the net assets available to pay benefits of a +/- 100 BPS change in interest rates.Asset TypeCarrying amountas at 31 Mar 15Effect on asset values£'000 +100BPS -100BPSCash and cash equivalents 27,728 2,773 (2,773)Cash Balances 12,602 1,260 (1,260)Fixed interest Securities 325,856 32,586 (32,586)Total change in assets value 366,186 36,619 (36,619)Income SourceCarrying amountas at 31 Mar 15Effect on asset values£'000 +100BPS -100BPSCash deposits/ cash and cash equivalents 192 19 (19)Fixed interest Securities 8,771 877 (877)Total change in income receivable 8,962 896 (896)This analysis demonstrates that a 1% increase in interest rates will not affect the interest received on fixed interestassets but will reduce their fair value, and vice versa. Changes in interest rates do not impact on the value of cash/cashequivalent balances but they will affect the interest income received on those balances. Changes to both the fair value ofassets and the income received from investments impact on the net assets available to pay benefits.Currency riskCurrency risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because ofchanges in foreign exchange rates. The fund is exposed to currency risk on financial instruments that are denominated inany currency other than the functional currency of the fund (£UK). The fund holds both monetary and non-monetaryassets denominated in currencies other than £UK.The fund’s currency rate risk is routinely monitored by the council and its investment advisors in accordance with thefund’s risk management strategy, including monitoring the range of exposure to currency fluctuations.The following table summarises the fund’s currency exposure as at 31 March 2015 and as at the previous period end.Currency risk – sensitivity analysisFollowing analysis of historical data in consultation with the fund investment advisors, the council considers the likelyvolatility associated with foreign exchange rate movements to be 13% (as measured by one standard deviation).A 13% fluctuation in the currency is considered reasonable based on the fund advisor’s analysis of long-term historicalmovements in the month-end exchange rates over a rolling 36-month period.78

Page 259This analysis assumes that all other variables, in particular interest rates, remain constant. A 13%strengthening/weakening of the pound against the various currencies in which the fund holds investments wouldincrease/decrease the net assets available to pay benefits as followsCurrency exposure - asset typeAsset value asat 31 March2015Change in Net assets available to paybenefits+13% -13%£’000 £’000 £’000Global Equities 321,647 41,814 (41,814)Private Equity 43,157 5,610 (5,610)Property 99,452 12,929 (12,929)Total change in assets available 464,256 60,353 (60,353)Currency exposure - asset typeAsset value asat 31 March2014Change in Net assets available to paybenefits+13% -13%£’000 £’000 £’000Global Equities 293,709 38,182 (38,182)Private Equity 36,117 4,695 (4,695)Property 111,542 14,500 (14,500)Total change in assets available 441,368 57,378 (57,378)b) Credit riskCredit risk represents the risk that the counterparty to a transaction or a financial instrument will fail to discharge anobligation and cause the fund to incur a financial loss. The market values of investments generally reflect an assessmentof credit in their pricing and consequently the risk of loss is implicitly provided for in the carrying value of the fund’sfinancial assets and liabilities.The council believes it has managed its exposure to credit risk, and has had no experience of default or uncollectabledeposits over the past five financial years. The fund’s cash holding under its treasury management arrangements at 31March 2015 was £40.3m (31 March 2014: £16m). This was held with the following institutions.SummaryMoney Market FundsRating 31-Mar-15 31-Mar-14£’000 £’000State Street- Liquidity Fund AAA 25,364 377Majedie Asset Management 2,769 6,557Bank deposits and current accountRoyal Bank of Scotland A 12,187 9,017Total 40,320 15,951Liquidity riskLiquidity risk represents the risk that the fund will not be able to meet its financial obligations as they fall due. The counciltherefore takes steps to ensure that the pension fund has adequate cash resources to meet its commitments. This willparticularly be the case for cash from the cash flow matching mandates from the main investment strategy to meet thepensioner payroll costs; and also cash to meet investment commitments.The council has immediate access to its pension fund cash holding.NOTE 18: FUNDING ARRANGEMENTSIn line with The Local Government Pension Scheme Regulations 2013, the fund’s actuary undertakes a funding valuationevery three years for the purpose of setting employer contribution rates for the forthcoming triennial period. The last suchvaluation took place as at 31 March 2013. The next valuation will take place as at 31 March 2016.79

The key elements of the funding policy are:Page 260 to ensure the long-term solvency of the fund, i.e. that sufficient funds are available to meet all pension liabilitiesas they fall due for paymentto ensure that employer contribution rates are as stable as possibleto minimise the long-term cost of the scheme by recognising the link between assets and liabilities and adoptingan investment strategy that balances risk and returnto reflect the different characteristics of employing bodies in determining contribution rates where theadministering authority considers it reasonable to do soto use reasonable measures to reduce the risk to other employers and ultimately to the council tax payer froman employer defaulting on its pension obligations.The aim is to achieve 100% solvency over a period of 20 years and to provide stability in employer contribution rates byspreading any increases in rates over a period of time. Normally this is three years but in some cases a maximum periodof 12 years can be granted. Solvency is achieved when the funds held, plus future expected investment returns andfuture contributions are sufficient to meet expected future pension benefits payable. When an employer’s funding level isless than 10% of the 100% funding target, then a deficit recovery plan will be put in place requiring additionalcontributions from the employer to meet the shortfall.At the 2013 actuarial valuation, the fund was assessed as 72.6% funded (72.5% at the March 2010 valuation). Thiscorresponded to a deficit of £359m (2010 valuation: £290m) at that time.Contribution increases were phased in over the three-year period ending 31 March 2017 for both scheme employers andadmitted bodies. The common contribution rate (i.e. the rate which all employers in the fund pay) is as follows.Year Employers’ contribution rate2014/15 16.8%2015/16 16.8%2016/17 16.8%Individual employers’ rates will vary from the common contribution rate depending on the demographic and actuarialfactors particular to each employer. Full details of the contribution rates payable can be found in the 2013 actuarialvaluation report and the funding strategy statement on the fund’s website.The valuation of the fund has been undertaken using the projected unit method under which the salary increase for eachmember is assumed to increase until they leave active service by death, retirement or withdrawal from service. Theprincipal assumptions were as follows.Financial assumptionsInvestment Return (discount rate) 4.60%Inflation 3.30% Assumed to be RPISalary Increase 4.30%Based on 25 year bond returns extrapolated to reflectthe duration of the fund’s LiabilityPension Increase 2.50% Assumed be 0.5% less than RPIMortality assumptionsFuture life expectancy based on the actuary’s fund-specific mortality review was as follows.Mortality assumptions at age 65 Male FemaleCurrent Pensioners 21.7 24.0 yearsFuture Pensioners (assumed current age 45) 24.3 26.2 years80

Historic mortality assumptionsPage 261Life expectancy for the year ended 31 March 2013 are based on PFA92 and PMA92 actuarial tables. The allowances forfuture life expectancy are as follows.Prospective pensionersCurrent pensionersYear of birth, medium cohort and 1% per annumYear of birth, medium cohort and 1% per annumminimum improvement from 2010 minimum improvement from 2010Commutation assumptionIt is assumed that future retirees will take 50% of the maximum additional tax-free lump sum up to HMRC limits for pre-April 2008 service and 75% of the maximum for post-April 2008 service.NOTE 19: ACTUARIAL PRESENT VALUE OF PROMISED RETIREMENT BENEFITSIn addition to the triennial funding valuation, the fund’s actuary also undertakes a valuation of the pension fund liabilities,on an IAS 19 basis, every year using the same base data as the funding valuation rolled forward to the current financialyear, taking account of changes in membership numbers and updating assumptions to the current year. This valuation isnot carried out on the same basis as that used for setting fund contribution rates and the fund accounts do not takeaccount of liabilities to pay pensions and other benefits in the future.In order to assess the value of the benefits on this basis, the actuary has updated the actuarial assumptions (set outbelow) from those used for funding purposes (see Note 18). The actuary has also used valued ill health and deathbenefits in line with IAS 19.Calculated on an IAS 19 basis, the actuarial present value of promised retirement benefits at 31 March 2015 was£1,777m (31 March 2014: £1,509m). The net assets available to pay benefits as at 31 March 2015 was £1,135.3m (31March 2014: £1,032.1m). The implied fund deficit as at 31 March 2014 was therefore £641.7m (31 March 2014:£476.9m).As noted above, the liabilities above are calculated on an IAS 19 basis and therefore will differ from the results of the2013 triennial funding valuation (see Note 18) because IAS 19 stipulates a discount rate rather than a rate which reflectsmarket rates.Assumptions usedInflation/pension increase rate assumption 2.4%Salary increase rate 4.3%Discount rate 3.2%NOTE 20: CURRENT ASSETSDebtors31-Mar-1531-Mar-14£’000 £’000Accrued income receivable 427 6,115Pension payroll control account 31 0Cash Balances 12,187 9,016Total 12,645 15,131NOTE 21: CURRENT LIABILITIES31-Mar-1531-Mar-14£’000 £’000Inland Revenue 21 9Due to London Borough of Lambeth 7,254 11,913Total 7,276 11,92281

Page 262NOTE 22: ADDITIONAL VOLUNTARY CONTRIBUTIONSMarket ValueMarket ValueName 31-Mar-15 31-Mar-14Prudential 1,208 1,059Equitable Life 243 453Clerical Medical 105 262Total 1,556 1,774NOTE 23: RELATED PARTY TRANSACTIONSThe Lambeth Pension Fund is administered by Lambeth Council. Consequently there is a strong relationship betweenthe council and the pension fund.During the reporting period, the council incurred costs of £1.0m (2013/14: £0.9m) in relation to the administration of thefund and was subsequently reimbursed by the fund for these expenses. The council is also the single largest employer ofmembers of the pension fund and contributed £41.7m to the fund in 2014/15 (2013/14: £42.9m). The amount payable tothe council as at 31 March 2015 shown as current liability.GovernanceThere are no elected members of the Pension Fund Investment Panel (PFIP) who are in receipt of pension benefits fromthe Lambeth Pension Fund but two pensioner representatives are in receipt of pension benefits from the LambethPension In addition, PFIP staff representatives D.Okechukwu and L.Osborne and trade union representative J Rogersare active members of the pension fund.Each member of the PFIP is required to declare their interests at each meeting.NOTE 24: CONTINGENT LIABILITIES AND CONTRACTUAL COMMITMENTSOutstanding capital commitments (investments) at 31 March 2015 totalled £35.1m (31 March 2014: £6.9m).These commitments relate to outstanding call payments due on Private Equity parts of portfolio. The amounts ‘called’ bythis fund are irregular in both size and timing over a period of between four and six years from the date of each originalcommitment.NOTE 25: CONTINGENT ASSETSAdmitted body employers in the Lambeth Pension Fund hold bonds to guard against the possibility of being unable tomeet their pension obligations. These bonds are drawn in favour of the pension fund and payment will only be triggeredin the event of employer default.82

A GLOSSARY OF LOCAL AUTHORITY FINANCIAL TERMS AND ABBREVIATIONSFor the purposes of compiling the Statement of Accounts the following definitions have been adopted:AccrualsThe accruals concept means that transactions within the Comprehensive Income & Expenditure Statement arerecognised as they are earned or incurred and not as money is received or paid. For example, if an invoice relating toMarch 2012 is expected to arrive in April 2012, it will be accounted for in the 2011/12 accounts (the financial year it relatesto), not the 2012/13 accounts (the financial year it arrives in.)Balance sheetThis statement is fundamental to the understanding of an authority’s financial position at year end. It shows:the balances and reserves at an authority’s disposallong-term indebtedness (which is over one year)the long-term and net current assets employed in its operationssummarised information on the long-term assets (items that are held for more than one year) by categoryCapital expenditureExpenditure on the purchase, construction improvement of significant assets including land, buildings, equipment, or eveninvestments which will be of use or benefit in providing services for more than one financial year. Expenditure can only betreated as “Capital” if it meets the statutory definitions and is in accordance with “Proper Accounting Practices”Collection FundA statutory fund used to record the billing and collection of council tax and non-domestic rates. Though it is independentof the General Fund, payments are made from it to support the General Fund services of the billing and preceptingauthorities (in our case, the London Borough of Lambeth and the Greater London Authority respectively) and to thenational business rate pool.Comprehensive Income and Expenditure StatementA statement that reports the net cost for the year of all the functions for which the authority is responsible, anddemonstrates how that cost has been financed from general government grants and income from taxpayers. The mostobvious difference from the Income and Expenditure Statement (which, under IFRS, it replaces) is that it now includes theStatement of Total Recognised Gains and Losses (STRGL).ConditionWith reference to grants, a condition typically means that the grant awarding body may ask for it back if it is not used for astated purpose. This is not the same as a specific grant, which is given for a specific purpose but which may legally bespent on something else if the recipient sees fit.Grants may either be “with conditions” or “without conditions” – the nearest equivalent terms previously used were “ringfenced” and “non-ring fenced.”Contingent assets and liabilitiesA contingency is a condition which exists at the balance sheet date, the outcome of which depends on one or moreuncertain future events and which cannot, therefore, be reliably or accurately estimated. Contingencies in the Council’sfavour are called contingent assets; contingencies which, if realised, would incur a cost to the Council are calledcontingent liabilities.DepreciationThe measure of wearing out, consuming, or other reduction in the useful economic life of a fixed asset, whether arisingfrom use, passing of time or obsolescence. It means that, rather than the whole cost of an asset being charged to revenuein the year in which it is acquired, the cost is spread out over the life of the asset.General Fund (GF)The account that summarises the revenue cost of providing services that are met by the Council’s demand on thecollection fund, specific government grants and other incomeGoing ConcernThe concept that the authority will remain in operational existence for the foreseeable future; in particular, that the revenueaccounts and balance sheet are not based on the assumption of an intention to curtail significantly the scale of operations.Housing Revenue Account (HRA)A statutory account that contains all expenditure and income to on the provision of council housing for rent.The HRA is ring-fenced account outside the General Fund. Local authorities are not allowed to make up deficit on theHRA from its own resources.MatchingThe matching concept says that expenditure and income transactions, including accruals, are matched with one anotherso far as their relationship can be established, or justifiably assumed, and dealt with in the period to which they relate.MaterialityPage 26383

Page 264Financial statements often cannot be precisely accurate but that this need not detract from their ability to be fairly stated.Within certain limits, a tolerance is permitted in measurement and disclosure of financial statement items. The concept ofmateriality determines the acceptability of the degree of this tolerance.Movement In Reserves statement (MIRs)This replaces the Statement of Movement on the General Fund Balance (SMGFB), reconciling the ComprehensiveIncome and Expenditure Statement for the year with the authority’s budget requirement, which is governed by statute anddiffers in certain key respects from accounting conventions.ProvisionsAmounts set aside for any liability or loss that is likely to be incurred, but where the exact amount and date is uncertain.PrudenceThe prudence concept states that revenue is not anticipated but is to be recognised only when realised in the form eitherof cash, or of other assets whose ultimate cash realisation can be assessed with reasonable certainty.Revenue Expenditure Funded From Capital Under Statute (REFFCUS)Expenditure incurred during the year that may be capitalised under statutory provisions, but does not result in the creationor enhancement of Council Owned assets.ReservesFunds set aside to meet future expenditure which falls outside the definition of provisions. Reserves can be for generalcontingencies and to provide working balances, or earmarked for specific future expenditure.Note that certain reserves are statutory in nature – for example, the Council is obliged to hold a revaluation reserve and itsuse is closely prescribed under the IFRS as interpreted for use in local government. The Council has no discretion in theexistence or use of these reserves.Statement of Movement on the HRA BalanceSimilar to the General Fund’s Movement In Reserves statement, this reconciles the HRA Income and Expenditureaccount for the year with the surplus or deficit for the year on the HRA Balance, calculated in accordance with therequirements of the Local Government and Housing Act 1989.Statutory provision for the financing of capital investmentFormerly known as the Minimum Revenue Provision (MRP), this is the minimum amount that must be charged to a localauthority’s revenue account each year and set aside to provide for debt repayment or other credit liabilities.Substance over formThe concept of substance over form requires that transactions and other events are accounted for and represented infinancial statements with regard to their economic substance and financial reality rather than just their legal form.84

Public reports pack Thursday 09-Jul-2015 19.00 Corporate Committee

Create successful ePaper yourself

Delete template?

Save as template?