The Audit, Governance and Standards Committee of Southwark Council met on Monday 13 July 2026 to review year-end reports on anti-fraud activities and the Enterprise Resource Planning (ERP) replacement programme, alongside external and internal audit plans. Key decisions included noting the Corporate Anti-Fraud Team and Special Investigations Team's year-end report, which highlighted £2.2 million in identified fraud, and approving the formation of sub-committees for standards and civic awards.

Corporate Anti-Fraud Team and Special Investigations Team Year-End Report 2025-26

The committee received the year-end report for the Corporate Anti-Fraud Team (CAFT) and the Special Investigations Team (SIT), which detailed their activities in preventing, detecting, and responding to fraud, bribery, and corruption. Paul Rock, Head of Internal Audit, presented the report, noting that the value of fraud identified increased by approximately £500,000 compared to the previous year, reaching a total of £2.2 million.

Councillor Renata Hamvas raised concerns about the increase in identified fraud value despite a decrease in team size over recent years. Paul Rock explained that the value of fraud identified can fluctuate annually, often influenced by the nature and scale of individual cases. He assured the committee that detection levels remain good due to initiatives like the National Fraud Initiative and the London Fraud Hub. He also noted potential opportunities for shared services with neighbouring boroughs to maximise resource use.

Regarding fraudulent Right to Buy applications, Paul Rock stated he was not aware of any criminal prosecutions, as these cases are typically resolved by preventing the application from proceeding, thus saving the council money. He committed to providing more detail on detected fraud types and actions taken at the next meeting. Councillor Felix Hamer expressed concern that fraudulent applications might be perceived as having no downside if they fail, suggesting a lack of retribution.

The committee also discussed tenancy fraud, with a request for the Special Investigations Team to provide a full briefing on their strategy, approach, governance, and risks at the next meeting. Councillor Richard Macmillan inquired about the cost of detection versus recovery, and Paul Rock agreed to provide this information separately. The committee noted the CAFTA and SIT year-end report.

Southwark360: Six-Month Progress Update on the Enterprise Resource Planning (ERP) Replacement Programme

Jason Martin, Programme Director, provided an update on the Southwark360 programme, which aims to replace the council's legacy SAP ERP system, implemented in 1999. The system runs HR, finance, purchase-to-pay, and payroll processes. He reported that the programme budget had not changed materially and was tracking broadly on schedule. Key risks identified included ensuring payroll is delivered on time and accurately, managing interfaces and integration with other applications, and adequately training and supporting staff through the transition.

Councillor Richard Macmillan asked about the top three risks from the project's risk register. Jason Martin identified payroll delivery, interface and integration challenges due to incomplete documentation from the previous system, and ensuring adequate staff training and support as the primary concerns. He confirmed that all these risks were being controlled.

Regarding the existing system's cybersecurity, Jason Martin expressed confidence in its safety as it still receives the latest security patches from SAP and operates within the council's existing infrastructure. He noted, however, that its useful life extends only until 2027.

Councillor Esme Dobson clarified that savings targets of £668k had been realised for 2026-27, ahead of the implementation. She also inquired about the methodology for benefits realisation, and Jason Martin confirmed a clear methodology was in place, with the first benefits register expected imminently.

The committee noted the six-month progress update on the Southwark360 programme.

External Audit Plan – Southwark Council & Pension Fund

Fleur Niebuhr, Partner at KPMG, presented the external audit plan for Southwark Council and the Pension Fund for the year ending 31 March 2026. She outlined that materiality for the council's financial statements was set at £34.1 million, with a reporting threshold of £1.7 million for misstatements. Key audit risks identified for the council include the valuation of council dwellings, management override of controls, and the valuation of post-retirement benefit obligations. For the Pension Fund, materiality was set at £22.6 million, with significant risks including management override of controls and the valuation of directly held investment property.

Kunal Malhotra, manager for the Pension Fund audit, detailed the plan for the pension fund, highlighting risks around the valuation of directly held investment property and contributions to the fund.

The committee noted the external audit plans for both Southwark Council and the Pension Fund.

Internal Audit Progress Report for 2025-26

Aaron Winter from BDO presented the final progress report on the 2025-26 internal audit plan. He confirmed that all work for the year had been completed, with 19 final reports issued. He was pleased to report a 99.4% implementation rate for previously raised internal audit recommendations, with only two outstanding. The report also included a summary of ten cyclical school audits and a thematic review on pension administration.

Councillor Felix Hamer inquired about the process for handling time-critical, urgent recommendations and Aaron Winter confirmed robust protocols were in place with management to ensure realistic timescales and effective follow-up. Councillor Graham Neale asked about the confidence in the team taking over from BDO, and Aaron Winter expressed confidence in the new shared service model and the incoming Head of Internal Audit, Paul Rock. Councillor Esme Dobson suggested inviting the Director of Adult Social Care to discuss areas of low effectiveness identified in two reports, which was agreed for the September meeting. The committee noted the update reports.

Internal Audit – Annual Report & Opinion 2025-26

Aaron Winter presented the annual report and opinion for internal audit for 2025-26. He confirmed that all work for the year was completed, with 19 reports issued. The overall opinion was Generally satisfactory with improvements required in some areas, indicating that controls were generally suitably designed and operating effectively, but with some weaknesses identified. He highlighted specific areas where limited assurance was provided, including Nursing and Residential Care, Waiting List Management, IT Back Up and Restoration, and Payroll. The committee noted the audit update report.

Internal Audit Risk-Based Plan, Strategy, Charter and Mandate

Paul Rock, the new Head of Internal Audit, presented the internal audit plan for 2026-27, the three-year strategy, and the charter and mandate for approval. He explained that the plan was risk-based, developed in consultation with directors and informed by the council's risk register. The strategy outlines the medium-term direction of the service, and the charter and mandate define its independence and responsibilities.

Councillor Felix Hamer asked about the proportion of work to be delivered in-house versus externally. Paul Rock stated his plan to recruit a deputy head, two senior internal auditors, and two auditors, aiming for 80% of the plan to be delivered in-house, supplemented by external expertise for specific areas like IT audit. He clarified that the proposed model is a co-sourcing model, which is common across local authorities. Councillor Graham Neale expressed confidence in the internal model, citing his personal experience where internal objectives focused on service quality and compliance, unlike external models which he felt could be influenced by fee income.

The committee approved the internal audit plan for 2026-27, the three-year strategy, and the charter and mandate.

Draft Annual Governance Statement 2025-26

Geraldine Chadwick, Assistant Director of Finance (Corporate), presented the draft Annual Governance Statement (AGS) for 2025-26. She explained that it is a statutory document that maps the council's assurance framework, detailing the roles of management, risk and compliance, internal audit, external auditors, and the committee itself.

Councillor Esme Dobson proposed an amendment to reflect the role of anchor institutions and the anchor network in the council's governance approach. Councillor Graham Neale requested that future AGS documents adopt a left-aligned, unjustified text style for better readability, particularly for dyslexic individuals. Councillor John Batteson requested that the forward-looking statement for next year reflect a fuller description of the council's commercial governance arrangements once the revised procurement framework is embedded. Geraldine Chadwick agreed to incorporate these comments into the final draft. The committee noted the draft Annual Governance Statement.

Compliance with CIPFA Financial Management Code

Geraldine Chadwick presented the report on compliance with the CIPFA Financial Management Code for 2025-26. She explained that the code provides a framework for assessing financial management and resilience in local authorities, based on six principles: leadership, accountability, transparency, standards, assurance, and sustainability. The council's review indicated a high level of compliance, with only minor areas for improvement identified in capital and balance sheet reconciliations.

Councillor Felix Hamer inquired about the trajectory of compliance over the years, asking about the percentage of completion and any instances of backsliding. Geraldine Chadwick stated that the code focuses on processes rather than specific actions, and she did not believe there had been any backsliding, with improvements being sustained. She highlighted capital and balance sheet reconciliations as an area where the council has formally improved its processes.

Clive Palfreyman, Strategic Director of Resources, emphasised the importance of the report as a check on whether the council is doing the basics right and a transparent demonstration of this to the community. He noted that while the report is dry, it underpins the finance team's ability to support the rest of the organisation. The committee noted the report.

Formation of Audit, Governance and Standards Sub-Committees for 2026-27

The committee discussed the formation of two sub-committees: the Standards Sub-Committee and the Civic Awards Sub-Committee. Councillor Colin Boyle proposed himself as Chair for both, and Councillor John Batteson also put himself forward for Chair of the Civic Awards Sub-Committee. Following a vote, Councillor Pascale Mitchell was elected Chair of the Civic Awards Sub-Committee, and Councillor Colin Boyle was elected Chair of the Standards Sub-Committee. The membership for both sub-committees was also agreed.

In-Year Review of Work Programme 2026-27: July 2026

Virginia Wynn-Jones presented the proposed work programme for 2026-27. Several items were added or confirmed for inclusion based on committee discussions, including further details on fraud types and costs from CAFT and SIT, the benefits register for the Southwark360 report, and an invitation to the Director of Adult Social Care to discuss audit reports. Councillor Esme Dobson proposed that the Director of Adult Social Care be invited to the September meeting.

Councillor John Batteson raised a point about the depth of review for the Statement of Accounts, suggesting an informal session to delve into the details. Clive Palfreyman offered to run an informal session with the draft accounts to provide more detail. Councillor Richard Macmillan expressed a desire to see the reality of spending against budgets, not just the theory, and suggested this might be a matter for the Overview and Scrutiny Committee. Clive Palfreyman clarified that the Statement of Accounts is a formal, accounting-led document, and a more detailed breakdown of spending would be found in the executive report on the council's financial performance.

Councillor Esme Dobson proposed including a review of the council's approach to budget setting, particularly the new administration's intention for a more participatory budgeting approach, to ensure the process and governance were robust. This was agreed for inclusion in the September meeting's work plan. The committee agreed the proposed work plan.

The meeting concluded with the noting of the proposed work plan for 2026-27.