The Audit and Transparency Committee of Kensington and Chelsea Council met on Monday 28 September 2026 to review the external auditor's annual report, audit findings, and progress on equalities recommendations. Key discussions focused on significant weaknesses identified in governance due to a cyber attack and in housing safety standards, alongside the Council's treasury management outturn and assurance updates.

Auditor's Annual Report and Audit Findings

Grant Thornton, the Council's external auditors, presented their annual report for 2025/26, highlighting two significant weaknesses. The first was in governance, stemming from a cyber attack in November 2025. Auditors identified that historical underinvestment in IT infrastructure, including reliance on older software versions and systems requiring internet connection, contributed to the incident and complicated recovery. A key recommendation was made for the Council to develop a costed plan for system upgrades, rebalance its cyber security strategy to prioritise prevention, and increase the frequency and uptake of cyber awareness training for all staff. The second significant weakness was in improving economy, efficiency and effectiveness, specifically concerning housing safety standards. The Regulator of Social Housing (RSH) issued the Council a 'C3' rating, indicating serious failings, due to an incomplete understanding of housing stock condition and low compliance with the Decent Homes Standard. The Council has developed an improvement plan, including a commitment to achieve 100% Decent Homes compliance by 2030, and is working to establish a new Asset Management System.

The Audit Findings Report for 2025/26 detailed adjustments made to the Council's accounts, primarily due to delays in processing Housing Benefit payments and Collection Fund statements caused by the cyber-attack. These adjustments, while not impacting the General Fund overall, led to revisions in debtor balances and reserves. The report also noted six recommendations for management, including enhancing year-end checking processes for expenditure, improving property record accuracy, addressing segregation of duties issues in Oracle Fusion, and reviewing the classification of properties.

The audit of the Pension Fund's financial statements was largely complete, with an unmodified opinion anticipated. However, the certification of the audit closure for both the Council and the Pension Fund was delayed pending confirmation from the National Audit Office on the Whole of Government Accounts and the completion of the Pension Fund's annual report.

Equalities and Equality Impact Assessment Audit Recommendations

A one-year progress report on the equalities and equality impact assessment (EqIA) audit recommendations indicated that out of the original 12 recommendations, seven have now been fully implemented. Five recommendations remain partially implemented, with ongoing work required to demonstrate embedding, consistency, and impact. Key areas of progress include strengthened EqIA governance, a redesigned EqIA form and guidance, and the embedding of equalities considerations within the Council's risk management framework. Remaining actions focus on establishing an EqIA Champion network, completing equality data mapping, embedding the EqIA monitoring framework, and demonstrating sustained cultural change.

Treasury Outturn Report 2025/26

The Annual Treasury Outturn Report for 2025/26 was presented, noting a decrease in the UK's base rate throughout the year. The Council achieved a weighted average investment yield of 4.31% against a debt portfolio weighted average interest rate of 4.02%. The report highlighted an underspend in the General Fund interest payable budget due to reduced borrowing in the General Fund and the use of HRA concessionary rates for borrowing. However, the HRA interest payable outturn showed an overspend, primarily due to an increase in HRA borrowing. The Council's total borrowing increased, but remained within authorised limits. The report also detailed the Council's investment strategy and performance, noting volatility in financial markets due to geopolitical events.

Assurance Update Report

The Assurance Update Report provided an overview of the work undertaken by Internal Audit and Fraud Investigations up to the end of August 2026. Six audits had been finalised, with one receiving substantial assurance, three satisfactory, and two limited assurance. Fraud investigations achieved 184 successful outcomes, including the recovery of two social housing properties through the London NFI FraudHub. The report detailed specific audit outcomes, including limited assurance findings for Housing Management Lancaster West Estate Decants and Housing Needs Temporary Accommodation. It also outlined the progress on fraud investigations, highlighting successes in parking enforcement and Grenfell Wellbeing Grants.

Forward Programme and Action Tracker

The Committee reviewed its action tracker, noting six outstanding actions. The forward programme for the remainder of the municipal year was also discussed, with potential deep-dive topics including the Medium-Term Financial Strategy, the fragility of housing stock and the care market, and health and safety. Informal briefings on cyber security and the Strategic Risk Register were also planned.