The Audit, Standards and Statutory Accounts Committee met to review the progress of the 2025-26 external audit and consider the draft audit results report. The committee also received an update on internal audit activities and a report on fraud investigation and prevention efforts.

External Audit Update and 2025-26 Accounts

The committee received an update on the 2025-26 external audit from EY, who are progressing in line with their audit plan. EY anticipates issuing a qualified except for opinion on the Council's accounts for 2025-26, which represents a further step towards restoring full assurance. A move to an unqualified opinion is anticipated for 2026-27. The external auditors highlighted that this trajectory places the Council in a strong position relative to many other local authorities facing similar challenges.

Key points discussed regarding the audit included:

• Materiality: Planning materiality for the audit increased to £12.6 million, with performance materiality set at £6.3 million. The threshold for reporting misstatements rose to £0.6 million.
• Significant Risks: EY reported no significant findings related to key audit risks, including fraud risks such as management override of controls and the inappropriate capitalisation of revenue expenditure. A factual misstatement of £1.5 million was identified regarding the over-capitalisation of an asset, but EY concluded it would not affect the audit opinion.
• Value for Money (VfM): EY's review of the Council's Value for Money arrangements indicated no significant weaknesses in governance or economy, efficiency, and effectiveness. However, work on financial sustainability is ongoing, with a particular focus on the updated Medium-Term Financial Strategy (MTFS) and the Council's transformation programme. EY noted a risk around financial sustainability due to projected funding reductions and rising service pressures.
• Rebuilding Assurance: The audit is progressing through the Ministry of Housing, Communities and Local Government's audit recovery programme. The Council is expected to achieve an unqualified opinion by 2026-27.
• Audit Differences: One corrected misstatement of £5.9 million was identified regarding grant income being recognised twice. One uncorrected misstatement of £1.5 million related to the over-capitalisation of an asset was noted, with EY concluding it would not affect the audit opinion.
• Fees: The scale fee for 2025-26 was £316,855, with EY expecting to charge additional fees for extra work. The Council has received £74,692 from the 'Build Back Grant' and anticipates £20,000 from the 'Backlog Grant'.

The committee approved delegated authority for the Chair to sign the 2025-26 accounts and the letter of representation upon completion of the audit.

Internal Audit Update

Andrew Hamilton, Assistant Director of the South West London Audit Partnership (SWLAP), presented an update on internal audit progress as of 30 September 2026.

Key points from the update included:

• Progress Against Plan: 28 reviews (51%) were completed or in progress against a plan of 55 reviews. This is behind the target for the first six months, attributed to staffing vacancies and the scheduling of audits in quarters three and four. An additional contractor has been engaged to boost capacity.
• Significant Control Weaknesses: No audits had received a Limited Assurance or No Assurance opinion. However, one audit on the Transformation Programme Governance resulted in a Reasonable Assurance opinion with one Priority 1 recommendation concerning member oversight. This recommendation was deemed implemented following a report to the Finance, Policy and Resources Committee.
• Overdue Priority 1 Recommendations: Two Priority 1 recommendations remain overdue, both relating to the Use of Fleet Vehicles. One concerns the development of a comprehensive Fleet Management Policy, with consultation scheduled with Trade Unions. The other relates to driver agreements, with an electronic sign-off process to be implemented by December 2026.
• Building Control: A finding regarding overdue mandatory three-month inspections of inactive sites was noted, with management working to clear backlogs and embed new processes.

The committee noted the progress against the internal audit plan.

Fraud Update

Kevin Holland, Assistant Director of Fraud, Risk & Insurance, provided an update on the work of the South West London Fraud Partnership (SWLFP).

Key points from the update included:

• Fraud Risk Threat: The fraud risk remains significant, with an increasing threat from AI-assisted fraud and identity fraud. Common risks include housing and tenancy fraud, council tax and benefits fraud, procurement fraud, grant fraud, adult social care fraud, payroll fraud, permit fraud, cyber-enabled fraud, and insider fraud.
• Performance: The SWLFP is forecasting 95.2% completion of its fraud plan for 2026/27. To date, 141 fraud cases have been worked on, with 35 closed with sanctions. Overpayments and notional savings identified or prevented amount to £651,287 for 2026/27.
• Housing Fraud: Efforts are underway to identify and address housing fraud, including illegal subletting and misuse of temporary accommodation. Verification visits are being conducted, and 3 placements have been cancelled due to validity issues.
• Prevention and Detection: The SWLFP is focusing on data analytics, data cleansing, and leveraging the London Fraud Hub. They are also exploring the use of AI for fraud detection and prevention. Mandatory online fraud awareness training is being updated.
• RIPA: The Council has made two non-RIPA applications for covert surveillance related to Blue Badge misuse. The Investigatory Powers Commissioner's Office (IPCO) report concluded that ongoing compliance with RIPA 2000 and the Investigatory Powers Act 2016 will be maintained.
• Transparency Code: Data on fraud investigation activity, including the number of employees undertaking investigations, fraud cases investigated, and amounts spent, is being published in line with the Local Government Transparency Code.

The committee noted the fraud progress report.

Committee Work Programme

The committee reviewed its work programme for the upcoming year. A discussion took place regarding the scheduling of future meetings, with a preference expressed to revert the February meeting back to a Standards meeting rather than an audit update. This would allow for more focused discussion on standards and governance matters. The Chair and Vice-Chair indicated a desire for earlier access to reports to facilitate more proactive engagement. The committee agreed to discuss the work programme further offline.

The meeting was confirmed as held and decisions were made.