The Audit and Risk Committee of Lewisham Council met on Tuesday, 11 November 2025, to review external audit findings, internal audit progress, anti-fraud efforts, and the corporate risk register. Key decisions included noting the external audit update reports for the main accounts and pension fund, approving the internal audit plan for 2025/26, and noting the annual report from the Anti-Fraud and Corruption Team and the update on the Corporate Risk Register.

External Audit Update

The committee received an update on the external audit for the 2024/25 financial year from KPMG. Auditors expressed confidence in issuing clean, unqualified opinions for both the council's main accounts and the pension fund, significantly ahead of the statutory deadline. A notable adjustment discussed was a prior year restatement concerning the funding of the Building for Lewisham programme. This involved reclassifying approximately £40 million, initially recorded as a revenue contribution to capital outlays, to internal borrowing. This adjustment has a positive impact on the Housing Revenue Account (HRA) reserves.

KPMG also presented their Value for Money (VFM) conclusions, noting improvements in the financial sustainability of the HRA and governance over housing stock condition. While acknowledging ongoing challenges and difficult decisions, the auditors found no significant weaknesses to report in their VFM conclusion for 2024/25.

A recommendation was made to formalise the plan for addressing issues identified in a special investigation, ensuring it maps to the Ombudsman's report and other council actions. The auditors also confirmed their independence, with only permissible non-audit work undertaken for the authority, specifically grant work on housing benefits.

A key concern raised during the audit was the completeness of leases, with nine out of fifteen selected leases not being found. While alternative procedures were used to ensure accounting completeness, the council acknowledged the need to continue efforts to locate or re-establish these lease documents.

The audit of the pension fund financial statements also yielded positive results, with auditors anticipating clean opinions. A minor overstatement of asset values in Level 3 pooled investment funds was noted, but this was considered a small, one-off error due to timing.

Internal Audit Update

The committee reviewed the progress of the Internal Audit Plan for 2025/26. As of 31 October 2025, six internal audit engagements had been completed, all receiving generally positive outcomes with substantial or satisfactory assurance ratings. One advisory engagement focused on responsive repairs contractors for housing, resulting in 18 agreed recommendations for improvement.

The report detailed progress against the overall audit plan, with a significant number of audits either in progress or in the planning stages. The team has been working to engage with Directorate Management Teams to agree on audit start dates, ensuring a clear work plan for the remainder of the year.

Regarding resourcing, the team has seen one departure and one new graduate placement. While current in-house resources are deemed sufficient for the majority of the plan, external contractors are being procured for Risk Management and Health and Safety audits due to a potential conflict of interest. There is also a possibility of engaging external support for housing services.

The report highlighted that 20% of the 73 open management actions were overdue, with a continued improvement noted in the number of outstanding actions. A new process for following up on recommendations has been implemented, including quarterly reporting to Directorate Management Teams and escalation of high-priority overdue actions to the Corporate Assurance Board.

A self-assessment against Global Internal Audit Standards has been completed, identifying areas for improvement, including the finalisation of an Internal Audit Strategy and the development of Key Performance Indicators (KPIs).

The committee approved the proposed 2025/26 Internal Audit Plan.

Anti-Fraud and Corruption Team Annual Report

The Anti-Fraud and Corruption Team presented their annual report for the year ending March 2025. The team has seen an increase in results, partly attributed to the effectiveness of two apprentices. A new case management system has been implemented, and a successful e-learning package on fraud awareness has been completed by 415 staff, with plans for it to become mandatory training.

During the year, the team investigated 30 staff cases, leading to various disciplinary actions, including three dismissals, one contract termination, and two resignations. Ten employees were investigated for working elsewhere without permission, but were cleared to continue secondary employment due to no conflicts of interest.

The team also handled allegations of misuse of disabled parking badges, resulting in 18 successful cases, including one prosecution that led to fines and prosecution costs of £1,479. The report noted this as a positive step, indicating a greater appreciation from the courts for the impact of blue badge fraud.

Pre-employment checks for the council's recruitment team have also seen a slight increase in those requiring further action, primarily due to a higher proportion of individuals having business interests. Housing fraud investigations for Lewisham Council and its partners resulted in the recovery of 10 tenancies and the cancellation of housing applications.

Corporate Risk Register Update

The committee received an update on the Corporate Risk Register, which currently lists 20 risks, with 11 rated as High. The highest risk remains a Significant Cyber Security Breach (LBL009). Since the last presentation, one risk has increased in score, and one has decreased. A new risk, Capacity constraints and/or budget pressures to Strategic Health Partners (LBL026), has been added due to anticipated cuts impacting council services. The risk register now includes historical assessment scores for the past three periods to illustrate risk movement. The risk related to core service systems not being up-to-date at year-end (LBL024) has been removed due to established processes.

The risk of an Inability to set a balanced budget (LBL010) has increased from 12 to 16, with the likelihood score rising to 4, attributed to ongoing pressures on demand-led services and the anticipated need for additional savings. The risk associated with Unpreparedness for the PSTN switch-off (LBL025) has reduced following a corporate site audit identifying only a small number of required upgrades and progress on housing upgrades and telecare device installations.

The report also detailed the combined directorate risk matrix, showing a decrease in high risks but an increase in moderate risks. Risk management efforts continue to develop, with engagement at senior management and service manager levels, and planned risk workshops. An internal audit of Enterprise Risk Management, to be conducted by an external consultant, is scheduled for completion this year to further strengthen risk maturity. The committee noted the addition of risk assessment history, which provides greater insight into risk trends.