No apologies were received.

Any member of the Council who has a disclosable pecuniary interest in a matter to be considered at the meeting is reminded to disclose the interest to the meeting and to leave the Chamber while any discussion or vote on the matter takes place.

Members are also reminded that if they have any other significant interest in a matter to be considered at the meeting, which they feel should be declared in the public interest, such interests should be declared to the meeting. In such circumstances Members should consider whether their continued participation, in the matter relating to the interest, would be reasonable in the circumstances, particularly if the interest may give rise to a perception of a conflict of interests, or whether they should leave the Chamber while any discussion or vote on the matter takes place.

A declaration of interest was received from Liz Murrall, Co-Optee, who declared that she had been appointed to the board of Public Sector Audit Appointments Limited.

The Chair did not deem this to be a disqualifying interest.

The minutes of the following meetings are submitted for confirmation:

(i)            10 February 2025

(ii)           17 March 2025

The minutes of the meeting held on 10 February 2025 were confirmed as a correct record.

The minutes of the meeting held on 17 March 2025 were also confirmed as a correct record.

Paul Jacklin, External Auditor at Grant Thornton LLP, presented to the Committee and explained how the Council would be audited. Risks that would be examined would include management override, valuation of land and buildings, investment properties and pensions assets. In addition to this, the external audit would examine the change of financial system from SAP, overseen by Hampshire County Council, to Oracle.

The Committee also heard that materiality had been set at £16.3 million which was based on 1.9% of the Council’s gross cost of services expenditure in 2023/24.

However, the Committee was cautioned that this was the figure determined at the planning stage and may change as the external audit progresses.

The Council’s pension fund would be audited by a different team and materiality would be £22.5 million. A separate materiality would be determined for the pension fund accounts as the amount, when including assets, is less than £22.5 million but the liabilities are considerable and thus it would be audited.

The Chair invited the Committee to comment and ask questions on the report. Members of the Committee individually:

1.    Questioned Grant Thornton’s claim that it has obtained 100% from the Financial Reporting Authority (FRC) Audit Quality Inspection and Supervision Inspection. It was noted that Grant Thornton audited 20 Public Interest Enterprises (PIEs) whereas BDO, which scored 40%, audited 217 PIEs. Concern was expressed that the use of percentages could be misleading.

2.    Sought clarification on how Grant Thornton LLP determined estimates and valuations and the impact this can have on the audit.

3.    Noted that the audit fee for the 2024/25 audit would be £427,772 which was higher compared to the 2023/24 audit. However, a full breakdown had not been provided.

4.    Drew attention to the materiality amount and asked how this would affect the audit especially in relation to work undertaken. Attention was also drawn to the report’s reference to ‘performance materiality’ of 70%. The Committee felt this was not clearly defined and questioned why performance materiality would be considered when auditing the Council’s accounts, but not when auditing the Council’s pension fund.

5.    Discussed the Housing Revenue Account (HRA), the challenges that it faced and how the audit would apply.

6.    Examined the audit strategy relating to Oracle, noting that Grant Thornton would limit its audit to the transfer of data from the old system to the new. It was observed that the external audit would not include the testing of the Oracle system itself, which raised concern that issues with Oracle may not be detected.

7.    Highlighted that Grant Thornton will, as part of its own audit, include audits by third parties. The Committee questioned how Grant Thornton  will be able to confirm that third party audits have been conducted correctly and the conclusions appropriate to the Council.

8.    Noted that Grant Thornton’s report was not easily accessible; attention was drawn to the font size which made reading difficult and the considerable use of colour was not necessary.

9.    Expressed concern that the Council intended  ...  view the full minutes text for item 4.

The Head of Financial Reporting and Controls and the representative of Grant Thornton LLP provided a summary of the report, and the questionnaire used. The Chair invited the Committee to comment and ask questions on the report. Members of the Committee individually:

1. Questioned the large reduction in fraud outcomes for 2024/25 and sought clarification on whether this was due to lower detection levels or a genuine decline. The Committee also noted that it would be good practice to inform the Chair of any major fraud where it is detected.

2. Noted that the Council operated a whistleblowing line called ‘Safe Call’ and asked how reports were processed and when the Committee would be informed.

The Committee heard that:

1. The Cabinet Office carries out a National Fraud Initiative (NFI) every two years, which involved matching records of government agencies and local authorities. The NFI was not carried out this year which explained the decline in fraud detection levels. It was also clarified that the Chair of the Committee would be notified of serious fraud.

2.  Calls relating to whistleblowing via ‘Safe Call’ are referred to Andy Hyatt, Triborough Head of Fraud and the Director of Audit, Fraud, Risk and Insurance. The Committee receives a report every six months on fraud and whistleblowing, and this includes allegations made via the ‘Safe Call’ line.

The Chair concluded the discussion by thanking participants for their contributions and summarised the issues raised.

The Chief Executive, the Director of Audit, Fraud, Risk and Insurance and the Director of Grenfell Legacy and Corporate Strategy presented to the Committee. The Committee was giving an overview of the risks and the following where highlighted:

1. The Council was awaiting the Government’s plans regarding communication to, and support for, local residents, given the impending demolition of Grenfell Tower. The Council was also waiting to hear from the NHS.

2. Funding for the Notting Hill Carnival to make sure that it is safe.

3. The regulatory requirements on the Council and ensuring that there is full compliance.

4. The rising cost of supporting children with complex needs.

The Committee also heard about how the risk register related to the Council’s broader commitments, including the Council Plan Action Plan, the Savings and Transformation programme and the Council’s commitments in response to the Grenfell Tower Inquiry Report.

The Chair invited the Committee to comment and ask questions about the report. Members of the Committee individually:

1. Discussed how the Council would manage the funding challenges that it faced in the future. The Committee sought clarification on how often the risk register will need to be reviewed considering the increasing uncertainty.

2. Questioned the annual timeframe relating to reviewing cyber risks, noting that there had been 4,817 phishing attacks on Council email addresses, and suggested reviews should be more frequent. The Committee expressed concern that the designation of cybersecurity as high risk suggested that the Council was vulnerable.

3. Drew attention to the risk relating to the Council’s ability to deal with a major incident, questioning the inclusion of a caveat relating to the Council’s capacity being outstripped, which could be interpreted as the Council seeking to prepare justification for any failure.

4. Sought clarification on how residents were factored into the risks outlined in the register recalling that the Council’s risk management failed to protect the residents of Grenfell Tower. There was discussion on when a risk was considered to have come to fruition and how this was defined in the risk register.

5. Discussed safety at the Notting Hill Carnival, drawing attention to media reporting on the issue and the incidents that occurred at the Carnival last year.

6. Questioned the delivery model for the refurbishment of the Lancaster West Estate which would be undertaken by a company established to carry out the refurbishment, noting that it would not report its accounts until April 2026.

The Committee heard that:

1. The Council was facing a financial gap of circa £20 million in 2026/27 and to address this the Council had drawn up and was enacting a savings and transformation programme. The Government had recently published proposals for a revised funding formula which would determine how much funding councils would receive. The proposal would most likely result in councils that levy a council tax that is less than the national average, receiving less funding from central government.  It was disclosed that the Royal Borough of Kensington and Chelsea’s Council Tax was less than the national average, however, it was emphasised  ...  view the full minutes text for item 6.

The Chair introduced the Draft Report explaining that it had been expanded on from the previous year. The report would be presented to July 2025 meeting of full council.

RESOLVED-

That the Committee approve the Annual Report of the Chairman of the Audit and Transparency Committee.

The Committee noted the forward plan and action tracker.