Wandsworth Council’s Audit Committee last night heard how the council is operating beyond its own stated tolerance for financial risk, does not include housing or building safety among its principal corporate risks despite repeated regulatory concerns, and has yet to confirm that the failings which enabled a £39,000 internal fraud have been fully addressed.
Taking place for the first time since May’s local elections, Thursday’s committee also considered the authority’s annual governance arrangements, internal audit findings and external audit reports.
Finances remain above the council’s own risk threshold
Among the most significant concerns was the council’s newly revised Corporate Risk Register, which identifies “Financial Stability” as carrying a residual risk score of 12 after mitigation measures have been implemented. This remains above the council’s risk appetite of 10.
The register itself identifies the possibility of a Section 114 notice – effectively declaring bankruptcy – as a potential consequence if financial pressures continue to grow.
Under the authority’s risk management framework, any risk exceeding the approved level should also be accompanied by a formally signed Risk Acceptance certificate.
Questioned by councillors, Kevin Holland, Assistant Director for Fraud, Risk and Insurance, said the recording of such exceptions formed part of a new digital risk management platform currently being introduced across the authority.
He did not identify whether a Risk Acceptance certificate had been completed for Financial Stability or for the five other corporate risks that also remain above the council’s tolerance level.
That concern was echoed by the council’s external auditor, Ernst & Young, which told the committee it had reviewed what it described as a “worsening outlook” within Wandsworth’s Medium Term Financial Strategy. Adrian Bamber, Audit Partner at EY, said the firm would revisit the issue once the council publishes its updated financial strategy in September, with further reporting expected later this year.
Housing absent from the council’s principal risk register
Neither housing management nor building safety appeared within the thirteen risks identified in the new Corporate Risk Register.
The omission is notable given the Regulator of Social Housing concluded in February 2025 that Wandsworth had committed serious failings. The draft Annual Governance Statement presented to the committee also identifies Housing Governance and Regulatory Compliance as one of only seven significant governance issues facing the authority during 2026-27.
Internal governance papers show that the housing department has repeatedly warned of governance concerns, most recently highlighting failings in the oversight, financial controls and service standards of certain Resident Management Organisations before an internal audit uncovered comparable shortcomings at Battersea Fields.
Ernst & Young’s own assessment describes the housing issues as representing “a significant weakness in the Council’s governance arrangements”, yet classified the finding as only a “Low” priority. Although this inconsistency was mentioned in briefing material prepared ahead of the meeting, it passed without discussion.
Fire safety concerns remain under scrutiny at Battersea Fields
One of the most critical internal audit reports presented to councillors concerned Battersea Fields Resident Management Organisation, which manages more than 500 council homes.
Auditors awarded the service a “Limited” assurance rating – the second lowest available – after identifying significant weaknesses in operational controls and regulatory compliance.
Among the most serious findings were 21 overdue Fire Risk Assessment actions, some outstanding for several months, alongside failures to meet emergency repair targets. Auditors found that three of five emergency repairs examined had taken as long as seven days to complete, despite a contractual target requiring completion within 24 hours.
The committee received no update on whether the overdue fire safety actions had since been completed. No timetable for their closure was presented.
Risk management overhaul falls months behind schedule
The committee also heard that a programme intended to modernise the council’s corporate risk management arrangements has fallen significantly behind schedule.
When members approved the review in July last year, officers believed that the new framework would be in place by November 2025. Instead, the digital platform supporting the new system was not rolled out until June this year, while the accompanying Risk Management Strategy is now expected to be adopted in September.
The delay has also left questions over how emerging risks were monitored during the transition.
Routine assurance mechanisms, including scheduled returns from departmental managers, were suspended while the new arrangements were being developed.
Cllr Hampton pressed officers on whether the new system could be trusted, asking: “How do we know this digital transformation will actually enhance the offering and not deteriorate from current practice?”
Mr Holland conceded: “A difficult question to answer until it’s tried.” He added that, under the previous approach, “returns were collated manually, leaving little time for support/challenge.”
Asked what alternative safeguards had operated during that period, Mr Holland told members that the new digital platform would ultimately improve visibility of risk across the organisation.
He did not identify a specific interim process through which new or escalating risks had been formally monitored while the previous arrangements remained suspended.
An unresolved fraud still awaiting closure
Questions also remained over whether the council has fully addressed the failures behind an internal overtime fraud case which cost taxpayers more than £39,000.
A report presented to the committee in March 2025 revealed that three members of staff had been dismissed after exploiting weaknesses in the authority’s overtime claims process to claim payment for hours they had not worked. At the time, officers acknowledged that the underlying control failure had not been resolved and said Human Resources had been tasked with strengthening the system.
Successive updates presented in July and November 2025, and again in March this year, referred to fraud-related recommendations being monitored through the council’s internal audit action plan.
Serious school audit findings remain undisclosed
The committee also received an overview of internal audit work identifying twelve Priority 1 findings – the most serious category of audit recommendation – across the authority.
Ten of those findings are explained within the published papers. Two, however, remain unexplained.
Hillbrook Primary School and Honeywell Infant School are each recorded as having received a Priority 1 finding, yet the appendix published with the committee papers provides only the number of findings, without describing their nature or the risks identified by auditors.
No explanation was sought during the meeting, leaving councillors without any indication of the issues that prompted the highest level of audit concern.
Building Control audit reveals years of missed income
A separate internal audit identified significant weaknesses within the council’s Building Control service, including a failure to recover fees for emergency inspections over a substantial period.
Auditors found that around 100 out-of-hours inspections of dangerous structures had gone unbilled each year for approximately five years, despite charges of up to £945 being available for each visit. The report also found that 1,012 routine site inspections had exceeded their statutory inspection intervals, with officers attributing the delays to staffing shortages.
While the findings point to a potentially significant loss of income, the audit did not estimate the total financial impact, nor did it set out how the council intends to recover any unpaid charges.
Raising the wider question of income collection during the meeting, Tanya Kalaji, Audit Manager, told members: “On revenue, one of our priorities across all audits is ensuring revenue is collected where it should be – this comes through in our findings on fees and income.”
External audit costs rise sharply
Councillors also questioned the steep increase in the fees paid to the council’s external auditor.
The annual scale fee paid to Ernst & Young has risen from £86,559 in 2021-22 to £363,148 this year: an increase of more than 320 per cent.
Responding to questions from Councillors Anna Marie Critchard and Claire Davies, Adrian Bamber, Audit Partner at EY, said the increase reflected wider changes across the local government audit market rather than any issue specific to Wandsworth. He explained that the Public Sector Audit Appointments body (PSAA), which procures local authority audits nationally, had reset fees following widespread delays.
Cllr Critchard put the scale of the rise to officers directly, explaining, “the scale fee has gone up 320% on what it had been, and EY are likely to ask for additional fees this year and next. What are the additional fees likely to be, and what steps are being taken to manage audit costs?”
Mr Bamber replied, detailing how “our starting assumption is no additional fees, provided we receive working papers that satisfy our requirements first time.”
Catherine Burston, the council’s Director of Financial Management, said officers had devoted additional resources to supporting the audit process in the hope of preventing any further costs. She told members: “It’s reassuring that the starting point is that the scale fee should be sufficient, particularly given the original fee uplift already reflects legislative changes and additional post-disclaimer work.”
Governance statement amended after committee dispute
The meeting’s most notable political disagreement centred on the wording of the draft Annual Governance Statement.
Labour councillor Stephen Worrall challenged a paragraph stating that the council’s constitutional arrangements were “fully operational”, arguing that the description did not accurately reflect the current reality, given that no political group holds overall control and the council’s overview and scrutiny committees have yet to become operational. He proposed “the paragraph be removed; I won’t support the report otherwise.”
He also objected to the paragraph’s reference to an individual councillor by name. Comparatively, Cllr Hampton rebutted, saying “I believe this is factual, other than the naming of an individual councillor, which should be removed. As it’s the Executive’s report, it isn’t really for the Committee to choose otherwise.”
Following discussion involving Cllrs Worrall, Hampton, Davis and Critchard, members agreed to remove the councillor’s name and delete the disputed section of the paragraph. The amended wording will now be referred back to the council’s Monitoring Officer before the Annual Governance Statement is finalised.
EY outlines limited use of artificial intelligence
Councillors also questioned Ernst & Young about its use of artificial intelligence during the audit.
Cllr Davies opened the discussion by telling officers: “I was interested in your audit process – you don’t mention using AI tools as part of that. I want to understand the extent to which you will or won’t be using AI tools, and have that made clear and transparent to the committee, given the risks that can raise, as well as any efficiency benefits.”
Mr Bamber said AI had been used only to assist with background analysis of draft financial statements and administrative tasks, rather than making audit judgements or reaching audit opinions, telling the committee: “We’ve invested quite heavily as a firm internationally in AI — not necessarily in the audit itself, but in background tools.”
He emphasised that responsibility for the audit’s conclusions remained entirely with the audit team.
To conclude the meeting, members voted – on the Chair’s casting vote and against the opposition of Cllr Hampton – to refer the council’s risk management report to Cabinet, the Shadow Cabinet and committee chairs for further consideration.
Cllr Hampton asked for her dissent to be formally recorded, saying the referral was “outside the Committee’s remit.”
Correction: In an earlier version of this story we incorrectly identified Cllr Critchard (Lab) as the member of the Audit Committee that dissented from the decision to send the report to cabinet. It was in fact Cllr Hampton (Con) and we have corrected the story in response. We apologise for the error.
