The Audit Committee of Lincolnshire County Council met on Monday, 23 March 2026, to review a range of financial and risk management reports. Key discussions included the lessons learned from education travel, updates on the new statutory framework for member standards, and the approval of accounting policies for the 2025/26 financial year. The committee also considered the external audit strategy, reviewed financial procedures, and received annual reports on risk management and counter fraud activities.

Education Travel – Lessons Learnt

The committee received an update on education travel, noting the key actions mitigating the risk associated with this service and the lessons learned from the transformation programme. The report highlighted that while pupil numbers eligible for education transport continue to rise, particularly for Day Specials (SEND) and Further Education pupils, successful implementation of new controls has reduced the strategic risk score. Mitigations include the development of a dynamic purchasing system, regular joint meetings between Children's Services and Transport, systematic contract reviews, and the promotion of personal travel budgets. Challenges remain, however, with the demand-led nature of the service and the difficulty in controlling costs influenced by external factors like fuel prices and employment costs.

New Statutory Framework to Strengthen Standards

The committee was informed about the government's plans to introduce a new statutory framework to strengthen standards of conduct for elected members in local government. This reform follows a consultation that indicated a desire for a mandatory minimum code of conduct, the re-establishment of Standards Committees, and stronger sanctions, including suspension. The proposed legislation is anticipated to introduce a prescribed minimum code of conduct, standardise expectations, and require Principal Authorities to convene Standards Committees. New powers to sanction, including interim suspension and disqualification from office, are also likely. The council is preparing by mapping its current code against expected national requirements and planning for local adoption once a national version is published.

Statement of Accounts 2025/26 – Accounting Policies

The committee was asked to approve the Statement of Accounting Policies for the financial year ending 31 March 2026 for both Lincolnshire County Council and the Lincolnshire Pension Fund. The report detailed changes to the Code of Practice on Local Authority Accounting for 2025/26, including adaptations to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets, which introduce new revaluation processes and require indexation for tangible non-investment assets. The council plans to continue its existing practice of a rolling programme of revaluations over a five-year cycle, supplemented by annual indexation. The report also outlined the requirements of the Accounts and Audit Regulations 2015 and the proposed reporting timescales, with draft unaudited accounts due by 30 June 2026 and audited accounts by 31 January 2027.

External Audit Strategy – Lincolnshire County Council and Lincolnshire Pension Fund 2025/26

KPMG LLP presented their External Audit Risks – Early Reflections report for 2025/26 for both Lincolnshire County Council and the Lincolnshire Pension Fund. Key themes included early reflections on audit risks, materiality, the audit cycle and timetable, and fees. For Lincolnshire County Council, significant risks identified include the valuation of land and buildings and the valuation of post-retirement benefits, with management override of controls also considered a significant risk. For the Lincolnshire Pension Fund, the primary risks identified were management override of controls and the valuation of investments, particularly Level 3 investments. The proposed audit fee for Lincolnshire County Council for 2025/26 was £325,000, an increase from £316,000 in 2024/25. The proposed audit fee for the Lincolnshire Pension Fund for 2025/26 was £98,500, an increase from £94,000 in 2024/25.

Financial Procedures

The committee was invited to review and comment on updated Financial Procedures, which reflect amendments made following the Constitution review in November 2025 and incorporate current financial codes of practice, guidance, and council policies. The six Financial Procedures cover Financial Planning and Management, Risk Management and Internal Control, Accounting Records and Financial Systems, Control of Resources and Assets, Income and Expenditure, and External Arrangements. Material amendments include changes to the approval process for budget changes that increase total expenditure, even if offset by income, and the addition of a clause in External Arrangements regarding prudent investment decisions related to the Prudential Code.

Risk Management Annual Report 2025/26

The committee received the Risk Management Annual Report for 2025/26, which summarised key objectives achieved and outlined high-level plans for 2026/27. The strategy for the past year focused on increasing the quality of risk information through a strengthened quality assurance process, resulting in an increased number of risk registers meeting the criteria. A significant change was the transition from an external software solution to the internal Microsoft suite of applications for managing risk information, including the migration of the risk dashboard to Power BI. E-learning modules on risk management have been developed for all employees and risk owners. The team's development has been supported by improved process guides, productivity trackers, and national engagement. Horizon scanning continues to highlight concerns around cyber threats and economic volatility. Work has begun on developing risk appetite statements aligned to each risk category.

Risk Management Strategic Risk Register Update 03-2026

An update on the strategic risk register was presented, noting that the register now contains thirteen risks, with the addition of the Working Age Adults risk. Key updates since the previous review included the IT Infrastructure risk achieving Substantial Assurance due to the successful implementation and testing of a secondary data centre, leading to its de-escalation to the directorate level risk register. The Budget risk direction of travel is improving due to increased certainty in future funding, although it remains dependent on the realisation of identified savings. The Working Age Adults risk has moved to Adequate Assurance following the implementation of controls and improved financial oversight. The High Needs Block risk remains at Limited Assurance due to the government's decision to write off 90% of deficits for three years, but the remaining 10% and the requirement for councils to cover deficits until reimbursed still present a risk.

Counter Fraud Annual Report 2025/26

The committee received an overview of the progress made against the 2025/26 Counter Fraud Plan. The report highlighted a 25% increase in referrals compared to the previous year, with six progressing to investigations. Investigations covered areas such as unauthorised overtime, inflated mileage claims, falsification of documentation, conflicts of interest, and timesheet fraud. One investigation was referred to Lincolnshire Police, resulting in an adult caution and employee dismissal. Investigatory work has led to identified recoveries and savings. The report also detailed the number of whistleblowing and confidential concerns received, with referrals relating to various service areas. Proactive work included the completion of 14 counter fraud reviews, exceeding the planned 12, and ongoing data analysis of procurement cards and expense claims. The team also participated in the National Fraud Initiative, identifying significant savings and errors.

Counter Fraud Annual Plan 2026/27

The committee was presented with the proposed Counter Fraud Plan for 2026/27. The plan aligns with the government's Fighting Fraud and Corruption Locally strategy and the Public Sector Fraud Authority's guidance. Key areas of focus include collaboration with internal and external partners, a communication plan to reinforce the zero-tolerance message, and expanded counter fraud control reviews covering whole service areas. The plan also introduces tailored education sessions for service areas based on review findings. The counter fraud team will continue to work with internal audit to deliver integrated reviews, aiming to reduce disruption to service delivery.

Annual Audit Committee Report for 2025

The committee reviewed its Annual Audit Committee Report for 2025, which summarised the committee's effectiveness, attendance, and interactions throughout the year. The report noted a change in committee members following the May 2025 local elections, with the new committee actively engaging and asking probing questions. Training sessions were provided on topics such as Global Internal Audit Standards, counter fraud, risk management, and financial accounts. The report highlighted the committee's oversight of governance, risk, and control frameworks, internal audit, external audit, and counter fraud assurance. The Head of Internal Audit's opinion for 2024/25 stated that governance, risk management, and management control frameworks were adequate, with internal controls operating effectively. The committee also reviewed updates on the CIPFA FM Code review and IFRS 16. Development areas for 2026 include further training on council finances and a reflection session to review performance.

Internal Audit Progress Report 2 of 2

The committee received details of the internal audit work completed between September 2025 and March 2026, in line with the annual internal audit plan. The report indicated that 95% of the agreed plan had been delivered, with two additional advisory assignments undertaken. The Head of Internal Audit's opinion for 2025/26 is expected to be informed by this work programme. The report detailed the status of live audit reviews, draft reports awaiting management responses, and executive summaries from finalised reports. Several audits, including HR Policy Implementation & Impact, LCC Wholly Owned Companies Governance & Financial Management, and School Financial Monitoring & Support, received a Limited assurance rating. The report also highlighted the development of a new IT solution for tracking management actions to improve transparency and reporting.

Internal Audit Plan for 2026/2027

The committee was presented with the proposed Internal Audit Plan for 2026/2027, which has been developed considering key risks and priorities. The plan remains agile to respond to changing risks and priorities. The Head of Audit has deemed the work programme sufficient to inform the Head of Audit's Annual Opinion for 2026/2027. The plan includes reviews of HR Restructure Efficiency, Health & Safety Statutory Obligations, Procurement Act Compliance, and various financial and operational areas across directorates. The internal audit team has been adequately resourced to deliver the plan, with ongoing development and training for staff. The report noted that the internal audit service achieved Fully Conform status in its external quality assessment in February 2022, with the next assessment due in 2027.

Audit Committee Work Programme

The committee reviewed its work programme for the upcoming period, which includes core assurance activities aligned with its terms of reference and best practice. Items scheduled for future meetings include a Combined Risk Report, providing a comprehensive review of strategic risks, and updates on the progress of various audit reviews. The work plan aims to ensure the committee effectively delivers its responsibilities and maintains oversight of the council's governance, risk, and control environment.