The Aberdeenshire Council Audit Committee met on Thursday, 2 July 2026, to review a range of internal audit reports, the annual governance statement, and the unaudited annual accounts. Key discussions included the governance and operational effectiveness of children's homes, the Aberdeenshire Integration Joint Board's governance, care home governance, voluntary severance processes, museum operations, and the implementation of the Council's Place Strategy. The committee also reviewed the Annual Governance Statement for 2025/26 and the unaudited annual accounts for the council and its charitable trusts.

Internal Audit Reports

The committee reviewed several internal audit reports, each assessing different areas of council operations.

Children's Home Governance (Internal Audit Report 2619)

An audit of children's home governance found that while the overall governance and operational arrangements were functioning effectively, providing reasonable assurance, there were areas for improvement. These included outdated policies and procedures, inconsistent monitoring of mandatory training, and gaps in child plan reviews and medication control. The report also highlighted issues with young people's expenses, payroll accuracy regarding rest breaks, and purchase card usage, with several instances of transactions contrary to council guidance. A significant concern was raised regarding purchase card use, with numerous exceptions noted, including holiday and travel expenses funded by the Frank Anderson Fund without full approval. Management accepted the findings and committed to implementing actions to address these issues, emphasising their commitment to ensuring children are cared for safely and that their care replicates that of children living at home.

Aberdeenshire Integration Joint Board (IJB) Governance and Controls (Internal Audit Report 2621)

This audit provided reasonable assurance over the IJB's governance and control framework, identifying moderate net risk. While the HSCP's Governance Handbook was found to be comprehensive, areas for improvement included the governance framework itself, with financial regulations not formally reviewed and inconsistencies in risk management processes. Performance reporting lacked detail on targets and projections, and financial management highlighted a lack of reserves and a formal reserves policy. Budget monitoring, while improved, still showed variations in reporting and a lack of clear corrective actions. Asset and resource management lacked a formal strategy, and information governance assurance was not regularly provided to the IJB. Management acknowledged the findings, noting that 2025/26 was a year of stabilisation with a focus on financial grip and control, and committed to further strengthening integration of finance and operational management.

Care Home Governance (Internal Audit Report 2626)

The audit of care home governance provided reasonable assurance, with moderate net risk. Plans for improved oversight and sustainable service delivery were underway but required focused intervention. Areas for enhancement included strategic planning, with the current plan remaining high-level and lacking service-specific detail. The structure and risk management of the area-based management approach presented risks of inconsistency, and a distinct leadership structure for care homes was absent. Resource and performance management showed that while managers had access to data, reporting largely explained variances rather than assuring risks were addressed, and standalone budget monitoring at a care home group level was absent. Management accepted the findings and committed to progressing further improvements, integrating them into existing plans and the wider transformation programme.

Voluntary Severance (Internal Audit Report 2625)

An audit of the voluntary severance (VS) scheme found reasonable assurance, with moderate net risk. However, it identified a lack of a separate, Council-approved VS policy, with discretion in redundancy payments and early pension benefits not clearly documented. Application and review processes showed variations in supporting documentation and insufficient detail to justify selection criteria, with some applications approved despite exceeding payback periods without clear justification. Calculations using spreadsheets lacked documentation on assumptions and testing, and data accuracy issues were noted, with discrepancies between information presented to panels and the master toolkit. Processing involved manual steps with potential for errors, and invoices for pension fund costs could vary significantly. Post-process management of vacant posts and budget monitoring lacked formal reporting to Council/Committee. Recommendations included improving documentation of rules, requirements, and assumptions, and enhancing transparency in reporting. Management accepted the findings and committed to reviewing areas of the application and review process to enhance recording and strengthen the audit trail.

Museums (Internal Audit Report 2627)

This audit identified significant weaknesses, resulting in a Major risk rating and Limited assurance over museum operations, particularly in the management of heritage assets. Key issues included outdated strategic plans and policies, significant gaps in collections documentation and control, with only 10% of the estimated collection recorded on the asset database. There were also weaknesses in acquisitions governance and no disposals or reviews of collections in the last three years. Loan management showed non-compliance with policies, including expired agreements, missing insurance, and unauthorised approvals. Preservation monitoring was not consistently reviewed, and emergency plans were outdated or untested. Management acknowledged the findings, noting the service's ongoing period of change and recovery, and committed to addressing documentation, assurance trails, and operational controls, particularly in preparation for re-accreditation.

Place Strategy Implementation (Internal Audit Report 2622)

The audit of the Place Strategy implementation found a Major risk rating and Limited assurance. While the strategy itself was comprehensive, its implementation was not progressing at the required pace or consistency. Weaknesses were identified in governance, project management, and oversight arrangements, with outdated aspects of the strategy and a lack of a SMART plan for prioritisation. Training on the Place Strategy was not consistently accessible, and service operational plans showed inconsistent detail regarding place considerations. Critically, Place Plan development had missed original deadlines, with only one of eight planned Place plans established by the target date. Budget setting and monitoring had not yet integrated Place and Wellbeing Assessments or local plans, risking poor prioritisation of resources. Management accepted the assessment and committed to reviewing the end-to-end implementation approach, including refreshing governance, establishing a prioritised delivery plan, and strengthening performance management and reporting.

Annual Governance Statement 2025/26

The committee considered the draft Annual Governance Statement (AGS) for 2025/26. The statement affirmed that Aberdeenshire Council has maintained a robust governance framework aligned with the CIPFA/SOLACE Delivering Good Governance in Local Government Framework. It highlighted that all Code of Governance self-assessment actions identified since 2022 have been completed, with a further self-assessment planned for 2026/27. The statement noted strengths in risk and resilience planning, Best Value, and partnership governance, with substantial progress made on prior-year governance actions. The Chief Internal Auditor provided assurance that the Council had an adequate and effective framework for Governance, Risk Management, and Control during the year. The committee was recommended to approve the draft AGS.

Unaudited Annual Accounts 2025/26

The committee reviewed the unaudited Annual Accounts for Aberdeenshire Council and its Charitable Trusts for the year ended 31 March 2026. The accounts were prepared in accordance with the Code of Practice on Local Authority Accounting and comply with relevant legislation. A note was made regarding a delay in system upgrades for asset indexation, which would be addressed in July 2026 and reconciled in the final accounts. The external auditors, Grant Thornton, will audit the accounts over the coming months. The committee was informed of upcoming sessions in September 2026 for all councillors to understand the Annual Accounts, with the audited accounts to be presented to Full Council in November 2026.

Scrutiny Referral to Education and Children's Services Committee – Secure Care

The committee was informed that the Education and Children's Services Committee had reviewed the Internal Audit Report 2613 – Secure Care Provision. Following a Stage 1 Scrutiny Report, the Education and Children's Services Committee concluded it was assured and that a Stage 2 workshop was not required. The Head of Children's Services was instructed to report this decision to the Audit Committee. The audit had identified concerns in areas such as payment controls, written procedures, training, procurement, and implementation and review. Children's Services had accepted all recommendations and committed to actions to address deficiencies, with only one action remaining to be completed by the end of June 2026.