The Governance and Audit Committee of Kent County Council met to discuss a range of issues, including the external audit plans for both the council and its pension fund, the corporate risk register, and updates on counter-fraud measures and internal audits. Councillor Michael Brown was elected as chair, and Councillor Martin Paul as vice-chair of the committee.

External Audit Plan for Kent Pension Fund

Paris Williams presented the external audit plan for the Kent Pension Fund 2024-2025, highlighting three significant risks: management override of control, and work around investments, particularly those not readily tradable, such as private equity, infrastructure, and directly held properties. The plan, agreed with management, considers materiality to be £122.1 million for assets and £35.3 million for contributions and benefits payable. Mr. Williams noted that the draft financial statements had been produced by management and published in line with statutory requirements. Councillor Paul asked about the opportunity for town councils to transfer their pensions into the county fund, and was assured that any transfers in or out would be picked up as part of the audit testing. Councillor Brody raised a question about a risk of lack of review of journals, and John, an officer, clarified that because it was a backward-looking audit, the systems and controls in place at the time would be accepted, but that going forward, they would try to design a way of avoiding that risk. The committee agreed to note the external audit plan.

Corporate Risk Register

Mark Scrivener presented the corporate risk register, giving an overview of changes and a summary of risks. He mentioned a training session for elected members on 21 July and offered a specific briefing on the corporate risk register for committee members. Councillor Sam asked for more information about the implementation of the Oracle Cloud system, to which Barry Jones, an officer, responded that the go-live date for the first few modules was 18 August, and that user acceptance testing was at an 88% success rate. Councillor Sam requested interim updates to the committee, which Mr. Jones agreed to provide. Councillor Palmer questioned the medium risk rating for fraud and error, suggesting fraud should be considered a high risk. Mr. Scrivener responded that the risk ratings took into account the controls in place, but that he would consider splitting fraud and error into separate columns. Councillor Farnley agreed to reflect that better in future reports. Councillor Palmer raised the issue of deterrents, and Ben Watts, General Counsel, assured him that prosecutions were taken from time to time. Councillor Hood raised questions about climate change impacts on council services and the sustainability of social care services, including the impact of visa restrictions and changes in employer national insurance¹. He also requested a report on peppercorn rents² and PFI arrangements. Councillor Paul raised a point about cyber security compliance for the supply chain, recommending cyber essential plus for larger suppliers. Councillor Black asked about local government reform and a timeline for addressing it as a risk. David Whittle, Director of Strategy Policy, responded that it was a complicated environment, but that it would wind its way to the corporate risk register at the appropriate time. Councillor Brady asked about the impact if controls slipped on climate change adaptation, and why the risk of adverse variance in savings and income had moved down from 25 to 16. Mr. Watts responded that many of the actions were linked to previous key decisions, and John Betts responded that the risk had reduced due to additional governance and monitoring. Councillor Palmer raised the risk to adult social services from the increase in national insurance, and Mr. Betts responded that they were working with commissioners to understand the pressures. The committee agreed to note the report.

Update on the Preparation of the Annual Governance Statement 2024-2025

Ben Watts gave a presentation on the annual governance statement, explaining its statutory basis and its importance for members of the committee. He emphasised the need for members to act in accordance with their role and to remember the vital part they play in the governance life cycle of the council. He also noted that the work of the committee was about improvement, not drama, and that it was important to consider culture, effect, and context. Mr. Watts noted that the annual governance statement was about the reality of KCC, and that the committee's role was non-political. He also noted that the operating context was always set out at the front end of the report, and that it was particularly important to recognise that operating context. He noted that the annual governance statement set out the reality of the budgetary and resource position. He noted that the annual governance statement was about avoiding failure, and about trying to make sure that lessons were learned from other authorities. He noted that the governance cycle for the organisation was the members' organisation from a political leadership perspective, and that included opposition members as well. He noted that the AGS looked at the challenges and the pressures faced in compliance with statutory duties. He noted that the three headline areas that they were working through at the moment in delivery terms for this year were living within the council's budgetary means, member governance and behaviour, and compliance with governance rules and framework. He noted that the draft AGS would come to the committee, and that they would have the opportunity to provide input on that. The committee agreed to note the update on the preparation of the annual governance statement.

Roles and Responsibilities of External Audit

Paul Dossett from Grant Thornton presented on the roles and responsibilities of external audit, emphasising the Nolan principles of public life and the best value duty. He highlighted the importance of the governance and audit committee and the role of statutory officers. He also outlined the external auditor's role in local authorities, including financial statements and value for money assessments. He detailed additional audit powers, such as dealing with local electors, statutory recommendations, and reporting to the public interest. He gave examples of statutory recommendations and public interest reports. He noted the importance of the committee having oversight on the delivery of recommendations. He noted that a lot of their reports would have the term 'those charged with governance' which referred specifically to the committee. He noted that the committee needed to be reflective of the findings of themselves, of internal audit and other findings, and offer challenge to officers, to auditors, about the reports that they bring. He noted that the committee had a duty to make sure it had oversight on the delivery of those recommendations. Councillor Paul asked about the length of time Grant Thornton had been auditors for Kent County Council, and John Ferds responded that the process was run by an independent third party called Public Sector Audit Appointments (PSAA). Councillor Brady noted that the public sector audit appointments group was another level of independence.

External Audit Plan for Kent County Council

Paul Dossett presented the final external audit plan for Kent County Council for 2024-2025, covering the audit's scope and responsibilities. He highlighted significant risks such as management override of control, revenue recognition, expenditure, asset valuation, and the pension fund net asset or liability. He also mentioned the new accounting standard IFRS 16³ and the group audit process. He noted that the council had significant financial challenges. Councillor Palmer asked about the companies that KCC had a stake in, leases, loans, and state aid rules. Mr. Watts responded that he would arrange a briefing and talk about the governance and financial arrangements, and that the performance of those companies and the asset value of those companies was a considerable net contribution to KCC on an annual basis. Councillor Horne asked about the IT audit strategy and the Oracle Cloud program, and Mr. Dossett responded that they would have a commentary on the quality of the control environment, but that their audit approach was a substantive audit approach where they did not focus and rely on controls. Councillor Hood raised a question about the disposals policy of the council, and Mr. Dossett responded that the council was not under the EFS program, but that they were concerned about the slippery slope of selling off assets for revenue purposes. Councillor Paul raised a point about cyber security compliance, and Mr. Scrivener responded that he would take that back to the ICT compliance and risk team. Councillor Black asked about local government reform, and David Whittle responded that it was live and being debated, and that there would be a form of LGR risk that would wind its way to the corporate risk register at the appropriate time. Councillor Brady asked about the impact if controls slipped on climate change adaptation, and Mr. Betts responded that the reason that they had taken a view about the risk of that reducing was the additional governance and monitoring that they had put in place for this financial year. Councillor Palmer raised the risk to adult social services from the increase in national insurance, and Mr. Betts responded that they were working with commissioners to understand the pressures. The committee agreed to note the external audit plan.

Commercial and Procurement Oversight Board Update Report

Claire Maynard presented an update on the work of the Commercial and Procurement Oversight Board, outlining its role as an informal gateway of governance. She noted that the board focuses on gold and silver contracts, based on value, risk, and complexity. She noted that the group had saved approximately £19 million. Councillor Brady welcomed the changes to the procurement act and the focus on social value and SMEs. Councillor Horne asked about contract management, and Ms. Maynard responded that they had a contract management review group, and that she was happy to bring that item to the committee as well. Councillor Brady asked about the makeup of that group, and Ms. Maynard responded that they were still working that out. The committee agreed to note the report.

Counter Fraud Annual Report

James Lannery presented the counter fraud progress report, summarising activity during the financial year 2024-2025. He noted that awareness of fraud and error risk was a key factor in mitigating this risk, and that there had been over 23 awareness sessions delivered to over 1,000 people. He noted that the impact of greater awareness had resulted in an increase in referrals being received by the team. He noted that the account fraud team had supported management within children's young persons and education following the identification by management of a number of irregularities within essential living allowance. He noted that the team had been working on a national fraud initiative, and that the public sector fraud authority along with the cabinet office were progressing with regulations that would bring social care data back into the national fraud initiative. He noted that the Kent intelligent network continued to support in the identification of fraud and error in the council tax and business rates. He noted that the counter fraud action plan for 2025-2026 included the supporting of an audit of KCC's anti-corruption controls by the European Council's group against corruption. Councillor Brady asked what percentage of the £1 million uncovered could not be recovered, and Mr. Lannery responded that they supported management in ensuring full recovery, but did not track the actual repayments. Councillor Brady asked about resources, and what was needed, and Mr. Lannery responded that he would cover that in an exempt item. Councillor Brady asked about trends in referrals, and Mr. Lannery responded that there was no rhyme or reason, but that they had seen peaks when they had done enforcement days. Councillor Martin asked about the success rate and the value of the team, and Mr. Lannery responded that they were working with management, and that their focus was on root cause. Councillor Black asked about the bus passes, and whether they were seeing a significant difference in the invoicing, and Mr. Lannery responded that he would have to have that conversation with the head of transport. The committee agreed to note the counter-fraud annual report, to note the progress of the counter-fraud action plan for 2024-2025, and to review, comment, and approve the counter-fraud action plan for 2025-2026.

Internal Audit Progress Report

Russell and Debbie Chisman presented the internal audit progress report. Mr. Chisman noted that they had successfully recruited to the trainee auditor position, and that they had now successfully recruited to the audit manager position. He noted that the implementation of agreed management actions had improved to 62% from 31%. Ms. Chisman highlighted positive assurance in treasury management and the data security and protection toolkit. She noted substantial assurance in the KCC incident response plan and the school's fiend review. She noted adequate assurance in education, alternative provision, pupil referral units, the key decision making process, and the basic needs and high needs allocation capital program. Councillor Hood asked about the lack of KPIs related to the pupil referral units, and Sarah Hammond responded that the pupil referral units did have KPIs, and that they were overseen and regulated by Ofsted. Councillor Black asked about the impact of the 45% of prior years audits still in progress on the 2526 plan, and Mr. Smith responded that there would be no impact on that. Councillor Black asked about impressed funds, and why it had taken so long to resolve, and Mr. Smith responded that there had been some complications with that one particular action, which might be better to answer outside of committee. Councillor Brady asked about the education people, and whether that was the reason why they didn't have KPIs for it, and Ms. Hammond responded that the TEP contract was set some years ago, and that they were constantly working with TEP colleagues to shift that need. The committee agreed to note the internal audit progress report for the period of January to June 2025.

Internal Audit Plan 2025-2026

Russell and Debbie Chisman presented the internal audit plan for 2025-2026. Mr. Chisman noted that the plan was developed through a risk-based planning process, and that the plan coverage against the pillars were detailed on slide 6, and how the plan covers the risks of the council were detailed on slide 7 and 8. He noted that there were 101 total potential audits identified, of which 45 were deemed as a priority, and 56 were on the reserve list for consideration during the course of the year. Councillor Black asked if the 1,250 days available included the slippage of 20 audits from 24-25, and Mr. Smith responded that it was accounted for in the resource projections, and that there shouldn't be any slippage. Councillor Hood asked about the RB 36, 2026 property disposals, and whether it was going to look at value for money, and Mr. Smith responded that they could incorporate that within that particular scope. The committee agreed the proposed rolling internal audit plan for 2025-26, subject to emerging issues and assurance requirements.

Treasury Update Report

John Betts presented the treasury update report, noting that at 31 March 2025 the Council had borrowings of £732.56m and investments of £475.01m. He noted that the Council had reduced its external borrowings by £39 million during the course of the year, and that they had made an early repayment of £10 million. He noted that the Council continued to manage its interest rate costs by borrowing from internal resources, as well as earning interest in its cash balances. He noted that the Council had met all its prudential indicators. Councillor Brady asked about the opinion on money market funds and investment funds, and Mr. Betts responded that he would refer that to Mr. Betts, and Mr. Betts responded that they would be briefing the portfolio holder on the treasury management investments and strategy going forward. The committee endorsed the report and recommended that it is submitted to County Council.

Exempt Items

Councillor Palmer raised a point of order that agenda item 17 should not be an exempt item, but after discussion, the committee agreed to proceed to a motion for exempt business that would cover both items 17 and 18.