The Audit and Governance Committee meeting on 13 October 2025 reviewed the progress of external and internal audits, discussed the council's risk register, and examined treasury management reports. Key decisions included noting the progress of audits, approving the internal audit charter, and accepting the quarterly risk and treasury reports.

External Auditors Progress Report

Rosie Kelly, Engagement Manager from KPMG, provided a verbal update on the external audit for the year ended 31 March 2025. The audit is approximately 85% complete and is on track for completion documents to be presented to the November Audit Committee. A significant risk identified was the valuation of land and buildings, primarily due to issues with the timeliness and quality of responses from the internal valuer. However, close collaboration with the finance team is expected to resolve these issues. A remaining outstanding item is the audit of the related parties disclosure note, as six councillors had not yet returned their declarations of interest, preventing the confirmation of the note's completeness. Democratic Services and group leaders were actively pursuing these outstanding declarations. Councillor Stephen Woodliffe inquired about an updated valuation for Corporation Farm, an investment property, and was informed that a new valuation certificate would have been provided, though no significant changes were noted in the audit's risk assessment for this year.

Internal Audit Progress Report

Claire Goodenough, Head of Internal Audit and Risk, presented the internal audit progress report, indicating that approximately 60% of the audit plan had been completed. Feedback from three finalised audits was shared, including a poor rating for the cyber audit due to delays in report issuance. The co-sourced partner for this audit has since amended their practices. A notable issue was the issuance of an insufficient control report, which is unusual and arose because no controls were in place for the audit team to test, despite an agreed scope. An assurance audit is scheduled for later in the year to assess improvements. Management actions arising from audit findings are being followed up, with most already closed.

A significant discussion arose regarding the insufficient control report. Councillor Anne Dorrian expressed concern about the lack of a Section 151 Officer present to answer questions and highlighted the unusual nature of such a report. Claire Goodenough confirmed it was the first such report she had issued in over 20 years and explained that processes were being put in place. She was unable to provide specific reasons for the lack of controls at that moment but confirmed an assurance audit would provide further evidence. Councillor Dorrian also raised concerns about information not being forthcoming from officers, impacting audit work, and requested a plan to address this. John Medler, from the Corporate Governance team, explained that feedback is progressed through the Senior Leadership Team and Corporate Governance team meetings.

Councillor Woodliffe asked for clarification on the cyber audit, and Claire Goodenough explained that the co-sourced partner had amended their practices following the feedback. The dates for the cyber audit and the insufficient controls audit were later provided: the cyber audit's fieldwork was in June 2025, with the report issued in August 2025, while the insufficient controls audit's fieldwork was in May 2025, with the report issued in July 2025.

Internal Audit Charter

The committee reviewed and approved the Internal Audit Charter, presented by Claire Goodenough. This document outlines the framework, authority, and reporting requirements for the internal audit function, aligning with professional standards from the Institute of Internal Auditors. Councillor Andy Izard proposed the adoption of the charter, with Councillor Stephen Woodliffe seconding.

BBC Q1 Risk Report

Suzanne Rolfe, Group Manager of Insights and Transformation, presented the Q1 Risk Report. The report detailed updates on risk training, including upcoming virtual sessions and the potential involvement of lead officers. The impact of Artificial Intelligence (AI) is also being considered for a future report. Key risk updates included:

• Civil Contingency Risk: Wording updated due to a new Partnership Resilience Manager. The battery storage risk is being addressed locally and regionally through the Lincolnshire Resilience Forum.
• Environment Act Risk: Updated in relation to the extension of a depot lease and the Waste Improvement Program Board.
• Business Continuity Risk: To be combined with Civil Contingency Risk.
• Health and Safety Risk: Increased to medium, with likelihood increased due to overdue audit actions. Health and safety clinics have been established to address this.
• IT Server Room Risk: A new risk identified, with a project underway to mitigate infrastructure risks from fire and data loss.
• Partnership Risk: A change related to local government reorganisation and workforce development strategy, with specific risks around staffing identified.

Councillor Anton Dani asked about financial penalties for missing government targets or bin collections, and Suzanne Rolfe stated there were no known penalties at this stage but would double-check regarding the Environment Bill. Councillor Dani also inquired about a trust issue (SELCP 02), which was described as being tolerated due to ongoing changes related to Local Government Reorganisation (LGR). Councillor Woodliffe questioned the IT server room risk, having understood the servers had been transferred, and was informed the report reflected the position as of June, with progress expected since then. Councillor James Cantwell asked about parish emergency plans, and Suzanne Rolfe committed to finding out and discussing with the Partnership Resilience Manager. Councillor Anne Dorrian enquired about the testing of mitigation effectiveness for high residual risks, and Suzanne Rolfe confirmed this was being addressed and would be detailed further. The definition and communication of risk appetite were also discussed, with plans to review this with Lincolnshire County Council experts in the next quarter. The risk register has been reviewed by auditors, not independently for completeness. Councillor Dani also raised questions about the definition of the local economy risk, net zero targets, and safeguarding, with Suzanne Rolfe providing explanations and committing to gather more information on safeguarding connections with external authorities.

Q1 Treasury Report 2025/26

Sean Howsam, Treasury Manager from PSPSL, presented the Q1 Treasury Report. The report covered the economic update, including a marginal decrease in GDP, lower earnings growth, reduced inflation, and a Bank of England base rate reduction. The council's investment strategy prioritises security, liquidity, and then yield.

A significant achievement highlighted was the repayment of the State Street loan, which had carried a high interest rate of 11.125%. This loan was repaid for a flat payment of £1.5 million, representing a saving of approximately £660,000 over the loan's lifetime compared to previous redemption quotes. The loan has been replaced with a Public Works Loan Board (PWLB) loan.

Regarding property fund investments, the overall net asset value saw a slight decrease. The M&G UK Property Fund is liquidating, with a portion of the council's investment still outstanding. The AEW fund has suspended trading due to significant redemption requests, and the council is awaiting further information on its future. The report also noted an increase in PWLB borrowing rates due to market volatility.

Councillor Stephen Woodliffe expressed satisfaction with the repayment of the State Street loan, a long-standing issue for the council. Councillor Richard Austin BEM inquired about the strategy for property funds, and Sean Howsam explained that the council monitors market conditions and forecasts, noting that exiting property funds at a loss would impact reserves. He also confirmed that the council remains compliant with its prudential indicators. Councillor Anne Dorrian praised Sean Howsam's work, particularly regarding the State Street loan, and requested further information on the loan's historical context and the total cost to the council. She also asked about the council's assets, including the value of the building it occupies, and Sean Howsam clarified that he manages treasury matters, not asset valuations, suggesting the property services team would have this information.

Work Programme

The committee reviewed the Work Programme for 2025-26. Councillor Stephen Woodliffe commented on the inadequate external sound system, expressing hope that the new system would improve clarity. Councillor Anne Dorrian suggested adding a self-assessment of the committee's effectiveness to the work programme, citing disappointment with the level of questioning. This was met with differing views from other councillors. Councillor Richard Austin BEM noted that questions were sometimes answered before others had a chance to ask, and that the reports were more comprehensive, reducing the need for extensive questioning. Councillor Woodliffe praised the committee's performance and the Chairman's effectiveness, stating no additional training was needed. Councillor Anton Dani defended councillors against accusations of laziness and emphasised the importance of maturity and respect. Councillor James Cantwell noted that a self-assessment process already exists and that Councillor Dorrian had left the meeting early. The committee agreed to proceed with the current work programme. Councillor Dani also requested information on the council's assets, which Sean Howsam stated was managed by the property services team.