The Audit, Risk and Governance Committee of Lancashire Council met on Monday 13 October 2025 to review external and internal audit progress, discuss the council's risk management strategy, and examine the corporate risk and opportunity register. Key discussions included the progress of financial statement audits, the implementation of IFRS 16 for leases, and the identification of new risks related to the council's improvement plan.

External Audit Progress Report and Sector Update

Ian from Grant Thornton provided an update on the external audit of Lancashire County Council's 2024/25 financial statements and the Value for Money (VfM) conclusion. The audit is on track, with detailed testing expected to conclude in early November. The report also highlighted the upcoming establishment of a new Local Audit Office (LAO) from April 2026, aimed at reforming the local audit system. Discussions touched upon audit fees, the complexity of public sector reporting, and the scarcity of audit firms willing to undertake this work. The implementation of IFRS 16, a new accounting standard for leases, was noted as a significant area of focus, with challenges identified in lease record completeness, holdover leases, and peppercorn rent leases. The report also provided an update on local government reorganisation, noting the lack of consensus among councils on proposals.

Internal Audit Progress Report

Andrew Dalecki, Head of Internal Audit, presented the quarterly progress report, indicating that 48% of the planned work had commenced, with 22% completed. Thirteen reviews had been finalised since the last meeting, with most receiving positive assurances. However, limited assurance was given for payroll processing and St. Bede's Catholic High School. A significant weakness was identified in payroll relating to overtime payments, specifically an issue that allowed individuals to change pay rates for overtime claims without a clear need. Recovery of overpayments is ongoing, with investigations into potential fraud or disciplinary action underway. Overpayments due to late notifications of leavers also remain an ongoing issue. St. Bede's Catholic High School required strengthening in procurement, budget monitoring, and clerking arrangements. The report also detailed grant audits, confirming compliance with conditions for various grants, including the Bus Service Operators Grant, Core Growth Hub Grant, Connect to Work Grant Scheme, Multiply Grant, and the Skills Bootcamp Grant Scheme.

Risk Management Strategy

Hannah Race presented a proposed new Risk Management Strategy for the council, aiming to consolidate and clarify existing guidance on risk management. The strategy emphasizes the council's approach to risk appetite, with definitions for 'adverse', 'cautious', 'open', and 'innovative' risk appetites. It outlines a step-by-step risk management process, including identification, assessment, treatment, monitoring, and reporting, and introduces an enhanced requirement for officers to identify and report on fraud risks. The strategy also aims for improved integration with other corporate governance processes, such as emergency resilience and business continuity planning, and a stronger emphasis on horizon scanning. The strategy is expected to be implemented by March 2026.

Corporate Risk and Opportunity Register – Quarterly Update

Hannah Race also presented the updated Corporate Risk and Opportunity Register. The risk score for recruitment and retention has decreased due to improved vacancy rates and reduced agency spend, though it will continue to be monitored. A new risk, Council Improvement Plan, has been identified and added to the register, reflecting significant challenges in service improvement, financial sustainability, and organisational effectiveness. The register also includes updates on risks associated with the council's partnership with the NHS Lancashire and South Cumbria Integrated Care Board (ICB) and a summary of complaints upheld by the Local Government and Social Care Ombudsman. The council's uphold rate for Ombudsman complaints was 89%, which was noted as being mid-table compared to similar authorities. Actions are being taken to address complaints, including improvements in SEND services, adult social care, highways communication, and the development of a new digital complaints system. The committee approved the updated Corporate Risk and Opportunity Register.

Decisions Made

The committee approved recommendations for the following items:

• Minutes of the Meeting held on 21 July 2025
• External Audit - Audit Progress Report and Sector Update
• Internal Audit Progress Report
• Risk Management Strategy
• Corporate Risk and Opportunity Register – Quarterly Update
• Appendices C and D to Item 7 - Corporate Risk and Opportunity Register - Quarterly Update
• Exclusion of Press and Public