The Audit, Risk and Governance Committee met to discuss external and internal audit reports, the risk management strategy, and the corporate risk and opportunity register. The committee approved the new risk management strategy and the updated corporate risk and opportunity register. Members requested more information on school places, local transport funding, and subcontractor costs.

Internal Audit Progress

Andy Dalecki, Head of Internal Audit, presented the internal audit progress report, which highlighted that 48% of the planned work had commenced, with 22% fully completed. 13 reviews had been completed since the last committee, with all but two receiving positive assurances. The two negative reports of limited assurance were for payroll and St Bede's Catholic High School.

Payroll Processing

The payroll function received limited assurance due to a weakness in overtime payments, where people could change pay rates for overtime claims. This was picked up by payroll with an exception report¹ and is being investigated, with a digital solution being developed. There was also an ongoing issue with overpayments due to late notifications of leavers. Councillor Stubbins asked about a statement in the report that Fusion generally requires line managers to authorise overtime, but that automatic approval was being used in some cases. Andy Dalecki, Head of Internal Audit, responded that digital services had looked into the issue and found that automatic overtime approval had only happened for one individual due to a glitch in the system.

Councillor Stubbins also asked what the overpayment of overtime was. Andy Dalecki, Head of Internal Audit, responded that there was an exception report that picks up when payments are more than they should be, and that gets checked manually. He added that five cases had been passed to the investigations team as potentially fraudulent, with one claim up to £40,000.

SEND Financial Decision Making

The audit of SEND (special educational needs and disabilities) financial decision making found a lack of a formal scheme of delegation² for authorising decisions, with the head of service authorising at £100,000. Councillor Jewell asked if there was any basis for how the £100,000 figure was arrived at. Andy Dalecki, Head of Internal Audit, responded that the recommendation will be for them to consider what that right level should be and who should be the ones approving and authorising that, and then that will be built into the process afterwards. Councillor Buckley asked if they would be looking at the whole range of finance that comes off it all, or just levels over £100,000 for that. Andy Dalecki, Head of Internal Audit, responded that they'll look at the whole range.

Vehicle Monitoring System

Councillor Tetlow asked about the new vehicle monitoring system, specifically the cost and whether the benefits would outweigh the cost. Andy Dalecki, Head of Internal Audit, responded that he didn't know the cost of replacing it, but would find out and report back to the committee. He added that the replacement of this is because the old system was coming to end of life.

Councillor Tetlow also asked about a statement in the report that controls will be improved by monitoring the usage of vehicles when not on council business or outside working hours, and asked if employees can use council vehicles outside of working hours. Andy Dalecki, Head of Internal Audit, responded that he didn't think there was a policy that stipulates that they can't use, but it's not something that's certainly encouraged.

Procurement

Councillor Jones raised concerns about procurement, stating that it seems that once decisions come to a cost and end up at procurement, it's sort of job done, and asked if there is scrutiny before that point. Andy Dalecki, Head of Internal Audit, responded that any smaller procurement will be done by the service, and that each officer who has responsibility has a responsibility for getting value for money and demonstrating that they've got value for money.

Councillor Edwards stated that they generally find with preferred contractors, the preferred contractor isn't doing the work, and the person that's actually doing the work is a fraction of the cost that the figures are there for, and asked if it would be possible to get a list of so-called preferred contractors. Andy Dalecki, Head of Internal Audit, responded that he didn't think they have a preferred list, but they do have on their procurement register who they have got contracts with and who they procure with. He offered to speak to the highway director to try and answer that question a bit more fully.

Councillor Edwards then asked if, when the council contracts out to a contractor to fix a pothole, and that contractor subcontracts the work out to someone else, is there a system in place to look to go direct to source and does that happen? Andy Dalecki, Head of Internal Audit, responded that subcontractors are always used on any big contracting basis, and it can be an economic way of getting the end of work done.

Councillor Edwards asked if the committee could look at bringing a report in to sort of show what subcontractor costs are or a rough idea or overview to give us an outlook to see the top end without scaling too deep into it, what the direct costs are.

It was agreed that the director of highways would put a response together to answer some questions and explain the procurement processes behind the highways and the contract management processes that are going on to give some assurances around that.

Councillor Austin suggested a briefing around the different procurement methods, for example, the notions of a framework agreement or a preferred provider, and how those things work.

Local Transport Funding

Councillor Ritson asked if the local transport funding is a kind of a routine schedule of review, and noted that there's a substantial amount of money not allocated yet this year. Andy Dalecki, Head of Internal Audit, responded that these grants generally are annual grants, and that they tend to do the ones where it's built within the grant conditions that need to be signed off by internal audit and generally chief executive.

Risk Management Strategy

Hannah Race, Head of Governance, presented a proposed new risk management strategy for approval. She explained that the proposal doesn't introduce anything radically different, but checks the arrangements against best practice. She noted that there is an enhanced requirement on all officers to identify and report on fraud risks, and improved integration with several other of the council's corporate governance processes.

Councillor Austin asked if new AI technology would assist in the future risk assessment. Hannah Race, Head of Governance, responded that AI can play a really key role in helping officers want to compile risk assessments, but also in that horizon scanning piece.

Councillor Ritson observed that the risk appetite is set by the executive leadership team in consultation with the cabinet, and asked what the basis of that thinking was. Hannah Race, Head of Governance, responded that it aims to recognise that they might need quite a nuanced and sometimes fast changing approach to respond to their kind of external environment.

The committee approved the report.

Corporate Risk and Opportunity Register

Hannah Race, Head of Governance, presented the updated corporate risk and opportunity register. She drew attention to the fact that the current risk score for recruitment and retention has gone down, and that a new risk has been identified relating to the delivery of the council improvement plan.

Councillor Stubbins noted that the council improvement plan is a red one and it's increasing, and asked what's happening and what isn't happening. Hannah Race, Head of Governance, responded that it's newly identified this time, and the first step was agreement of the improvement plan, which went to cabinet last week.

Councillor Edwards asked why they think the adult social care demand is expecting to go down. Hannah Race, Head of Governance, responded that the projected risk score is going down, not the level of demand for services, and that it's just saying that they anticipate their arrangements for managing that risk are going to start being more effective.

Councillor Jones noted that the actions for quarter three is the two year council improvement plan to be presented to cabinet, and asked if they are expecting that risk to hopefully decrease off the back of that. Hannah Race, Head of Governance, responded that the expected direction of travel for the next quarter at the moment is just horizontal, but that they'd like that to be indicating a downward green arrow as the actions identified in the action plan are delivered.

Councillor Ritson stated that there's very little improving, and asked what sort of things would they be asking for if there's been no movement on that whatsoever in six months time. Hannah Race, Head of Governance, responded that the committee can request some more kind of detailed deep dives into specific risks.

Councillor Ritson requested a deep dive around school places at a future meeting.

Councillor Edwards noted that on SEND demand, the current score is 16 and the target score is 16, and asked if they should not be aiming a bit higher. Hannah Race, Head of Governance, responded that she'll have to double check that one, and it's possible it's a typo.

Councillor Edwards also asked, in terms of the backlog in educational health care plans, how is that adding to the risk, and if that waiting list was lower or non-existent, how much would it help the risk. Hannah Race, Head of Governance, responded that the risk SEND demand is about their ability to meet their statutory responsibilities, and that this covers a number of things, including the financial pressures that come with that, and delivering good outcomes as well for Lancashire's children and families.

Councillor Austin noted that on the Ombudsman's annual review, Lancashire is sort of midway down the table, and asked what these sort of complaints generally come from. Hannah Race, Head of Governance, responded that this table is about complaints that have been referred to the Ombudsman and then upheld by the Ombudsman, and that she would probably direct him to the next cabinet agenda, which is going to include the annual report and complaints and feedback, which will have a much more detailed summary.

Councillor Jewell asked, regarding the item on future local government reorganisation, why there is a confidence level of fairly confident, and what the analysis of the fairly confident and the confidence level is regarding that item. Hannah Race, Head of Governance, responded that it's a confidence level that the actions will affect the risk score, and that they expect the actions that they've identified are likely to result in the risk score coming down.

The committee approved the report.