The Audit and Governance Committee of the Lancashire Combined County Authority (LCCA) met on Wednesday, 14 January 2026, to discuss key updates on the authority's activities, review its financial assurance framework, and consider reports on internal audit progress, counter financial crime, and the corporate risk register. Decisions were made regarding the approval of the Counter Financial Crime and Anti-Money Laundering Governance Framework and the Corporate Risk and Opportunity Register.

Key Updates for LCCA Committees

The committee received an update on the LCCA's strategic priorities in transport, economy, and skills. A significant development is the LCCA's transition to becoming the sole local transport authority for Lancashire from April 2026. To manage this, the authority will adopt a commissioning and assurance model for transport for the financial year 2026-27. This model allows for the gradual build-up of strategic and technical capacity within the LCCA while retaining local expertise from Blackpool Council and Blackburn with Darwen Council. Significant funding for transport will begin to flow through the LCCA from April 2026.

In terms of staffing under the commissioning and assurance model, a small number of local authority staff will be transferred to the LCCA and directly employed in strategic roles. The HR workstream for this is underway in consultation with the three constituent councils.

The update also touched upon the ongoing governance review of the LCCA, which has concluded. The leaders of the constituent councils have expressed willingness to engage with the minister for devolution on key areas, including investment certainty, timescales for further devolution, public and stakeholder consultation, and the potential for a mayoral proposal.

The committee was also informed about the corporate services currently provided to the LCCA by each of the three constituent councils, with a table detailing these functions included in the report.

LCCA Financial Assurance Framework

The committee reviewed the LCCA's initial financial assurance framework, which has been developed over the authority's first nine months of operation. This framework is designed to provide confidence that the LCCA's governance arrangements are being implemented effectively. The report detailed the key financial documents that have been approved by the LCCA, including its Constitution, Financial Regulations, Contract Procedure Rules, Capital Strategy, and Treasury Management Strategy.

A significant point raised was the ongoing complexity surrounding VAT recovery on non-business activities, which is awaiting ratification in the Finance Bill 2025/26. Until this is resolved, the constituent upper-tier authorities are carrying LCCA-related costs. The report also noted that KPMG has been appointed as the external auditor for the LCCA, with an indicative fee of £164,000. The capital programme has seen substantial growth, increasing from £3.3 million in March 2025 to £70 million by December 2025, largely due to funding from the Department for Transport.

The committee also discussed the development of the LCCA's approach to social value, which is still being determined and is expected to form part of the procurement policy and strategy.

Internal Audit Progress Report

The Head of Internal Audit presented a progress report on the work undertaken as part of the 2025/26 audit plan. As of 27 November 2025, 28 days of audit activity had been completed, representing 33% of the total planned 85 days. Key areas of work included the assurance framework for support services, risk management, and governance. The audit of risk management was completed and provided reasonable assurance regarding the effectiveness of the LCCA's risk management framework. The report highlighted that while operational risks were more developed for Adult Skills than for Transport and Economic Development, work was ongoing in these areas. The committee was asked to consider and comment on the report, fulfilling its role of providing independent oversight of the LCCA's governance, risk management, and internal control framework.

Counter Financial Crime and Anti-Money Laundering Governance Framework

The committee was asked to approve three key governance policies designed to prevent, detect, and respond to misconduct, financial crime, and money laundering risks. These policies are:

• Whistleblowing Policy: This policy provides a confidential mechanism for reporting wrongdoing and protects whistleblowers from retaliation, in compliance with the Public Interest Disclosure Act 1998. It outlines how concerns can be raised internally or externally to prescribed regulators.
• Counter Financial Crime Policy: This policy establishes procedures to prevent and detect fraud, bribery, and corruption, aligning with the Fraud Act 2006 and Bribery Act 2010. It defines roles and responsibilities for safeguarding public funds and outlines the process for reporting and investigating suspected financial crimes.
• Anti-Money Laundering Policy: This policy sets out the LCCA's commitment to complying with the Money Laundering and Terrorist Financing Regulations 2019, even though local authorities are not directly covered by the regulations. It details obligations for customer due diligence, reporting suspicions to the Money Laundering Reporting Officer (MLRO), and record-keeping.

The committee was informed that these policies are crucial for maintaining high standards of integrity, transparency, and accountability within the LCCA.

Corporate Risk and Opportunity Register - Quarterly Update

The committee reviewed the updated Corporate Risk and Opportunity Register, reflecting progress made during Quarter 3 (October-December 2025) and planned activity for Quarter 4 (January-March 2026). The register has been refreshed to align with the LCCA's current operating environment and identifies across the board risks that could impact the authority.

A notable change is the increase in the risk score for Local Transport Authority Functions from 9 to 12. A new risk, Engagement of Third-Party Providers, has also been added to the corporate risk register, with a risk score of 12. This risk relates to the potential for the LCCA to fail to comply with public procurement legislation and its own Contract Procedure Rules due to a lack of understanding or clarity regarding forward plans, processes, and responsibilities, particularly as a new authority with officers working in dual capacities. The committee was asked to consider and approve the updated register.

Audit and Governance Committee Work Programme 2025/26

The committee reviewed its draft work programme for 2025/26. The programme includes standing items such as updates from the Interim Chief Operating Officer, Internal Audit, and the Corporate Risk and Opportunity Register. It was noted that the work programme is an evolving document and may be subject to change to accommodate emerging priorities. The committee was asked to consider the programme and make any necessary revisions.

The next meeting of the Audit and Governance Committee was scheduled for Monday, 23 March 2026.