The Audit, Risk and Governance Committee of Lancashire County Council met on Monday 26 January 2026 to review the council's financial statements and audit findings. Key discussions included the approval of the 2024/25 Statement of Accounts, audit findings for the Lancashire County Pension Fund and the council itself, treasury management activities and strategy, and the internal audit progress report. The committee also considered reports on procurement waivers, member conduct complaints, and the corporate risk and opportunity register.

Statement of Accounts 2024/25

The committee was asked to approve the council's statement of accounts for the 2024/25 financial year. These accounts had been subject to external audit, with some minor adjustments made following the audit. The committee was also requested to authorise the Chief Financial Officer and the Chair of the committee to sign management representation letters for the external auditor. The report highlighted that failure to approve the accounts by the statutory deadline of 27 February 2026 would result in a disclaimed or modified audit opinion, which is an undesirable outcome.

External Audit Findings

Lancashire County Pension Fund: Grant Thornton UK LLP presented their audit findings report for the Pension Fund. Overall, the report was positive, noting that the audit went smoothly and was considered a clean report for a pension fund. There were a small number of adjusted misstatements for misclassification and disclosure purposes, and a handful of unadjusted misstatements deemed not material. The auditors intended to issue an unqualified audit opinion. Recommendations were made regarding IT controls, which were common to both the pension fund and the council, and delays in processing member changes by LPPA (Lancashire Pension Fund Administration).

Lancashire County Council (LCC): Grant Thornton UK LLP also presented their audit findings report for LCC. The audit work was nearing completion, with no matters identified that would require modification of the audit opinion or material changes to the financial statements, subject to outstanding matters such as the evaluation of subsequent events and receipt of management representation letters. The auditors intended to issue an unmodified opinion. The report noted that the council had not had to take advantage of 'backstop' arrangements and did not have a backlog of prior year accounts, producing its 2024/25 accounts by the government deadline.

Auditor's Annual Report: This report summarised all the work undertaken by the external auditor for Lancashire County Council during 2024/25, with a particular focus on value for money arrangements. The auditor assessed the council's arrangements under three criteria: financial sustainability, governance, and improving economy, efficiency, and effectiveness. The overall assessment for all three criteria was 'A', indicating no significant weaknesses were identified. However, improvement recommendations were made regarding savings delivery, the Dedicated Schools Grant (DSG) position, and the timely implementation of audit recommendations. The report also noted that the council's use of procurement waivers was low and did not indicate a significant governance concern, though further improvements were planned.

Treasury Management Activity and Strategy

The committee received an update on treasury management activity from April to December 2025. The report indicated a net increase in borrowing due to refinancing maturing debt and financing the DSG deficit. Investments totalled £700m, with a lower-than-expected rate of return of 2.37% compared to the SONIA rate of 4.10%, largely due to holding gilts and corporate bonds that would incur a loss if sold. The report also detailed the council's borrowing activity, with total borrowing at the end of December at £1.213bn. Prudential indicators showed that while the authorised limit for external debt was not exceeded, the operational limit was briefly surpassed in October and November 2025, primarily due to additional borrowing for the DSG deficit. The proposed Treasury Management Strategy for 2026/27 was presented, outlining the council's approach to borrowing and investment, with a focus on security, liquidity, and yield. Key proposals included the creation of a Working Capital Enhancement Reserve (WCER) to manage the impact of long-term investment decisions and a restriction on new investments over 12 months.

Internal Audit Progress Report

The Head of Internal Audit presented the progress report, detailing work completed since the last committee meeting. 13 reviews had been undertaken, with most receiving positive assurance. Two areas received limited assurance: payroll, relating to overtime payments, and St. Bede's Catholic High School, due to weaknesses in budget monitoring, clerical, and procurement arrangements. The report also noted challenges in recruiting experienced auditors, impacting the completion rate of the audit plan. Recommendations were made regarding IT controls in Oracle Fusion, specifically concerning privileged access management and segregation of duties, and the need for a formal process for self-assigned roles. Follow-up audits indicated progress in addressing prior year recommendations, though some remained in progress.

Procurement Waivers and Non-Compliance

The report detailed procurement waivers and non-compliance for the period April to September 2025. 14 waivers were recorded with a total value of £894,577, representing 0.2% of the total contract value awarded. This showed a slight increase in both the value and number of waivers compared to the previous reporting period. While not considered a significant governance concern, the report noted the need for ongoing monitoring and improvement in recording practices and commercial commissioning strategy.

Code of Member Conduct - Annual Report of Complaints

The committee received an annual report on complaints made against county councillors under the Code of Member Conduct. While there was an increase in the number of complaints received in 2025 (61 compared to previous years), most were resolved informally and no formal breaches requiring determination by the Conduct Committee were identified. The report noted that the increase in complaints may be linked to wider social media use by councillors and a more diverse political landscape. Steps were being taken to improve standards, including introducing a complaints form, adopting the LGA's 'Debate Not Hate' campaign, and updating social media protocols.

Corporate Risk and Opportunity Register

The committee reviewed the updated Corporate Risk and Opportunity Register. No new or increased risks were added to the register. The risk score for financial sustainability had reduced due to a balanced two-year budget and a multi-year government settlement. However, the Dedicated Schools Grant (DSG) position had deteriorated, with a cumulative deficit and a forecast for further decline, necessitating immediate action. Climate-related risks were noted as absent from the register, despite strategic commitments.

Other Matters

The committee also noted the external audit findings for the council's financial statements, which were largely positive, with an anticipated unmodified audit opinion. Recommendations were made regarding IT controls in Oracle Fusion and the need for a formal process for self-assigned roles. The report also highlighted the implementation of IFRS 16 Leases, which resulted in the recognition of Right of Use Assets and Lease Liabilities on the balance sheet.

The meeting concluded with the noting of the date of the next meeting and the exclusion of the press and public for Part II items, which included updates on salary overpayments, counter financial crime, and appendices related to procurement waivers and the corporate risk register.