The Audit and Governance Committee meeting on 21 April 2026 reviewed the council's internal and external audit progress, plans, and financial policies. Key discussions included the effectiveness of internal controls, the upcoming external audit strategy, proposed accounting policies for the next financial year, and the council's treasury management performance. The committee also reviewed the council's risk register and work programme.

Internal Audit Progress Report

Claire Goodenough, Head of Internal Audit for Lincolnshire County Council, presented the Internal Audit Progress Report for April 2026. She confirmed that 100% of the agreed audit plan for the financial year had been completed, with positive feedback received on most audits. One audit, relating to the timeliness of reporting by a co-provider, received a poor response and had been discussed with their management. The report detailed the assurance ratings for completed audits, which included one substantial, eleven adequate, one limited, and one insufficient control rating. An additional audit was requested and carried out due to the insufficient control finding, which subsequently provided limited assurance. The council demonstrated a high rate of implementation for management actions, indicating effective engagement with internal audit.

Councillor Adam Cartwright raised concerns about the lack of a centralised grant register and asked about the forms of register in place, the information they record, and how this informs future grant decisions. Claire Goodenough stated she did not have this operational detail but would investigate and circulate the response. Councillor Cartwright also questioned the escalation process for savings proposals that are not on schedule. John Medler, Assistant Director – Governance and Monitoring Officer, explained that quarterly financial reports presented to the Senior Leadership Team (SLT) and the executive would identify variances related to savings.

Councillor Stephen Woodliffe questioned the resolution of issues related to unavailable training records due to the absence of a central tracking system and the clarity of report formats. Councillor Woodliffe also asked about the root causes of seven key findings and insufficient controls, and how ICT cyber security issues, such as the absence of documented procedures for threat escalation, undefined remedial timescales, and unresolved vulnerabilities, were being resolved. Claire Goodenough noted that these were operational matters that officers present at the meeting would need to answer. John Medler clarified that savings proposals were monitored through quarterly financial reports and that a transformation and efficiency board had been set up.

Councillor Woodliffe also raised concerns about the insufficient controls finding and the ICT cyber security report, asking how these issues were being resolved. Claire Goodenough explained that internal audit's role was to audit, and the answers to these specific operational questions would need to come from the relevant officers. Ray Flannery, Democratic Services Team Leader, was asked to make a note to ensure relevant officers attend future meetings to answer such questions. Councillor Jonathan Noble suggested that the Section 151 Officer, who historically attended these meetings, should be present for financial matters. Councillor Carter Price suggested a pre-meeting to identify likely questions, but this was generally disagreed with, with the consensus being that officers present should be able to answer questions arising from reports.

Claire Goodenough also presented the Internal Audit Plan for 2026-2027, which had been consulted on with the leadership team. The plan included two thematic audits on risk management and savings, building on the previous year's testing. Councillor Ralph Pryke asked if the audit of identification and monitoring of savings would look into minutes from the Efficiency Board meetings, as he had previously raised concerns about their absence. Claire Goodenough explained that the audit plan was developed from a risk assessment and they were not yet at the point of detailing specific audit terms of reference for that particular area. Councillor Pryke requested this be added to the action plan. Councillor Andy Izard asked if Boston Borough Council was considering Key Performance Indicators (KPIs) for certain departments, similar to Linkershire County Council. John Medler confirmed that a performance management framework with KPIs and indicators already existed and was reported quarterly.

External Audit Plan and Strategy

James Boyle from KPMG presented the external audit plan and strategy for the year ending 31 March 2026. He outlined the materiality levels for the audit, which remained consistent with previous years. The significant risks identified were the valuation of land and buildings using the depreciated replacement cost (DRC) model, management override of controls, and the valuation of post-retirement benefit obligations. Boyle noted that the Code of Practice on Local Authority Accounting had introduced changes to asset revaluation, requiring a five-year rolling programme or quinquennial revaluation. The council planned to implement a five-year rolling valuation for 'Other Land and Buildings', with assets selected by management and valuations undertaken by an internal valuer.

Councillor Jonathan Noble questioned why the external auditor could not select the assets for valuation themselves to potentially uncover surprises. James Boyle explained that as long as the revaluation occurred within the five-year period, the accounting standard was met. Councillor Noble also requested a glossary for acronyms, which Boyle agreed to update in future versions. Councillor Noble praised the report, noting the absence of significant risks identified in the council's arrangements for financial sustainability, governance, and improving economy, efficiency, and effectiveness.

Councillor Adam Cartwright asked about the identification and delivery of £651,000 of efficiencies by the year-end, and the procedures in place to facilitate this. James Boyle stated this would be followed up in the year-end report, explaining that in a more mature environment, efficiencies would be identified before the financial year started.

Accounting Policies 2025-26

Ellie Stacey, Head of Finance Delivery – Technical and Corporate (PSPS Ltd), presented the proposed accounting policies for the 2025-26 financial statements. She highlighted a substantial change in the Code of Practice regarding the valuation of property, plant and equipment, which no longer permits full annual revaluation. The council would now adopt a five-year rolling programme with annual indexation. Councillor Jonathan Noble asked for the rationale behind this change, and Ellie Stacey explained it was for efficiency. Councillor Stephen Woodliffe asked if councillors could now enter the pension scheme. John Medler confirmed that government legislation would permit councillors to join the Local Government Pension Scheme in the forthcoming financial year, with details to be communicated. Councillor Woodliffe also noted a minor amendment regarding Her Majesty's Revenue and Customs to His Majesty's Revenue and Customs for accuracy.

Regulation of Investigatory Powers Act (RIPA) 2000 - Annual Update

Christian Allen, Assistant Director – Regulatory, provided an update on the council's activities regarding RIPA. He confirmed that a partnership RIPA policy was adopted in 2024 and was current. There had been no RIPA-approved activity undertaken by any of the three councils in the last year, and a nil return was submitted to the Investigatory Powers Commissioner's Office (IPCO). A partnership Body Worn Video (BWV) policy was introduced last year, and a new partnership CCTV policy for non-public realm systems was planned for development in 2026-27. Training for officers on RIPA was conducted on a three-year rolling cycle. Councillor Woodliffe asked about the recording and accessibility of training records, and Christian Allen confirmed they were recorded and accessible. Councillor Jonathan Noble asked if enforcement officers routinely wore body-worn videos, and Christian Allen explained it was discretionary, based on an assessment of necessity for evidential purposes or officer safety. Councillor Woodliffe also questioned why body cameras were not mandatory, and Christian Allen reiterated that their deployment was based on a risk assessment.

Q3 Treasury Report 2025-26

Sean Howsam, Treasury & Investments Manager (PSPSL), presented the Q3 Treasury Report. He provided an economic update, noting a flat economic performance, a fall in average earnings growth, and a cut in interest rates by the Bank of England. The report detailed interest rate forecasts from external advisors MUFG Corporate Markets, indicating rates were expected to remain stable until September 2027. The council's investment strategy prioritised security of capital, liquidity, and yield. Investment performance year-to-date showed a gradual fall in interest rates. The council's investments totalled approximately £25.5 million, a decrease from the start of the year due to spending on capital expenditure and the use of reserve balances. Property fund investments had seen a decrease in value, with the MNG UK Property fund liquidating its assets. The AEW UK Core Property Fund had a particularly low return, and the council was awaiting decisions on its future. The report also detailed borrowing costs, showing a favourable variance due to savings on the premature redemption of a loan. Compliance with treasury and prudential indicators was confirmed.

Councillor Jonathan Noble asked about the temptation to invest more than £2 million in high-performing institutions, given the good returns. Sean Howsam explained that the council could lend up to £5 million per institution but aimed for a split of investments to manage risk. He also noted that higher rates were achieved towards the end of the financial year due to market liquidity. Councillor Woodliffe praised the reports for being excellent and easy to read, but noted that property fund investments had lost value and achieved returns below inflation. Sean Howsam explained that property funds operate in cycles and that the council was keeping them under review, considering the difficulty of exiting the market at present. He also discussed the AEW UK Core Property Fund, explaining that a large redemption request had put its future validity into question, and a decision on winding down the fund was pending. Councillor Woodliffe also asked about the possibility of repaying a £1 million loan at a lower cost than the principal amount, similar to a previous favourable repayment. Sean Howsam explained that premature repayment on the recent PWLB loan was not possible until after a year had passed and was unlikely to be at a discount unless interest rates rose significantly. Councillor Adam Cartwright asked if a similar amount to the £17 million in matured council investments had been reinvested in other council lendings. Sean Howsam confirmed that loans maturing in January, February, and March had been repaid, and rollovers were based on market interest rates. Councillor Woodliffe asked how quickly the council could react when a fund started to crash, and Sean Howsam explained that the Section 151 Officer had delegated authority for investments, and property fund reductions tended to be gradual rather than sudden plummets. He also addressed the impact of the Middle East dispute on interest rates, stating that forecasts did not show an increase but that escalation could lead to a flight to safety driving up borrowing costs.

Quarter 3 25/26 Risk Report

Suzanne Rolfe presented the Quarter 3 Risk Report. She explained the council's strategic risks, noting that some were tolerated and others were being treated with mitigation actions. Key risks highlighted included those related to the Environment Act (BBC12), waste collection round pressures (BBC15), service delivery (BBC20), health and safety (BBC24), and AI governance and oversight (BBC31). She noted that the red status for health and safety risks had now been resolved. The report also detailed partnership risks, including funding (SELCP-07) and staffing (SELCP-08), which were currently amber. Fraud risks were also reviewed, with no changes reported for Q3. Councillor Andy Izard asked about the inclusion of council tax collection and arrears in the risk assessment, and Suzanne Rolfe stated she would feed this into the review. Councillor Jonathan Noble confirmed that council tax collection figures were available and generally in the low 90% range. Councillor Woodliffe raised concerns about battery energy storage systems (BBC06) and their potential impact on civil contingency risks, and Suzanne Rolfe agreed to follow up. Councillor Woodliffe also questioned why the server room project (BBC29) was halted due to political tensions, and Suzanne Rolfe stated she would try to find out more details. Councillor Adam Cartwright asked for more information on the AI oversight risk (BBC31), and Suzanne Rolfe explained it was related to an ongoing audit and the rapid adoption of AI, with governance and oversight being put in place. Councillor Carter Price raised concerns about digital connectivity (BBC07), particularly regarding the switch-off of landlines and poor mobile signal in rural areas, and Suzanne Rolfe agreed to provide more information from the growth team.

Work Programme

The committee reviewed the Work Programme for 2025-26 and the draft for 2026-27. Councillor Woodliffe asked if the CCTV policy would be presented with the RIPA update in March 2027, which was confirmed. Councillor Adam Cartwright noted that the dates for the upcoming meetings were still unspecific and requested official dates. Ray Flannery agreed to take this as an action point. Councillor Jonathan Noble raised concerns about a corporate peer challenge noting that Boston's plan for addressing the structural deficit over the medium term was not clear, and there was a potential finance gap of £6.5 million. Ray Flannery agreed to investigate this and come back with answers.