The Audit Committee of Lincolnshire County Council met on Monday 23 March 2026 to discuss a range of financial and operational matters. Key discussions included lessons learned from education travel, updates on the new statutory framework for strengthening standards, and the review of financial procedures. The committee also received reports on risk management, counter fraud activities, and internal and external audit plans.

Education Travel – Lessons Learnt

Mike Reed, Head of Transport Services, presented a report on the lessons learned from the transformation programme for education travel. He highlighted that escalating costs, primarily due to an increasing number of children requiring transport, particularly those with Special Educational Needs and Disabilities (SEND), had been a significant challenge. A two-year transformation programme, involving collaboration with various council departments, had been implemented to mitigate these costs. Key initiatives included the introduction of an improved dynamic purchasing system with an e-auction platform called Panacea, which acted similarly to eBay to drive down costs. Joint working groups with Children's Services were established to ensure transport implications were considered during child placement decisions. Regular termly reviews of SEND children's cases had led to de-escalation of needs and reduced transport requirements, such as removing the need for passenger assistance. The use of personal travel budgets was also promoted as a cost-effective alternative where financially beneficial for both the authority and parents. To address potential monopolies in SEND transport provision, Transport Connect Limited, a council-owned tech company, was being utilised to introduce more competition. A dedicated contract management team was created to improve engagement with operators, identify tendering obstacles, and enhance operator performance. A dashboard providing live daily data had been developed to improve operational efficiency and long-term financial planning.

Successes highlighted included cultural shifts towards greater collaboration between services, breaking down historical silos. The dashboard provided valuable operational insights, enabling quicker reactions to negative trends and more accurate budget projections. Operator engagement had become more open and collaborative, with a better understanding of obstacles faced by smaller operators, leading to improved support through the tendering process.

Ongoing challenges remain, particularly the demand-led nature of the service and the escalating number of SEND pupils. While hopeful that government white papers on SEND would improve the situation, this was expected to take time. Inflationary pressures, including fuel and employment costs, were also identified as significant challenges. Despite these, the council was confident that current systems and processes would help mitigate service failures. Regular benchmarking against other local authorities indicated Lincolnshire was in a strong position, transporting approximately 19,000 children daily with very few issues.

Councillor Locke inquired about the sustainability of current controls given the projected growth in SEND. Mike Reed expressed confidence in the existing relationships with Children's Services and the open dialogue, but acknowledged that the delivery of SEND places was crucial and outside his direct influence. Councillor Middleton praised the report as local government leadership at its best and asked about the potential to charge for sharing best practices, the scope for increasing personal transport budgets, and whether the council's rigorous business approach could be translated to other departments. Mike Reed explained that personal travel budgets depended on parental choice and ability, and while they aimed to increase their use, quantification was difficult due to the size of Lincolnshire and parental commitments. He also noted that the collaborative approach and mentality of constructively challenging decisions without negativity could be translated to other parts of the council. Councillor Davies asked about the accuracy of future forecasting charts and the relative impact of preventative controls. Mike Reid identified route optimisation as having the biggest impact, explaining the process of amalgamating contracts to reduce vehicle usage. He acknowledged the complexity of forecasting SEND growth due to unpredictable factors like address changes and evolving needs. Councillor Carrington questioned the wording in the Next Steps section regarding ceasing non-discretionary elements and whether it should be discretionary elements. He also raised concerns about the unsustainable trajectory of SEND provision costs and the potential diversion of resources from children who need them most, urging for an action plan. Mike Reed clarified that the Next Steps referred to ceasing non-discretionary elements, and that policy changes, particularly regarding grammar school transport, could yield significant savings but would likely face backlash and judicial review. He stressed the difficulty in quantifying the impact of initiatives like SEND hubs due to numerous variables. Councillor Roberts asked about contingency plans for fuel shortages and the possibility of withdrawing transport for discretionary elements like grammar schools if costs escalated. Mike Reed confirmed that withdrawing transport for grammar schools could save £2-3 million annually but would require a political decision and a full policy review. He also noted that the better belonging scheme for SEND schools would likely have a positive impact but was difficult to quantify.

New Statutory Framework to Strengthen Standards

Nicola Calver, Monitoring Officer, presented a report on the government's plans to introduce a new statutory framework for standards of conduct for elected members. The current legislative framework, introduced by the Localism Act 2011, abolished the Standards Board for England and many of its sanctions, leading to local authorities creating their own codes of conduct based on the seven Nolan principles. New legislation is expected to introduce a mandatory code of conduct to create uniformity, with local authorities able to add their own provisions. A standalone standards committee will likely be required, tasked with determining complaints and deciding on actions, including the power to suspend councillors pending investigation or as a sanction. Automatic disqualification from office could occur after multiple suspensions. These powers would only apply to breaches of mandatory code sections. A national appeals body is also expected. While no official timeline is set, changes are anticipated towards the end of 2027, possibly with a transitional period. The monitoring officer is keeping a close watch on developments.

Councillor Davies expressed concern about the move towards unelected bodies dictating to elected members, recalling the politically nasty process of the previous Standards Board regime. He argued that the electorate, not peer groups, should be the ultimate arbiters and that such processes could be a waste of taxpayer money investigating political arguments. He stated, I don't agree that all views deserve respect. Andrew Middleton, an independent person for three councils, offered a different perspective, having dealt with numerous complaints without many reaching a standards committee. He believed it was possible to separate alleged breaches of conduct from policy disagreements, which should be addressed at the ballot box. He highlighted the experience of monitoring officers in handling such divisions and did not foresee an Armageddon scenario.

Statement of Accounts 2025/26 - Accounting Policies

Claire Welberry, Strategic Finance Lead, presented the Statement of Accounting Policies for 2025/26 for both Lincolnshire County Council and the Lincolnshire Pension Fund. She confirmed that there were no material changes to the accounting policies for either entity. The committee was asked to approve the statements of accounting policies for use in preparing the financial year-end accounts and the local government pension scheme pension fund accounts. The external auditors, KPMG, confirmed they had reviewed the papers and found everything to be in order, with key application of policies to be reviewed during their external audit. The committee unanimously approved the statements of accounting policies for use in preparing the financial year-end accounts and the local government pension scheme pension fund accounts.

External Audit Strategy - Lincolnshire County Council and Lincolnshire Pension Fund 2025/26

Claire Welberry introduced the External Audit Risks - Early Reflections report from KPMG for 2025/26. Rashpal Khangura and Alex Heaps from KPMG presented the report, highlighting key risks for the council, including the valuation of land and buildings, and the valuation of post-retirement benefits. They noted that the triennial pension valuation would bring a different flavour to the risk this year. The standard risk of management override of controls was also identified. Materiality was set at 2% of expenditure, with a range considered. The audit cycle and timetable were outlined, with the full audit plans to be presented in June. Fees were set by PSAA.

Councillor Davies questioned the generic nature of the risks presented and asked how the Lincolnshire perspective was incorporated. Rashpal Khangura explained that while statutory functions and the nature of local authorities meant many risks were similar nationally, specific issues like home-to-school transport due to the county's geography were considered. He added that the value for money risk assessment, to be presented in June, would offer more specific flavour. Councillor Carrington asked if the focus and quantum of time for the audit were tailored to the council's history of compliance. KPMG confirmed that materiality levels and audit effort were influenced by past outcomes and the current environment.

Financial Procedures

Claire Welberry presented an updated report on the Financial Procedures, which had been reviewed to reflect changes to the Constitution and current financial processes. Key amendments included clarifications on budget changes, rewording in the control of resources and assets procedure, and the addition of a clause in external arrangements regarding prudent investment decisions in companies. The committee was invited to review and comment on the updated procedures. No specific questions were raised by members.

Risk Management Annual Report 2025/26

Kevin Lane, Risk Manager, presented the Risk Management Annual Report. He highlighted the strengthening of quality assurance processes, resulting in improved skills for the internal team and risk owners. A significant change was the switch from the SharkCloud risk software system to using Microsoft 365 facilities, primarily SharePoint, which offered cost savings and greater governance. A risk dashboard with live data was embedded, providing daily oversight. Refreshed e-learning modules for all employees and risk owners were developed. Standardisation of internal processes within the risk team had also been undertaken. The strategy for the next 12 months would focus on risk governance, including escalation routes and risk appetite, strengthening the strategic risk group, and delivering wider risk training.

Councillor Davies requested more information on how risk management was embedded across the council and external validation for training effectiveness. Kevin Lane agreed to provide more detail in the next report and hoped internal audit would provide external validation. Councillor Lott inquired about any limitations of the new MS365 system compared to SharkCloud. Kevin Lane stated that while MS365 lacked the visual aspect of SharkCloud, it was more effectively used due to its accessibility and the ability to develop at their own pace.

Risk Management Strategic Risk Register Update 03-2026

Kevin Lane provided an update on the strategic risk register. The IT infrastructure risk had been moved to substantial assurance due to the successful implementation and testing of a second data centre. The cyber risk remained a key concern. The high needs block risk remained on the register, with central government confirming 90% coverage of the SEND deficit, though the remaining 10% still presented a significant financial challenge. The SEND reform paper was out for consultation. The strategic budget risk showed an improving direction of travel due to increased funding certainty, but the ability to achieve identified savings was a new cause for concern. The working age adults risk had seen improvements in controls, with care packages now overseen by senior management. The LFR command and control centre risk remained on the register due to ongoing teething issues with the newly installed system.

Councillor Davies expressed concern about the budget savings risk, suggesting it should be regularly monitored by the audit committee due to its significant financial implications. Claire Welberry confirmed a program was in place to monitor savings at head of service level, reporting up to CLT. Councillor Carrington questioned the substantial assurance for IT infrastructure, asking if the second data centre provided a complete backup. Kevin Lane explained that cyber risk was a separate, more green risk, and the second data centre was a direct mirror of the first, with successful failover tests. Ian raised concerns about the recency of the mirroring and its representation relative to the wider IT risk. Kevin Lane clarified that the risk was initially due to aged systems, most of which were being replaced, and that smaller hubs and routers were now covered under cyber risk.

Counter Fraud Annual Report

Mark Harrison, Team Leader – Counter Fraud, presented the Counter Fraud Annual Report. He highlighted over 40 fraud awareness sessions delivered to staff, and a 92% increase in employees completing the online counter fraud course. Since April 2025, 75 referrals of potential fraud had been received, leading to six investigations. One investigation was referred to Lincolnshire Police, resulting in an adult caution and dismissal. Management action was taken in another case, and three individuals resigned during investigations. The council received 20 confidential reports and nine whistleblowing reports. Proactive work had completed 97.9% of the planned reviews, with 14 reviews conducted overall. Management actions raised totalled 61, with 43 completed.

Andrew Middleton asked if root and branch investigations were conducted to eliminate repeat frauds. Mark Harrison confirmed that control weaknesses were identified and reported to the relevant area. Councillor Davies inquired about how complex corporate frauds, like those seen in other authorities involving shell companies, would be detected. Mark Harrison stated this fell outside the remit of the counter fraud team, but the Master Data section handled due diligence for contractors. Ian raised concerns about the valuation of blue badges and the recovery rate, asking for connectivity to true savings. Mark Harrison explained that while the NFI data was valuable, recovery was handled by other areas, and that sundry accounts, while financially small, had process and guidance issues. Megan Wood, Principal Auditor Counter Fraud, would present the plan for next year, which would include looking at external fraud risks.

Counter Fraud Annual Plan 2026/27

Megan Wood presented the Counter Fraud Annual Plan for 2026/27. The plan detailed areas for review based on intelligence, emerging risks, and fraud risk assessments. Control reviews would be expanded to cover whole service areas, encompassing both internal and external fraud risks. Bespoke education sessions would be introduced following reviews, tailored to specific findings. Ian commented positively on the plan, noting the balance between reactive and proactive elements and the focus on end-to-end processes. He also thanked Mark Harrison for his service. The Counter Fraud Annual Plan for 2026/27 was unanimously approved.

Annual Audit Committee Report for 2025

Claire Goodenough presented the Annual Audit Committee Report for 2025. The report summarised the committee's effectiveness, attendance, and interactions throughout the year. It highlighted the committee's role in overseeing governance, risk, and control frameworks, and its engagement with internal and external audit. The report noted the formation of a new committee following the May 2025 elections and the training provided to members. The Annual Audit Committee Report for 2025 was unanimously approved for presentation to Full Council.

Internal Audit Progress Report 2 of 2

Claire Goodenough provided an update on internal audit work completed between September 2025 and March 2026. She confirmed that closure meetings for draft reports had taken place with no changes to assurance ratings. The work would form the basis of the annual audit opinion. Ian requested more specificity in the audit opinions beyond high-level statements, focusing on themes and trends. Councillor Davies inquired about overdue management actions and the desired target for their completion. Claire Goodenough explained that a new system was being developed to improve visibility and tracking of management actions, and that while the current number of overdue actions was not uncommon for a council, she aimed for zero overdue actions. Andrew Middleton provided perspective, noting that Lincolnshire's committee had fewer outstanding actions than others he sat on. Ian and Councillor Davies further discussed the importance of metrics like bounces (deferrals) of actions. The Internal Audit Progress Report 2 of 2 was unanimously approved.

Internal Audit Plan for 2026/2027

Claire Goodenough presented the proposed Internal Audit Plan for 2026/2027. She noted an increase in the number of audits due to improvements in the quality and effectiveness of the internal audit team, allowing for greater resource deployment. The plan had been developed in consultation with leadership, external audit, and partners. The Internal Audit Plan for 2026/2027 was unanimously approved.

Audit Committee Work Programme

Claire Goodenough presented the Audit Committee Work Programme. She explained that the programme would be developed further with input from the new chair and vice-chair, and would include proposed training. Councillor Davies requested an overview of how monies reclaimed through fraud would be handled and further information on complex corporate fraud. Claire Goodenough explained that fraud investment had been reduced in many county councils, with fraud staff often integrated into internal audit, requiring different skill sets. She assured the committee that Lincolnshire's fraud team was well-resourced and aligned with internal audit standards. Andrew Middleton suggested a more substantive discussion on complex corporate fraud, and Claire Goodenough agreed to incorporate this into the work plan. Andrew Middleton also raised the potential high-risk area of family contributions to adult social care costs, asking if it had been reviewed. Claire Goodenough confirmed that thematic audits were conducted, with a focus on direct payments and similar topics in the coming year. Ian suggested looking at patterns across large data sets for irregularities, similar to HMRC's approach. The committee noted the work programme and comments made.