Agenda item

(A report by Mark Harrison, Audit Manager – Lincolnshire County Council)

The Head of Internal Audit & Risk presented a report which provided a summary of internal audit activity undertaken during the 2024/25 financial year and set out the annual audit opinion on the Council’s governance, risk management, and internal control arrangements.

It was reported that the overall audit opinion for the year was one of “adequate assurance”, meaning that the control framework was generally reliable and that controls to mitigate key risks were operating effectively, although some areas required improvement. The opinion had been informed by a combination of assurance and consultancy work, follow-up reviews, and other governance documentation.

The Head of Internal Audit & Risk highlighted the following key points:

·         The audit opinion had been based on a combination of assurance and consultancy work, follow-up reviews, and other governance documentation.

·         Two areas had received a limited assurance rating during the year:

·         Insurance: The audit identified concerns regarding the outsourcing of insurance administration by PSPS to a third-party provider (TRF). Issues included a lack of contract management, unclear roles and responsibilities, and incomplete asset records. These deficiencies had resulted in the postponement of the 2024/25 insurance re-tendering exercise and the extension of existing contracts, which was not compliant with the Council’s procurement regulations.

·         Bank Reconciliations: The audit found inconsistent processes across different accounts, high levels of manual intervention, and delays in completing reconciliations. The lack of automation and the impact of staff turnover were noted as contributing factors.

·         The audit team had experienced delays in accessing data and systems, which had negatively impacted performance indicators. Improvements were planned for 2025/26, including a change in audit management and closer engagement with the Section 151 Officer to ensure timely access to information and improved delivery.

·         The audit service continued to conform to Public Sector Internal Audit Standards, with a 2022 external assessment confirming full compliance.

Members discussed the report and commented as follows:

·         Members expressed concern regarding the two areas of limited assurance and emphasised the importance of ensuring that such findings were not repeated in future audits. It was noted that the insurance function, in particular, required clearer oversight and accountability. Officers confirmed that a service review of the insurance function was underway and that improvements had already been made, including the successful completion of a new insurance tender and updated reconciliations.

·         In relation to bank reconciliations, Members noted that processes varied across accounts, with high levels of manual intervention and delays in completion. The lack of automation and the impact of staff turnover were highlighted as contributing factors.

·         Members commented on the terminology used in audit reports and requested that future reports include clearer definitions of assurance levels to aid understanding. It was suggested that a summary of assurance categories be included in future reports to assist Members in interpreting audit findings.

·         Members also questioned the effectiveness of oversight arrangements and whether there were any mechanisms in place to hold PSPS accountable for underperformance, particularly in relation to the insurance contract. It was acknowledged that, as a Teckal company, PSPS was owned by the Council and its partners, and therefore financial penalties would not be appropriate in the traditional sense.

·         Clarification was sought on the contractual arrangements with TRF, and it was confirmed during the meeting that the insurance function had indeed been outsourced. Officers undertook to provide a written response to clarify the governance and oversight arrangements in place.

·         The Committee welcomed the assurance that improvements were being implemented and noted the importance of maintaining strong oversight of outsourced services.

Resolved:

That the report be noted.

[The Head of Internal Audit & Risk left the meeting at 7.11pm, following consideration of the above item.]