The Audit Committee of Hertfordshire Council met on Friday 25 July 2025 to review the council's financial performance, governance, and risk management. Key discussions included the 2024/25 draft accounts, treasury management, the annual governance statement, risk management updates, and anti-fraud reports. The committee also received progress reports on internal audits and the whistleblowing procedure.

2024/25 Draft Accounts and Audit Update

The committee received an update on the publication of the council's draft 2024/25 Statement of Accounts, which were published on 30 June 2025. The audits for both the council's accounts and the Hertfordshire Pension Fund have commenced. Notable changes in this year's accounts include the adoption of International Financial Reporting Standard (IFRS) 16, which alters how leases are accounted for, and the presentation of the council's Dedicated Schools Grant (DSG) deficit. The council moved into a DSG deficit position for the first time in 2024/25, with a deficit of £25.5 million recorded at 31 March 2025. A statutory override, introduced by the government in 2020, currently prevents this deficit from impacting the general fund until March 2028, while a national solution is sought. The committee was invited to note the publication of the draft Statement of Accounts and the Statement of Accounting Policies.

End of Year Report on the Treasury Management Service and Prudential Indicators 2024/25

This report provided an overview of the council's treasury management activities for the year ending 31 March 2025. The council maintained a diverse investment portfolio, earning £6.03 million in interest with a return of 4.85%. New long-term borrowing of £135 million was undertaken to fund the capital programme. The report detailed the council's adherence to treasury management and prudential indicators, with no breaches of the lending policy reported. The economic review highlighted market volatility in interest rates and gilt yields, influenced by new UK and US governments. The council's long-term borrowing portfolio stood at £568.6 million as of 31 March 2025, primarily sourced from the Public Works Loan Board (PWLB). The report also noted the restructuring of a £9.4 million LOBO loan due to an proposed interest rate increase, which was subsequently refinanced through the PWLB. The committee was invited to note the treasury management end-of-year report.

Annual Governance Statement 2024/25 and Code of Corporate Governance 2025/26

The committee considered the draft Annual Governance Statement (AGS) for 2024/25 and the updated Code of Corporate Governance for 2025/26. The assessment of effectiveness concluded that the council's governance arrangements remain reasonable and fit for purpose. The AGS identified several significant governance issues, including the implications of local government reform in Hertfordshire, a disclaimed statement of accounts for 2022/23 and 2023/24 due to external audit challenges, and an Accelerated Cause of Concern (ACOC) for Hertfordshire Fire and Rescue Service regarding fire prevention activity. The report also detailed the impact of the May 2025 County Council election results, which led to a change in administration and a 'No Overall Control' situation. The committee was asked to approve the draft AGS and the updated Code of Corporate Governance.

Risk Management Update

This report presented proposed changes to the council's risk management framework, aiming to streamline reporting and refresh the council's risk appetite. The number of corporate risks has been reduced from 37 to 18, with risks now categorised under five themes: strategic, finance, people, service delivery, and statutory duty. The report highlighted several Severe Risks (red category), including insufficient funding for SEND, the potential impact of devolution and local government reorganisation, funding gaps, climate change, costs arising from the Emissions Trading Scheme, and shortages in the social care workforce. The committee was invited to note the proposed changes to the risk management framework and the revised list of corporate risks.

Anti-Fraud Report 2024/25

The committee received the annual anti-fraud report, detailing the work undertaken by the council and the Shared Anti-Fraud Service (SAFS) to combat fraud. The report indicated high levels of fraud detected, with prevented fraud significantly outweighing losses. SAFS delivered 800 operational days for Hertfordshire County Council, falling slightly short of the planned 837 days due to a reduction in funding from Adult Care Services. Key performance indicators (KPIs) were presented, showing strong performance in areas such as fraud referral response times and membership of national anti-fraud networks. The report highlighted a significant increase in fraud referrals, particularly concerning Blue Badge misuse and attempted mandate frauds targeting schools, alongside an increase in allegations against care services. The National Fraud Initiative (NFI) exercise identified £1.7 million in new council tax revenue and potential benefits of up to £1.6 million from reviewing empty properties. The committee was asked to note the activity undertaken to deliver the 2024/25 Anti-Fraud Plan and protect the council.

Delivery of the 2025/26 Anti-Fraud Plan

This report provided a progress update on the delivery of the council's Anti-Fraud Plan for 2025/26. The council has maintained its anti-fraud, anti-bribery, and corruption policies, with SAFS issuing several fraud alerts and executive reports to address emerging threats and system weaknesses. Reactive work saw 96 fraud allegations received between April and June 2025, with 53 cases under investigation and estimated losses of £1.4 million. Four investigations were closed, identifying £56,000 in fraud losses/savings. Proactive work included the National Fraud Initiative (NFI) exercise, which identified potential savings of £550,000, and the 'Hertfordshire Council Tax Framework', which generated over £1.7 million in new council tax revenue. The committee was asked to note the progress on delivering the 2025/26 Anti-Fraud Plan.

Hertfordshire County Council – SIAS Internal Audit Progress Report

The committee received an update on the delivery of the council's internal audit plan for 2025/26. As of 29 June 2025, 20% of the planned audit days had been delivered, with 17% of projects completed to draft report stage. The report detailed the outcomes of 11 assurance projects and four grant certifications. Proposed amendments to the audit plan included deferring an audit on Section 106 / CIL to 2026/27 due to expected planning reforms, cancelling two grant certification activities, and adding a new audit on Pensions Administration for the Firefighters Pension Scheme. One new limited assurance opinion was issued concerning the use of Purchase Cards, highlighting inconsistencies in control application. The report also provided an update on the implementation status of outstanding high and medium priority audit recommendations. The committee was asked to note the progress report and approve the proposed amendments to the audit plan.

Hertfordshire County Council – Whistleblowing Annual Report 2024/25

This report provided an overview of the council's whistleblowing procedure and activity during 2024/25. Sixteen reports were made under the procedure, a significant increase from the four reported in the previous year. Of these, seven related to bullying and harassment, and four were considered to meet the criteria for whistleblowing under the council's policy. Investigations found allegations in two cases were not upheld, one was upheld, and one remained open. Comparative data from other local authorities indicated that Hertfordshire's number of reports was not dissimilar to councils of a similar size. The committee was invited to note the report.

Future Work Programme

The committee reviewed and noted its future work programme, which included further internal audit progress reports, risk management updates, and a risk focus report to be selected by the committee for the October meeting. The committee also anticipated receiving positive news on audits in the autumn.