The Audit Committee of Durham County Council convened on 26 November 2025, at County Hall, Durham to discuss a range of reports covering governance, risk management, audit findings, and financial performance. Items on the agenda included presentations and reports from the Corporate Director of Resources, the Director of Legal and Democratic Services, and the external auditor. A key focus was the review and approval of the council's audited statement of accounts for the year ended 31 March 2025.

Company Governance Arrangements

The Director of Legal and Democratic Services was scheduled to give a presentation on company governance arrangements. The report pack states that local authority trading companies (LATCos) are established for:

• Commercialisation and income generation
• Flexibility
• Risk and compliance
• Oversight and accountability

The presentation was scheduled to include an overview of Durham County Council's companies, including wholly owned companies such as Chapter Homes Durham Limited¹ and Service Direct (Newco) Limited, and joint venture companies such as Forrest Park (Newton Aycliffe) Limited, Durham Villages Regeneration Limited, Seaham Harbour Community Interest Company, Low Copelaw Limited Liability Partnership and Aykley Heads Development LLP. The presentation was also scheduled to cover the historic arrangements for company governance, and the roles and responsibilities of the Shareholder Working Group, Company Governance Review Group, and Strategic Leads.

Audit Completion Reports

The committee was scheduled to consider the Audit Completion Report 2024/2025 Durham County Council, and the Audit Completion Report 2024/2025 Durham County Council Pension Fund. The reports, prepared by Forvis Mazars LLP, summarise the audit findings and conclusions for the year ended 31 March 2025. The reports state that the audits were substantially complete, and that unqualified opinions, without modification, were anticipated. The reports also include summaries of misstatements identified, and any significant control deficiencies.

Annual Governance Statement

The committee was scheduled to consider the Annual Governance Statement for the year April 2024 to March 2025 and Actions Update. The report sought approval of the Annual Governance Statement (AGS) for 2024/25, and provided an update on the progress being made in relation to the actions arising from the Council's Annual Governance Statement (AGS) for the year ended 31 March 2025. The AGS demonstrates the council's compliance with the principles of good governance, and the review of effectiveness for 2024/25 concludes that the council's corporate governance arrangements in place during the year were fit for purpose in accordance with the governance framework, best value duty and characteristics of a well-functioning local authority. The review of governance arrangements for 2023/24 identified six improvement actions to strengthen governance during 2024/25, progress on these actions can be viewed at Appendix 3 to this document, noting that two actions have been carried forward into 2025/26, these are Poverty Action Plan and Information Governance. The review of governance arrangements for 2024/25 identified seven improvement actions to strengthen governance during 2025/26.

Statement of Accounts

The committee was scheduled to consider the Statement of Accounts for the year ended 31 March 2025. The report pack states that the draft (unaudited) statement of accounts for Durham County Council and its Pension Fund for the financial year ended 31 March 2025 was authorised by the Responsible Financial Officer on 27 June 2025 and published on the Council's website the same day. The report pack also notes that legislation was brought into force on 30 September 2024 to address the Local Audit Backlog, identifying the statutory requirement to publish audited accounts on or before the 2024/25 backstop date of 27 February 2026. The external audit work was stated to be complete, and an unmodified opinion was expected to be issued following approval of the financial statements at the meeting.

Health, Safety and Wellbeing Performance

The committee was scheduled to receive an update on the council's Health, Safety and Wellbeing (HSW) performance for Quarter two 2025/26. The report pack notes that there were 410 accidents, incidents and near misses which is a decrease from the previous quarter and statistics at the end of quarter two indicate a projected decrease for the year by four per cent. There was one Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) specified injury and 17 incidents which caused employees over seven-day reportable absence from work. There were six fire related incidents during Quarter two, all related to the collection of household waste and there were no injuries and limited vehicle damage. There were 107 risk-based Health and Safety (H&S) and fire safety audits and inspections of council premises and work activities during the quarter which resulted in an overall compliance rate of 92% which is a slight increase from previous quarters. Legal action is continuing in relation to the initial cladding installation contractor and clerk of works provider at Durham Bus Station. Following an internal audit of non-attendance of occupation health appointments the occupational health service manager has identified reasons and reviewed individual clinicians practice around non-attendance and communication with managers and employees. An action plan has been put in place with the aim of addressing the reasons for employees not attending appointments with the aim of reducing the rate of non-attendance at appointments.

Treasury Management

The committee was scheduled to receive the Mid-Year Review Report on Treasury Management for the period to September 2025. As at 30 September 2025, the Council held £460.735 million in borrowing and had £142.002 million in cash balances invested with counter-party financial institutions. The net debt position was therefore £318.733 million, which is lower than the position at 31 March 2025, when net debt was £360.626 million. This decrease is largely a result of higher in-year cash investments. Whilst new borrowing was arranged in April 2025, the Council has continued to manage a significant under-borrowed position. The level of cash balances held during the period has allowed the council to delay the borrowing required to fund its current capital programme commitments, whilst interest rates remain high. During the half year period to 30 September 2025, the Council has fully complied with its Treasury Management Strategy and the Treasury Management Indicators relating to interest rate exposure, maturity structure of borrowing and sums invested for more than one year. The Council has also fully complied with Prudential Code Indicators which relate to the capital programme and how much the Council can afford to borrow.

Strategic Risk Management

The committee was scheduled to receive the Strategic Risk Management Progress Report for 2025-26 - Review 2: June – 30 September 2025. The report pack states that the report supports the Council's Risk Management Strategy, highlighting the strategic risks facing the Council and providing an insight into the work carried out by the Corporate Risk Management Group between August and November 2025. The report pack also notes that since the last update to the Audit Committee:

• One risk is close relating to Radon Gas Management.
• One risk is removed relating to Climate Change is closed and removed from the Corporate Risk Register.
• Four new emerging risks are included in the risk register as emerging risks, (Performance Management, Transformation Programme, Oracle Fusion, Subject Access Request's (SAR's).
• One risk is uprated (Health and Social Care Reforms It is elevated from Major/ Possible with a (Net Risk Score of 36) to Major/ Probable and a (Net Risk Score of 48) and is now considered a Corporate Key Risk.

Local Code of Corporate Governance

The committee was scheduled to consider the Updated Local Code of Corporate Governance. The report pack states that Durham County Council is committed to upholding the highest standards of governance in support of its strategic ambitions. The Council's governance framework is built on the seven principles of good governance developed by CIPFA and SOLACE and brought to life through locally adopted behaviours. Together, these ensure governance is not just compliance, but a culture of ethical leadership, transparency, and continuous improvement. Various updates and amendments have been made to the Local Code of Corporate Governance following the annual governance review 2025, to reflect changes during the year and to better reflect the arrangements currently in place.

Corporate Fraud Team

The committee was scheduled to receive the Corporate Fraud Team Update Activity Report Period Ended September 2025. The report pack notes that the Corporate Fraud Team received 393 referrals between April and September 2025, 78% of which related to Durham County Council alleged frauds. During this reporting period the Corporate Fraud Team:

• Strengthened the council's governance framework through updates to fraud related policies.
• Co-ordinated the National Fraud Initiative (NFI) for the Council, Durham Constabulary and County Durham & Darlington Fire & Rescue Authority.
• Joined the Cabinet Office Fraud Hub enabling real time data matching and secure collaboration.
• Recommended 11 sanctions which is over 50% increase from the previous year.
• Identified £132,897 in fraud was identified related to council funds and assets with an additional £379,874 relating to Tenancy and Right to Buy fraud.

Internal Audit

The committee was scheduled to receive the Internal Audit Progress Report Period Ended September 2025. The report pack states that the report provides an overview of performance against the Internal Audit Plan 2025/26 up to 31 March 2026, and aims to:

• Provide a high level of assurance, or otherwise, on internal controls operating across the Council that have been subject to an Internal Audit of systems and processes;
• Advise of any issues where controls need to be improved in order to effectively or better manage risks;
• Advise of other types of audit work carried out such as grant certification or advice and consultancy reviews where an assurance opinion on the control environment may not be applicable;
• Advise of any amendments to the Internal Audit Plan previously agreed;
• Track the progress of responses to Internal Audit reports and the implementation of agreed audit recommendations;
• Advise of any changes to the audit process; and
• Provide an update on performance against the key performance indicators agreed as part of the Audit Plan. The report pack also notes that fourteen reviews were removed from the approved Internal Audit Plan in the quarter, and six unplanned reviews were added to the Internal Audit Plan in the quarter. As at 30 September, approximately 35% of the individual audits in the revised plan had been delivered. The average score of 4.8 out of 5 (where 1= Very Poor and 5 = Very Good) is in line with the average score from 2024/25, which was 4.9. As at 30 September 2025, of the 352 actions due to be implemented, 340 (97%) had been implemented in the year. Three 'limited assurance' opinion audit opinions were issued during the period.