The Audit Committee of Hertfordshire Council met on Friday, 5 June 2026, to review draft audit plans, approve accounting policies, and discuss the annual assurance statement and governance reports. Key decisions included the approval of the 2025/26 Statements of Accounting Policies for both the Council and the Pension Fund, and the endorsement of the Annual Assurance Statement and Internal Audit Annual Report for 2025/26, alongside the approval of the 2026/27 Internal Audit Charter. The committee also approved the draft Annual Governance Statement for 2025/26 and the updated Code of Corporate Governance for 2026/27.

Draft Audit Plans for Hertfordshire County Council and the Pension Fund

The committee received and noted the draft audit plans for the 2025/26 financial year for both Hertfordshire County Council (HCC) and the Pension Fund, presented by Tim Cutler from KPMG. Progress on planning and risk assessment for both audits was reported as good. The audit plans outlined a materiality level of £60 million for the main authority audit, representing 2% of the budget expenditure for 2025/26, with a performance materiality set at £45 million. A key development in the audit approach for the upcoming year is the planned use of AI transaction scoring to analyse up to 100% of data sets, aiming to identify higher-risk transactions and improve audit efficiency. This technology has been successfully trialled on NHS audits and is being introduced for the first time in local authorities.

Significant risks identified for the HCC audit include the valuation of land and buildings, management override of controls, and the valuation of post-retirement benefit obligations. For the Pension Fund, the primary significant risk identified was management override of controls, with other areas of focus including the valuation of investments and the actuarial position of the scheme. The auditors confirmed that no non-audit services were planned, ensuring their independence.

HCC and Pension Fund 2025/26 Statement of Accounting Policies

The committee approved the 2025/26 Statements of Accounting Policies for both Hertfordshire County Council (HCC) and the Pension Fund. The primary amendment to HCC's policies for the current year relates to updated guidance from CIPFA concerning the valuation of property, plant, and equipment (PPE). This introduces a requirement for valuations to be conducted on a five-year rolling basis, supplemented by annual indexation in intervening years. Indexation is a method used to apply inflationary increases to assets between professional valuations to ensure their carrying value remains materially up-to-date. Hertfordshire County Council already employed a rolling revaluation model with indexation, and the new guidance has formalised this approach, prompting a review of the Council's indexation policy to ensure compliance with the CIPFA Code. The Council consulted with its independent external valuers, Carter Jonas, to determine appropriate indices for its various asset classes. No changes were made to the Pension Fund's accounting policies from the previous year.

Hertfordshire County Council – Annual Assurance Statement and Internal Audit Annual Report 2025/26

The committee noted the Annual Assurance Statement and Internal Audit Annual Report for 2025/26, which concluded that there is generally a sound system of governance, risk management and control in place at Hertfordshire County Council, with some identified areas for improvement. The Shared Internal Audit Service (SIAS) reported that 94% of planned audit days were delivered, and 90% of projects reached draft report stage. Client satisfaction was high at 91%. The report highlighted that four limited assurance audits were issued, with two already finalised. The committee also noted the continued robustness of the follow-up process for internal audit recommendations, with management actively engaging in their implementation. The results of the self-assessment against Global Internal Audit Standards indicated that SIAS generally conforms, with minor areas for improvement identified in formalising processes for recording potential impairments to objectivity and refining root cause analysis for organisational themes. The committee approved the 2026/27 Internal Audit Charter and sought management assurance that the scope and resources for internal audit were not subject to inappropriate limitations during 2025/26.

Annual Governance Statement 2025/26 and Code of Corporate Governance 2026/27

The committee approved the draft Annual Governance Statement (AGS) for 2025/26 and the updated Code of Corporate Governance for 2026/27. The AGS concluded that Hertfordshire County Council's governance arrangements continue to be regarded as reasonable and fit for purpose. Significant governance issues identified for 2025/26 include the ongoing Local Government Reorganisation (LGR) process, with detailed improvement actions and monitoring arrangements outlined. The AGS also provided an update on significant governance issues from the previous year, noting that the disclaimer on the Statement of Accounts had been removed, and the Accelerated Cause of Concern regarding fire prevention activity had seen two of the five recommendations closed. The committee was informed that the Council's external auditors, KPMG, had not identified any significant weaknesses in the Council's arrangements for financial sustainability, governance, or improving economy, efficiency, and effectiveness. The AGS also highlighted positive progress in SEND services, with the Improvement Notice lifted by the Secretary of State for Education. The updated Code of Corporate Governance sets out the Council's standing arrangements for ensuring good governance.

Future Work Programme

The committee noted the proposed future work programme, which includes reviewing the draft Statement of Accounts, Treasury Management reports, further updates on audits, and annual reports on whistleblowing, fraud, and internal audits. Risk management will also be a key focus, with a revised risk management framework and a risk-focused report on cyber security scheduled for the next meeting.