The Audit Committee of Durham County Council met on Friday 29 May 2026 to discuss a range of governance, audit, and financial matters. Key topics included the governance arrangements for the Aykley Heads development, audit strategies for the council and its pension fund, and progress reports on internal audits and strategic risk management.

Aykley Heads Company Governance Arrangements

The committee was scheduled to receive a presentation on the governance arrangements for the Aykley Heads development, a joint venture between Durham County Council (DCC) and Muse Developments, with a collaboration agreement with Durham University. The presentation was expected to cover the ambition for the Aykley Heads Innovation District, which aims to create up to 38,468 sqm of floorspace, support up to 4,000 knowledge-intensive jobs, and enhance the region's innovation economy. The plans included the development of an Innovation Hub as part of Phase 1, supported by £27 million from the North East Combined Authority (NECA). The demolition of County Hall was also scheduled to facilitate Phase 2 development, with works anticipated to begin in January 2027. The presentation was also set to detail the joint venture structure, key contracts such as the Members Agreement and Conditional Land Sale Agreement, and the decision-making processes within the joint venture, including provisions for deadlock and exit. Key legal risks and mitigations were also to be discussed, focusing on ensuring a viable scheme, maintaining partnership relationships, controlling the site, and mitigating delays in delivery.

Audit Strategy Memorandum Durham County Council

The committee was to consider the Audit Strategy Memorandum for Durham County Council for the year ending 31 March 2026, presented by the external auditor, Forvis Mazars LLP. This document outlines the planned scope and timing of the audit, including significant and enhanced audit risks. The report detailed the audit approach, which is risk-based and includes planning, interim work, fieldwork, communication, and completion phases spanning from February 2026 to November 2026. Significant risks identified included management override of controls and the valuation of land and buildings, with planned responses to address these. The memorandum also set out materiality levels for the audit and detailed the proposed audit fees. The auditors confirmed their independence from the Council, adhering to the FRC's Revised Ethical Standard. The framework for Value for Money work was also outlined, focusing on financial sustainability, governance, and improving economy, efficiency, and effectiveness.

Draft Audit Strategy Memorandum Durham County Council Pension Fund

A similar Audit Strategy Memorandum was scheduled for discussion concerning the Durham County Council Pension Fund for the year ending 31 March 2026. This report, also from Forvis Mazars LLP, detailed the planned audit scope, approach, and timeline, including planning, interim work, fieldwork, communication, and completion phases. Significant risks identified for the Pension Fund included management override of controls and the valuation of investments within level 3 of the fair value hierarchy, particularly concerning unlisted property funds managed by CBRE and BCPP. The planned responses involved detailed testing of valuations, comparison to supporting documentation, and review of valuation methodologies. Materiality levels for the Pension Fund's financial statements were also set out, along with proposed audit fees. The auditors confirmed their independence from the Pension Fund.

Internal Audit Progress Report for the Period Ended March 2026

The committee was to receive an update on the work undertaken by Internal Audit during the period 1 April 2025 to 31 March 2026, as part of the Internal Audit Plan for 2025/26. The report aimed to provide assurance on internal controls, advise on areas needing improvement, report on other audit work, detail amendments to the plan, track progress on recommendations, and update on performance indicators. Appendices to the report included performance against the plan, final reports issued, actions raised and implemented, performance indicators, and details of overdue actions and limited assurance reviews (which were to be discussed in Part B of the meeting). The report highlighted that 81% of planned productive audit days had been delivered, below the target of 90%, partly due to staff absences and vacant posts. It was noted that 95% of all recommendations raised had been implemented.

Internal Audit Strategy, Charter and Plan 2026/2027

The committee was asked to review and approve the Internal Audit Strategy 2026-2030, the Internal Audit Charter, and the Internal Audit Plan for the period 1 April 2026 to 31 March 2027. The strategy, updated to align with the Global Internal Auditing Standards (GIAS) in the UK Public Sector, outlines the function's medium-term approach, focusing on enhancing effectiveness and delivery. The Charter, also updated to reflect GIAS, formally defines the internal audit service's operations, authority, and governance. The proposed annual plan for 2026/27 was developed using a risk-based approach, incorporating work carried over from the previous year, planned assurance work, due diligence, service requests, grant certification, contingency for emerging risks, and follow-up on recommendations. The plan allocated an estimated 4,010 days for audit work.

Other items scheduled for discussion included:

• Audit Strategy Memorandum Durham County Council Pension Fund
• Internal Audit Progress Report for the Period Ended December 2025
• 2025-26 Changes to the Code of Practice for Local Authorities in the UK and agreement of Accounting Policies for inclusion in the Statement of Accounts
• Corporate Governance Review and Final Accounts Timetable for the Year Ended 31 March 2026
• Counter Fraud and Corruption Strategy 2026-2030
• Corporate Fraud Response Plan and Sanctions Policy
• Anti Money Laundering Policy
• Confidential Reporting Policy
• Draft Internal Audit Plan 2026-2027

Part B of the agenda included an item on the Internal Audit Progress Report for the Period Ended December 2025, which would be considered in private.