The Audit and Governance Committee of Gloucestershire Council met on Thursday 22 January 2026 to review external audit reports, discuss the council's treasury management strategy, and consider updates on internal audit activity and the code of conduct for members. Key decisions included approving the appointment of a new Independent Person to the committee and noting the proposed treasury management strategy for 2026/27.

KPMG External Audit Report

Duncan Laird from KPMG presented the external audit report, summarising key findings from the 2024-25 audit. He confirmed that the audit was complete with no outstanding matters. A query was raised regarding related party transactions, and it was noted that the Finance Team is working to strengthen their systems to ensure all necessary responses are received in the future. Regarding the valuation of post-retirement benefit obligations, KPMG explained that their specialist team, who deal with the Pension Fund, found the actuary's view to be optimistic but that the overall position was not materially different. KPMG also confirmed they rely on external experts for the valuation of land and buildings due to its subjective nature. The committee noted that Gloucestershire County Council (GCC) was below the monetary threshold for reporting to the National Audit Office (NAO). In response to a question about the impact of the new SAP system's potential delay beyond its planned 1 April 2026 go-live date, the Executive Director of Corporate Resources expressed confidence that the system would launch on time, having passed the technology readiness gateway and successfully tested the payroll system. The committee noted the report.

KPMG Auditors Annual Report

Duncan Laird, Key Partner at KPMG, presented the Auditors' Annual Report, which summarises findings from the 2024-25 audit of Gloucestershire County Council. He confirmed that KPMG issued unmodified opinions on both the Council's and the Gloucestershire Pension Fund's financial statements on 24 November 2025, indicating that the statements provide a true and fair view of the council's financial performance and position. Members raised concerns about the Dedicated Schools Grant (DSG) deficit, acknowledging it as a national issue stemming from underinvestment. The Executive Director of Corporate Resources explained that this concern had been raised through lobbying groups and was being discussed with the Government as a priority, with the council awaiting the final settlement and the publication of SEND reforms to determine the full impact. She emphasised that this was a significant challenge for all local authorities, requiring national resolution to support special educational needs. The council acknowledged the growing DSG deficit as a significant risk to its financial sustainability, a point noted in the S151 officer's section 25 statement and quarterly monitoring reports to Cabinet. The Chief Executive, Executive Director of Corporate Resources, and Executive Director of Children's Service meet monthly with senior staff from Education and Finance to monitor finances, understand variances, and develop a recovery plan, building on the 'Delivering Better Value' programme. The DSG deficit had increased by £32.8 million in the current year to £78.5 million, with five-year modelling predicting it could exceed £110 million by March 2026 due to ongoing high needs funding challenges. The Executive Director stressed that children with Education, Health, and Care Plans (EHCPs) in Gloucestershire deserved quality education and that the authority was inadequately funded by the Government in this area. The final budget would be discussed at the February Council meeting. The Chair thanked KPMG for their timely report. The committee noted the report.

Annual Governance Statement Update

Darren Skinner, Head of Planning, Performance & Improvement, provided an update on the Annual Governance Statement (AGS) action plan. He explained that the AGS is a statutory document detailing the council's governance arrangements, and the 2024/25 statement was approved by the committee in September 2025. This report updated progress on the AGS action plan ahead of the 2024/25 self-assessment process. Eight of the nine identified governance issues were carried forward from the previous year. Mr Skinner noted that CIPFA had published updated guidance for the AGS, with a focus on improving engagement and effectiveness, particularly regarding the format of the AGS document and its accompanying Code of Corporate Governance. He highlighted an increased emphasis on member engagement in the self-assessment process, with the AGS being presented to the committee for discussion before and after drafting, and Lead Cabinet Members signing off director statements. During the discussion, a member raised concerns about ICT data sovereignty and the potential impact of the US Cloud Act. Mr Skinner reassured the committee that ICT was addressing this risk and that the council's primary systems were not US-based. The implications of the DSG deficit were also discussed, with members reiterating concerns about the funding formula disadvantaging Gloucestershire's children. Some members expressed dissatisfaction with the mileage app used for SAP, citing usability issues and additional work for users, and officers agreed to investigate these concerns. The administration costs associated with Local Government Reorganisation (LGR) were questioned, with some members viewing it as a financial drain that could be better allocated elsewhere and doubting its benefit to residents. The committee noted the progress made on actions to enhance good governance and suggested any further assurance required for the 2024/25 AGS self-assessment process.

Treasury Management Strategy

Gareth Rees, Head of Financial Management, presented the proposed Treasury and non-Treasury Investment Strategies for 2026/27. These strategies will be presented to Full Council in February as part of the Medium-Term Financial Strategy (MTFS) and were submitted to the Audit and Governance Committee for comment. The Treasury Management Strategy outlines how the council will manage its cash flows, borrowing, and investments for 2026/27, focusing on identifying, monitoring, and controlling financial risks. Key objectives include ensuring the security and liquidity of investments while achieving optimal returns, supporting council priorities within the 2026/27 MTFS, presenting the Minimum Revenue Provision Statement for 2026/27, and incorporating Responsible Investment Principles into treasury policies. Members were informed that training on these strategies was provided by treasury advisors Arlingclose on 16 January, which reassured them about the processes and detailed the authority's investments and borrowings. Mr Rees highlighted that the policies on responsible investment under Treasury Management Practice 1 (Risk Management) had been expanded. Fossil fuel investments represented only 0.4% of the total invested balance as of December 2025. The authority had disinvested from one fund, achieving a capital gain of over £500,000, reducing exposure to fossil fuels to just three funds. As required by the Code, key prudential indicators were presented to Cabinet quarterly through Budget Monitoring Reports. Arlingclose drew members' attention to the Liability Benchmark, used to guide borrowing and investment decisions, noting that the council was moving into a negative investment position, potentially requiring externalisation of debt due to approved and proposed capital programme increases funded by borrowing. The limit for longer-term investments had increased from £120 million to £150 million to provide greater flexibility. The Vice-Chair suggested that Stroud District Council's responsible investment policy was clearer and more concise, and members agreed to discuss this further with officers. The Cabinet Member for Finance, Assets and Transformation requested a list of areas the authority does not invest in for clarity, and officers agreed to circulate this via email. Members were assured that invested funds were actively monitored, and disinvestment occurred when appropriate. The cost of active management was requested for circulation. It was clarified that there was no exposure to cryptocurrency. The committee noted the proposed strategy for 2026/27, including the Minimum Revenue Provision Policy.

Anti Money Laundering Regulations & Guidance

Enver Enver, Director of Finance, reminded the committee of the council's responsibilities regarding money laundering and outlined the procedures in place to meet legislative requirements under the Proceeds of Crime Act 2002, Criminal Finances Act 2017, Money Laundering Regulations 2017, and Terrorism Act 2000. The Anti-Money Laundering policy had been updated to reflect the Economic Crime and Corporate Transparency Act 2023. Mr Enver reported that there had been no reported incidents of money laundering. The Chair suggested amending the guidance and training section of the policy to include staff and members, which officers agreed to do. The committee noted the report and agreed to the wording amendment.

Internal Audit Activity Progress Report 2025-26

The Head of Audit Risk Assurance (ARA) presented the report detailing progress against the approved Internal Audit Plan for 2025-26. The Chair declared she was a recipient of the Homes for Ukraine scheme. A member sought clarification on the number of high-priority audits and expressed concern about the lack of detail for red-rated audits. The Head of ARA clarified that the lead auditor had discussed the red-rated audits with the Senior Leadership Team and agreed to circulate further details. Members requested more context for cancelled or deferred audits, and the Head of ARA reassured them that the number of open recommendations had been resolved, agreeing that more narrative was needed. The committee noted the report.

Annual Report on Code of Conduct and Standards Regime

The Monitoring Officer (MO) explained the current standards regime, established by the Localism Act 2011, which places responsibility on councils for promoting high standards of conduct and handling complaints against members. Gloucestershire County Council's arrangements are overseen by the Audit & Governance Committee, with day-to-day handling of complaints managed by the Monitoring Officer, supported by two Independent Persons. The report provided an overview of Code of Conduct complaints against County Councillors in 2025 and the council's arrangements for promoting high standards. The appointment of the two Independent Persons was extended for a further four years in May 2025, and they were praised for their timely, well-considered, and unbiased contributions. The council received 25 complaints in 2025, a significant increase from previous years. Nineteen complaints were assessed, with ten rejected at the initial stage due to insufficient evidence or no breach of the code. In the remaining nine cases, informal resolution was pursued, resulting in six councillors issuing written apologies. Three complaints related to omissions in councillors' Registers of Interests, prompting an email to all councillors to review and update their registers, with further checks planned. The MO noted that the identity of councillors subject to complaints is not disclosed unless a case proceeds to a Hearings Panel. Despite the increase in complaints, all assessments were completed within timescales. The committee's support was sought for introducing an online complaints form on the council's website to ensure all necessary information is provided upfront, improving efficiency and reducing the risk of missed or misdirected complaints. The MO also detailed the Government's consultation on strengthening the standards and conduct framework, with proposals including a mandatory national code of conduct, required standards committees, a 'right to review' for decisions, a potential independent helpline for complainants, and legislative changes to allow for suspension and disqualification of members for serious breaches. The Chair requested an amendment to the wording regarding training, clarifying it was provided on a request basis, and agreed to add a footnote. In response to a question, it was noted that the Independent Persons do not receive remuneration, and this had not been raised as a concern, though it might be revisited in light of the Local Government Review. A member commented on the subjectivity of balancing freedom of expression with the rights of others and welcomed the online form. The MO acknowledged the importance of respectful political debate. It was suggested that a training session on the revised code would be beneficial once published. Members also noted the helpfulness of Equality, Diversity, and Inclusion training and encouraged its uptake. The committee noted the report, approved the proposal for an online complaints form, formally recorded gratitude to the Independent Persons, and noted the Government's proposals for strengthening the standards and conduct framework.

Appointment of the Independent Person to the Audit & Governance Committee

The Head of ARA presented the report, explaining that the Audit and Governance Committee's role had evolved, making an independent voice with appropriate knowledge and skills crucial, as recommended by CIPFA. The committee was asked to approve the appointment of Mr Matthew Regan as the Independent Person. Mr Regan, who lives in Stroud and has extensive experience in rail engineering management consultancy, safety, risk management, and incident investigation, was unanimously recommended by the interview panel. His experience as a Director for Women In Transport, a non-profit organisation focused on equality and diversity, was also highlighted. References confirmed his suitability for the role. The committee approved the appointment of Mr Matthew Regan as the Independent Person on the Audit & Governance Committee until May 2028.

A&G Committee Workplan

The committee noted the workplan.

Exclusion of Press & Public

The Board agreed to exclude the press and public from the meeting for the following agenda items in accordance with Section 100 A (4) of the Local Government Act 1972, due to the likely disclosure of exempt information.

Exempt Minutes of the Previous Meeting

The committee approved the exempt minutes of the meeting held on 26 September 2025.