The authority launched an investigation following allegations from a whistleblower in January last year.
The allegations related to irregularities in highways repairs records and erroneous charging for plastic gullies between 2002 and 2012.
As a result Amey Lafarge has now agreed to repay the council £279,202.
A statement released by the council to the Watford Observer said: “Allegations of improper practice were made against particular employees of Amey Lafarge, one of the partners in our former highways contract, last year.
“We carried out a detailed investigation at the time, with the co-operation of the contractor.
“This thorough investigation found irregularities which resulted in a rebate from Amey Lafarge to the county council and internal disciplinary action at Amey Lafarge.
“At the time, we also informed Hertfordshire Constabulary, whose view then was that this was a civil, rather than a criminal matter.
“As we had already investigated this matter and were satisfied by the action taken by Amey Lafarge at the time, this decision by the police brings this matter to a close.”
Amey Lafarge was replaced by Ringway as the council’s highways contractor last year.
In a statement Amey Lafarge said: “Amey Lafarge takes any allegations of fraud extremely seriously.
“A thorough internal and independent investigation was carried out into a small number of employees at the time and appropriate disciplinary action was taken.
“We are pleased that the decision made by the police brings this matter to a close.”