There were no apologies for absence.

There were no disclosures of interest.

The Committee received a report on the work undertaken by Internal Audit for the period 1st September 2008 to 30th November 2008.

The Chair informed the Committee that he had received prior notification of specific questions from Councillor Martins relating to payroll, in particular the total overpayment and the total amount recovered. He also sought assurance that the process for notifying payroll of staff leaving had been strengthened.

The Audit Manager responded that the situation had improved significantly since the appointment of a new Payroll Manager and the recommendations in the action plan had been implemented and more robust checking measures established. However, errors which had occurred prior to his appointment were still coming to light but these should reduce over time. A data cleansing exercise was to take place which could possibly identify further errors. With regard to the issue of staff leaving, the Managing Director had written to all Heads of Service emphasising the need to notify Payroll. Some unavoidable overpayments occurred when people left abruptly just before pay day.

There were 21 cases of overpayment amounting to figure of £32.5K. In 16 cases repayments had been made or arrangements were in hand for repayment amounting to a total figure of £17.5K. This left a figure of £15K still to be recovered.

The Audit Manager went on to present the rest of the report. He drew Members' attention specifically to the range of risks arising from Shared Services and also sought the Committee's approval for the deletion of the "thin client" audit as there had not been sufficient progress to carry out a post implementation review.

In response to a Member question about the reasons for the delay on this audit, the Audit Manager said that it was due to unforeseen technical issues. The Director of Finance added that some departments had had difficulty accessing certain systems.

A Member asked about the likelihood of recovering the outstanding £15K Payroll overpayments. The Audit Manager explained that the normal procedure would be followed, with the Payroll Manager attempting to recover the monies in the first instance. All recovery options would be pursued and the cases could ultimately be taken to court. However, each case was dealt with on a individual basis and Heads of Service could recommend write offs to the Director of Finance if appropriate.

The Committee received a report reviewing progress made in strengthening risk management arrangements.

The Director of Finance introduced the report. She explained that Health & Safety reports would resume from March as a replacement Health & Safety Officer had now been appointed. He was a very proactive officer and had already suggested a number of improvements.

With regard to Emergency Planning and Business Continuity, she explained that a number of incidents had occurred recently including a major power cut which had knocked out the IT system. This had led to BIS looking at improvements which could reduce the impact of this happening again in future.

Four places had been taken up on a forthcoming Herts Resilience Training event.

It was hoped that the insurance claim for the flood damage to the Town Hall in 2006 would be settled sooner rather than later and the Director of Finance commented that there was no reason to expect any dispute with the insurers. She added that quite a lot had been learnt about the infrastructure of the Town Hall building following the flood and some proactive work was now being considered, for example repair work on pipes.

A Member asked about the benefits of Shared Services and whether any reciprocal agreements were in place, for example, in respect of accommodation.
The Director of Finance said that this kind of arrangement would be easier once the housing staff had moved out of Three Rivers DC's offices. She added that Three Rivers DC had helped the Council out during the flood by taking calls. BIS was also looking at whether servers should be located at the County Council facility where it would be away from the area and safer in the event of a Watford power cut. During the flood, it had been possible to re-direct telephone calls to Three Rivers.

A Member asked whether there were any plans to reinstate the Risk Champion. The Chair agreed to take this up with his Group Leader. The Director of Finance said that previously, under "use of resources", it had been important to demonstrate that it made a difference. However, not having a Member Champion had not led to criticism in recent assessments where the focus was more on outcomes. It was important that Members demonstrated an awareness of risk management. A Member commented that this was the role of the Audit Committee.

The Committee received a report setting out the Council's treasury management activities during 2008/09 to date, and proposing a Treasury Management and Investment Strategy for 2009/10. Certain changes to the existing policy were proposed in the light of the increase in funds being managed, the recent banking crisis and other developments.

The Chair said that there were two questions he was regularly asked by residents:

•Why, if the Council had so much money, did Council Tax keep going up and why was money so tight
•How had Watford Borough Council managed to avoid investing in Icelandic banks - what did they know?

The Interim Head of Finance explained that there were rules on how local authority money could be spent and using capital receipts to reduce Council Tax was not permitted. However interest received, which even now was around £1M, made a significant contribution to the revenue fund and helped keep Council Tax down.

With regard to the Icelandics, he explained that officers had heeded warnings and when the Council's investments in Iceland matured last year, they had decided not to re-invest.

The Interim Head of Finance then went on to introduce the report. He drew Members' attention to an error in 5.6 of Appendix B in respect of deposits with non rated building societies; the limit should read 50% and not 70%.

In response to a Member question about these limits, the Interim Head of Finance explained that an investment table was maintained and updated constantly to ensure the limits were not exceeded. He added that placing money was not as easy as it seemed but that there were checks and balances in place.
The Director of Finance explained that, when the stock transfer funds came in, it had been necessary to invest in a number of places and getting a good return and ensuring security had seemed more important than complying with limits.

A Member commented that there seemed to be an inconsistent approach to use of the Co-op Bank. He noted that the Council used the overnight deposit facility at the bank even though it did not meet the Council's minimum credit rating.
The Director of Finance explained that the Co-op was appointed as the Council's bank back in 2002 and the use of the bank as an investment counterparty was a secondary consideration. The Council's money was deposited with them so it made sense to use their overnight facility. It was very short term and was only used to invest surplus funds at the end of the day. She added that banking services would be looked as part of the Shared Services arrangement. She said that It might also be sensible to use Money Market Funds as an alternative investment facility for some of the funds. The Interim Finance Manager commented that it was often impractical to place short-terms funds with other banks.

Members acknowledged that a balance had to be struck between security and the need to obtain returns.

The Chair thanked the interim Head of Finance for presenting the committee with a very comprehensive and helpful report.