There were no apologies for absence.

There were no disclosures of interest.

The minutes of the meeting held on 14th January 2009 were submitted and signed.

The Chair informed the Committee that this would be the last meeting Janice Maule would be attending as she was retiring from the Council. He thanked Janice on behalf of the Committee for all the work she had put into the meetings and her guidance.

Janice thanked the Chair for his comments. Initially she had been sceptical about the need for another Committee, but Members had engaged themselves in the work and had been interested in the subject, making the meetings very worthwhile.

The Committee received a report of the Head of Legal and Property Services setting out the half year report of requests made under the Freedom of Information Act 2000.

Members noted the increased numbers of requests made under the Act. The Portfolio Holder was concerned about the amount of resources required to respond to the questions, as many of the requests involved more than one question. He believed that interest groups would be asking more questions leading up to the elections. In small sections, if an officer left the Council, it could be difficult to retrieve the relevant information. The Chair noted the Section 106 request and felt that a lot of work was needed to respond to it.

A Member commented that it was important people did not feel the Council was reluctant to respond to questions.

The Committee received a report of the Director of Finance including a summary of the external auditor's progress on the current year's audit work.

Martin Grundy advised the Committee that the report was for Members to note. There were two areas he wanted to highlight. The first was that the Audit Commission had brought forward the audit timetable and the work had to be finished in the calendar year. He added that the current year's audit work was on track.

Following a question from the Chair about the next Use of Resources report, Mr Grundy advised that the initial findings would be ready in June and the final report in September.

The Director of Finance informed the Committee that the Annual Audit Letter would be presented at the Committee's June meeting.

The Committee received a report of the Director of Finance which included a report from the Council's auditors relating to the Council's arrangements for securing economy, efficiency and effectiveness in its 'Use of Resources' arrangements in a number of key financial areas.

Richard Lawson informed the Committee that the 2008 report's assessment work had been carried out between July and August 2008. He advised that the Council had been awarded an overall level 2. There had been improvement on the previous year.

Martin Grundy added that level 1 was the lowest scoring level and 4 was the highest. Level 2 was considered to be satisfactory and the Council was a strong 2.

Richard Lawson then outlined some of the key elements in the report. He referred to paragraph 2.19, which showed a reduction in score from 3 to 2. The reason for this was because they had not been able to see performance option appraisals when the Council considered its capital projects. He advised that the Comprehensive Area Assessment increased the emphasis on outcomes rather than management arrangements. The auditors were currently in discussions with officers about the new approach.

The Portfolio Holder stated that the recommendation asked the Committee to note the report. However, Cabinet would welcome Members' views and recommendations on the use of resources.

The Director of Finance informed the Committee that officers had concentrated on financial reporting during this year as it had been awarded a level 1 category in the previous year. The increase to level 2 had validated the emphasis officers had put into this work. The new auditors had asked for information that had not been requested previously and was not available, otherwise a score of 3 could have been reached. She had been disappointed that the Council had not gone back up to a level 3 for financial standing. The shortcomings in some of the areas appeared to be based on documentary evidence rather than what actually happened. The details were not necessarily minuted in one to ones or management meetings. Officers tended to just get on with the work. If the process had remained the same, this could have been concentrated on and these issues picked up for 2009. However, due to the changes, the future was unclear. It was hoped that the way the auditors proposed to work with officers would help the Council to identify everything in time. The Council should be in a reasonable position to secure level 2 and to hopefully move forward. The Director of Finance commented that Members needed to consider how much resource was put into the work in order to try to get a level 3 award. It had cost the Council a lot of money to get the accounts right by bringing in experienced staff. She added that initially Shared Services would be a drain on staff time.

The Chair said that it was interesting to note that if the Council had put in more resources, it might have been possible to be achieve level 3.

A Member referred to the section about 'probity', which had moved from level 3 to 2. He said that he could not see what the Council needed to do to get back up to level 3. He commented that the Council had got to its current financial position from a poor base. He suggested that the Council should be aiming for level 3 even if it remained at level 2.

Martin Grundy explained that the key areas for improvement were the Standards Committee and internal audit time. The report noted that time allocated to fraud and corruption work had not been fully used.

The Audit Manager responded that the service had completed the piece of work in less time than allocated, as officers had been able to use an Audit Commission questionnaire and analysis software used by the Better Performance Unit. Other work had also been carried out relating to fraud that had not been shown on the work plan. Furthermore, the time allocation for work on the Benefit Fraud Inspectorate's recommendations had been exceeded by two and a half days. He said that he was disappointed by the comments in the report.

The Director of Finance informed the Committee that officers had not had the opportunity to discuss the assessment before the scores were finalised. It was difficult due to the shortened timescale.

The Portfolio Holder stated that the report showed the value of having notes of meetings. They could show the reason things had been changed. He had learnt this himself through experience. The documentary evidence would be even more important under the new regime. This would have an effect on staff time, as work would need to be put in order. Cabinet would also need to bear this in mind when making decisions. It was important to ensure staff were not put under pressure which could result in a proper audit trail not being maintained.

A Member referred to the comments about probity and said that if there were resources in place to deal with fraud, it was good if incidents were picked up. If incidents of fraud were not picked up this was not good. However, there might not have been any problems in the first place.

The Director of Finance advised that officers had had a discussion about the Standards Committee. There were not many problems related to Members' behaviour which needed to be considered by the Committee. Previously she had challenged the District Auditor about probity as there had not been any cases. At that time the response had been that Members had not had up to date training. It was difficult to prove a negative.

Martin Grundy commented that the old 'Use of Resources' assessment had a framework in place and work was checked off the list. The new assessment had become more outcome focussed and was more tailored to individual authorities.

The Vice-Chair commented on the risk management training and said that it was embedded throughout the Council. She was aware there had been a number of training sessions. She asked what the next steps would be.

The Director of Finance advised that the training needed to be tailored to individuals' needs. The majority of officers needed general awareness, for example health and safety in relation to employees and the public. There was a continual programme of training. Not everyone needed the same level of understanding as Heads of Service. Lunch and learn sessions were held. The Audit Manager added that two lunch and learn sessions had been held in February.

The Vice-Chair asked whether there was evidence it was being effective. The Audit Manager responded that the previous Risk and Insurance Manager had conducted sessions for Services and the Interim Manager had held the two lunch and learn sessions for managers who had not attended the original training programme and for new managers. Approximately 25 people had attended the two sessions. There had been interesting debates and issues raised would be included on the agenda for the Risk Management Group to discuss.

The Director of Finance advised that one example was that an officer had asked through the Managing Director's questions on the Intranet, why it was not possible for everyone to see the Risk Registers. Originally there had been concerns about this, but the Risk Registers had now been published and accessible by all staff. This showed that people were thinking about risk.

Following a further question from the Vice-Chair, the Audit Manager explained that officers were in the process of producing some guidance notes for publication on the Intranet.

The Portfolio Holder advised that in relation to Members' behaviour, the majority of Councillors were not connected to the local business community and there was a high level of delegation to officers. This meant that there was less opportunity for Councillors to get into trouble. This placed an emphasis on the Audit team's work and the need to have evidence. He commented that Shared Services was on the Risk Register. There were a couple of issues in the report. One of these related to long term debtors, which was an issue in Revenues and Benefits. The new Head of Service was trying to put together procedures for following up these cases, as there had not been clear procedures in place. Another issue was the cost of services. It had been a fascinating report and had provided the Council with a number of challenges.

The Chair commented that the Portfolio Holder had asked the Committee for comments that could be fed back to Cabinet. He said that Value for Money was important and needed to be carefully looked at.

The Portfolio Holder added that, from the discussions, he had noted risk training was important and that internal control needed to be sufficiently resourced.

A Member asked for clarification on paragraph 2.39. He said that it referred to performance management and not the outcomes perceived by the public.

The Director of Finance advised that the performance indicators were reported to central government. Public satisfaction was measured by some indicators. They did not explain whether the Council was spending more on a service because it was doing more. One problem had been that the use of resources had been seen as a financial issue. Under the new scheme all services needed to be engaged in the right way. It was necessary to show that it was embedded in everyday work. The message to Cabinet was that the use of resources was as important as other areas of work.

The Vice-Chair asked how often the action plan would be presented to the Committee for monitoring.

The Portfolio Holder suggested it might be useful to have an update at the June meeting.

The Committee received a report of the Audit Manager providing information on the work undertaken by the service for the period 1 December 2008 to 28 February 2009. The Audit Manager reported that there were no major issues. It was estimated that 90% of the plan should be completed by the end of the financial year.

The Committee received a report of the Audit Manager setting out Internal Audit's Service Plan and the proposed work plan for the coming financial year.

The Audit Manager advised that the work plan helped the service to meet its objectives. Shared Services would be implemented throughout the coming year. At Three Rivers District Council the Internal Audit Service was provided by an external company. An issue in 2009/10 would be how to the two audit teams avoided duplicating work on new systems under the new structures. He had met managers at the Council and Deloittes to start to discuss a way forward. He would report back to Members as work progressed. He added that Members needed to be assured that systems would be robust and good controls would be in place. It was possible that something unforeseen could happen requiring changes to the audit plan and the Committee would be consulted.

Following a question from the Chair about the location of the team, the Audit Manager advised that Finance and ICT would be located at Three Rivers District Council. The other services, Human Resources and Revenues and Benefits, would be located at Watford. Initially his team would be based in Watford and at a later date would move to Three Rivers District Council.

The Audit Manager added that when the Finance team moved to Three Rivers, there would still be two financial systems in place. Arrangements had been made to ensure that next year's final accounts would be completed by separate teams.

The Director of Finance said that the two sets of accounts would be closed simultaneously. There would be resource over and above the future staffing levels to ensure this could be carried out properly on the existing systems.

The Portfolio Holder advised that the ICT server was being moved to Apsley, to the County's server room. This would assist in the triangulation of the two Councils' computer systems. Neither Council could afford to have their servers down. In the future it was hoped to move to common systems as contracts expired. This explained why the implementation of Shared Services was expensive. It was necessary to ensure it was done correctly.

The Committee received a report of the Director of Finance updating the Council's existing Code of Corporate Governance in line with current advice. The aim was to be more focussed on the outcomes that good governance should produce.

The report had been considered by Cabinet at its meeting on 23rd February, where it was resolved to recommend the adoption of the updated code to Council. It was also considered by members of the Standards Committee on 4th March, who noted the contents of the report.

The Director of Finance advised that this would refresh the 2003 Code. It was necessary to provide evidence to show that the Council had complied with its own Code when preparing the Annual Governance Statement. She asked the Committee to consider whether there was anything it was felt should be incorporated in the Code or ought not to be reflected in it.

A Member commented that the Code appeared to be challenging and ambitious. He felt there would be more challenges as the Council moved into the new year with regard to investment and maintaining partnerships. He said that the challenge would be for Cabinet to make sure that resources were available, as he considered there could be a strain on existing resources.

The Portfolio Holder advised that Cabinet was aware of these issues. He commented that there were many areas the Council could only try to influence as it did not have direct responsibility for them. Problems could arise when the dominant partner said they were unable to spend time on a project. The challenge in this circumstance would be how the Council could increase its influence without taking over lead responsibility. It would be necessary to judge each partnership. One benefit was that Watford was not a one employer town, unlike some other towns and cities.

The Portfolio Holder stated that the Code was ambitious; however, much of it was already being done. For example, the membership of the Council was generally representative of the local community in relation to ethnicity and gender. However, as in most authorities surrounding London, there was an under representation of Afro-Caribbean and Eastern European members. He said that Members' training at the Council was very good. One area that needed to be considered was continuity within a Cabinet government. It was necessary to provide non-Cabinet Members with experience of responsibility. It was important to mentor people. The loss of a Cabinet Member would be very significant. The same approach was also necessary for officers, ensuring there was a proper foundation to develop officers' skills.