There were no apologies for absence.

There were no disclosures of interest.

The minutes of the meeting held on 18th March 2009 were submitted and signed.

The Audit Commission issued an annual letter to Members summarising its work during the past year. The report had been circulated to Members previously and also reported to Cabinet on 21st April. It was now presented to the Audit Committee for formal consideration.

Richard Lawson presented the Letter and highlighted the key points. He explained that, in respect of Use of Resources, there were no areas where the Council had scored below the minimum requirements and that the score within financial reporting had actually increased from a level 1 marking in the prior year to a level 2 marking this year.

He also referred to the one outstanding grant claim which could not be signed off until the 06/07 claims had been signed off. In response to a question from a Member on this issue, the Interim Finance Manager explained that the delay had been due to the time waiting to get a response from the District Auditor. One claim for 07/08 had now been settled but the District Auditor needed to deal with the 06/07 claim. It was anticipated that it would be possible to close the HRA by the end of the year.

A Member asked about changes which might occur with the introduction of CAA. Richard Lawson responded that the five current themes would be reduced to three and there would be a move away from box ticking and towards more rounded judgements. The aim was to establish greater consistency within the auditing process.

The Committee received the Audit Manager's Annual Report on the work of the Internal Audit Service for 2008/2009 and his opinion of the adequacy and effectiveness of the Council's control environment.

The Audit Manager introduced the report referring specifically to the Audit Opinion outlined in paragraph 2 of the report. He added that the report demonstrated a continuing trend of improvement and a general reduction in the number of recommendations made.

He drew the Committee's attention to the concerns raised in paragraph 5 of the report with regard to creditor payments and also the process of appraising contractors and suppliers. Instructions had been issued to all Heads of Service in respect of the creditor payments and a further analysis showing the latest position requested. He would be reporting back to the committee on the situation regarding contractors/suppliers in due course.

A Member raised the issue of risk management, which he had raised on numerous occasions previously. He said he could not understand the apparent reluctance of managers to take the matter seriously.

The Audit Manager responded that the situation was improving and the recruitment of a permanent Risk Manager had brought about a noticeable change. He commented, however, that it would never be possible to achieve 100% perfection in this area.

The Head of Strategic Finance added that he now attended service planning preparation meetings where he gave an overview of the financial position and also emphasised the importance of risk management. It was important to include risk management in each area of the service plan and risks identified should be included in the risk register.

In response to a question about monitoring risk management, the Audit Manager explained that it was a difficult issue to quantify but action was being taken to raise awareness, including training sessions, guidance notes and publicity. The Head of Strategic Finance added that an audit had been carried out on two areas and had identified room for improvement. A report had been considered by Leadership Team to ensure that improvement and consistency would occur. There was also a section in the Corporate Plan on risk management which had not been included before.

The Accounts and Audit (Amendment) Regulations 2006 required that an annual review of the effectiveness of its system of internal audit was carried out. The Committee received a report considering the evidence to support the view that it had been effective over the past year. It was noted that it should be read in conjunction with the Audit Manager's Annual Report set out elsewhere on this agenda.

The Head of Strategic Finance introduced the report and commented that he was impressed with the amount of audits carried out and the standard to which they were done. The recommendations were clear, concise and actioned by Heads of Service. The external auditors also valued the Audit Manager's views and had actually reduced their fees because they were able to rely on the work done by him and his team.

The Chair asked whether the Audit Manager always instigated the audits. The Audit Manager said that he did approach Heads of Service and ask whether they felt there were any areas which would benefit from an audit. He also carried out risk assessments and incorporated them into the Audit Plan by giving them a high, medium or low risk rating.

The Committee received a report on minor changes to Internal Audit's work programme for 2009/10. It was noted that the part of the reduction in audit days resulting from the re-allocation of work was to be allocated to income and expenditure controls at the West Herts Crematorium. The Chair welcomed this proposal as the Crematorium had recently incurred a lot of expense with the purchase of 2 new cremators and had also had staff sickness issues.

The Committee received a report attaching the Annual Governance Statement that the Council was required to produce annually, for inclusion in the Statement of Accounts. Supporting evidence was set out in an appendix to the report. Best practice required that Members considered this separately from the accounts.

The Head of Strategic Finance introduced the report. He said this was a key document for the external auditors and provided a wider view than just finance. The external auditors required evidence that the Council was operating proper governance. He drew Members' attention to paragraph 4.14 of the report which identified areas for improvement.

A Member advised that Watford Community Housing Trust should be added to the list of key stakeholders forming the Local Strategic Partnership.

The Committee received a report providing an overview of Risk Management issues over the past year. It also included the current version of the Corporate Risk Register.

The Audit Manager introduced the report. He referred specifically to the flu pandemic and assured the Committee that the Council had planned a response. He also advised that the insurance claim relating to the flood damage had been settled satisfactorily the day before the meeting.

A Member asked whether the Council's response to the flu pandemic included residents. The Audit Manager advised that the emergency response plan was about keeping Watford Borough Council services running. Other agencies would have plans which included residents. He added that it had been indicated the pandemic would be much worse in the Autumn and a desk top exercise was being organised to help test the Council's preparation for the worst, should it occur.

The Committee was asked to receive and approve the Council's Final Accounts for the financial year 2008/09, and the statutory Statement of Accounts.

The Interim Finance Manager introduced the report and thanked the Finance Team for the work they had done in preparing the accounts. He reported two amendments to the figures quoted in the report: The outurn figure was £15.292 million and not £15.296 million, creating a variation of £0.644 million before transfer rather than £0.648 million and the transfer to the General Fund Working Balance was £359K rather than £363K.

A Member drew the Committee's attention to an error on page 53 of the statement in the paragraph on Members and Chief Officers. Councillor Laventure and not Councillor Baddeley was the nominated representative on the Board of the Watford Community Housing Trust. She also asked about the under-spend of £106K on the Disabled Facilities Grant.

The Portfolio Holder explained that a "log jam" had been caused as a result of Occupational Health prioritising social housing rather than private. This had created a disparity between the Trust and the private sector. The situation was gradually being worked through but he agreed that each sector should be treated equally and endorsed the Member's view that the organisations should work together. It was important that all the funds were used but it was difficult where organisations were involved which the Council did not control. The Head of Strategic Finance agreed to raise the matter with the Head of Community Services. It was noted that the budget had been increased part way through the year.

A Member asked whether it was possible to establish one Occupational Health Team to deal with the less difficult cases and one to work on those which were more complicated. The Portfolio Holder responded that this was a County responsibility but he understood officers were working on the problem.

In response to a question from the Chair, the Interim Finance Manager gave an explanation of the term "contingent asset" referred to on Page 79 of the Statement. Put simply, it was an asset arising from a previous event which was uncertain at this time and could not therefore be included in the accounts. The two situations referred to related to VAT claims.

A Member asked how the money would be spent if received. The Interim Finance Manager responded that this would be a political decision.

The Chair asked about the position in respect of the HRA fund. It was explained that a few assets remained but an application had been made to appropriate the balance into the General Fund and this had been successful. The HRA would, however, have to remain open until the outstanding claim had been resolved. Items in the HRA related to the pre-transfer period e.g. rent arrears. The balance of the HRA once closed would eventually be transferred to the General Fund.

A Member thanked officers for a very easy to read and understandable statement.

The Head of Strategic Finance and the Chair of the Committee each signed the Statement of Responsibilities.

The Committee received a report providing a brief quarterly review of the Council's Treasury Management performance for 2008/2009 and arrangements up to the present time regarding investment strategy.

The Head of Strategic Finance advised that HCC was carrying out training on treasury management. He would check whether the training was appropriate for Watford councillors. He added that it was important for Members to increase their knowledge base.

He advised the Committee of a correction to paragraph 5.1 of the report which stated that only the top 6 building societies by Group Assets would be used. West Bromwich Building Society had now moved up to position 3 knocking Skipton Building Society, which the Council used, to position 7. The Council would therefore use the top 7 building societies rather than 6.

It was noted that it would probably be necessary to place a tranche of the portfolio with the Government Debt Management Office although use of this facility would be kept to a minimum as the interest rate was very low. The Interim Finance Officer informed the Committee that he had approached the Office three weeks ago and was still waiting for a response.

The Committee would continue to receive quarterly updates on the Treasury Management position.