Councillor Mortimer replaced Councillor Grimston for this meeting.

There were no disclosures of interest.

The minutes of the meeting held on 30th September 2010 were submitted and signed.

The Committee received the formal report from Grant Thornton on the Use of Resources Assessment for Watford BC for 2008/2009. Richard Lawson of Grant Thornton attended the meeting to provide further information and answer questions.

Richard Lawson presented the report and highlighted the changes from last year. The Council had been scored as a strong level 2 (satisfactory performance) with significant potential to move towards level 3 performance in future years, provided the issues highlighted in the assessment were addressed. These recommendations had been discussed and agreed by the Head of Strategic Finance, the Interim Head of Finance and the rest of the Leadership Team. Richard Lawson informed the Committee that only two authorities in the country had scored level 4 across the board.

The Head of Strategic Finance commented on the valuable role played by the Budget Panel which demonstrated a good example of scrutiny involvement. He added that good progress had been made and confirmed that Leadership Team had contributed to the Action Plan to address the issues highlighted in the report.

A Member referred to the recommendation relating to the level of member scrutiny of the final accounts and asked whether this would be the responsibility of the Budget Panel or the Audit Committee. The Head of Strategic Finance confirmed that it would be the responsibility of the Audit Committee. He added that there would probably be a presentation before the accounts were next submitted to help make them easier to understand.

In response to another Member question, Richard Lawson gave an explanation of the new use of resources framework.

A Member commented that it was a pleasing report and commended officers on the work done. He referred to the recommendation on comparative costs and asked why the Council's costs were still not going down compared to others.

The Head of Strategic Finance responded that a programme of comparisons of the Council's high cost areas was being carried out to establish whether the Council was working efficiently. Work was being done on Environmental and Public Health Services to look at why Watford's charges appeared to be high. Planning and Development was another area to be looked at. It was hoped that by the end of March some useful comparative data would be available.

In response to a comment by a Member about the difficulties in obtaining comparative information, the Head of Strategic Finance agreed that such exercises could be time consuming and problematic. He advised that the Council was a member of the CIPFA benchmarking group for the HR function and which could be used for comparative purposes.

Another Member expressed surprise that, whilst all authorities might have the same objectives in terms of functions, there was still no real standardisation. He gave comparison of waste collection as a classic example.

The Committee received the formal report from Grant Thornton regarding the Annual Audit letter for 2008/2009. Richard Lawson of Grant Thornton attended the meeting to provide further information and answer questions.

Richard Lawson presented the report and highlighted the key areas. He commented that the Council had prepared good quality accounts and the auditors had provided an unqualified conclusion on the adequacy of the Council's arrangements for ensuring economy, efficiency and effectiveness in its use of resources. He drew Members' attention to the need for the Council to continue its preparations for the introduction of accounting under the International Financial Reporting Standards (IFRS).

The main area of concern related to the certification of grant claims, details of which were contained in Section 4 of the auditors' report and in particular the outstanding 2006/7 Housing Revenue subsidy claim. The auditors had also drawn attention to four reconciliations within the benefits system where discrepancies had been found.

The Head of Strategic Finance reported that the position in respect of the Housing Revenue subsidy was the same as last year and could potentially result in a £478K claw back from the Department of Work and Pensions (DWP). Contact would be made with the DWP again this year to try to avoid claw-back or to get the amount reduced considerably and he was confident this would occur. He would report back to the committee.

The Interim Head of Finance went on to explain the problems he had had in trying to use the on-line Government Gateway system for submitting the 2006/2007 claim. The on-line claim form had become corrupted and he was now waiting for the Audit Commission to give authority to him to get back onto the system again to certify the claim. Once the position had been resolved it would be necessary to apply to the Secretary of State for closure of the Housing Revenue Account.

The position in respect of the reconciliations in the benefits system was to be investigated by Internal Audit.

The Committee received the external auditor, Grant Thornton's Audit Plan for 2009/10. Richard Lawson of Grant Thornton attended the meeting to provide further information and answer questions.

Richard Lawson introduced the report. He drew the Committee's attention to the details in the report identifying areas of high risk and the auditors' response. He also referred to the timeline contained in section 4 "Planned outputs" and to the advice contained in Appendix A on IFRS implementation.

The Head of Strategic Finance advised that Richard would also be working for Three Rivers DC which would help with Shared Services.

The Chair enquired about the deficit for 2008/9 in respect of Building Control. The Building Control regulations required the accounts to break even.

The Interim Head of Finance said he hoped that the Building Control account would achieve a break- even position over a rolling three year basis, although that had not been achieved over the past few years. He added that the Council was looking at the possibility of a joint service with Three Rivers DC which should help bring it more into line.

The Head of Strategic Finance added that the situation could not be allowed to continue. The problem was mainly due to the fact that the income had reduced but support costs were still high.

The Committee received a report on the risk management issues for the period June to December 2009. It was noted that the Corporate Risk Manager was a shared post with Hertsmere BC and that she worked for just two days a week at Watford.

The Corporate Risk Manager introduced her report and drew the Committee's attention to the new risks added to the Corporate Risk Register and the sections on training and awareness and business continuity planning. It was noted that a business continuity training exercise had taken place involving all services to test the business continuity plans in place against the risk of severe staff shortage due to swine flu.

The Committee was asked to approve a revised Anti Fraud and Corruption Strategy, including the Whistle-blowing Policy.

The Audit Manager introduced the report. He explained that the last approval had been in March 2008 and that there had been no changes made to the Strategy since then as it had been decided to wait for the introduction of Shared Services and then take the opportunity to harmonise the two strategies.

He said that it was important to demonstrate a robust approach to fraud and corruption and that people felt able to report. The policies would be publicised to all staff including being placed on the Intranet.

In response to a question from a Member about when Three Rivers DC was likely to approve the policies, the Audit Manager explained that he was not sure of the process but understood it had to go through several committees there. He also advised, in response to another question from the Member, that in his 9 years at Watford Borough Council he had only known of 2 whistle blowing cases (one of which did not follow the process).

The Member asked whether any use of the policy would be reported. The Audit Manager explained that it would depend on the severity of the issue but in any event the "whistle-blower" would remain anonymous.

In response to a question from another Member about the level of benefit fraud in Watford, the Audit Manager said that such fraud was prevalent in every area but that the team was fully committed and stretched. There were no league tables but prosecutions were published.

The Head of Strategic Finance added that it was important to include details of the policies in the induction pack for new starters and to include in compact arrangements with voluntary organisations which the Council grant aided.

Richard Lawson advised that contractors should also have access to the policies. The Audit Manager responded that they were referred to in contract documents.

The Committee received a report and appendices providing information on the
work undertaken by Internal Audit in the period 1st September 2009 to 30th
November 2009. The Audit Manager introduced the report.

The Chair commented that he noted the reference to payroll in Appendix 3 of the
Report. The Audit Manager advised that he had a meeting arranged with the Head of HR to check on progress.

The Head of Strategic Finance informed the committee that Barry Austin would be taking over internal audit for Three Rivers District Council with effect from 1st April and that he would be discussing with him what areas within Watford to be looked at during 2010/2011.

A Member referred to Appendix 1 which related to work progress on individual audits. She commented on the number of issues and the fact that a number had run over time.

The Audit Manager agreed that some work had taken longer than anticipated and some of the delays had resulted from Shared Services where it was not always easy to set up meetings to discuss what was being done. Work was, however, prioritised, to ensure that key areas were covered.

The Committee received a report outlining the changes in financial reporting following the introduction of International Financial Reporting Standards (IFRS) to local government. The report highlighted:

•What IFRS was
•Why the Council was doing it
•What had been done to date by officers
•What the substantive changes were
•What effect it would have on the authority

The Interim Head of Finance explained that there was a lot of comparative information to pull together. A project group had been formed in conjunction with Three Rivers DC to work on a joint implementation exercise. Project plans were on track to be implemented on time and in accordance with the regulations.

He referred to the major substantive changes as outlined in the report, especially relating to the re-categorisation of leases and the valuation of individual components in buildings. Not getting this right could have a significant impact on the audit and he was working with external audit to ensure that this did not arise.

A Committee Member congratulated officers on the work done so far but added that it was important not to let other work slip as a result of the increased time and resources which it would take. She asked officers to keep a close watch on the situation and to flag up any concerns.

The Committee would receive regular reports on progress.

The Committee received a report setting out the Council's proposed Treasury
Management and Investment Strategy for 2010/11 together with details on
Treasury Management Practices.

The Interim Head of Finance introduced the report and explained each of the key recommendations in the report which would be considered by Cabinet on 18th January and submitted to Council for approval on the 27th. .

A Member asked whether Three Rivers District Council had accepted Watford's strategy. The Head of Strategic Finance explained that Three Rivers had different parameters but the intention was to harmonise if possible. He advised on the three key principles which Watford officers applied - SLY - Security, Liquidity and Yield in that priority order. He added that security was very much at the top and that he was looking at adopting a more conservative approach including limiting the number of building societies invested in to the top 5/6 by asset size. The downside was, of course, that the yield would be less.

The Committee received a report providing a review of the Council's Treasury Management performance for the eight months ending 30th November 2009/2010.
The Interim Head of Finance introduced the report. He drew Members' attention specifically to the section relating to base rates. It was noted that bank base rates were not expected to rise until September 2010 at the earliest and consequently the return that Members could expect on their investments would in turn remain static with an ultimate impact on the Council's budget.

The Head of Strategic Finance provided some background to Appendix A of the report which detailed temporary investments as at 30/11/09. He commented that, whilst some of the rates were derisory, he had to put security first.

In response to a request from the Chair, the Head of Strategic Finance provided the following list of the top ten building societies by asset size:

1.Nationwide
2.Britannia
3.Yorkshire
4.Coventry
5.Chelsea
6.Skipton
7.West Bromwich
8.Leeds
9.Principality
10.Newcastle

The Committee received a half year report of requests made under the Freedom of Information Act 2000. From 1st April 2009 until 30th September 2009 the Council had received 100 requests all but 8 of which were replied to in the required time. A list of the requests was attached as appendices to the report.

A Member noted the number of requests received. She asked officers to flag up with the Committee if they considered the number of requests was becoming too onerous.