Councillor Khan replaced Councillor Martins and Councillor Johnson replaced Councillor Mortimer for this meeting.

There were no disclosures of interest.

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

The Committee received the external auditor's Annual Report to those Charged with Governance for the financial year 2009/10. Richard Lawson and Paul Dossett of Grant Thornton were present at the meeting to present their report.

Richard Lawson advised that the auditors were pleased to be able to issue an unqualified opinion on the accounts for 2009/10. He drew the Committee's attention to a couple of points: The liability of the clawback of housing benefit which had been reduced from £3.5million to £189,000 after further evidence was provided. With the forthcoming audit of the 2009/10 claim it was recommended that an advance cleansing of the data be carried out which would subsequently resolve any issues in advance of the audit.

The Richard Lawson also referred to the Housing Revenue Account. Once the claim had been successfully audited the Council could apply to the Secretary of State for the closure of the HRA. Successful application would result in the transfer of balance of £1.2 million from the HRA to the General Fund.

A few other improvements had also been suggested by the auditors along with an action plan which would be followed up next year.

A Member put three questions to the auditors:

Whether the Council Tax/NNDR position had been resolved (1.5 of the Statement); the situation in respect of the pension fund (1.9 of the Statement) and how value for money would be assessed once the assessment regime was scrapped, (1.12 and 1.13 of the Statement).

Paul Dossett responded that value for money scoring would cease from January 2012 and it was not clear at this stage whether it would be replaced by anything else. The auditors would, however, continue to make judgements on value for money beyond this date. He accepted the Member's point about how the Council could demonstrate value for money if the regime was no longer in place.

The Head of Strategic Finance added that the Council was very proactive in ensuring value for money and was currently looking at severe efficiency savings to meet the Government's demands. Officers were also seeking information from like minded authorities who were carrying out similar exercises to make comparisons.

Paul Dossett then responded to the Member's question about the pension fund. He said this was a major issue affecting all local authorities. The Government had commissioned a review following concerns that the level of the deficit may require a potential increase in employee contributions.

In response to a question from the Chair about how the Herts County shortfall of £78million compared with others, the Head of Strategic Finance said that Herts was typical of most authorities - 50-60% funded. There would probably be a need to tighten up in the future although the County had indicated that the move from basing the figures on RPI to CPI could bring about a small improvement of around 6-8%. The County had actuarial valuations being carried out at present and had asked Herts authorities what they wanted to do. All the authorities except Dacorum had opted for an increase in employer contributions of 1% year on year with effect from April 2014. Dacorum had opted for a start date of April 2011. It was expected that the Government would ultimately change the scheme to make it less expensive.

Paul Dossett then responded to the Member's question on Council Tax and NNDR. He confirmed that further procedures had been carried out to ensure accuracy and that the outcome was satisfactory.

The Chair referred to International Finance Reporting Standards (IFRS). He asked what arrangements were in place to ensure re-instatement of the 2009/10 accounts.

The Head of Finance (Shared Services) explained that an impact assessment had been carried out when IFRS was introduced followed by regular reports and checks by auditors. The situation was satisfactory and nothing untoward had been reported in the Grant Thornton assessment. The accounts for 2009/10 would be re-instated on an IFRS basis and this would provide comprehensive figures.

Paul Dossett said that the re-instatement exercise was critical. It would provide a good opportunity to review and address any issues and make the 2010/11 audit a smoother process.

The Chair asked for reassurance that, with regard to Shared Services, there was the technical capacity to cover the 2010/11 accounts. The Head of Finance (Shared Services), said that Shared Services had been operating for 11 months. There had been staff vacancies initially and consultants had been employed to cover the transitional period. The budget had now been set, the new financial system implemented and the accounts closed for Watford BC and 3RDC. The vacancies had now been successfully filled and they were concentrating on outputs with the emphasis on resilience. There had been difficulties because of new staff and new systems and there were risks and challenges but they were optimistic that these would be met.

In response to a further question from the Chair about the recruitment process, the Head of Strategic Finance confirmed that excellent appointments had been made.

A Member referred to the favourable variances and asked about the slippage in the use of Section 106 funds.

The Head of Strategic Finance responded that this related to the capital programme. There were limitations on where the funds could be spent and it was sometimes difficult to find a scheme. The Croxley Rail Link was an example of a large project which had slipped. The Portfolio Holder added that another example was Oxhey Bridge which had slipped from 2002. A lot of Section 106 schemes involved working with partners which sometimes caused delays. The Croxley rail Link was the only remaining transport scheme and it was difficult to know what would happen if the Government abolished the scheme. He confirmed that a close watch was kept on due dates to avoid having to pay money back.

The Chair and the Head of Strategic Finance thanked Grant Thornton for attending the meeting and the professional approach they adopted to the work.

The Committee received a report and copy of the Ombudsman's Annual Review of its dealings with the Council for the financial year 2009/2010

The Committee received a report providing a half year review of the Council's Treasury Management Strategy and investment performance as at the 7th September 2010 for the financial year 2010/11.

The Head of Strategic Finance introduced the report. He explained that base rates were still very low and were likely to remain so for the next nine months. Investing for a 12 month period attracted better interest than investing for a three month period as did adopting a medium rather than low risk approach.

It was noted that a Nat West account had been set up on the back of the Three Rivers bank contract. It was a same day call account and offered a very good rate of interest (0.9%). It was backed by Government guarantee and would be increasingly used where the Council had temporary cash flow surpluses which could not be loaned out for any length of time. In the past the Council had had to have recourse to overnight facilities at the Co-operative Bank (0.56% rate of interest) but Nat West provided better security and a higher yield.

In response to a question from the Chair regarding TRDC, the Head of Strategic Finance explained that they had different advisers from Watford with different views. TRDC invested in the top ten building societies whereas Watford had reduced this to the top five.

A Member asked about the maturity profile and the Head of Strategic Finance said that he would rather reduce the level of short term investments as the base rate was unlikely to change, but this would depend on cash flow

The Committee received a report on the work undertaken by Internal Audit in the period 1st April 2010 to 31st August 2010. The Audit Manager introduced the report. He confirmed that the transition to TRDC had gone well. He advised that the section now comprised four members of staff, including the Audit Manager, plus a secondee from Deloittes who would be with them for three months.

The Committee received the second quarterly report detailing progress made in implementing Internal Audit recommendations. The Audit Manager introduced the report and said there were no outstanding issues to report. An action plan had been produced following the external consultant review of Revenues & Benefits and implementation of its recommendations would be looked at by Internal Audit later in the year.

The Committee received a report on the Revenues & Benefits review. The Head of Strategic Finance explained that he had had some concerns and wanted an independent health check. Watford had changed its software system, which had been an extra issue for staff, along with the integration with Three Rivers DC staff and their ways of working and culture.

Since the report and action plan had been published a new Head of Revenues and Benefits had been appointed and the Head of Strategic Finance was confident that he would act on the recommendations in the action plan and deal with the problems. He would be invited to attend the next meeting to update the Committee.

The Auditors would start looking at the 2009/10 housing subsidy claim the following week. The submission was late because he had wanted a thorough check carried out first.

The Portfolio Holder added to the Head of Strategic Finance's comments about the difficulties faced by the combining of the section and the significant increase in workload. The section had been under immense pressure. The external perspective provided by the review would give the new Head of Service an in depth analysis of the situation. The time taken to process claims had now decreased but it had to be stressed that accuracy was crucial as mistakes could prove very expensive.

A Member asked whether the backlog of complaints and Freedom of Information requests referred to in the Management Summary applied to both councils. The Head of Strategic Finance confirmed that it did and the Portfolio Holder added that this was as a result of the work overload but that the new Head of Service was aware of the need to deal with these requests and complaints in a timely manner.