There were no apologies for absence.

There were no disclosures of interest.

The minutes of the meeting held on 30 June 2011 to be submitted and signed.

The Committee and Scrutiny Officer confirmed that Councillor Wylie, Portfolio Holder for Finance and Shared Services had attended the previous meeting, but it had not been recorded on the minutes published on the Council’s website.  The Portfolio Holder had been included in the set presented for the Chair to sign.

The minutes of the meeting held on 30 June 2011 were submitted and signed.

This report includes the Ombudsman’s Annual Review of its dealings with the Council for 2010/11.

The Committee received a report of the Head of Legal and Property Services including a copy of the Ombudsman’s Annual Review of its dealings with the Council for the financial year 2010/2011.

The Head of Legal and Property Services informed the Committee that further information about the Ombudsman’s decisions was available on the Ombudsman’s website, including the reasons for the decisions. 

Following a Member’s question about comparison with the previous year, the Head of Legal and Property Services advised that the review only referred to the number of enquiries received.  It would be necessary to refer to the report presented at last year’s Committee if Members wanted to be able to compare results.  She added that if the Ombudsman were to find maladministration by the Council then a report would need to be submitted to Council.

Following a request for clarification, the Head of Legal and Property Services informed the Committee that the reference to cases being submitted for reinvestigation related to those complaints which had been made direct to the Ombudsman without progressing through the Council’s complaints procedure.  The complainant was referred to the Council’s internal system.  If the complainant were still unsatisfied and wanted to continue to make a complaint this would then be investigated by the Ombudsman and was classified as a resubmission.

RESOLVED –

that the Annual Review be noted.

This report allows the Committee to ask questions of the external auditor concerning his ‘Report to those charged with Governance (ISA260)’ and to approve the Statement of Accounts for 2010/11.

The Committee received a report of the Head of Strategic Finance incorporating the External Auditor’s report to those charged with Governance (ISA260), the draft letter of Representation, the Statement of Accounts 2010/2011 and the Summary of Financial Outturn 2010/2011 which had been presented to Cabinet at its meeting on 26 September.

The Head of Strategic Finance apologised to the Committee that the documents had been late.  He explained that the Finance Team had had to close three sets of accounts.  There had been a significant amount of work to be carried out and the statement had had to be produced under International Financial Reporting Standards (IFRS).  This was the first time it had been necessary to comply with the new statutory accounting framework. This also resulted in a considerable amount of work for the External Auditor; hence the delay.

Richard Lawson informed the Committee that they were able to provide an unqualified opinion for the financial statement and the Value for Money Conclusions.  The report included details of areas that were being finalised.  He referred the Committee to page 23 of Appendix 1 to the report and adjustments to the financial statement.  The figures were below the materiality limits and it was for the Committee to take this into consideration when making its decision. 

The Head of Strategic Finance explained the phrase ‘materiality’; this referred to the size of any financial adjustment.

A Member stated that in order to be able to scrutinise the report, the Committee needed plenty of time to be able to evaluate the information.  It was very difficult to do this in two days.  The process needed to be more streamlined.  The Member asked for further clarification about the reason the draft financial statement missed the original deadline.  He was concerned there was a weakness in the process and the accounts needed to be agreed at this meeting.

Paul Dossett responded that the Council had issued the primary statement.  A full set of working papers had not been supplied at the start, but this was not considered to be a major concern, but they should have been ready.  Discussions had been held with officers regarding next year’s process.  It was acknowledged that the Shared Services team had produced three sets of accounts.  Synchronisation of the process needed to be streamlined.  It was necessary to engage with other services, including Revenues and Benefits.  He added that by combining IFRS and Shared Services, it was likely that it would not be perfect the first time.  A large amount of IFRS work carried out this year would not recur next year.  He acknowledged that Members needed sufficient time to scrutinise the papers.

The Head of Strategic Finance informed the Committee that the full set of financial statements should ideally have been ready for 30 June.  He had discussed the matter with the Director of Resources at Three Rivers District Council.  The External Auditor had identified the issue of capacity pinch points and it was possible that some external resource  ...  view the full minutes text for item 19.

Report to follow

The Statement of Accounts was included as part of minute number 19 above.

This report provides the second quarter’s review of the Council’s Treasury Management Strategy and investment performance.

The Committee received a report of the Head of Strategic Finance setting out the second quarter’s review of the Council’s Treasury Management Strategy and investment performance.  The Head of Strategic Finance circulated a further update of the Council’s investment portfolio as at 23 September 2011.

Following a question from a Member about the difference in investments as shown in the two statements, the Head of Strategic Finance explained that the investments with Nat West and the Co-op Bank were related to the Council’s day to day cash flow.  At the end of the day the Council’s current account should balance to zero as no interest was gained.  The Council was able to draw these investments back as required and had reduced between the two weeks due to precept payments to the County Council and Hertfordshire Police Authority.

The Member asked about the risk related to Santander UK and whether it was backed by the Government’s guarantee.  This was a particular concern if Greece defaulted on its loan.

The Head of Strategic Finance advised that Santander Spain had avoided investing in Greece and the sub-prime market.  The committee report included a statement from Sector about Santander UK.  In Sector’s opinion Lloyds and the Royal Bank of Scotland were felt to be protected by the Government and investments could be of up to 12 months maturity. All other financial institutions should have investments of no more than three months duration, a policy already adopted with Watford’s portfolio.  In the case of Santander UK, the current investment had only been set for one month.  As a last resort, if a problem were identified within the financial services sector then it would be possible to invest in the Debt Management Office where the rate of interest was only 0.25%.

Paul Dossett added that the Council had to take a balanced view.  Grant Thornton was not concerned with the Council’s approach; the investment was regularly reviewed.

Following a question about other investment options, Paul Dossett advised that local authorities could not invest in gold.  It could only invest in banks and building societies or government bonds.  The Head of Strategic Finance added that it was not possible to invest in stocks and shares.

RESOLVED –

that the report be noted.

This report introduces the Acting Audit Manager’s Final Annual Report on the work of the Internal Audit Service for 2010/2011 and his opinion of the adequacy and effectiveness of the Council’s control environment.

The Committee received a report of the Acting Audit Manager which introduced the Final Annual Report on the Internal Audit Service for 2010/2011.  The Acting Audit Manager said that there were still concerns about Revenues and Benefits.  There was an ongoing issue regarding the stability of ICT. 

Councillor Rackett asked to add another recommendation and moved –

‘2) to ask for Overview and Scrutiny Committee to consider setting up a Task Group to investigate the performance of Revenues and Benefits and consider recommendations for improvement should these issues still be outstanding at the next scrutiny committee.’

A Member commented that this was the role of the Three Rivers and Watford Shared Services Joint Committee.

Councillor Rackett said that under its scrutiny powers, Members were able to call-in any Shared Services’ decision.  He added that Three Rivers District Council may wish to be involved in the review.  Overview and Scrutiny Committee had reviewed the services’ performance but had not heard that the service was improving.

One Member commented that he was not convinced that a Task Group was the way forward.  Councillor Rackett suggested that the idea was put forward and Overview and Scrutiny Committee could consider it.

A Member said that he believed scrutiny was required from an audit viewpoint.  The backlog of assessments was due to be completed by December, although some Members were sceptical that this would be achieved. 

The Head of Strategic Finance advised that Members needed to consider the terms of reference of the Joint Committee.  The report before Audit Committee was related to finance.  Councillor Rackett was referring to caseload.  The Council had the right to take a strategic overview of the service being delivered but should not get involved in operational issues.

The Committee and Scrutiny Officer explained that the scrutiny proposal form could be forwarded to Councillor Rackett for completion and then circulated to the other members of Audit Committee.  Once the proposal was finalised it would be forwarded to the Head of Revenues and Benefits for comment prior to it being considered by Overview and Scrutiny Committee at its next meeting in November.

Following a question asking whether the Head of Revenues and Benefits had been invited to the meeting, the Head of Strategic Finance apologised that he had not invited him.  The main focus of the meeting was the Statement of Accounts.  He assured members that at the next meeting the Committee would review all the issues raised and the Head of Revenues and Benefits would be invited to attend.

RESOLVED –

1.      that the contents of the final annual internal audit report for 2010/2011 be noted.

2.      that the Overview and Scrutiny Committee be asked to consider setting up a Task Group to investigate the performance of Revenues and Benefits and consider recommendations for improvement should these issues still be outstanding at the next scrutiny committee.

This report provides updated information on the work undertaken by Internal Audit on the audit plan for 2010/2011 since the last report to Audit Committee in March and also for the work on the 2011/2012 Audit Plan in the period 1 April 2011 to 2 September 2011.

The Committee received a report of the Acting Audit Manager which provided information on the work undertaken by Internal Audit in 2010/11 and the current financial year up to 2 September 2011.

A Member noted that IT and Revenues and Benefits had again been highlighted as having problems.  He asked whether the creditor payment arrangement recommendations had been implemented.

The Acting Audit Manager confirmed that half of the recommendations had been implemented.  The remainder should be commenced in October.  The additional stage would be a prior authorisation stage, which would be signed off by the Finance Manager.  It had not been introduced earlier as it would add an extra delay in payments being processed.  The stages added immediately provided sufficient controls before a payment was released.  The new stage was considered to be beneficial.  The recommendations followed Government best practice.

RESOLVED –

that the contents of the report be noted.

This report highlights any lack of progress in implementing Internal Audit recommendations.

The Committee received a report of the Acting Audit Manager which highlighted any lack of progress in implementing Internal Audit recommendations.

Following a Member’s question about the BACS payments being processed by IT, the Acting Audit Manager informed the Committee that this was the current process.  Service areas generated the source files and IT then processed them and forwarded them to BACS. 

The Head of Finance Shared Services explained that historically in Three Rivers the BACS payments had been processed by the individual services.  The Systems Administrators were then transferred to IT and the BACS payments were transferred with the officers.  Following the Internal Audit report the function was being transferred back to services.  Officers were undergoing training and the relevant software was being put in place.

RESOLVED –

that the contents of the report be noted.