To receive apologies for absence.

Apologies were received from Ian Baker, SWAP, and Cllrs Roy Birch, Frankie Evans and Len Lawton.

To confirm the minutes of the meeting held on 27 September 2012 (attached).

The minutes of the meeting held on 27 September 2012 were confirmed and signed as an accurate record.

The chairman to identify any items of urgent business.

The vice chairman identified no items of urgent business.

To receive any declarations of interest in any matter to be discussed at the meeting.  Members and officers are requested to identify the nature of the interest.

The Group Manager for Finance and Property declared an 'other' interest in item 9 as a proposed director of SWAP.

The chairman to sign the staff and member gifts and hospitality registers and the fraud and corruption register.

Cllr Jones, vice chairman of the committee, confirmed that he had inspected and signed the gifts and hospitality registers and the fraud register.

Peter Barber, Grant Thornton, to present the letter.

Peter Barber, Grant Thornton, said that Grant Thornton was delighted to have taken over as external auditor for the Council. He added that he and Kevin Henderson were very pleased to continue to build on relationships with the Council established when working for the Audit Commission. It was key for Grant Thornton to maintain continuity.

This fees letter was shorter than in previous years and he would present a detailed letter later in the year. He confirmed the anticipated reduction of 40 per cent in the external audit fee for 2012/13. He also confirmed that the code had not changed and that he would be working with the Council's internal auditors to avoid duplication. At the committee's September meeting he would report findings from his work, 75 per cent of which concerned financial statements and the remainder a value for money conclusion. The focus would be on resilience in the current economic climate regarding economy, efficiency and effectiveness.

He said that Grant Thornton was undertaking work on financial planning and resilience in all councils and would produce an overarching report. Outside the code work would be undertaken on certification and claims, for which the indicative fee was £16,150, but might vary according to the amount of work necessary.

Cllr Bill Evans congratulated Grant Thornton on the reduction in the fee, asking if there was scope for further future reductions. He also asked what the figure of £325 per hour represented for engagement lead.

Peter Barber replied that it had initially been the intention to introduce the 40 per cent reduction over a period of time, but it had been possible to implement it in the first year of the new regime. Current fees would not be subject to annual inflation increases for five years. The fee had been discussed with the Section 151 Officer and assumed that the Council would continue to submit paperwork that was in order. The fees for certification were based on a skills mix of auditors involved. The highest level of appointed auditor was likely to form a lower proportion of work undertaken compared with other staff.

Cllr Hogan was pleased at the 40 per cent reduction but disappointed to learn that there would be no scope for further reductions given the excellence of the Council's paperwork.

Peter Barber commented that the reduction was based on the 2011/12 fee, which had taken account of the Council's significant improvement. Over the past two years this Council's fee had fallen further than any other. He hoped that no work would be required to lead to an increase in the fee.

The Head of Paid Service said that the Council's senior managers had discussed the importance of continuity with the new external auditors and it would be valuable to keep working with Peter Barber and Kevin Henderson.

The committee noted the report.

Kevin Henderson, Grant Thornton, to present the report for consideration.

Kevin Henderson, Grant Thornton, presented the report, commenting that the issues were historical. The Audit Commission had taken the view that because some councils' claims would not have been completed by the switchover all should be presented in the name of Grant Thornton. There had only been two claims for the Council during the year, and the auditors' work had led to an increased subsidy for the Council.

The committee noted the report.

Ian Baker, SWAP, to present report F.195 for consideration.

The SWAP Audit Manager presented report F.195, commenting that there had not been many operational reviews in quarters two and three. Internal auditors were focusing on key control audits in the quarter three and had faced staff resource issues in quarter two. SWAP had now recruited an auditor and the quarter 4 report would show the effect. One audit had been delayed, as SWAP needed to liaise with the Cotswold Audit Partnership, who also audit the GO Shared Service, which should occur in the near future. SWAP was undertaking creditor fraud audits at all its partner councils and would produce an overarching report.

She had been pleased to issue substantial assurance for data security and had begun to audit information systems, but not disaster recovery or website platform. After discussion with the ICT Manager and 151 Officer internal audit would undertake due diligence work regarding the new project to share ICT with Cheltenham Borough Council.

In conclusion she said that the Council had managed risks well and had been given reasonable assurance for key controls. The Council was doing ongoing work on the partial assurance for recovery of overpaid benefits. There were no high corporate risks and SWAP had given more than satisfactory assurance on audit reviews.

The committee noted the report.

The Group Manager for Finance and Property to present report F.191, regarding the partnership's decision to become a Private Limited Company by Guarantee.

The Group Manager for Finance and Property presented report F.191, explaining that for a year there had been discussion about creating more flexible arrangements. The proposal would enable SWAP members to cast votes or have their say by phone. Operationally staff would TUPE across to SWAP, which would no longer be tied down by the Green Book governing councils. Three of the Council's elected members had attended a SWAP briefing in October 2012, where councillors emphasised their need to retain control. The proposal would mean that Section 151 officers became directors of SWAP and above them would be a management board comprising elected members. This would mean that councillors would review all key decisions. The Council's legal team had analysed the proposals and he emphasised that the new quorum would not deprive the Council of having its say.

He ended by saying that the proposal would give limited trading opportunities with other organisations such as town councils. If approved by the Council the arrangements would come into effect on 1 April 2013.

Cllr Bill Evans said that three models had been debated at the October 2012 meeting. It was reassuring to see that the proposed model was one that retained the most democracy and councillor involvement.

Cllr Hogan asked why the opportunity to expand SWAP's work was now being played down, given that it had seemed to be a major factor when previously discussed.

The Group Manager for Finance and Property replied that he was being realistic and SWAP was keen to ensure that its management team focused on core activities, rather than 'drumming up business'. The challenge was to keep the internal audit fee at the same level. The venture was not about income generation, but creating more flexible arrangements.

Cllr Hogan asked to what extent the Council would be locked in to the new arrangements in terms of penalties for withdrawing.

The Group Manager for Finance and Property replied that the Council had signed up initially to a five-year contract with SWAP and would need a period of notice, which would reasonably be one financial year. If it did decide to withdraw, the two SWAP staff would be TUPE'd to the Council.  He would find out the detail before the Cabinet considered the matter in February 2013.

Cllr Bill Evans asked for clarification of the term Teckal. The Group Manager for Finance and Property explained that Teckal was an exemption that would allow SWAP to expand its work with other public bodies without them having to go through a bidding process. SWAP also needed to be careful about how much of its reserves it put into the company, as the maximum was £200,000 before being regarded as a public sector subsidy, so the Council could be receiving a rebate.

The committee agreed to add a further recommendation to name its representatives on the two new SWAP boards.

RESOLVED - to

a)     Approve the formation of a company limited by guarantee, to replace the existing SWAP Joint Committee,

b)  ...  view the full minutes text for item 9.

The Group Manager for Finance and Property to present report F.190 for consideration.

The Group Manager for Finance and Property presented report F.190, saying that there had not been much change since the last meeting. The Council was in a position to progress the home working policy with health and safety support from GO Shared Service specialists. He would insert a revised due date.

The Committee noted the report.

The Head of Paid Service to present report F.194 for consideration.

The Head of Paid Service presented report F.194, explaining that the Corporate Governance Group had recently reviewed its terms of reference as at annex B to the report.

The committee noted the report.

The Group Manager for Finance and Property to present report F.193 for consideration.

The Group Manager for Finance and Property presented report F.193, commenting that the Finance Manager had managed to get the information into one document, but that it was still a complex issue. Predictions were that interest rates would be flat for 18 months. He then highlighted the following points from the report.

Paragraph 2.4 - the impact of funding levels running down on. He emphasised that he would not allow the working balance to get below £900,000; the table was purely hypothetical and reflected the need to make future savings.

Paragraph 2.7 - the impact on council tax. He indicated an error where the effect on council tax band D had used the previous year's base.

Paragraph 3.1 - the apparent debt of £803,000 represented the impact of buying the new refuse vehicles.

Paragraphs 4.1 and 4.2 - The Council had worked with Sector, its adviser to look at wider criteria for assessing satisfactory counterparties. The Council's cautious approach could lead to holding all its eggs in one basket and the move would give it more opportunity while retaining its policy regarding risk. Sector had the knowledge to give sound advice on agency ratings, giving colour codes to indicate the safety level of institutions. The Council would never consider the yellow rated ones, since its policy remained one of limiting investment terms to a maximum of two years.

Paragraph 4.5 - The historical risk of default, put another way, was less than 5/1000 to 1.

Paragraph 5.3 - Investments were defined as 'specified' if up to a year and 'unspecified' if longer. Sector recommended considering the short end of the market.

Clarifying for Cllr Hogan the Group Manager for Finance and Property explained that the £595,000 expenditure from capital reserves was for wheelie bins. It had been cheaper for the Council to buy them itself rather than paying more through the Council’s contractor, including interest over six years.

Cllr Hogan asked why money was locked into capital reserves.

Group Manager for Finance and Property said that it gave the Council flexibility. He added that the reserve would be made up from revenue. Reserves could be used to finance initiatives only as a last resort and capital receipts could not be used.

Cllr Bill Evans asked who from the Council and how often met with the counterparties to hold them to account.

Group Manager for Finance and Property said that the shareholders held the institutions to account, but the Council used Sector's investment criteria to guide it in making decisions. The Group Manager for Finance and Property and Finance Manager met Sector and Tradition, its treasury adviser, each year. Both advisers had done well for the Council only dipping below the market performance only once in the previous six years.

George Healey asked why total core funds were falling and what the Council could do to about it.

Group Manager for Finance and Property replied that the report had been prepared just after central government had given its grant settlement. The  ...  view the full minutes text for item 12.

The Risk, Insurance and Procurement Officer to present report F.192 for consideration.

The Risk, Insurance and Procurement Officer presented report F.192, summarising the main changes. He highlighted paragraph 2.3, which concerned the challenge of developing financial models to maximise funding.

The committee noted the report.

All meetings at 5.30pm with a training session at 4.30pm (unless otherwise stated)

The committee agreed to move May meetings to March and January meetings to December for future cycles, so that meetings became quarterly and the internal audit annual plan could be presented before the beginning of the next year.

The vice chairman thanked Su Walker, the Finance Manager, for her thorough work, business-like approach and patient, clear explanations at Audit Committee meetings over the past few years. On behalf of the committee he wished her well in her new life across the channel.

All meetings at 5.30pm with a training session at 4.30pm (unless otherwise stated)