To receive apologies for absence.

Apologies were received from Cllrs Derek Biddle, Norman Stephens and Marie Rosenthal, Solicitor to the Council.

To confirm the minutes of the meeting held on 23 September 2010 (attached).

The minutes of the meeting were confirmed and signed as an accurate record.

The chairman to identify any items of urgent business.

The 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 and indicate whether it is personal or prejudicial.

No declarations were made.

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

Clllr Birch, the chairman of the committee, confirmed that he had inspected and signed the registers of gifts and hospitality and the fraud register.

Alex Walling, Audit Commission to present the report for consideration.

Alex Walling, Audit Commission, presented the report, stating that the 2009/10 work was complete, having met the September deadline for an opinion. She highlighted the two value for money criteria at page 15 and the briefing, which explained changes in procedure and the way ahead.

Cllr Birch asked if there had been any new information regarding the abolition of the Commission (Agenda page 15, paragraph 7).

Peter Barber replied that the Commission was still waiting for legislation, which had slipped in the parliamentary calendar and might be passed in April. There was a risk that there would not be enough time for councils to complete the process of going to the market and securing a contract in time for 2012/13. The Commission would inform councils as soon as it knew the position. He confirmed for Cllr Hogan that the legislation was separate from the Public Bodies Bill.

The Head of Paid Service asked for clarification on why the fee rebate of 1.5 per cent for the current year and five per cent for the following year were lower than the committee might have expected. (Agenda page 17, paragraphs 26 and 27).

Peter Barber replied that the Commission had just received news that the Department for Communities and Local Government (DCLG) would meet the costs of winding down the Commission. The Audit Commission Board’s proposed fee reduction structure had been sent to interested parties for consultation in December. The board would consider responses in February to determine the final fee structure. The current proposals meant that district councils would receive the lowest rebate at 5 per cent, whereas some county councils would receive 10 per cent, the justification being achievement of economies of scale. It was difficult for area auditors, as there was no local control. The fees were set nationally by the Commission to ensure break-even, considering the totality of fees.

Peter Barber clarified for Cllr Birch that two officers had attended the Commission’s workshop on 20 January. (Agenda page 17, paragraph 22).

Cllr Dormer asked for confirmation that if the government did not pass the legislation to abolish the Commission by the end of April, the council would find it impossible to secure the services of a supplier at all, and even if passed in April, the council would have to work very quickly.

Peter Barber confirmed that risk, adding that the Commission was encouraging the DLGC to give councils the opportunity to roll over their present arrangements for a year, to ease the process. With possibly 200 councils or more going to the market at the same time, there was a risk that the market could not cope with the tendering process.

The committee noted the report.

Peter Barber to present the letter.

Peter Barber presented the report, explaining that the letter represented a summary for the whole year. The council was required to post it on its website to give the public an opportunity to see how the council had performed. He had not identified any material errors in financial reporting and had concluded that the council was performing at an adequate level in all ten areas considered. This represented a significant improvement from the previous year. He reminded the committee that the Commission no longer gave scores. He said that the Benefits inspection had found the service to be fair with uncertain prospects for improvement. It offered recommendations to address weaknesses. Since publication of the letter, central government had announced its two-year grant settlement to councils. The Commission would also be working with Finance staff on how it was introducing the International Financial Reporting Standard (IFRS) and reworking the 2009/10 accounts to the IFRS rules.

The Head of Paid Service reminded members that the council had sent all members a copy of the letter and it had been on the website for several months.

Cllr Birch asked if the comment regarding the Budget Working Group referred to the GO project. (Agenda page 29, paragraph 28)

The Group Manager for Finance and Property confirmed that it did refer to the GO project, which was on target to begin operation in October. The council had also been in talks with one of the GO partners regarding joint working using the same computer system in Benefits,. The council was also sharing its land and property expertise with Tewkesbury Borough Council.

Cllr Birch asked how internal audit would approach areas of joint working given that it involved the work of other councils.

The Group Manager for Finance and Property replied that careful management would be needed and the GO partners were already exploring the issue.

Ian Baker, SWAP, confirmed that he had discussed with the other audit teams in the GO partnership how to make sure of achieving overall assurance.

Peter Barber commented that the challenge was to ensure that internal governance arrangements were applied externally to achieve accurate and timely information regarding joint work. He added that the health service had needed to bear in mind similar arrangements.

Cllr Birch asked if the total figure of £205,000 for internal and external audit was what the Commission would expect for an authority such as this council.

Peter Barber replied that the Commission’s fee of £105,000 was above the mid point for district councils, because of the work undertaken around use of resources.

Ian Baker said the SWAP per-day fee was the same across the partnership and that this council had required just below the average number of audit days.

Cllr Hogan asked if the audit fees would fall over the next few years to reflect the fall in the council’s budget.

Peter Barber replied that one justification for the abolition of the Audit Commission had been that a competitive market should bring down costs. The  ...  view the full minutes text for item 7.

Alex Walling, Audit Commission to present the report for consideration.

Alex Walling explained that the Commission was required to check that grants were used for their intended purpose. The fee of £40,000 had been higher than for the previous year, because of extra work in Benefits. The Commission had made some recommendations to strengthen the compilation of claims and returns. She had given a qualified opinion for claims, but stated that to put it into perspective, that was the case for sixty per cent of councils. She recognised that the improvements put in place in Revenues and Benefits took time and were only just beginning to take effect. She explained that the Commission needed to review the national non-domestic rates return (NNDR) in more detail every three years.

George Healey, independent committee member, asked if pensioners’ claims represented a material risk and whether the Commission checked samples.

Alex Walling said that those claims were not material and that the Commission did not consider them specifically, but that good practice suggested that the council might want to look at them.

Alex Walling confirmed for Cllr Hogan that qualification of the NNDR was procedural and not due to the council having wrongly written off debts.

The committee noted the report.

Peter Barber, Audit Commission to present the report for consideration.

Peter Barber presented the report, commenting that the commission’s 2009/10 work was complete and the report gave more detail for 2010/11. He highlighted the basis of the plan (Agenda page 48), the Commission‘s work with officers on IFRS and his recognition that the council would need to include Single Status financial implications into its financial statements.

He had already discussed initiatives to address a reduction in the Council’s government funding, which would remain a risk. The Commission would look at the robustness of the council’s annual budget and financial planning, and how it identified and acted on pressure points.

Cllr Birch asked if the Commission’s work with the internal audit team was complete or ongoing.

Peter Barber replied that the Commission was in constant contact with SWAP and had confidence in its work.

Cllr Robinson commented that the increase of eleven per cent in the scale fee was in addition to being charged for work it no longer needed for its current risk level.

Peter Barber agreed that the council’s risk level was lower, but the fee reflected its 2009/10 rating, so the council should have seen  a reduction in the fee for 2010/11 However he repeated that the Commission’s method of determining fees had changed and was not now based on changes in risk.

The committee noted the report.

Jacqui Gooding or Ian Baker, SWAP, to present report A.100.

Jacqui Gooding, SWAP, presented report A.100, a quarterly progress report. The Council’s senior officers had agreed all recommendations and had set targets. One report for the year had been finalised and the others were either at draft report or discussion document stage. She was pleased that the internal audit team was on track to complete all planned work by the end of the year. She also drew members’ attention to the additional, unplanned work undertaken for reviews of IT and the Community Interest Company (CIC).

Cllr Birch said that when he had attended the recent SWAP partnership meeting, mention had been made of a possible reduction in internal audit work as a result of reduced service delivery. He asked how SWAP would be affected.

Ian Baker replied that many partner councils had the same view as the Group Manager for Finance and Property, seeing no reason to reduce audit days without specific reasons. However SWAP was anticipating a possible reduction and had been introducing temporary staff positions.

Cllr Birch announced that he had received questions from Cllr Hogan relating to the CIC review. The committee would not debate those questions, since not all members had read the report. The Democratic Services Officer distributed the questions and answers prepared by SWAP as attached to these minutes.

Ian Baker repeated that the conclusions in the review had been based on tangible facts.

Cllr Hogan stated that the committee needed to establish what should happen if another committee commissioned an internal audit report. He believed that any such work involving audit should end with a report to the Audit Committee.

The Head of Paid Service commented that such reports would still have to be presented to the committee that commissioned them, but that they could then be passed automatically to the Audit Committee.

RESOLVED – that any report on work from the internal audit team commissioned by any of the council’s other committees be reported to the Audit Committee after consideration by those committees.

The committee noted the report.

The Head of Paid Service to present report SD.61 for consideration.

The Head of Paid Service presented report SD.61 on the Annual Governance Report action plan, explaining that the AGS is published at the end of a financial year and highlights both work undertaken in that year and areas for focus in the following year. She clarified that the council was not necessarily failing to meet minimum standards in the seven areas identified on agenda page 84, paragraph 2.1; however, they were areas where the council could constantly improve, in order to keep on top of best practice. The Corporate Governance Group regularly reviewed progress against the actions, which it reported to the Audit Committee. Some areas had no end point, since they were ongoing.

The committee noted the report.

The Head of Paid Service to present report F.98 regarding strategic risks.

The Risk, Insurance and Procurement Officer presented report F.98. He said that the council’s lead officer in the GO project was working closely with the Corporate Leadership Team and he anticipated that the risk would appear as adequately managed at the next meeting. However because of the timing of the implementation of the two systems, interfaces from the Benefits system to the financial system would have to be written twice, once for the current system and once for the GO system. Commenting on SR-B3.08 on agenda page 99, he said that the funding reductions were now known and the risk had been renamed. Risk SR-B3.10 regarding the Core Strategy should not appear at the next meeting if, as expected, Full Council agreed the strategy in February.

Cllr Birch asked how officers determined the timings for completion of actions.

The Risk, Insurance and Procurement Officer answered that he followed policy and guidance agreed by the committee to attempt to make the process as objective as possible.

The committee noted the report.

The Group Manager for Finance, Land and Property to present for consideration report F.95

The Group Manager for Finance and Property presented report F.95, explaining that the annex was lifted directly from the council’s Covalent monitoring system, which contained comments on reasons for the progress status of each recommendation.

The Head of Paid Service added that she had asked managers to include a new target date in the comments section, if a recommendation was not on target. She then confirmed for Cllr Birch that the Cabinet had agreed the fees and charges booklet at its meeting on 20 January.

The committee noted the report.

The Finance Manager to present report F.94 for consideration.

The Finance Manager presented report F.94, informing the committee that the missing figure on agenda page 108, paragraph 2.3 first bullet, was £1.1 million. She commented that the consultant fees in paragraph 2.2 had been less than expected. The changes in reporting embedded leases had no effect on the ‘bottom line’

Cllr Birch asked if those embedded leases had not been picked up before.

The Finance Manager replied that there had been a change in the rules on how leases were categorised and the new rules required that the contracts were subject to a series of tests. The Group Manager for Finance and Property added that the use of Mike Young, the consultant had represented excellent value for money.

The committee noted the report.

The Finance Manager to present report F.97 for consideration.

The Group Manager for Finance and Property presented report F.97, explaining that it picked up year-on-year changes in summary. The IFRS changes made it appear as if the council was borrowing (agenda page 114, paragraph11), but the reducing figure represented the leases for printers and vehicles that would be paid off in 2013/14. The council sought an extension to the counterparty list to include institutions from countries with an AAA rating, since officers were struggling to find counterparties with whom to invest and had at times left monies in the Co-operative Bank current account. He emphasised that the council would still only invest a maximum of £2 million abroad at any one time.

The Finance Manager explained for Cllr Birch that the table at agenda page 116, paragraph 20 reflected consideration of revenue and capital costs, looking forward on a rolling basis. In the previous year there had been no budget set for 2014/15 so the whole amount showed as a change for year four.

RESOLVED – to approve the six key elements of report F.97, and recommend these to Cabinet for adoption by Full Council.

(a)   The Treasury Management Strategy for 2011/2012 to 2013/2014 contained in Annex B.

(b)   The prudential and treasury indicators and limits for 2011/2012 to 2013/2014 contained in Annexes A, B and B2 of this report.

(c)   The Minimum Revenue Provision (MRP) statement at paragraph 14 of Annex A of this report, which sets out the Council’s policy on MRP.

(d)   The Authorised Limit prudential indicator contained at paragraph 13 of Annex B to this report.

(e)   The Investment Management Strategy for 2011/2012 contained in paragraphs 22 to 32 of Annex B of this report.

(f)     The revised investment counterparty criteria detailed in paragraph 33 of Annex B to this report.

The Finance Manager to present report F.96 for consideration.

The Finance Manager presented report F.96, highlighting that the table on agenda page 137, paragraph 3.1 showed how often investment turned over and that the table on agenda page 138, paragraph 3.4 reflected interest rates, which were now substantially lower than 12 or 18 months previously.

The Group Manager for Finance and Property apologised for the poor synchronisation of presenting a mid year report so late in the year. It would be better to bring a report covering the first five months’ activity to the September meeting. He emphasised that even though interest rates had remained low, the council was still forecasting an investment income of £240,000 for the whole year. Answering Cllr Birch, he said that it was positive to finish the period with more money than the council had begun with, due in part to refunds of overpaid benefits and a NNDR refund.

Cllr Dormer asked why the council did not consider investing in PIBs, (guaranteed bonds).

The Group Manager for Finance and Property explained that the risk was too high for a public body such as the council to take. The council’s policy was to be risk averse in investment terms and so far it had not lost out.

The Finance Manager added that the council’s rules dictated that it look at organisations rather than specific investment vehicles, and this would rule out these types of investments in building societies.

RESOLVED - to agree the actions below and to recommend them to Cabinet for approval. 

a)     Note the content of report F.96 on treasury activity and the prudential indicators.

b)     Note the changes made to prudential indicators in Annex A resulting from the application of International Financial Reporting Standards (IFRS) to the Council’s 2009/2010 accounts.

c)      Note the changes made to the security, liquidity and yield benchmarking in Annex A.

d)     Recommend approval of the changes to the Investment Criteria for the 2011/2012 strategy outlined in section 6 of the report.

All meetings at 5.00pm with a training session at 4.00pm.

The Group Manager for Finance and Property said if proposed legislation were passed in March, that the committee only needed to consider the accounts once, which would be at its September meeting, rather than at the June and September meetings as in previous years.

All meetings at 5.00pm with a training session at 4.00pm.