Of the meeting held on 23 September 2010

The Minutes of the meeting held on 23 September 2010 were approved as a correct record and signed by the Chair.

To consider the report of the Executive Head of Finance

The Committee considered a report which summarised the Council’s Treasury Management operations for the first six months of the financial year. 

The Council had, by Minute 165(b)/10, approved the treasury management prudential indicators for 2010/11.   Details of the treasury management activities in the first six months were reported.  It was noted that these had been within the limits set by the prudential indicators.  At 30 September 2010, the Council’s external debt totalled £64.9m with an average annual interest rate of 5.01%.  No new long term borrowing had been undertaken during this period.  However, it was thought that further external borrowing could be required from March 2011 as available internal resources fell and opportunities for internal borrowing reduced.  This was due to work progressing on building the new Stanley Park High School and using the government grant.  As part of the Comprehensive Spending Review all Public Works Loan Board rates had been increased by 1%.  This had made that borrowing less competitive against other commercial loans.  The Council’s treasury advisers – Sector, had indicated that Lender Option Borrower Option loans were currently the cheapest option available to the Council and a bid had recently been placed for a loan totalling £10m, the outcome of which was awaited.  No temporary loans had been entered into during the first six months of the year. 

Details of investment balances during the first six months of the year were also reported.  The average investment amount available had been £53.2m and the interest received totalled £296k.  This represented an average interest rate of 1.19% which compared favourably with the seven day London Interbank Bid Rate of 0.42%. 

The Council was due to consider a new treasury management and annual investment strategy for 2011/12.  Proposals to change to the new strategy were considered by the Committee.  Mr David Whelan, Managing Director of Sector, gave a presentation which outlined how that company calculated the creditworthiness of individual counterparties.  Sector used a weighted scoring system which assessed the following factors for each institution:

·                    Credit Ratings from each of the three main rating agencies (FITCH, Moody’s and Standard and Poors)

·                    The outlook for a particular institution (negative or positive outlook)

·                    An institution’s Credit Default Swap (CDS) spread as an early indicator of potential risk

·                    The Sovereign credit rating of the country in which the institution is domiciled

·                    Guarantees given by the UK Government for specific institutions

The assessment of all the factors listed above produced a mathematically calculated risk weighted score to indicate an institution’s relative creditworthiness.

When devising the current strategy the Council had taken the decision to supplement Sector’s model with a set of minimum credit ratings from each of the three credit ratings agencies when selecting counterparties it could invest with from the Council’s agreed list.  This procedure followed recommendations contained within the new Treasury Management code. However, this approach was incompatible with Sector’s methodology which did not apply minimum credit ratings but instead used the range of different indicators shown above to assess an institution’s financial  ...  view the full minutes text for item 1004.

To consider the Annual Letter from the Council’s external Auditors.

The Committee considered the Annual Audit letter for 2009/10 which was introduced by the Engagement Lead Lindsey Mallors. 

An unqualified opinion on the financial statements of the Council and the Pension Find had been issued.  An unqualified value for money conclusion which stated that the Council had proper arrangements in place to secure economy efficiency and effectiveness in the use of resources had also been received.  Two material items had arisen during the course of the audit and statements amending these had been issued.  An uncertainty had also been identified in the Statement of Total Recognised Gains and Losses.  The statement had not been amended and had no impact on the auditor’s opinion.  No significant issues had arisen during the Pension Fund audit.  No objections to the accounts had been received and the closing audit certificate had been issued on 24 September 2010.

Although the Comprehensive Area Assessment regime had been discontinued and the auditor was no longer required to assess the Council’s use of resources, a value for money conclusion was still required.  This had been based on work carried out in March 2010 and demonstrated the achievement of good value for money.

It was noted that the letter identified a number of challenges and developments for the Council.  These included:

·                    maintaining overall financial health;

·                    implementing International Financial Reporting Standards from 2010/11; and

·                    ensuring the continuing effectiveness of the South London Waste Partnership to achieve value for money in the treatment and disposal of waste.

Future developments and priorities for the coming year include:

·                    managing the Council’s physical assets;

·                    delivering as a Big Society Vanguard; and

·                    the transition to a new Chief Executive.

There was also a need to put in place new audit arrangements in the light of the government’s proposal to abolish the Audit Commission from 2012. Although the Audit Commission would remain as the Council’s auditor until then, there had already been changes to the work in support of the value for money conclusion which would focus on securing financial resilience and prioritising resources within tighter budgets.

It was hoped that as a result of the abolition of the Use of Resources inspection regime, there would be a reduced audit fee from 2010/1.

It was also noted that the Pension Fund Working Party had agreed that, with effect from the annual Council meeting in May 2011, the Working Party should be wound up and a Pension Fund Committee created instead

Ms Mallors indicated that the objection to the 2008/09 accounts had taken some time to resolve but that a certificate of completion had now been issued.  Ms Mallors also mentioned that there was a consultation paper on the Audit Commission’s web site on their work programme for 2011/12 and level of fees. 

            Resolved:  That the Annual Audit Letter for 2009/10 be noted.

To consider the report from the District Auditor

The Committee had before them a report from the Engagement Lead which updated the Committee on the work the District Audit Commission had carried out since September 2010. 

The main focus of work had been on certifying grant claims, the results of which would be reported at the next meeting.  A detailed audit plan for the 2010/11 work programme would also be presented at that meeting.  Details of the specified reporting procedure for the statutory Value for Money conclusion on the Council’s arrangements to secure economy, efficiency and effectiveness were also reported together with a summary of recent Audit Commission national reports.

Attention was also drawn to changes to the external audit team’s approach which arose from new International Standards on Auditing from the Auditing Practices Board “Clarity Project.”

            Resolved: That the report be noted.

To consider the report of the Chief Internal Auditor

The Committee considered a report which summarised the activities of the Council’s Internal Audit Team for the first half of the financial year. 

Details of the delivery of planned audit days were reported.  The figures indicated that the service was on track to deliver its annual quota of 1,545 audit days, though it was noted that there was some variance from the audit plan mainly relating to the scheduling of audit work and responding to requests for work that were not included in that plan. 

Details of planned audit assignments were reported.  It was noted that following financial irregularities at one children’s centre, all fourteen such centres were now being investigated. The abolition of the Financial Management Standard in Schools had been welcomed and would free up internal audit resources for other work.  A follow up audit into the Direct Payments system in Adult Social Services and Housing had seen the implementation of 13 out of the 15 recommendations that had previously been issued.  The implementation of the two outstanding recommendations was dependent on the full implementation of the Abacus software, used to carry out client’s financial assessments.

            Resolved:  That the report be noted.

To consider the report of the Chief Internal Auditor

The Committee considered a report from the Chief Internal Auditor on recent investigation work that his team had undertaken.

Eleven investigations had been initiated so far this year, two of which were ongoing.  Details of investigations closed since the last meeting were reported.  Possible Police action was awaited in respect of one of  those investigations whilst in another though no impropriety had been found, changes to improve record keeping and transparency had been recommended.  Of the two outstanding investigations, one involved disciplinary action being taken against the member of staff.

Online fraud awareness training had been launched and had been completed by over 300 staff.

It was also noted that the Benefits Investigation Team, established to combat Housing Benefit Fraud, had won the ‘Excellence in Anti Fraud’ category in a national award organised by the Institute of Ratings, Revenues and Valuations (IRRV).  (Minute 681(a)/10 refers).

            Resolved:  That the report be noted.

Report of Chief Internal Auditor

(Indicative time 45 minutes)

Following concerns that had been raised in relation to the Sutton Town Centre redevelopment, it was proposed to carry out a review of this project.

The objective of the review was to carry out a full, independent evaluation of project governance including routine elements of a post project evaluation, as well as all aspects from the project’s approval through to its implementation and completion.  The review would start immediately and it was hoped would be completed during the first half of 2011.

            Resolved:  (i) That the following amended terms of reference be agreed for the Internal Audit review of the Sutton Town Centre redevelopment:

            To consider all aspects of the Sutton Town Centre Redevelopment project from its approval and planning through to its implementation and completion, including consideration of the following:

·                    Delivery of the project vision that was approved by Members

·                    Details of the areas of consultation that were undertaken

·                    Assessment of the effectiveness of project coordination and oversight in managing operational and financial risks

·                    Compliance with the Council’s own policies and procedures for procurement, project management, contracting and design

·                    The mechanisms put in place for monitoring progress and signing off project deliverables by those involved with the project.

(ii) That a progress report be submitted to the next meeting of this Committee.

To consider the report of the Strategic Director - Resources

Further to Minute 682/10 it was reported that all payments over £500 for the months of August to November had been made available on the Council’s web site. 

Guidelines had now been issued by the Local Government Group in partnership with the Local eGovernment Standards Body, the Society of Information and Technology Management and the Chartered Institute of Public Finance and Accountancy, in collaboration with the Local Data Panel.  The system provider for the financial accounting software were developing, free of charge, a tool to present the extracted information in the required format.  These new requirements for publication were due to come into effect for January 2011 data in early February.

It was noted that there had been little public interest so far in the information that had been posted.

            Resolved:  That the report be noted and staff congratulated on making this information available on the web site so promptly.