Agenda and minutes

To elect a chairman and vice-chairman of the committee for the remainder of the municipal year.  

RESOLVED: To

(a)               elect Councillor Simon Howell as chairman of the committee for the remainder of the municipal year; and

(b)       elect Councillor Mohinder Kainth as vice-chairman of the committee for the remainder of the municipal year. 

To record the attendance of substitute councillors, if any, who have been authorised to attend in accordance with the provisions of standing order 17(1), with notification having been given to the proper officer before the start of the meeting and to receive apologies for absence. 

None

To receive any declarations of disclosable pecuniary interests in respect of items on the agenda for this meeting.  

None

To receive notification of any matters, which the chairman determines, should be considered as urgent business and the special circumstances, which have made the matters urgent, and to receive any announcements from the chairman. 

None

Any statements, petitions and questions from the public under standing order 32 will be made or presented at the meeting.

None

To consider the head of legal and democratic services’ report. 

The committee considered the monitoring officer’s report that proposed arrangements to deal with requests for dispensations from district councillors to allow them to take part in council and committee meetings where they had a disclosable pecuniary interest. 

The committee recalled that it had been authorised by Council to grant dispensations under section 33 of the Localism Act 2011.  The committee noted that it could grant a dispensation in any of the following circumstances:

• where so many members of the decision making body had disclosable pecuniary interests in a matter that it would “impede the transaction of the business”
• without the dispensation, the representation of different political groups on the body transacting the business would be so upset as to alter the likely outcome of any vote on the matter
• where the authority considered the dispensation was in the interests of persons living in the authority’s area
• without the dispensation, no member of the Cabinet would be able to participate in this matter
• where the authority considered that it was otherwise appropriate to grant a dispensation

As the Act gave discretion to allow a sub-committee or panel to grant a dispensation, the committee established a dispensations panel to determine such requests.  The panel would comprise three members of the committee or their substitutes, one of which would, wherever possible, be the committee chairman or vice-chairman.  The committee noted that the panel could be convened urgently if necessary to deal with any requests but would be subject to the usual access to information rules as they would be properly constituted local government meetings with agendas and minutes. 

The committee supported the proposals. 

RESOLVED: To

(a)               appoint sub-committees (to be known as Dispensation Panels) comprising three members of the committee, or their appointed substitutes, and authorise the Dispensation Panel to determine dispensations referred by the monitoring officer;

(b)               appoint each member or substitute of the Audit and Governance Committee to serve on any dispensation panel which is convened so as to include her or him in its membership;

(c)               agree that wherever possible, a panel should comprise the chairman or vice-chairman of the committee plus two other members of the committee, but that this should not affect the principle that any three members of the committee or their appointed substitutes will constitute a properly appointed panel;

(d)               authorise the monitoring officer to convene panels having regard to councillors’ availability and eligibility to take part;

(e)               adopt the procedures for dealing with dispensations set out in appendix 1 to the monitoring officer’s report with effect from the date of this committee; and

(f)                 authorise the monitoring officer to make minor amendments to the procedures including minor or consequential amendments required for clarification, consistency and compliance with the council’s style guide.   

To consider the audit manager’s report. 

The committee considered the audit manager’s report on internal audit activity during the third quarter of 2012/13, covering October to December 2012.  Of the audits referred to in the report, two had received a full assurance rating from internal audit, five had received satisfactory assurance, and two had received limited assurance.  The report also referred to five follow-up audits, of which internal audit had given full assurance to one and satisfactory assurance to four. 

The committee considered the report on the discretionary grants 2012/13 audit, which had received limited assurance.  The committee noted that the rationale behind delegating the approval of capital community grants to four area committees was to give local councillors the opportunity to have some element of choice in awarding grants to local projects.  The committee accepted this. 

The committee discussed the report on the payroll 2012/13 audit, which had received limited assurance.  In answer to a question from a councillor, the committee noted that in the case of an IT failure, there were back up plans to carry out the payroll run.  The committee also noted that the council’s officers met regularly with the payroll contractor, Capita, to discuss issues and performance.  The head of finance reported that he was pleased an audit of the new payroll control environment was carried out soon after the transfer of the full service to Capita Carlisle and believed that the recommended actions would strengthen the control environment.   The committee noted that internal audit would carry out a follow-up audit on the payroll service. 

The committee also noted appendix 2 to the report, which set out weaknesses that internal audit had identified as systemic within the council.  The audit manager kept these under review. 

RESOLVED: To note the report. 

To consider the audit manager’s report. 

The committee considered the audit manager’s report on internal audit management in the third quarter of 2012/13, being October to December 2012.  This looked at management issues within internal audit and progress against the 2012/13 audit plan. 

The committee noted that there were no significant issues to report and that just one non-key audit was likely to be in progress at the financial year-end (March 2013).  Otherwise, the audit plan was on schedule for completion. 

In answer to a question from a councillor, the committee noted that the head of finance would be reviewing the staff resources necessary to carry out corporate fraud and benefit fraud work when the government provides detail of the council’s role in detecting fraud under the new universal credit scheme and would come forward with proposals. 

RESOLVED: To note the report. 

To consider the head of finance’s report.  

The committee considered the head of finance’s report that detailed the council’s treasury activities for the first six months of 2012/13 and looking to the rest of the financial year, provided an update on current economic conditions. 

The committee noted that the council’s treasury management activities had operated within the agreed parameters set out in the 2012/13 treasury management strategy.  The officers expected the council to receive approximately £120,000 more investment income by the financial year-end than predicted; the committee welcomed this. 

RESOLVED: To

(a)               Note the treasury management mid-year monitoring report 2012/13; and

(b)               Advise Cabinet that the committee is satisfied that the council’s treasury activities are being carried out in accordance with the treasury management strategy and policy. 

To consider the head of finance’s report. 

The committee considered the head of finance’s report that presented the proposed treasury management strategy for 2013/14 to 2015/16.  The report set out the expected treasury operations for the period, comprising four elements required by legislation:

·        The prudential indicators required by the Chartered Institute of Public Finance and Accountancy (CIPFA) Prudential Code for Capital Finance in Local Authorities

• The treasury management strategy in accordance with the CIPFA Code of Practice on Treasury Management.  This set out how the council’s treasury service would support capital investment decisions, and how the treasury management would operate day to day.  It set out the limitations on treasury management activity through prudential indicators, within which the council’s treasury function must operate
• The annual investment strategy, which set out the council’s criteria for selecting counterparties and limiting exposure to the risk of loss on its investments.  This strategy was in accordance with the Department for Communities and Local Government’s investment guidance and formed part of the treasury management strategy
• A statutory duty to approve a minimum revenue provision policy for 2013/14

The officers recommended changes to the treasury management strategy for 2013/14 to:

(a)               Raise the limit that could be invested in UK government-backed institutions to £15 million

(b)               Extend the investment period with the council’s own ‘house bank’, the Co-operative Bank plc, to three months duration and to set a limit of £5 million

(c)               Provide the facility to invest £3 million in a pooled property fund

(d)               Add a limit of £5 million for the investment in corporate bonds with a minimum AA- credit rating or equivalent

(e)               Add a limit of £3 million for investment in equities via a pooled fund

(f)                 Provide a limit of £15 million for investment in managed bond funds

(g)               Change the counterparty limits and maturity periods for investments with building societies as set out in table 5 of appendix A to the report

Some councillors expressed concerns at the proposal to invest in (c) to (f) above, worrying that the council would be taking unnecessary risks with taxpayers’ money.  Other councillors believed that the proposed strategy would allow the officers flexibility to place surplus funds, spread risk across a broader range of investment options, and achieve greater returns.  The committee noted that the corporate bonds the council would invest in would be housing association bonds or AAA bonds.  The strategy gave priority to security and liquidity. 

The committee supported the recommendations, with the exception of Councillor Crawford who asked for his abstention to be recorded, and his concerns relayed to Cabinet. 

RESOLVED: To recommend Cabinet to recommend Council to

(a)               approve the treasury management strategy 2013/14;

(b)               approve the prudential indicators and limits for 2013/14 to 2015/16 as set out in table 2, appendix A to the head of finance’s report;

(c)               approve annual investment strategy 2013/14 set out in appendix A to the report and the lending criteria detailed in table 5. 

To consider the external auditor’s report.  

The committee considered the 2012/13 audit fee letter from the council’s external auditor, Ernst & Young.  This set out the audit work proposed for the council for the 2012/13 financial year, and the actual audit fee for 2010/11. 

The fees reflected the risk-based approach to audit planning set out in the Code of Audit Practice.  The indicative fee of £61,397 would cover the cost of auditing the council’s financial statements, providing a value for money conclusion, and Whole of Government accounts.  The committee also noted that there was a separate fee of £19,750 for the certification of claims and returns in 2012/13. 

The committee was pleased to note that the fee was reducing, subject to the external auditor finding no issues that required further investigation. 

RESOLVED: To note the report. 

To consider the external auditor’s report (stapled separately). 

The committee considered the annual certification report 2011/12 from the council’s external auditor, Ernst & Young.  This looked at the sums the council claimed from the government in grants and subsidies and checked whether the council had correctly accounted for these in its returns to government. 

The committee noted that the council’s housing benefit subsidy claim was subject to both amendment and qualification.  The amendment affected the grant due to the council, increasing it by £6,963.  The auditor drew the committee’s attention to the non-housing revenue account rent rebates section of the housing benefit claim.  There were a number of errors disproportionate to the number and value of claims.  The auditor believed effective data cleansing of non-housing revenue account cases would significantly reduce these errors, reduce audit time, and reduce the impact on benefit staff in resolving queries.  If the auditor had not discovered the errors, this would have resulted in lost subsidy to the council. 

RESOLVED: To note the report.  

To adopt and sign as a correct record the minutes of the meeting of the committee held on 26 September 2012. 

RESOLVED: To adopt as a correct record the minutes of the committee meeting held on 26 September 2012 and agree that the chairman signs them. 

To consider the strategic director’s report.  

The committee considered the strategic director’s report on actions arising from previous committee meetings and updated the schedule as set out below. 

RESOLVED: To update the action arising as follows:

To review the audit and governance work programme. 

The committee updated its work programme for 2013/14.  The external auditor reported that it would submit its annual audit letter and management report to the committee in September. 

RESOLVED: To update the committee’s work programme. 

None