Agenda and minutes

RESOLVED:  To note the attendance at this meeting of the following duly appointed Reserve Members:-

To appoint the Vice-Chair for the Municipal Year 2017-18

RESOLVED:  That Councillor Barry Macleod-Cullinane be appointed as the Vice?Chair of the Committee for the 2017-18 Municipal Year.

Councillor Barry Macleod-Cullinane in the Chair.

That the minutes of the meeting held on 5 April 2017 be taken as read and signed as a correct record.

RESOLVED:  That the minutes of the meeting held on 5 April 2017 be taken as read and signed as a correct record.

RESOLVED:  To note that no public questions, petitions or deputations were received at this meeting.

There were none.

Report of the Director of Finance

The Committee received a report which set out the Council’s draft financial accounts for 2016-17.  The Director of Finance advised that they had been prepared three weeks prior to the deadline and were now subject to any comments in the notice period; to date, there had been no representations.  A report on the final accounts would be made to the Committee in September along with the external auditors’ opinion.  The timetable for the submission of accounts would change for 2017-18, with the draft Statement of Accounts required to be available by 31 May 2018, and the audit required to be completed by 31July 2018.  Decisions would need be made on how to liaise with the Committee on the draft accounts given the new timetable. 

In response to a Member’s query about the placement of Pension Fund balances with RBS when their rating had slipped below the usual level required for investment of Council funds, an officer confirmed that RBS was the Council’s corporate banker, that the requirement in this instance was for liquid investments, sometimes overnight deposits, and that RBS was in any event backed by the UK Government.

A Member asked about the £5.4m property investment reported at Page 67 of the report.  The Director of Finance reported that the Council had purchased a building in Manchester as part of a strategy approved by the Cabinet to take advantage of property yields.  Due diligence was always carried out before such transactions were finalised. 

The Member also asked about the reference to “deferred proceeds on sale of assets” in the table at Paragraph 5.14.  It was explained that this related to properties received in lieu of cash in respect of the disposal of premises in Gayton Road.  The accounting had been based on the “estimated fair value”.

In response to a Member’s question about the £8,000 cost reported in the table at Paragraph 5.30, it was explained that this related to dealing with the objection to the accounts.  The same Member’s query as to where to find information on the amortisation of plant and machinery was also answered. 

A Member asked the Director of Finance whether she was confident that the level of borrowing for capital financing remained at a prudent level since the report indicated that it now represented 62% of the capital financing requirement.  The Member reported that the Chief Executive had indicated some concern over the level of borrowing.  The Director of Finance emphasised that the key aspect of the level of borrowing was the ability to finance it, and the Council had appropriate plans in place.  However, she also acknowledged that the Council’s financial position was changing and that, in view of the budget pressures, a review of capital projects and the regeneration programme was intended.  The Director of Finance agreed to update the Committee about this at the next meeting. 

In response to a Member’s query, it was explained that the reference to the “unspent balance of capital maintenance grants for schools” concerned the timing  ...  view the full minutes text for item 187.

Report of the Director of Finance

The Committee received a report which summarise treasury management activities in the 2016-17 financial year. 

On behalf of the Chair of the Committee, who had submitted his apologies to the meeting, the Vice?Chair asked about the outlook in respect of interest rates.  The Director of Finance advised that the Treasury and Pension Fund Manager would be reviewing options and these would include use of money market funds.  The Council required liquid options which constrained returns, but every effort was made to secure the best rates available.  Similarly, the cash balances were relatively small compared to other investors and it was increasingly difficult to find better options when interest rates were declining across the board.  An officer advised that the decline between 2015?16 and 2016-17 in the average life of in-house investments from 74 days to 11 days, reflected longer term loans falling out and the strategy of retaining liquidity.  The Director of Finance added that some authorities were moving to active management of funds in order to reduce cash balances to zero.  In response to a Member’s query about the future of interest rates, the Vice?Chair referred to the value of cash holdings depreciating to such an extent that Swiss institutions were charging investors to hold cash; he referred to the risks of this in relation to the Council’s borrowing plans.

RESOLVED:  That the report be noted.

Report of the Corporate Director, Commercial and Resources

The Committee received a report outlining the 2016/17 year end reports for Internal Audit and the Corporate Anti-fraud Team, including the Head of Internal Audit’s draft overall audit opinion on the control environment.  An officer reported that all the performance indicators for her service had been met with some exceeded.  She corrected Paragraph 2.5 of the report, stating that there had been three “red” assurance reports, rather than two, and also referred to particularly challenges during the year, including responding to the theft of funds at Harrow Arts Centre. 

On behalf of Chair of the Committee, the Vice-Chair commended the performance of the services and asked about the item concerning the manipulation of data by a former Headteacher of a Borough school.  The officer advised that completion of the Human Resources investigation report by the Independent Human Resources advisors, as recommended by Internal Audit, was still awaited; appropriate action would be considered when that report was available. 

In response to Members’ questions about the Arts Centre theft of funds, the officer briefly explained the circumstances and the judgments made about the effectiveness of possible responses. 

An officer outlined the aspects of the report relating to the Corporate Anti-Fraud service; he drew attention to the cases reported in Appendix 3 and to the brief update on the service plan progress for 2017-18.  He highlighted the growing threat from fraud and cyber-crime which now constituted almost one out of every two crimes recorded according to the Crime Survey of England and Wales 2016.

In response to a Member’s query about partnerships with other councils, the officer confirmed that closer working was carried out with other London Boroughs and there was a strong connection in West London with Ealing, Hillingdon, Hounslow, Barnet and Brent and the London Councils anti-fraud community met twice a year as a group to discuss fraud patterns and trends, emerging fraud risks and any initiatives to combat fraud. 

A Member asked about the issue of sub-letting of social housing and the  officer reported that whilst nationally housing tenancy fraud was a significant fraud risk for Councils, Harrow had a number of controls in place to combat it and worked closely with Housing.  Another Member suggested that savings in temporary accommodation costs might justify additional investment in investigations in this area. The officer reported that all cases that were set live on the housing waiting list underwent a fraud check before any individual/ family was allocated a permanent tenancy. The officer advised that there were about 40 to 50 live tenancy fraud cases under investigation at any one time and the service was managing to respond to the fraud referrals.  It was confirmed that tenants’ photographs had been included on tenancy agreements for a number of years now and this provided a useful added layer of fraud risk control.  There were, however, many variables in these cases across London, and the robustness of housing management was a key factor. 

In connection with Paragraph 2.12 of the report, a Member asked  ...  view the full minutes text for item 189.

Report of the Corporate Director, Commercial and Resources

The Committee received a report Council’s Draft Annual Governance Statement (AGS) for 2016/17 required to meet the requirements of the Accounts and Audit Regulations 2015. 

An officer explained that the AGS had been drafted in accordance with a new CIPFA/SOLACE framework which clarified that a formal Code of Governance was not required. Consequently, it proposed that the Council adopt a more flexible, interactive governance structure available on the intranet and as set out at Appendix 3.  The draft governance statement had been issued to the external auditors.

The Vice-Chair supported the proposal for a more interactive, web-based approach and suggested that use be made of video and audio to make it more user-friendly.  However, he underlined the importance of ensuring that staff and others could find the information quickly online without complicated navigation and searches.

In response to a Member’s query about provisions in the draft AGS which might cover the Council’s increasing commercial activities, the officer confirmed that Appendix 5 dealt with the Council’s work with a range of partners, including the set-up of Council-owned private companies.  Whilst it would not be possible to assess the governance arrangements of all partners/companies this year, a rolling programme would be put in place. In response to the Member’s suggestion that all private companies set up by the Council, be required to adopt a similar code of governance, the officer agreed that this would form part of her review on which she would report to the Committee in September. 

The Vice-Chair referred to a discussion at the Overview and Scrutiny Committee the previous evening when the Portfolio Holder for Finance and Commercialisation had fielded questions on the regulations and guidance followed by the Concilium group of companies in relation to contract, financial and health and safety issues.  The discussion had included concerns about the transparency of the companies’ operations and possible conflicts of interest among those responsible for running them.  He did not consider that the Council’s relationship with these companies was one of “partnership” in the conventional sense, and he remained concerned that there was insufficient understanding of their governance arrangements; in his view, this was becoming more important as resources were now being committed at a significant level and the expectations of income generation were important in the context of the Council’s overall budget.  The Vice-Chair suggested that similar attention should be paid to other initiatives involving private sector partners on which the Council was relying heavily, such as Project Infinity.  The officer stated that the governance arrangements of such initiatives would be covered by the annual review of governance.  

RESOLVED:  That the Council’s Draft Annual Governance Statement for 2016/17 be noted and endorsed.