Agenda item

Report CEO 1409

The Internal Audit Progress Report was written by Luis Remedios, Head of Audit.

The report informed Members of recent audit activity across the Council and provided updates on matters arising from the last Audit Sub Committee. It covered:

  Priority One Recommendations

  Audit Activity

  Waivers

  Publication of Internal Audit Reports

  Auditor of the Year

  Housing Benefit Update

  Other Matters

  Risk Management

The Head of Audit introduced the report by explaining that this report covered the last two months of internal audit activity. There would be a further report written in September 2014, and this would be circulated to the Audit Sub-Committee Members by email in October 2014. Much time had been spent on completing work from the previous year, and much time had also been given to the investigation of the part two fraud investigations.

The Committee referred to Section 3.5 of the report on page 50 of the agenda—Looked After Children (LAC). It was noted that two areas of concern had been identified by the London Borough of Wandsworth Audit Team. The first of these was that proper controls for evidencing funding approvals for placement decisions were not in place. In one instance it was identified that an over payment of £11,336.00 had been made; action had been taken to recover the over payment.

A secondary issue that had been identified with respect to LAC, was that the completion of assessments and reviews was often failing to take place within statutory timescales. If this was not rectified, there was a danger of both sanctions and reputational damage.

Recommendations to deal with these issues were being implemented.

The Committee referred to Section 3.7 of the report. This was another audit problem that had been identified by the LBW Audit Team. It was noted that there were problems in many services around the issue of ordering and invoices. There were many cases where orders had been raised after invoices had been received. This caused problems in that commitment to expenditure was not reflected in budgets. The Vice Chairman expressed surprise and concern at this, and stated that it was really an easy problem to solve. The matter had been raised  by  the Chief Executive, in recent meetings with chief officers and senior managers and it was clear that this practice was not acceptable. Members had asked if the worst offenders were being targeted and the Head of Audit responded that they were but given the number of retrospective orders of 3,290 over a four month period it was a corporate problem. This recommendation was accepted by management for  implementation. 

The Committee noted Section 3.8 (page51) of the report, which related to TCES (Transforming Community Equipment Services). It was noted that there had been numerous problems with the verification of Invoices Submitted as outlined in the report. It appeared that there were no proper audit trails or challenges, no proper stock control, differences in the charge out rate for non-stock items stored to that specified in the contract, no analysis of speed rates charged, no challenge where the number of collection and deliveries charged on the invoice differed to that of the monthly statistics supplied by the contractor, and no challenge where the unit cost of the equipment supplied varied with the contracted specification rate. Performance measures specified in the contract were not being submitted by the contractor other than collections and deliveries. The Chairman commented that the report did outline a lack of competency on the part of the contractors and speculated if this was reflected in their general service levels. The Committee were assured that management had accepted that more detailed checks needed to be made on the monthly invoices before payment was made. In future, managers would be required to check a sample of transactions on the invoices.

The Committee considered Section 3.19 of the report. The introduction of the FBM (Full Budget Monitoring) system was noted. The Committee were informed that the budget monitoring review rates over the last five months, varied between 26% and 64%. The Committee were unhappy with these figures, and felt that they were not acceptable. The Committee considered possible reasons why the percentage compliance rates were low and below targets. Councillor Nicholas Bennett felt that middle management was not good enough, and that also there should be more involvement at Director Level to ensure compliance. Councillor Fawthrop commented that there would also be a failure to monitor cumulative spend on the part of budget holders by not engaging in the FBM process The Committee intended to monitor the FBM compliance statistics, and to see what the figure was in November. Councillor Fawthrop proposed a motion that if the compliance rates were below 85%, then Directors should be called to account to the Sub-Committee. This motion was seconded by the Chairman. 

The Committee next considered the matter of the Waivers Procedure as outlined in Section 3.27-3.30 of the report. The Committee was happy with the way that Care Services and Education PDS Committees undertook the scrutiny of placements. It was therefore agreed that placement waivers were no longer required to be reported to the Audit Sub-Committee. 

The next matter that the Committee discussed were the nominations for “Auditor of the Year”. The work of two Auditors (A and B) was outlined on the report. The Committee considered the work of both auditors, and they were both highly commended. The Committee decided that Auditor B should receive the nomination.

The Committee noted that the DWP were in the process of setting up a Single Fraud Integrated Service, and that this would take effect in LBB from 1^st July 2015. It was noted that LBB’s fraud contract with RB Greenwich had previously expired in March 2014 and had been extended for a year. LBB were looking into any possibilities that may exist to continue to employ the services of RB Greenwich under the new arrangements subsequent to 1^st July 2015.

The Committee next turned their attention to Section 3.46 of the report, which was a review of Value for Money Arrangements. The Head of Audit stated that due to conflicting pressures the work had not yet been completed and that two of these audits were outstanding. Councillor Bennett stated that he felt that such matters should be for Departmental Finance Officers to deal with, and not  Audit. The Chairman suggested that value for money should be the responsibility of every officer, and that it was a matter for audit to scrutiny. Councillor Bennett averred that each department should be responsible for approximately four reviews per year, and that ultimate responsibility for this should rest with departmental heads. He also felt that the findings of these reviews should be conveyed to PDS Committees. The Vice Chairman (Councillor Collins) agreed with this. Councillor Bennett advocated that the matter of departmental value for money reviews should be referred to the Executive and Resources Committee. 

Councillor Bennett stated that when reviewing VFM arrangements departmentally, consideration should be given by department heads as to what assistance could be given to managers, what sort of targets they should be working to, and how processes could be streamlined. These were matters that should be adopted without compromising financial regulations. Councillor Fawthrop asked how VFM studies could be pursued in conjunction with commissioning, and suggested that perhaps there should be benchmark clauses. The Chairman stated that it may be a good idea if contracts had KPI’s (Key Performance Indicators). Councillor Fawthrop suggested that it may be a good idea to audit contracts for KPI’s. The Vice Chairman suggested that it may be prudent to appoint a delegated person to look at VFM issues for three departments. The Chairman declared that it may be advisable to request the Executive and Resources Committee to set up a Working Party to report on VFM.

It was agreed by the Committee that a referral be made to the Executive and Resources Committee to make provision for a Working Group to consider the matter of how departments could review VFM arrangements. 

RESOLVED that:

(1) the Internal Audit Progress Report be noted

(2) a referral be made to the Executive and Resources Committee to make provision for a Working Group to consider the matter of how departments could review VFM arrangements

(3) an email update be sent from the Head of Audit to Committee Members in October 2014 to provide an update on the progress of internal audit activity

(4) if the compliance rate with respect to the Full Budget Monitoring system was below 85%, then Directors should be called to account to the Sub-Committee.

(5) placement waivers were not required to be reported to the Audit Sub-Committee 

(6) the list of internal audit reports publicised on the web be noted, and the reports approved where exemptions were sought

(7) auditor B was nominated to receive the award of auditor of the year

(8) the continuing achievements of the counter fraud benefit partnership with the Royal Borough of Greenwich be noted

(9) the impending changes to the counter fraud partnership with RB Greenwich be noted.