Agenda item

FSD 17083

 

This report was presented to the Audit Sub Committee by David Hogan, Head of Audit.

 

The report was presented to inform Members of recent audit activity across the Council and to provide an update on matters that had arisen from the previous meeting of the Audit Sub Committee in June.

 

The Head of Audit outlined to Members the ‘The Three Lines of Defence Model’ that was applied by many commercial and public sector organisations and the role that Internal Audit played in the model. Internal Audit was the third line of defence that would report to the Audit Sub Committee, Senior Management and the Corporate Leadership Team.

 

An update on Audit resourcing was provided, and it was clarified that recruitment for the post of Trainee Auditor would commence in April 2018, making use of Apprentice Funding.

 

The Chairman welcomed Catriona Ellis to the Internal Audit Team.

 

A Member wondered if the Audit Plan had been drafted based primarily on resources rather than on what Internal Audit would actually do if there were no resource limitations. The Head of Audit stated that an Audit Needs Assessment was required. He expressed the view that in the current climate, it was only possible to plan ahead for one year, rather than five or six years which would have been preferable. This being the case, it was important to use the services of other departments in the Council, as outlined in the processes around the ‘three lines of defence’.

 

The Head of Audit wanted to include a high level review of Governance in next year’s plan, and to give priority to looking at the more risky issues. There was a need to prioritise and risk assess.

 

A Member stated that the Head of Audit should bring concerns to the Committee if needed, and that Internal Audit was a crucial part of the Council. A Member commented that in his experience, not much seemed to come to light in planned audits, but rather things came to light from self-referrals. The Head of Audit advised that not much in the way of fraud was picked up directly by Internal Audit, the emphasis was in ensuring that the correct systems and governance were in place; this in turn would reduce the scope for fraud. It was important to choose the right areas to investigate. 

 

The Committee noted Appendix A which detailed outstanding priority one recommendations. A comprehensive update on the Waste Services Audit was detailed in the part 2 report.  Other areas where priority one recommendations were outstanding were:

 

·  Document Storage and Retention

·  Temporary Accommodation

·  Review of Waivers

·  Review of Reablement Team

·  Street Works

·  Review of Contract Monitoring

 

Members noted that although four priority two recommendations had been raised with respect of Payroll Expenses, the assurance rating was Substantial.  Similarly, although there were two priority two recommendations with respect to the Pensions Audit, the overall rating was Substantial.

 

The Committee was briefed that three priority two recommendations had been made with respect of the Bromley Children’s Project, but that the overall assurance rating was Substantial.

 

The Head of Audit informed Members that the follow up audit relating to Children with Disabilities had been completed, and that of the four recommendations arising from the previous audit, two had been fully implemented and two had been partially implemented. 

 

The Audit opinion relating to Debtors was Substantial, but five priority two recommendations had been suggested to further improve controls. Two priority two recommendations had been raised with respect of the Early Years Audit, but the overall Audit opinion was Substantial. The Head of Audit reported on the audit of internet usage. Three priority two recommendations were raised to improve controls, but the overall opinion was Substantial.

 

The Committee noted the follow up Audit reports for Marjorie McClure School and Poverest Primary School. 

 

The Committee was updated concerning the follow up report on the Community Infrastructure Levy (CIL). It was noted that five of the previous recommendations including the two priority one recommendations had been implemented, and that four new recommendations had arisen out of the follow up audit. 

 

Members were appraised regarding the Contract Monitoring Audit. Although controls were working well in the areas of locating contracts and ensuring that they were signed and sealed, the overall assurance opinion was Limited. Internal Audit had made three further recommendations, one was a Priority One, and two were Priority Two recommendations. These were related to ensuring that relevant supporting documentation was retained with the contracts, and that the value of Public Liability Insurance held was sufficient.

 

Members were briefed further on Priority One recommendations:

 

·  Document Storage and Retention

·  Temporary Accommodation

·  Waivers

·  Street Works

·  CIL

·  Contract Monitoring

·  Learning Disabilities 

 

Document Storage and Retention:

 

It was understood that 900 boxes had been identified for destruction by TNT. Even so, it was expected that for a variety of reasons new files would need storing, and that this was likely to remain as a Priority 1 issue until the right equipment and IT Infrastructure was in place. The Chairman wondered how this issue could be moved on, as the date for completion of the Civic Centre Accommodation Strategy had not been clarified. A Member suggested that LBB should not wait, and should progress with the implementation of the IT infrastructure. 

 

Temporary Accommodation:

 

Members were reminded that at the previous Audit Sub Committee meeting there were issues that needed to be resolved around the collection of rent, the use of accommodation and delays in dealing with evictions. The Committee was briefed that Internal Audit had met with the Director of Housing and The Head of Allocations and Accommodation to discuss these issues. It was also the case that the Housing Team were working closely with Liberata to redraft the arrears collection procedures and processes. A new Housing IT system was being developed. The Director of Housing had asked that the Priority 1 recommendation remain in place while the new IT system and other processes were being embedded.

 

Review of Waivers:

 

Members heard that the waiver process was being enhanced, and that a new digital authorisation process was being developed. The view of Internal Audit was that the two priority one recommendations should remain in place until the digital authorisation process had been fully implemented. 

 

Street Works:

 

The Committee heard that in the audit report that was finalised in June 2017, five priority one recommendations had been identified. The recommendation relating to contract monitoring minutes had evidenced progress, and so the recommendation was now closed. A further recommendation had been raised with respect to unauthorised variations to contracts. Internal Audit had evidenced that a new Change Control Notice was being implemented and so the recommendation was now closed.

 

Two other issues that had previously been identified were problems with complying with contract procedure rules and inadequate contract monitoring. Internal Audit was satisfied that sufficient progress had been made in both these areas, and so the recommendations were now closed. The Committee were informed that the Priority One recommendation relating to raising invoices in a timely manner would remain open.

Internet Usage:

 

The Head of Internal Audit explained that there was a lack of technical controls that could be applied to Blackberry phones to prevent users from accessing inappropriate sites, although there was no suggestion that users were doing so.  In terms of staff accessing the internet, staff were trusted not to abuse access to the internet or spend excessive time in using the internet for non-work related use. Technical controls were in place, and managers could ask for reports if they felt it was required. 

 

Contract Monitoring:

 

Members were concerned to note that problems existed with supporting documentation that either was missing or could not be found and with copies of Public Liability Insurance not being available in certain cases. As a result two Priority One recommendations had been raised. 

 

The Committee noted that Ernst & Young had been appointed as the new External Auditors. They would commence work for LBB on 1^st April 2018.

 

Members noted the Annual Audit Letter, and that the Auditor had issued an unqualified opinion on the authority’s financial statements on 27^th September 2017.

 

Members were advised that there had been an objector to the accounts. The objections were in two areas:

 

·  Waste Management and Street Cleansing Services

·  Trade Waste Collection Service

 

The external audit of the Council’s accounts could not be concluded while the objections remained open. A Member asked what happened next in relation to the objections. It was explained that this was a matter that would have to be dealt with by the External Auditors—they would have to assess if the objections materially affected the accounts and were currently reviewing the issues raised. This process was likely to be expensive to the Council. The External Auditors could be challenged by the Objector in court if not satisfied.

 

The matter of ‘Journal Posting’ was discussed briefly, but no recommendation was made on the night. ‘Journal Posting’ was the name given to the practice of using book-keeping practices to move money between budgets internally.  Internal Audit would look at the issues raised in its Main Accounting Audit scheduled for quarter 4. 

 

The winner of the ‘Auditor of the Year’ was Deepali Choudhary, and she was presented with the Tickner Cup. 

 

 

 

 

 

RESOLVED that:

 

(1) The Committee note the results of the Zurich Risk Management exercise

 

(2) The Committee note the actions taken to improve the Risk Management Process

 

(3) The Committee note the Departmental Risk Registers

 

(4) The Committee approve the revised Corporate Risk Register

 

(5) The Committee note the Internal Audit Progress Report

 

(6) The Committee note the redacted Internal Audit reports published on the web

 

(7) The Committee note the list of waivers sought since March 2017

 

(8) The Committee note the appointment of Ernst and Young as the new external auditor

 

(9) The Committee note the letter of Representation

 

(10) The Committee note the Code of Transparency around the reporting of fraud

 

(11) The Committee note the minute extract from the GP&L Committee dated 12^th September 2017