Agenda item

FSD 19024

 

The Internal Audit Progress Report was written by the Head of Internal Audit and informed Members of recent audit activity that had taken place across the Council; it also provided an update on matters that had arisen from the previous meeting. Members were asked to note and comment on the report and also to approve the updated Anti-Fraud and Corruption Policy and associated documents.

 

The Head of Audit briefed Members that a ‘Risk Register Refresh’ had taken place between December 2018 and January 2019, but none of the risk registers required any major changes. A revised suite of risk registers would be presented to the Committee at the June meeting, along with the Annual Governance Statement. The External Auditors had identified Brexit as an additional risk.

 

A GDPR ‘health check’ took place in November 2018 and was scoped in conjunction with Zurich. The outcome of the health check was largely positive. Members heard that the planned audit of Business Continuity would be deferred as the two officers previously dealing with the service had left the Council.

 

The Head of Audit was pleased with the findings of the audit that had been undertaken regarding the Housing Register, and so the assurance provided was ‘Substantial’.

 

The Chairman looked at the audit findings relating to the Management of Strategic Property, and the Director of Regeneration was present to answer  questions on the audit. The Chairman was disappointed to note that the assurance level for the ‘Management of Strategic Property’ was ‘Limited’. 

 

It was clarified that with respect to the management of Strategic Property. The main contractor was Amey, and the sub-contractor was Cushman & Wakefield. There were various issues that were identified by Internal Audit. There were instances identified when invoices were paid to the sub-contractor where the appropriate supporting documentation did not seem to support payment in full. 

 

Another issue that had been identified in the audit was that work had been undertaken by the sub-contractor which was outside the scope of the original contract. It had not been able to be determined if the TFM agreed schedule of rates had been applied to this work and so it could not be determined if the Council had obtained value for money in these cases.

 

Additionally, the Head of Audit stated that the KPIs on the contract were not working because they were deemed not workable. It was also the case that there were no instances of default penalties being applied.

 

When the contract commenced in October 2016, it had been agreed that the Strategic Property Sub-Contractor would develop a £1m Income Generation Plan. Internal Audit expressed limited confidence in the plan being developed on time and achieving the planned savings.

 

The Director of Regeneration commented that the report was fine and fair, and was accurate at a point in time. He said that in some areas (like disposing of the Old Town Hall), Cushman and Wakefield were very effective. However, there were other areas where he felt that they lacked understanding of what was required from the Council.

 

The current plan to generate £1m of new income was being assessed by the Finance Department. Clarification was required to ensure that any money that had been classed as ‘new money’ or new income, did indeed meet the relevant criteria to be so classified. He said that the issues that had been identified around KPIs represented a learning curve; he was hopeful that those issues had now been addressed. 

 

The Chairman asked Mr Brand if the Council had lost money. Mr Brand responded that this was likely not to be the case. He pointed out that from the offset, Cushman & Wakefield were dealing with information relating to property assets that was in a mess, and which required data cleansing. The initial piece of work that had been required was to cleanse the property database. Working on the Income Generation Plan would follow the data cleansing. The Director was confident that additional income was being generated. The sub-contractors were treating the Property Portfolio with respect.

 

The Director advised that LBB only became aware of issues/problems as both parties worked though the contract. From the offset there were issues with staffing, IT and inaccurate data. It was noted that financial incentives existed for the sub-contractor to achieve the ‘new income’ target, and that they were now being supported by Finance to do so. 

 

Mention was made of rental arrears relating to community groups and the various tensions and issues around this. Cushman & Wakefield had been asked to undertake a review of leases. A Member asked what the aggregate rental arrears was, and the Director responded that he would check and email the Member with the information.

 

The Vice Chairman enquired about agreements to reduce rent or forego rent increases for community groups. He asked if any records existed that recorded these discussions. The Director said that LBB supported local organisations and that Cushman & Wakefield were aware of the political environment. Many of the community groups were not commercial organisations and so would not be able to bear rent increases.

 

The Vice Chairman referred to the matter of ‘unworkable KPIs’ and asked if LBB had now understood what had happened, so that the same thing did not happen again. It had taken a year to re-negotiate the KPIs and this had to be avoided.

 

 

The Director responded that LBB was indeed looking at the lessons that had been learnt. He acknowledged that the contract should have run better and that outside advice should probably have been sought earlier. Change controls had now been implemented.

 

It was noted that tensions had existed between Cushman & Wakefield and Liberata regarding unpaid rent, but the Director assured that things were better than before and were moving forward in a satisfactory manner. A Member said that there should have been proper variations of leases. The Chairman expressed the view that it was unfortunate that discussions and meetings had not been formerly minuted and documented. The Director assured that management actions had now been put in place to address the various issues. The management actions had been agreed by the Director.

 

The Chairman asked what awareness did Members of PDS Committees have of these issues. The Director clarified that the issues had been reported into the Resources Portfolio. Finance was also aware. The Chairman asked if the ER&C PDS Committee was aware. The Director responded in the affirmative.

 

A Member asked for assurances that leases were now being dealt with in the proper manner. The Director stated that he was now a lot more confident that this was the case. The Member asked if it was possible to recoup retrospective payments from tenants. The Director explained that if this course of action was pursued, then many community groups would be in danger of closing. He felt that what was now required was to put the community groups on the right footing going forward, and to manage them on a case by case basis.  

 

A Member expressed concern that unworkable KPIs had been agreed. He was also concerned that this had taken a year to deal with. He asked who this had been reported to and it was noted that the matter had been reported to the Contracts & Commissioning Sub Committee and to the Strategic Asset Management Group.

 

The Chairman thanked the Director of Regeneration for attending the meeting and for answering questions, and the Committee then turned their attention to the audit of Parking Income. 

 

The Head of Internal Audit briefed the Committee that two P1 recommendations had been made subsequent to the audit of parking income. These were recommendations regarding contract variations and key performance indicators. Five additional P2 recommendations were made to improve controls. Resultantly, the audit opinion was ‘Limited.’ 

 

A Member asked if KPIs were ‘right’, expressing the view that they were in fact ‘wrong’. He felt that an unhealthy focus on KPIs meant that the KPIs themselves became the objective rather than service delivery. He felt that this should be considered, as KPIs often seemed to be the cause of problems in contracts.

The Head of Audit stated that KPIs should be meaningful, should be well thought out, and monitored at an early stage. There was a cost to monitoring that had to be considered. It may a useful exercise to consider what other organisations were doing.

 

The Head of Audit briefed Members on the audit of Health and Safety. Various recommendations were made, including a P1 recommendation to address the fact that a ‘Risk Assessment Universe’ did not exist. This meant that LBB would not be able to demonstrate that it had assessed its health and safety risks, and had formulated action plans to implement controls. The Vice Chairman expressed concern regarding possible reputational damage that LBB could suffer if the relevant controls and assessments were not in place.

 

Members were pleased to note that the audit of Debtors’ Income had resulted in a rating of ‘Substantial’ assurance.

 

Members were briefed concerning the audit of St Olave’s School. Although the audit rating was ‘Limited’, it was still felt that good progress was being made as the school had fully implemented 8/14 of the previous recommendations, and another 4 recommendations had been partially implemented. The new audit had revealed a weakness in the expenditure process, which had resulted in two new P2 recommendations.

 

The Committee was appraised regarding the audit of Information Governance and GDPR. The audit opinion for Governance, Policies and Procedures was ‘Substantial’. The audit opinion relating to training and awareness arrangements was ‘Limited’. 

 

Members were briefed concerning the P1 follow up audit relating to the review of agency staff. In January 2019, it had been identified that 195 agency staff had been engaged for longer than 6 months, while 18 staff had been engaged for longer than 3 years. Internal Audit had asked HR to provide the business cases made by the Directorates to continue the engagements. The information was in the process of being collated.

 

It was noted that in many cases the continued engagement of staff in Children’s and Adult Social Care was required due to a shortage of qualified staff. Mr Barrie Cull (Internal Audit) briefed the Committee on this matter and said that HR should be chasing the business cases, rather than leaving it for internal audit to do so. He said that more extensive testing would be undertaken and the Committee would be notified of the results. 

 

The Committee noted that the use of agency staff in Children’s Social Care provided flexibility, and avoided issues associated with pensions and TUPE. A Member enquired if HR had ever refused a business case of this nature. Mr Cull responded that he was not aware of a refusal, but it was the case that the business cases presented were normally strong. It was agreed that the Committee be kept informed of developments, and that an update on the matter should be brought to the next meeting of the committee on 4^th June.

 

Members discussed the audit of the Reablement Team and the Reablement Assessment Team. Members were informed that the P1 recommendation relating to Reablement Performance Data had now been implemented. The P1 recommendation relating to the Outcome Measurement Tool was also now considered as closed as the OMT was no longer being used. 

 

The audit of direct payments showed that all of the P1 recommendations had now been implemented. The audit of Creditors showed that matters were being progressed, but there were still issues that required addressing. The matter was now being overseen by Mazars. 

 

Members were updated regarding the Council’s Anti-Fraud and Corruption Policy, and Money Laundering Protocol. The Policy and Protocol were reviewed in November 2018, and minor changes were made. Local authorities were not directly covered by the requirements of the Money Laundering Regulations 2017, but it was generally considered good practice to comply with the spirit of the legislation. This would include the ability to demonstrate that appropriate safeguards and reporting arrangements had been put in place. 

 

The Committee heard that the risk of the Council contravening the Money Laundering Regulations was low, but it was vital that employees were familiar with their responsibilities, as it was possible to incur serious criminal charges for a breach of the legislation. The Head of Internal Audit had been appointed as the Money Laundering Reporting Officer.

 

As a result of changes made to the Council’s Anti-Fraud and Corruption Policy, the amount of money that the Council would accept in cash had been reduced from £10k to £5k. The Committee agreed that Internal Audit should raise awareness of the changes with Managers and Staff. A Member suggested that computer based training be adopted for these areas, as this could then be recorded.   

 

RESOLVED that

 

1) The report is noted

 

2) The Committee notes the Internal Audit reports that had been published on the Council’s website

 

3) The updated Anti-Fraud and Corruption Policy is noted and approved, along with the associated documents  

 

4) Internal Audit raise awareness of the changes to the Anti-Fraud and Corruption Policy with managers and staff

 

5) The Committee be kept informed of developments around the submission of business cases from HR for the retention of agency staff beyond usual timescales, and that an update on the matter be brought to the next meeting of the Committee on 4th June.

 

6) The Director of Regeneration would respond to the query from a Member regarding aggregate rental arrears.