Agenda item

The Head of Internal Audit and Assurance explained that in the first part of the year members of the Audit Team had been seconded because of the Covid  pandemic to work in other areas, this included working with the Shielding Team to support vulnerable people. As the number of Covid cases had dropped and restrictions eased, members of the Audit Team had been relieved of these duties, and so the Audit Team had commenced work on the internal audit recovery plan which had been shared with the CLT.

The Audit Team had been undertaking work supporting the processing of business support grants, and later with respect to the test and trace support payment scheme, and variations of support to business as a result of the three-tier coronavirus alert system. The role of Internal Audit was to advise on controls within the system and to perform assurance work when it was functioning. The Head of Audit and Assurance  informed the Committee that two members of the Audit Team had been notified that because of the recent rise in Covid cases, they were being put on notice that it was likely they would be required to return back to resourcing the Covid Support Team. The Chairman and the Committee thanked the members of the Audit Team who had been seconded to Covid Support Work. 

The Chairman highlighted Section 3.210 of the report which referred to work on local restriction grant payments that was due to take into effect, if and when the borough went into ‘Tier 3’. The Chairman mentioned that because Bromley had  now moved from ‘Tier 3’ into more of a full lockdown, would those services now  be triggered. The Head of Audit and Assurance responded that the Audit Team were waiting for new guidance which was expected over the next few days.

The Head of Internal Audit and Assurance explained that members of the Audit

A Member commented that he had been in contact with the Director of Finance to ask about fraud related to Covid business grants. The Member felt it necessary to draw the Committee’s attention to the associated response from the Director of Finance, which was dated, 12th of October 2020. It was noted in the response that 3500 payments had been made and only seven of those were cases involving possible fraud which needed further investigation. This number was very low. It was the case that because of controls introduced by the Head of Audit and Assurance and his team, these controls were now recognised nationally as examples of best practice.

The Member had also been in contact with the Portfolio Holder for Resources and Contracts who commented that those councils that had initially been applauded in Parliament for the rapid distribution of money were now having to claw back money that had been paid in error. The Committee expressed their thanks to the Audit Team for their sterling work in this area, and for the fact that the work was of such high quality that it had been recognised nationally.

The Head of Audit and Assurance stated that before he took up his position within the authority, much attention had been directed towards contract governance and documentation. He was pleased to note the positive changes that had been embedded within the organisation. Contracts had been signed and sealed, company guarantees, indemnities and performance bonds were retained securely and were current. Five recommendations had been made which were aimed at improving the control framework. One of the recommendations was to ensure that contractors had the correct type and level of insurance in place. A Member asked if departments referred contracts to the Insurance Officer at an early stage, to ensure that the correct insurance was in place. The Head of Audit and Assurance pointed out that it was clearly stated on contracts what the requirement was in terms of insurance obligations and the Procurement Section would flag up any issues or seek advice from the Insurance Officer if required. The Audit Opinion for Contract Governance and Documentation was ‘Reasonable’.

With respect to the audit of Debtors, the Audit Team sought to establish if records were reliable, if separation of duties was evidenced, if debts were raised and coded in a timely manner, and that actions were being taken in line with the Council’s debt recovery procedures. Many of these were evidenced, in place and working well, but some recommendations were made to improve the control framework. The Audit Team recommended that management should ensure that they were able to access and produce a report from systems relating to users who were able to access the system. Those who had access to the system should be reviewed on a regular basis to ensure continued appropriateness. It was also recommended that management should undertake a monthly spot check of 5% of write offs to ensure that the relevant details were retained on file. The Audit Opinion for Debtors was ‘Reasonable’.

The Head of Audit and Assurance updated members on the audit of the Pension Fund and it was noted that controls to ensure that the pension fund was compliant with the Regulator’s Code of Practice on Government and Administration of the Public Pension Scheme were working well. Also noted was that the sub-committee for Pensions and Investment held regular meetings which were attended by advisors from the Council’s appointed pension fund advisors. Reports on fund manager performances were provided to the Council and presented to the quarterly meetings of the Pensions and Investments Sub-Committee. Three recommendations were made to improve the control framework and one of these related to the availability of minutes of the most recent meetings of the Pensions and Investment Sub-Committee, which had been delayed with Democratic Services. The Audit Opinion for the audit of the pension fund was reasonable.

Members were updated with respect to the audit of Street Lighting. One of the purposes of the audit was to make sure that revised service delivery arrangements were in place because of service delivery targets that could have been affected by Covid 19. Recommendations were suggested to improve the control environment, which included the fact that the end to end procedure for delivery of the Street Light service should be formally documented, together with a review of the training needs of staff. It was brought to the attention of the Committee that the street lighting jobs were not routinely supported by before and after photographs identifying the asset and its location. It was suggested that consideration should be givento obtaining photographic evidence to support works orders. The overall audit opinion for Street Lighting was reasonable.

Members were briefed that the Troubled Families Claim had been signed off by Internal Audit. This was also the case for the Local Transport Revenue Block Funding (Blue Badge New Criteria Implementation) Specific Grant Determination: 2019 to 2020. It was noted that the evidence seen by Internal Audit demonstrated that the grant conditions had been met with respect to the BCF Disabled Facilities Capital Grant. 

Members were briefed concerning the follow up of the Leaving Care priority one recommendations. Previously, Internal Audit had made six priority one recommendations with respect to Leaving Care after the audit of October 2018. Two of these recommendations had been outstanding for a while. The Head of Audit and Assurance updated the Committee by saying that sample testing had been undertaken by the Audit Team in October 2020. They found that the  outstanding recommendations were now being implemented and that therefore all of the priority one recommendations could now be closed.

Members were reminded that previously a priority one recommendation was outstanding with respect to Strategic Property and the associated £1m income generation strategy. It was confirmed that the strategic property aspect of the existing contract was being brought back in house, and so now the outstanding recommendation relating to the income generation strategy could be closed.

The Committee received an update concerning the previously outstanding priority one recommendation with respect of No Recourse to Public Funds. Previously, this recommendation was related to noncompliance to contract procedure rules to procure accommodation, along with the use of a single housing provider with no contractual arrangements in place;  additionally there was no oversight of cost and value for money. The Committee heard that Internal Audit were now satisfied that these issues had been resolved, and that therefore the recommendation could be considered as being fully implemented.

Members were provided with an update regarding the Priority 1 recommendation for Starters and Leavers. There were a number of processes that needed to be completed, including the completion of an automated form that went to IT. The idea was that a streamlined process would be in place to deal with the handing in of equipment, passes, and removal from the internal email and telephone system. It was found that previously this process had not been implemented particularly well. The implementation of a new system had been delayed because of Covid 19. Internal Audit had conducted tests related to members of staff that had left since April. It was found that IT equipment was being returned in a satisfactory manner. However, Internal Audit found that it was still the case that a high number of people nonetheless had an active account. This matter was subsequently discussed at a meeting of the Corporate Leadership Team, and the Chief Executive instructed that Directors be notified when staff left, so that they could ensure that the relevant processes were implemented correctly. The Head of Internal Audit and Assurance informed the Committee that the Priority 1 recommendations could still not yet be closed, as full compliance had not yet been achieved. It was noted that a new IT system was being developed that would hopefully make things more consistent and achieve better compliance. It was noted that the Chief Executive was not happy that this issue had not yet been fully resolved. The Chairman expressed surprise that this matter was still ongoing.

Members also expressed dissatisfaction that the issue had not been resolved, but were pleased to note that the Chief Executive was active in seeking to resolve the matter. A Member raised a concern with respect of security passes; he felt it was worrying that security passes were not being handed in and destroyed when employees left the organisation. He expressed the view that this was a security risk and highlighted the fact that in the light of recent terrorist incidences, the UK threat level from terrorism had been raised, and that public buildings were possible targets.

The Head of Audit and Assurance responded that ideally, old security passes should be handed in and destroyed. However, it was the case that when an employee left the organisation, their security pass was deactivated, so they would no longer be able to use the pass to access the building. The Member responded by pointing out that a person could still try and tailgate someone into the premises by using an old identity card, as well as the fact that the card could be used in the High Street to obtain discount in certain stores. A discussion took place regarding the possible root causes of this problem. A Member suggested that the matter of properly dealing with staff leaving the organisation should be added to a manager’s objectives. For the moment the Priority 1 objection would need to remain open.

Members heard that it was previously the case that three Priority 1 recommendations with respect to Highways Maintenance needed implementation. One of the recommendations had been evidenced as being implemented, and could now be closed. Measures had been put in place by management to implement the remaining two recommendations, but Internal Audit had not had time to evidence if the new processes  had been implemented successfully, so for now the priority one recommendation would remain open. 

Members were pleased to note that the priority one recommendation regarding schools finance had been implemented and could now be closed.

Regarding the audit of procurement cards, it was previously the case that three priority one recommendations were outstanding. It was the intention of internal audit to undertake a fresh audit of procurement cards in the near future.

and so these recommendations would remain until the new audit was completed.

The Head of Audit and Assurance updated the Committee regarding the audit of Saint Olave’s School. It was noted that previously, there were two priority one recommendations outstanding. The school had made some progress in implementing the recommendations. However, Internal Audit were planning to audit the school later in the year and so the recommendations would remain open until then.

Members were updated with respect of waivers and it was noted that the number of waivers was higher than usual because of COVID-19. This was because in certain cases tendering was now not feasible. The waiver process was implemented on the basis of contract regulations and the waivers had been authorised by the Director of Finance, the Director of Corporate Services, the relevant departmental director, and in some cases also by the Portfolio Holder.

It was noted that in terms of external audit, the 2018/19 accounts had been signed, been given an unqualified opinion and published on the Bromley Council website. The accounts for 2019 to 2020 had been published on the 30th of June and were now currently being audited.

With respect to VFM (Value for Money) this opinion had not yet been provided until all the work regarding the objections to the accounts had been completed. Regular updates were now being provided by KPMG, and they hoped to finalise the work by the end of November 2020. After this, Ernst and Young would review the work and the opinions that had been put forward by KPMG. Members were glad to hear that no objections had been raised for this year, and so the cycle of objections seemed to have stopped. Members noted that the scale audit fee was originally quoted as £91K, but Ernst & Young had asked for a revised fee of £188K. The Director of Finance had asked for a meeting with the PSAA concerning this.

The Head of Audit and Assurance summarized the main changes that had taken place with respect to the Financial Regulations 2020 and additionally the Financial Regulations for Schools 2020.

A Member expressed concern that the focus of audits undertaken by Internal Audit was the ‘protection of cash’. He expressed concern regarding some aspects of the planning process whereby a planning officer could advise a developer and then write the associated planning report. He stated that there should be a separation of duties. It looked like a practice that was not sound.  The Head of Audit and Assurance responded that this was a matter that had been looked into and that LBB were complying with relevant guidance. If there were still concerns they could be looked at. The Member replied that the process did not sit well with the public and should be changed. Another Member stated that he agreed with these sentiments, and that the process should be changed.

RESOLVED that:

1--The  Internal Audit Progress Report be noted

2--The list of internal audit reports published on the Council's website be noted 

3--The External Audit update be noted

4--The Audit Sub-Committee recommend to the GP&L Committee and the Council, that the revised corporate financial regulations and financial regulations for schools be agreed.