Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: No
Prior to the introduction of the internal audit report, the Chairman welcomed Gerry Palmer, Procurement Business Partnership Manager, Wealden District Council to the meeting, who provided Members with an update on the East Sussex Procurement Hub.
The internal audit had found that there was no up-to-date procurement strategy (an issue first raised at the last audit in August 2015) and no service level agreement (SLA) in place to formalise the current arrangements with the East Sussex Procurement Hub (ESPH). A benchmark assessment against each of the key elements of the National Procurement Strategy for Local Government had been completed by the ESPH and council officers and the outcome had been received in February 2019. The Procurement Strategy was being updated and consultation with officers and Members was due to take place over the following months in the form of workshops to be held in the Town Hall, with the revised strategy being presented to Cabinet in September 2019. In addition, a revised SLA was anticipated to be ready for consultation in July 2019.
The Audit Manager led Members through the internal audit report to 31 March 2019. The Council was required to ensure that it had reliable and effective internal control systems in place and the adequacy of these systems was tested by both Internal and External Audit.
The report included an annual report on the performance of the Internal Audit Service. In the year up to 31 March 2019, Internal Audit had operated in accordance with the Public Sector Internal Audit Standards (hereafter referred to as ‘the Standards’). It was a requirement of the Standards that a report was made to the Audit and Standards Committee on audit matters and any emerging issues, not only in relation to audit but risk management and corporate governance.
The Internal Audit team had successfully completed the majority of the work for 2018/19; however, work on one audit (Software Licensing) was still ongoing at the year end and two other audits (Acquisition & Financial Management of ICT Facilities and Catering - Colonnade Café/Restaurant) did not proceed because the work was either covered elsewhere or no longer required.
The report gave details of the nine audits completed in the final quarter, a summary of all audit reports completed in 2018/19 and progress made on implementing audit recommendations. Seven of these had provided good or substantial assurance on the overall governance arrangements. However, the other two audits (Benefits – Finance Extract and Creditors) only provided limited assurance due to problems with the introduction of a new computer system and the long term absence of a key member of staff. Members requested that an update be provided to the Committee at the September meeting.
An overview of the findings arising from all nine audits was given in Appendix A to the report.
Appendix B to the report provided a summary of all audit reports completed in 2018/19, the level of compliance and assurance rating for each review, and the overall performance of the Internal Audit team against the plan. The details of all audit reports issued in the first three quarters of 2018/19 have already been reported to the Committee at previous meetings.
Appendix C to the report provided a summary of progress made on implementing the audit recommendations reported at previous meetings. It was reported that most of the long outstanding recommendations had been cleared and only three 2017/18 recommendations were yet to be fully resolved. Good progress also continued to be made on the more recent recommendations.
The Audit Manager had been requested by Members at previous meetings to provide a progress update on the following items:
• Public Conveniences Cleaning Contract – The audit report (issued in July 2018) received a limited rating because the contract paperwork (i.e. signed contract and performance bond) had still not been finalised at the time of the audit despite the contract having been in operation since April 2017. Both documents had since been obtained as a result of management pressure on the East Sussex Procurement Hub and the contractor (Specialist Hygiene Services Ltd) to resolve the issue. The signed contract was eventually obtained in January 2019 and the performance bond in April 2019.
• Homelessness Prevention Grants and Loans – The audit was a follow up review of the 2017/18 audit which only received a minimal assurance rating owing to the major control weaknesses found and the discovery of a £12,250 fraud. Whilst some progress had been made to improve procedures since that audit, the latest report still received a negative (limited) assurance rating because the new controls were not being consistently applied and management oversight was still found to be inadequate. The Head of Housing and Community provided an update which gave assurance that financial controls are now being followed and that management are overseeing the process.
In addition to compliance work, the Audit Manager also coordinated the National Fraud Initiative (NFI) data matching exercises and the whole Internal Audit team assisted with the process of reviewing the matches. The NFI matched Council data both nationally (to other public sector organisations) and locally (between the authority’s own records) to help prevent and detect fraud. The national data match took place once every two years and was last carried out in October 2018. The majority of the matches found (87%) related to housing benefit/council tax reduction cases and needed to be reviewed by the Revenues & Benefits team to either be dealt with in-house or referred to the Department for Work and Pensions for further investigation.
The local data match exercise was carried out every December; it’s primary purpose was to identify council tax payers who were wrongly claiming single person discount. The December 2017 review was completed during 2018/19 and had identified 12 errors resulting in £46,736 in savings. Work on the December 2018 matches was currently underway.
The Internal Audit team had also carried out some Counter Fraud duties during 2018/19. This work primarily focused on council tax and business rates and a number of properties were identified which were either wrongly classified as empty, were in receipt of rate relief they were not entitled to, or required banding/rating by the Valuation Office. This work also uncovered several holiday lets which had not been declared. These cases were followed up with the help of colleagues in the Revenues & Benefits team and an additional £76,095 of revenue income was being collected as a result.
Internal Audit has also secured £20,000 of former Department for Communities and Local Government funding from the East Sussex Counter Fraud Hub for use on counter fraud initiatives. Negotiations were underway with Hastings Borough Council with a view to using the money to jointly fund a fixed-term Investigator post to enhance the Council’s capacity in this area. However, it was likely that alternative uses of funding would need to be explored and the Audit Manager would report back to the Committee in due course.
Routine audit work during 2018/19 had also identified £43,897 in confirmed savings/extra income due to financial errors, which included a Section 106 debt which had been underpaid, business rate relief which had been wrongly applied and other debts which had not been billed.
The Audit Manager was pleased to report that evaluation of the Internal Audit team’s conformance with the Standards, to assess the efficiency and effectiveness of the service had concluded that there was a high level of overall effectiveness. The team’s first external peer review was completed in April 2017; no significant issues were found. Quality assurance questionnaires were also used to capture client feedback, the vast majority of which had been very positive indicating a high level of satisfaction with the quality of the Internal Audit Service.
Internal Performance Measures set for the Audit Team also demonstrated that most of the targets for 2018/19 had either been met or exceeded.
The summary of completed audits showed that six audit reports were given a limited or minimal assurance rating. Whilst this appeared to be a disappointing result when compared to the previous year, Members noted that several of the areas reviewed faced a particularly challenging year owing to either the implementation of a major new computer system (Unit4 Business World) or increased demand as a result of changes in Housing legislation. Only five of the 85 control objectives examined during the year was not “met” at least in part, and two of the affected audits (Benefits - Finance Extract and Public Conveniences Cleaning Contract) only received a limited assurance rating because of a specific issue which had since been resolved.
It was requested and agreed that officers would provide an update on the Unit 4 Systems Administration and that the Audit Manager would report back on the Whistleblowing policy.
Taking into account all the factors within the report and the routine quarterly reports, it was confirmed that the Audit Manager’s overall opinion on the Council’s framework of governance, risk management and control was that it was adequate and effective.
1) the Internal Audit report to 31 March 2019 be noted;
2) the Audit Manager’s opinion on the control environment be approved; and
3) updates on the Unit 4 Systems Administration and the Whistleblowing policy be added to the Work Programme.
Publication date: 13/03/2020
Date of decision: 24/06/2019
Decided at meeting: 24/06/2019 - Audit and Standards Committee