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Agenda item

Interim Internal Audit & Assurance Report

Minutes:

The Head of Audit Partnership introduced his report providing a mid-year update on work conducted by Mid-Kent Audit in pursuance of the audit plan approved by the Committee in March 2016.  The report also included an update on 2015/16 work concluded too late for inclusion with the 2015/16 annual report in June 2016 and an update on the Mid-Kent Audit Service generally, including the most recent outturn against performance measures.

 

It was noted, inter alia, that:

 

·  The audit review findings so far included a cluster of weak assurance reports which shared similar characteristics principally relating to issues around the ‘second line of defence’.  This covered those controls which worked to identify and correct any failures in the Council’s direct management controls before they could expose the Council to risk or harm.  Some of the findings so far signalled that certain of these second line controls were not working consistently or comprehensively.

 

·  The weaknesses applied specifically to areas where the Council had entered new areas of business (such as Mote Park and Cobtree Cafés), management of new ways of working (Section 106 Agreements) and working through third parties (Hazlitt Arts Centre Contract Monitoring).

 

·  The overall message had been shared with senior management which had independently identified some of the key weaknesses, was already acting to address them, and would take further action in response to their own review and audit recommendations.

 

·  In the first half of 2016/17 the Internal Audit Service had issued a critical recommendation relating to its work in reviewing Hazlitt Arts Centre Contract Monitoring; specifically, this related to the resolution of the findings of the ROSPA Fire Risk Assessment and the adequacy of some of the fire doors in the building.  The initial management response to the critical recommendation and further information was now available.

 

·  The report provided further information on recommendations arising from audit reviews, and, with one exception, the Council was on track with implementing the recommendations.

 

·  In terms of progress in respect of reviews which had provided only weak assurance ratings, some areas had been re-assessed as sound following implementation of recommendations, but further work was required to achieve that level in other areas (such as Mote Park and Cobtree Cafés).

 

·  Since the adoption of the Council’s new Whistleblowing Policy in September 2016, a few issues had been raised, but none had resulted in serious findings.

 

·  The Head of Audit Partnership was confident, given progress to date, that the audit plan would be completed within budgeted days.

 

In response to a question regarding continued discrepancies in takings reconciliations at the Mote Park and Cobtree Cafés, the Head of Audit Partnership explained that the Council had brought the Mote Park and Cobtree Café service back in-house towards the end of 2015.  The in-house operation was examined by Internal Audit the following spring, and it was found that takings reconciliations were incorrect.  Whilst Internal Audit was satisfied that there was no evidence of fraud, it had made a recommendation that takings reconciliations should be addressed to make them more accurate.  On re-examining the service later in the year, it was found that whilst satisfactory controls were in place at the Mote Park Café, this was not the case at the Cobtree Café.  Internal Audit had provided further advice on takings reconciliations and had been following up its recommendations over the last few weeks.  An update on progress would be included in the next report to management.

 

During the ensuing discussion, reference was made to the following issues:

 

Section 106 Agreements

 

Noting the audit review finding that there were weak controls in operation to manage the risks associated with recording and monitoring Section 106 Agreements, a Member expressed disappointment that, notwithstanding the efforts made by Councillors of all parties, concerns had been raised about monitoring spend by dates with the Council having to return funds to developers unused and further balances identified as being at risk.

 

The Committee was mindful that a review was being undertaken of the Planning Service and that Section 106/CIL management would form part of that review.  It was pointed out that there seemed to be some reluctance on the part of some service departments to draw down and spend developer contributions, and this should form part of the discussion.

 

The Head of Audit Partnership undertook to look into whether details of the Section 106 contributions returned to developers unused could be circulated to all Members of the Committee and to the Parish Council representatives.

 

Contract/Project Management, Monitoring and Reporting

 

Arising from the audit review finding that there were weak controls in operation within the service to monitor the contract for the management and operation of the Hazlitt Arts Centre, the Committee discussed the arrangements for the implementation and monitoring of contracts for outsourced services and for the management of new areas of business, having regard also to the Council’s commercialisation agenda.

 

The Committee felt that in outsourcing services, the Council should make clear in the contract documentation precisely what was required and ensure that adequate contract monitoring and reporting procedures were in place.  Failure to monitor these contracts properly was a serious issue.  It was the role of Internal Audit to check that the monitoring reports were forthcoming and acted upon.  Similarly project management arrangements in respect of new areas of business such as the Mote Park and Cobtree Cafés needed more attention.

 

The Director of Finance and Business Improvement assured Members that management took the findings of these audit reviews very seriously, and was acting to address the audit recommendations, although it would take some time before the effects showed through in audit reporting.  A report could be submitted to the Committee on the progress being made on the implementation of the recommendations.

 

The Head of Audit Partnership advised the Committee that contract monitoring arrangements were reviewed from time to time by Internal Audit.  Last year, audit reviews of the Leisure Centre and Waste Management contracts found that sound controls were in place.  To provide further assurance, a report could be submitted to a future meeting setting out the findings of audit work undertaken in respect of the top ten contracts (in terms of cost) in recent years.  If the work had not yet been done, details could be provided of when it would fall due in audit planning.

 

In response to comments by Members as to whether the weaknesses found were indicative of a systemic issue, the Director of Finance and Business Improvement advised the Committee that he did not think that it had been established that this was the case.  Some contracts were very effectively managed, but the audit review of the Hazlitt Arts Centre Contract Monitoring had identified that there were lessons to be learned in terms of the monitoring of contracts for outsourced services.

 

It was suggested that, in terms of lessons learned, the Officers should be seeking to ensure best practice and effectiveness in contract preparation and implementation and monitoring and reporting processes, particularly when moving to new areas of business and working through third parties.

 

The Committee noted the progress in achieving the 2016/17 internal audit and assurance plans and the findings so far, and asked the Officers to consider the points raised in the discussion on contract/project management, monitoring and reporting, and to report back to a future meeting with views.

 

RESOLVED:

 

1.  That the progress in achieving the 2016/17 internal audit and assurance plans and the findings so far be noted.

 

2.  That the Officers be requested to consider the points raised in the discussion on contract/project management, monitoring and reporting, and to report back to a future meeting with views.

 

3.  That the Head of Audit Partnership and the Internal Audit Team be thanked for their performance and achievements to date.

 

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