Agenda item

To receive a report by the Head of Service (Economic and Community Regeneration) on progress in responding to the Internal Audit review.

(Report to Follow)

The report of the Head of Economic and Community Regeneration on the response and actions undertaken following the Internal Audit Review (Maritime Diesel), November, 2014 was presented for the Committee’s consideration

The Head of Economic and Community Regeneration informed the Committee of progress to date against the recommendations of Internal Audit following its review of the processes and procedures for the receipt, storage, issuing, invoicing and cash collection and receipting and recording of income on the Council’s General Ledger relating to Maritime Diesel as documented in section 3 of the report. The Officer drew the Committee’s attention to the fact that successfully completing the ongoing recommendations (i.e. part of recommendation 2 and recommendation 6 in the schedule under section 3) will be determined by cost and budget availability. The Officer elaborated on the likely costs involved for the extent of the upgrade work required and said that the short to medium term strategy for the sale of maritime fuel needs to be determined before a decision to invest is made.

The Committee considered the report, and in a detailed discussion, the following issues were raised –

•           Whilst the Committee noted that the scope of the internal audit review was confined to assessing the adequacy of the systems, processes and procedures in place for the sale, billing and payment of maritime fuel, Members were also keen to learn more about the commercial aspects of the service and whether there are ways of enhancing the value for money dimension of the service including by alternative ways of provision e.g. outsourcing. The Officers confirmed that the service is commercially viable providing returns in the region of 20% to 30% and that it is a service that is worth providing. Procurement issues have been   addressed and the service is competitive in terms of cost but the fundamental question in the long-term is whether the Authority wishes to continue with the supply of maritime fuel not necessarily for commercial interests but in support of the fishing industry.

•           The Committee considered whether the compass of audit reviews should be widened beyond control and governance issues to address the value for money dimension of services where that applies and whether there is a way for the Committee to have an input into the scoping of reviews. The Committee suggested that internal audit reviews could be better linked to value for money considerations so that the Committee can place the issues raised by audit reviews in their wider context and better understand the broader considerations that may inform reviews. The Head of Economic and Community Regeneration confirmed that an independent evaluation of the maritime service has been undertaken beyond issues of governance and internal controls which has looked at the statutory and non-statutory aspects of the service as well as various models for its delivery. The Interim Internal Audit Manager advised the Committee that whilst professionally he did not advocate combining an assessment of system controls and value for money in a single review, it is not unusual for an allocation to be made within the IA Operational Plan for value for money reviews and that it is open to the Committee if it so wishes to approve the allocation of a proportion of resources specifically for value for money studies.

•           The Committee noted from the Officers’ verbal report that the Council had used the current supplier for maritime fuel for a number of years and it questioned whether this is common practice within other service areas in the Council of which the Committee should be aware. The Interim Head of Resources and Section 151 Officer confirmed that the practice is not unique to the supply of maritime diesel service. Internal Audit has in the past raised issues in relation to procurement and it has also been the subject of an independent review. A considerable amount of effort has since been put into improving the procurement function within the Authority in terms of increasing the capacity and enhancing the skills set of the procurement team and also by introducing corporate procurement processes and procedures. However, the practice whereby services keep to the same supplier for a length of time without testing the market is widespread and is being addressed.

•           With reference to sundry debtors and invoices raised, the Committee sought clarification of the amounts involved. The Officers confirmed that financial records are now generated via the Civica Ledger system thus providing a clearer picture of billing and transactions. The service’s financial processes have now been modernised and put on a corporate footing.

•           The Committee noted the need to ensure that sundry debts are recouped; the Interim Head of Resources confirmed that progress on enforcing debt is being made.

It was resolved to accept the report of the Head of Economic and Community Regeneration and to note the progress made.

ACTION ARISING: Head of Economic and Community Regeneration to provide the Committee for information purposes with the Balance Sheet for the Maritime Diesel Service for the past five years.