Agenda item

To present the minutes of the previous meeting of the Audit and Governance Committee held on 28^th June, 2017.

ARISING THEREON

To receive a verbal report by the Head of Housing Services in relation to the two Limited Assurnace audit in relation to the Housing Maintenance Unit in Gaerwen.

The minutes of the previous meeting of the Audit and Governance Committee held on 28^th June, 2017, were presented and confirmed as correct.

Arising thereon –

•           Statement of Accounts

Michelle Hopton, Deloittes, informed the Committee that the audit of the accounts had commenced in mid-June and that the substantive work is expected to have been completed by the end of this week. The Auditor confirmed that there were no issues of significance to report of at this point in time. External Audit’s full report and conclusions regarding the accounts would be presented to the Committee’s September meeting.

•           Limited Assurance Audits – Housing Maintenance Unit

The Internal Audit Update presented to the Committee’s 28th June, 2017 meeting had highlighted two reviews relating to the Housing Maintenance Unit in Gaerwen where the assurance provided was deemed to be Limited. The Committee had requested that the Housing Services Manager be called to the Audit and Governance Committee to explain how the weaknesses in internal controls arose, how the service is delivering on the agreed actions to address the control issues identified in the audit reviews and how it proposes to ensure that the system of control remains effective in future.

The Housing Technical Services Manager informed the Committee that the two audit reviews had formed part of the process of transforming the Housing Maintenance Unit (HMU). Following the adoption of new arrangements, Housing Maintenance Management asked Internal Audit to review the systems for effectiveness and to identify any potential weaknesses that needed remedying. The HMU’s General Manager has been co-ordinating the introduction and implementation of new processes within the existing system with the ICT Service.

The HMU’s General Manager reported that the internal audit review had produced in the region of 15 recommendations some of which were due for implementation by 31 May, 2017. All of these latter recommendations have been actioned and the processes to which they relate are now being re-audited the results of which are due by the end of July. The Officer said that he did not foresee any major problems as the initial results have been favourable apart from some more minor issues which will need to be addressed but which are not unexpected given that the implementation date  was only the end of May. Other recommended actions are due to be completed by October which he was confident would be fulfilled and the final tranche of recommendations are to be actioned by March, 2018. Arrangements are in place to ensure that the dates will be met; the HMU’s staff have embraced the recommendations and actioning them has already yielded improvements especially with regard to recording information within the Orchard Housing Management system which is the service’s key system as regards housing and asset management.

The Committee considered the information presented verbally and it made the following points –

•           The Committee sought clarification of whether actioning the audit recommendations had entailed introducing new systems. The HMU’s General Manager said that that changes have been in the way the service utilises the existing Orchard Housing Management system particularly in relation to recording jobs by sub-contractors including by whom the job was undertaken, the completion date as well as the invoice and order tracking number so that an audit trail is produced for each such job. Job tracking is already undertaken by the in-house officers via electronic recording devices; these are not used for external contractors. The latter are manually managed which involves recording information relating to orders, completion dates and invoices. The team includes 2 schedulers and 3 administrative staff who are responsible for inputting the information. The ultimate aim of the work prior to and stemming from the internal audit review is to ensure that the processes and procedures in place to manage the external contractor side of the HMU’s operations are as robust as they can be and provide the necessary safeguards and assurance.

•           The Committee noted that the timescale for implementing the improvements as recommended by Internal Audit was generous especially when making such fundamental administrative and procedural changes might be expected to take much less time. The HMU’s General Manager said that the issue is ICT derived and involves trying to make the best use of the Orchard system in a way that meets the HMU’s needs and produces the relevant information as and when required in an user friendly way, and in a way that helps informed decision making. The Orchard system is very technical and such a task is not an overnight fix and could take a matter of months which is reflected in the implementation timescale.

•           The Committee noted that the Internal Audit review as presented to the Committee’s June meeting highlighted shortcomings in the Orchard system in relation to its not recording the true costs per job as the system does not include staff costs per job. Consequently, the real costs of each job are not identified nor recharged, the trading account is therefore misstated resulting in poor decision making and value for money analyses. The Committee sought assurance that this problem has or is being rectified. The HMU’s General Manager said that the issue requires a long term solution; the Orchard system is made up of a number of different modules one of which is Direct Works which is the costing system within Orchard. This is not currently utilised by the service; fully implementing the module would require significant work.

•           The Committee sought clarification of whether the Council has evaluated the Orchard system for effectiveness and functionality and whether it is satisfied that the system meets the HMU’s needs to be able to generate the necessary data to evidence that the service is efficient, cost-effective and provides value for money. The Head of Function (Resources) and Section 151 Officer said that implementing and administrating the Orchard Direct Works module is difficult because in order for it to operate in way that is effective and helpful the module requires full details of all the costings involved in any single job; this is an onerous task in terms of time and effort. The assessment that needs to be made is whether implementing the Direct Works full costings module is justified given the time and effort that requires and whether the information about the HMU’s efficiency and value for money can be obtained in a better, less time intensive way than by drilling down to the details of each individual job. HMU Management does record and monitor actual costs against the service’s budget but this is done on a global basis against the global budget rather than on a job by job basis. Another measure of the HMU’s efficiency is the level of customer satisfaction with the service provided which is reflected in the performance data issued.

•           The Committee sought assurance that sufficient controls were now in place to guard against the potential manipulation of data for performance target purposes. The HMU’s General Manager confirmed that each job by external contractors is recorded by its order number, completion date and invoice which is then cross referenced to the order number and completion date; in-house operatives use the electronic mobile device to record jobs. The Officer confirmed that he was satisfied that the controls now in place are working but that further refinements need to be made to ensure 100% compliance.

The Head of Internal Audit and Risk said that the follow-up audit shows that all the immediate actions have been completed by 31 May; of the 4 recommendations required to be implemented by 31 July, 1 has been implemented and the other 3 are in progress. The formal follow-up report will be presented to the Committee’s September meeting.

It was resolved to accept the information presented and to note the progress to date by the Housing Maintenance Unit against the actions recommended by the Internal Audit review.