Agenda item

To present the Head of Internal Audit and Risk.

The report of the Head of Audit and Risk which provided an update on Internal Audit’s progress with regard to service delivery and reviews completed was presented for the Committee’s consideration.

The Head of Audit and Risk reported as follows –

•           That 5 internal audit review reports were finalised in the period as detailed in paragraph 3.2 of the reports. Two of the reports – School Transport and Corporate Procurement Framework – Corporate Compliance resulted in a Limited Assurance opinion. The Committee was provided with the full Limited Assurance reports separately to the agenda.

•           That follow up reviews of two areas previously assessed as providing Limited Assurance, namely the Housing Maintenance Unit and ICT Disaster Recovery show that the Council has demonstrated good progress in implementing the actions agreed to address the risks identified in areas, and consequently the Housing Maintenance Unit has now been reassessed as providing Reasonable Assurance and ICT Disaster Recovery as providing Substantial Assurance.

•           To date, the Internal Audit Service has completed 22% of the Annual Plan with a further 17% currently work in progress. The internal audit approach is being reviewed; additionally, due to changes in corporate fraud arrangements and significant slippage from 2016/17, the resource available to complete the Operational Plan for 2017/18 has been reduced. The Head of Audit and Risk will undertake a risk assessment during quarter three and audit reviews will be prioritised to ensure resources are targeted to the areas of highest risk.

•           The Committee’s terms of reference were scheduled to be submitted to this meeting line with the Forward Work Programme. However due to two issues – the scheduling of  training on 15 September when Members will have an opportunity to review the terms of reference for appropriateness and the publication of updated CIPFA guidance in November, 2017 it is proposed that the review of the terms of reference be deferred until the Committee’s December, 2017 meeting.

The Committee considered the information presented and made the following points:

•           The Committee noted with disquietude the number of concerns highlighted by the Limited Assurance review of School Transport in relation to the monitoring of contractor compliance; controls over expenditure and income collection. The Committee sought assurance that speedy action is being taken to address the systemic and procedural weaknesses identified so that it can be demonstrated that contractors are fully compliant with contract requirements; that the service is cost-effective and that sound arrangements are in place to ensure that all income due to the Council is being collected.

The Head of Function (Resources) and Section 151 Officer said that the Executive in 2016 allocated £1m from General Balances to address Business process issues within various areas of the Council including school transport. The Education Service in Anglesey along with those of the five other North Wales authorities have signed up to the ONE software system as part of a collaborative procurement exercise. One of the system’s modules relates to school transport and utilises information about pupils’ addresses and the schools they attend to produce an optimum taxi/bus route which when updated for any changes will reorganise the routes accordingly. Anglesey has not hitherto implemented this module because of resources and data cleansing issues but when implemented it will generate savings because it takes a more scientific approach to how routes are allocated. However, in order for it to work effectively, the database from which it draws information must be up to date and accurate and this will involve data cleansing work. Work was planned before Internal Audit issued its review report so Management was aware of issues with school transport; the Internal Audit review confirms those issues and imposes a formal action plan to address them.

With regard to income collection which it is recognised needs to be improved, the ultimate aim of the Council is to move to a system whereby payments for services are made online in advance. For that to happen the Council needs to upgrade its systems and it is currently planning and working to that end.

The Committee was given the opportunity to question the Head of Service (Highways) on the service’s approach to the issues arising. The Officer said that whilst expenditure on school taxis needs to be reviewed, the allocation of contracts for both taxis and buses is based on a competitive tendering process. Additionally, secondary school transport in Anglesey has consistently been the second lowest in Wales as regards cost.

Whilst the Committee took some assurance from the Officer feedback on the issues identified by the Internal Audit review as requiring attention and noted that specific measures have been recommended to rectify those issues particularly around controls and processes, it was of the view that Scrutiny be asked to consider the service issues arising, to formulate an action plan and to report back to this Committee on the outcome of its examination of the matter. Additionally, given that School transport encompasses two services and input from a number of officers from across those two services, the Committee recommended that the process of implementing the action plan is likely to deliver swifter results if it were project managed by a team to provide oversight of progress.

•           The Committee also noted with concern the Limited Assurance review of the Corporate Procurement Framework – Corporate Compliance; the Committee sought assurance that action is being taken to improve internal controls and compliance in this area.

The Head of Function (Resources) and Section 151 Officer said that the  Corporate Procurement function within the Authority has made significant progress since  a fitness check of procurement arrangements at Anglesey was undertaken by KPMG in December 2013 as part of a review of procurement at all 22 Welsh Authorities commissioned by Welsh Government. The major issue which has led to Internal Audit issuing a Limited Assurance opinion in this instance is the absence of a complete central contracts register which holds information about all the contracts the Council enters into and which is then monitored. Whilst the Council does have a corporate contracts register the Officer said that he was not able to provide assurance at this point that it is 100% complete; however the Corporate Procurement Team is currently working with Accountancy and other services to identify the gaps in the register. As well as working on the register, the Team also monitors compliance with procurement regulations and both advises and undertakes work on individual tenders which can take up a lot of team resources. So whilst Management has commenced work to implement the internal audit action plan, it is doing so in a way that current Team resources and demands allow. The remainder of the issues identified by the Internal Audit review are mainly housekeeping matters of a moderate or minor risk.

The Committee accepted the explanation provided by the Head of Function (Resources) and Section 151 Officer and was assured that appropriate action is being taken to respond to the risk and control issues identified by Internal Audit

The Head of Audit and Risk confirmed that follow up audits of both the areas where the assurance has been assessed as limited will take place at the end 6 months and an update report provided to the Committee at that time.

•           The Committee sought an update on progress with regard to implementing the recommendations of CSSIW’s review of Children’s Services. The Head of Audit and Risk said that the governance responsibility for the Action Plan resulting from the CSSIW review lies with the Corporate Scrutiny Committee. Additionally, it was noted that several members of the Audit and Governance Committee are also members of the Children’s Services Improvement Panel and/or Corporate Scrutiny Committee which has oversight of monitoring progress on implementing the Children’s Services Improvement Plan. Those Members confirmed to the remainder of the Audit Committee that regular detailed reports are made to the Corporate Scrutiny Committee and that progress against the Improvement Plan is currently on track. The Committee determined in light of this information that it did not therefore require a formal update report.

It was resolved –

•           To note Internal Audit’s latest progress in term of its service delivery, assurance provision, reviews competed, performance and effectiveness in driving improvement and to accept the assurance provided subject to the additional action proposed with regard to the IA review report in relation to School Transport.

•           To postpone the review of the Committee’s terms and conditions until CIPFA issues its new guidance document.

ADDITIONAL ACTIONS PROPOSED:

•           The IA review report in relation to School Transport to be referred to Scrutiny for its examination with the recommendation that an Action Plan be formulated and that the Plan be monitored and overseen by a Project Team. The Audit Committee to be informed of the outcome of Scrutiny’s examination of the report.

•           That provision be made in the IA Plan to indicate the date of the Audit Committee meeting to which individual review reports are likely to be presented.