To update members on the progress of internal audit work and to bring to their attention any key internal control issues arising from work recently completed.

The head of internal audit presented the report and highlighted the following: 

·         Six audits had been completed since the last update.

·         Two audits were at draft stage

·         Six audits were in progress.

·         One audit had been deferred to a later date at the request of the client.

·         A special investigation in quarter 1 had been completed. 

·         There were no high corporate risks identified in the audits. 

Three audits had priority 2 findings and details of these, together with timescales, were contained on pages 65 to 77 of the agenda pack. 

Contract management audit

The contract management audit was partial and had three priority 2 findings.  Three contracts had been audited.   Two were well managed but there had been findings in respect of the mainstream passenger transport contract. 

Following a query from a member of the committee, it was confirmed 2 officers asked do not use the contracts management tool kit and use localised arrangements to contract manage.  The assistant director confirmed that the contract procedure rules form part of the constitution that all directorates follow and the toolkit was available to officers to use but needed updating.    The resourcing of the commercial team was being looked at and the target date for updating the toolkit and other actions was 30 April 2020. 

The head of transport and access services confirmed that a compliance officer had been recruited and this has provided dedicated resource for developing contract management processes, monitoring and documentation.  The monitoring programme has been developed to monitor over 40 transport providers delivering over 200 passenger transport contracts.  

It was noted that onsite contract compliance checks would take place without advance notice and that the programme will be target where there are concerns relating to specific providers following an intelligence led approach. 

South Wye Transport Package (SWTP) Phase 1 – Governance

The internal audit in respect of the SWTP had looked at the procurement of the Southern Link Road (SLR) which had four priority 2 findings.     The findings had been in connection with the procurement process and the recording and documentation of the actions of officers during the process.  

A member of the committee noted that in the audit plan for 2018/19 there was an audit in connection with the effectiveness of major projects which had been reasonable and there had been no priority 2 recommendations and sought clarification of the interlinkage of the two audits given the findings in the SLR phase 1 audit.  The head of internal audit confirmed that there were interlinkages and that the audit into the effectiveness of major projects had had a wider scope and the SLR phase 1 audit had looked at one particular area.    There had been priority 3 recommendations in the effectiveness of major projects which were not reported to the committee.   

A member of the committee noted that in the Blue School House follow up report, recommendation 7 had been marked as in progress and recommendation 8 had been marked as complete.    The head of internal audit reported that the follow up audit of Blue School House would have looked at a number of different contracts to see if they were complying and those samples were compliant.  

A member of the committee stated that weakness in the major project processes had been reported since 2015.   It was noted that internal audit had made recommendation in connection with major projects which had been accepted by management.   It was management’s responsibility to undertake the recommendations by the agreed timescales.    Internal audit will highlight where controls are not in place and report back to the committee as it was responsible for oversight.  

A member of the committee drew parallels in connection with the lack of minutes and decision recording with those found in the Ofsted inspection into children’s safeguarding.   The chief executive commented that this was a valid point.  He indicated that some areas relax the administrative processes when there were timing pressures, e.g. contract complexity.   Reminders about the need to record were powerful and important.    It was also stated that as a consequence of the audit, a meeting of the senior management team was being arranged to ensure that the messages were enforced.   It was acknowledged that there were weaknesses in some areas.    He believed that the committee could be reassured that the introduction of the Verto project management software system in effect prevented individuals in the procurement process from having the ability to overlook some of the decision making processes.  

It was noted that the public interest would be why the significant investment in project management processes and documentation had not really prevented these issues occurring.    The chief executive stated that he was keen to have a system in place which was good for project management but was also a tool for communication with councillors as to the progess and process of the decision making required.   When this system was introduced, it had been noted that there would be a need to culture change and there had been a significant amount of training provided to staff.   It was noted that if individual officers do not record something, no system is going to identify that something has not happened except the officers and those involved in the discussions.    Officers needed to understand that the recording of information is very important for transparency. 

The chief executive reported that he was in the progress of organising a follow up to the corporate peer review which was the most substantial the Local Government Association (LGA) offered and this area could be considered.     It was noted that the committee do have concerns about project management and how it is managed and further internal audit work and a peer review could be sought to look at these areas to try and resolve issues. 

With regard to the alternative procurement assessment, it was confirmed that officers undertaken this and the chief finance officer confirmed that the ones he had seen were compliant with the contract procedure rules.   Consideration may be needed to including this in the internal audit plan. 

RESOLVED

That

(a)  That the possibility of more internal audit work centring around the contract procedure rules be considered; and 

(b)  A peer review is undertaken to see what best practice looks like in other authorities.