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 Committee received an update on the progress of internal audit work and internal control issues arising from work recently completed.  The principal points covered by Mr. Khangura included:

1.         To date, seven audit reviews had been finalised and nine reviews were being completed by Audit Services, with draft reports issued in four areas.

2.         Two areas had been graded as providing ‘limited assurance’, these being Income Collection - Industrial Lets and Public Health - Food Licensing.  These areas would be reviewed as part of the 2013/14 audit work to ensure that recommendations had been implemented.

3.         In respect of Industrial Lets, it was reported that the Council needed to establish a clear framework of control, undertake reconciliation, and tighten processes.  Furthermore, Audit Services had identified incorrect commercial lets which meant that some income had not been received in 2012/13 but this was being rectified.

4.         In terms of Food Licensing, the Council needed to develop the function’s controls in a number of areas, including documentation associated with food hygiene inspections, follow up inspection visits, and staff training.

5.         Two areas had been graded as providing ‘Substantial Assurance’, these being Treasury Management and Council Tax/National Non-Domestic Rates.

6.         A number of reviews were currently being completed by Audit Services and any significant issues arising from these areas would be reported to future meetings of the Committee.

7.         Audit Services had received very positive feedback to date in response to an audit satisfaction questionnaire circulated to key service managers involved in the audit process so far.

A Committee Member commented that the contamination of beef products with horsemeat was entirely unrelated to the audit review of Food Licensing, nevertheless the authority needed to be aware of the implications and potential reputational risks associated with recent international developments. 

The Chairman proposed that an update on the implementation of recommendations in respect of Food Licensing be made at the next, or a subsequent, Committee meeting.  A Committee Member noted the statement that ‘reporting to the Regulatory Committee required further development’ and said that clarity was needed about the appropriate route to progress this element and for a level of assurance to be provided regarding the effectiveness of the process.  Another Committee Member commented on potential consumer confusion about the award of ‘stars’ for food hygiene inspections.

With reference to the audit review of IT systems, it was requested that information be shared with both the General Overview and Scrutiny Committee and the Health and Social Care Overview and Scrutiny Committee to assist imminent work in relation to IT.

A Committee Member, using the example of the Yazor Brook flood alleviation scheme, commented on the need for assurance that appropriate systems were in place in respect of procurement and the monitoring of contracts.  Mr. Khangura outlined the approach for the audit review of procurement, including the sampling of some contracts.  In response to comments by Committee Members, the Chief Officer Finance and Commercial explained that an allocation had been made in the budget in respect of remedial works associated with the Yazor Brook flood alleviation scheme but actual costs would depend on the solution and liability determinations.  The Vice-Chairman noted that the focus of the Committee should be on outcomes rather than on the details of specific contracts.

Committee Members were concerned about the position with Industrial Lets, particularly given the potential impact of accumulated arrears on business finances.  The Chief Officer Finance and Commercial commented on the need to keep industrial assets fully occupied, particularly given the implications of the business rates retention scheme that commences in April 2013, and said that the authority would continue to look carefully at particular circumstances with individual businesses.  A Committee Member said that Herefordshire needed to be ‘open for business’, the county could not afford to lose employers, and the regular collection of rental charges assisted with financial management.

In response to a question from a Committee Member, Mr. Khangura explained that Audit Services, rather than Council managers, selected samples and he briefly outlined audit sampling methodology.

Concerns were expressed about the management of licences and tenancy issues at Hereford Butter Market and the Chief Officer Finance and Commercial said that he would refer the matter to the Director for Places and Communities.

Committee Members commented on the challenging economic conditions for local businesses and the wider economy.  The Chief Officer Finance and Commercial said that the Council did all it could to support businesses, such as small business rate relief, but trading conditions had the biggest influence on commercial viability.

A Committee Member said that income collection was a fundamental task and was alarmed at the situation with Industrial Lets.  The Chief Officer Finance and Commercial concurred and said that the situation had arisen against a backdrop of organisational change, with the loss of corporate knowledge and the fragmentation of responsibilities between the Council and Hoople.  It was noted that the matters were being resolved, alongside a broader review of collection procedures.  It was re-iterated that the audit opinion of ‘Substantial Assurance’ had been given in terms of Council Tax/National Non-Domestic Rates.

A Committee Member said that, in light of the findings of the Robert Francis Inquiry report into Mid-Staffordshire NHS Foundation Trust and the financial challenges identified in the Council’s Budget 2013/14 and Medium Term Financial Strategy, the authority would need to be mindful of accountabilities and the deliverability of objectives when considering workforce capacity going forward.

The Chairman noted the wide range of audit activity being undertaken and thanked Audit Services for the report.

RESOLVED:  That the report be noted.