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 chairman used his discretion to move the progress report on the 2018/19 internal audit plan to the first item. 

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

·                  7 audits had been completed since the last update

·                  2 audits were in draft

·                  10 audits were in progress

·                  6 audits were assessed as reasonable

·                  There were 3 priority 2 findings across 6 audits

Hoople

The priority 2 finding had been in connection with the calculation of a key performance indicators (KPIs) as not all KPIs had written methodologies in support of the KPI calculation.   The recommendation had been accepted and there was a target completion date of 31 March 2019.

It was confirmed that without reviewing all the KPIs, it was not possible to confirm whether the issue with the Hoople KPIs would found in other KPI either within Hoople or elsewhere in the council.  

With regard to the development regeneration partnership (DRP) KPIs, there was no reason to believe that there was an issue with the KPIs but a 100% guarantee could not be given. 

Internal Control Improvement Board (Blueschool House)

The head of internal audit reported that pages 62 to 63 of the agenda pack provided an update on the internal control improvement board follow up review.    The report was currently in draft and would be provided to committee members when it was finalised. 

It was reported that the infrastructure was now in place to address the recommendations from the Blue School House audit report and provide a solid control framework.   Training has been provided on the processes and they now needed to be embedded across the council. 

During the discussion of the issue, the following points were raised:

·        That the South Wye Transport Package (SWTP) was not currently on the new project management system (Verto).   This was disappointing and frustrating for the committee as they were seeking assurance that a major project was following the project management processes now in place.    

·        The committee had requested assurance at its November meeting and again at its January meeting and it was only at this meeting that it was being reported that the assurance would not be possible because the project was not yet on Verto.

·        The agreement to move to the Verto system had only been agreed in October 2018 and there was a phased approach to projects being loaded on the system.

·        The SWTP would be subject to an internal audit in Q1 which would include governance compliance. 

·        Some committee members expressed concern that there may be an unauthorised overspend on a major project.   The chief finance officer confirmed that he did not recognise that there was an overspend on the SWTP.    A large amount of money had been spent and appropriately reported in the public domain on this project.   There had been a lot of examination of this project in a number of different forums.

·        The chief finance officer and head of internal audit were unable to comment further on this project until the review had taken place.   

·        The SWTP was now moving into the next phase as the public inquiry had reached a conclusion.  

·        Other projects had been loaded onto the Verto system as they were incurring more spend that SWTP.  

·        As a result of the outcome of the public inquiry, the SWTP project would now be loaded onto Verto as there would be more spend on the project.  

·        There had been significant progress made in relation to the recommendations following the Blueschool House review.   There were now checks and balances in place which would make it less likely that an incident like Blueschool House would occur again. 

·        It was confirmed that there had been spend on the SWTP from October to date but it was relatively small in terms of a project with a £35m spend.   The SWTP was a long term project and during the next phase there would be a greater amount of spend. 

·        The committee were concerned that there was an unauthorised overspend on the project given the recent officer decision to move £1m from the existing road network budget to the SWTP.   If there was no overspend, then why was £1m transferred from a different budget to the SWTP.   It was explained that SWTP had a capital budget of £35m, £27m was from the Department of Transport (DoT) and £8m from the council.   The chief finance officer again confirmed that he was not aware of any overspend on this project.

A member of the committee requested that there be no further spend on the SWTP project until there had been assurances given to the committee that this project was compliant with the current project management and governance process.    The chief finance officer explained that as the approved project was now moving into the next phase, there would be expenditure incurred and he was unaware of any reason to delay that spend. 

The chief finance officer confirmed that the DoT will pass the funding to the LEP which would then be passed to the council. 

Compliance with contract and finance procedure rules - revenue

A member of the committee indicated that the findings of this audit appeared to parallel the issues with regard to the capital budget.  In particular there was a lack of governance which appeared to replicate the issue of contract management for capital projects. 

Following a query from a member of the committee, it was confirmed that the audit into the declarations of personal and business interests had been not removed but had been deferred and would need to be added to the 2019/20 internal audit plan.  The reason for the deferment was that the implementation of a new process had been delayed for the declaration of those interests.

RESOLVED

That the report be noted.