Agenda item

To consider the Internal Audit work undertaken and the assurance given on the adequacy of internal controls operating in the systems audited.  

11.1          The report of the Head of Corporate Services, circulated at Pages No. 68-96, was the third monitoring report of the financial year and summarised the work undertaken by the Internal Audit team for the period December 2018 to February 2019.  Members were asked to consider the audit work completed and the assurance given on the adequacy of the internal controls operating in the systems audited.

11.2           The Head of Corporate Services advised that the full details of the work undertaken in the period were attached at Appendix 1 to the report.  It was noted that a ‘limited’ opinion had been issued on the audits in relation to Ubico client monitoring (budgetary control framework); Community Infrastructure Levy (governance); and the General Data Protection Regulation (privacy notices).  A list of audit recommendations that were due to be followed-up could be found at Appendix 2 to the report; of those 15 recommendations, 12 had been implemented, one partially implemented and two were yet to be implemented.  Two of the three recommendations which were partially implemented or unimplemented had now been followed-up twice and Officers were in attendance to answer any questions in accordance with the Committee’s requirements.

11.3          With regard to the Ubico client monitoring audit, Members were advised that a previous audit undertaken in 2016/17 had made a series of recommendations to improve contract monitoring arrangements, therefore, this audit had been carried out as part of the 2018/19 audit plan and the Head of Corporate Services was pleased to report there had been significant improvement.  A new set of Key Performance Indicators (KPIs) had been developed and agreed across all of the Ubico partners around the key activities undertaken in waste and recycling services.  The KPIs were reported to the various governance boards and to the Council’s Overview and Scrutiny Committee on a six monthly basis with the first report presented in January 2019.  This did not include KPIs in relation to grounds maintenance which had been developed by a Member Working Group and approved by the Executive Committee earlier in the month.  It was noted that there were still some elements of the service which did not have KPIs, for instance, trade waste which was currently being reviewed with a report being taken to the Overview and Scrutiny Committee at the end of the year.  Members were informed that a limited opinion had been issued in respect of financial reporting e.g. budget monitoring.  Regularity and detail had improved, i.e. a monthly budgeting report was produced and reviewed by the Finance Team which was more detailed than it had been originally and, although there had previously been limited analysis, the report now covered various activities and verbal assurance had been given that there would be further improvements following the appointment of the new Ubico Financial Controller.  Notwithstanding this, a detailed review of the latest budget figures had highlighted a number of concerns in relation to the substantial overspend and limited information to explain the position – at the end of quarter three, Ubico had reported a projected overspend of £230,887, which was a significant increase from the previous month, and certain areas were considerably overspent, particularly tyres and Personal Protective Equipment (PPE).  With regard to the overspend on PPE, it was noted that this had originally been allocated to a holding account before being fully attributed to Tewkesbury Borough Council which was also concerning.  It had since been established that operatives working on the Tewkesbury Borough Council contract had been issued with new higher-specification kit but Tewkesbury Borough Council had not been notified of this nor had Officers been approached to approve the spend.  The overspend on tyres was yet to be justified with the next meeting of Senior Officers taking place on 9 April 2019.  Members were advised that days would be allocated in the 2019/20 audit plan for any potential internal audit involvement, should that be required following those Officer discussions.

11.4          A Member questioned whether the Council had been given any indication that there would be an overspend.  In response, the Finance Manager explained that the projected full-year outturn in December 2018 had shown a £153,000 overspend but just a month later this had increased to £230,000 with the outturn for the end of February 2019 at £267,000 – there was an expectation that the projection would be consistent and Officers needed to know why it had changed so significantly in such a short space of time.  The Member indicated that she had real concerns about this, particularly as the full year outturn could be even worse, and questions needed to be asked.  Another Member welcomed the new KPIs that had been put in place and felt that was the best way to ensure the company stayed on target; however, he too was very concerned with what he had heard and felt that senior management initially needed to discuss the issues with Ubico but that should be followed by a full audit.  A Member did not understand why Ubico could not work within a budget as the costs seemed to be for fairly standard, predictable items e.g. tyres, equipment.  This would not be happening if the service was still provided in-house so she felt that Officers needed to take more control.  The Finance Manager advised that senior managers had written a letter to the Ubico Managing Director giving a deadline of 29 March to provide a full, robust explanation of the overspends.  She assured Members that Officers were working hard to address the issues and were hopeful they could be resolved.  She agreed that it was necessary to understand the budget and stressed that the invoices related to the overspends would not be paid until they had been accounted for. 

11.5           A Member questioned whether other Ubico partners had experienced similar problems and at what point Members would be made aware of the results of the conversations between Officers and Ubico – in her view, it needed to be discussed at a Council meeting.  The Borough Solicitor clarified that Ubico was a teckal company, of which Tewkesbury Borough Council was a shareholder, and it was necessary to establish what had happened on this occasion and put in place mechanisms to ensure that it did not happen again; clearly this should not have happened but it needed to be managed in the proper way and she did not feel there would be any merit in the issue being discussed at Council at this stage.  The Finance Manager indicated that, as a shareholder, Tewkesbury Borough Council had the power to change things and Officers had confidence in the Ubico Financial Controller who understood the issues and wanted to work with them.  In terms of other authorities, she reminded Members that Tewkesbury Borough Council was one of seven partners and financial information from each was reported to the Joint Waste Team.  The Head of Corporate Services reiterated that there would be more internal audit work to do around the Ubico contract and days would be allocated in the audit plan following the conversations between Ubico and the relevant Officers.  A report would be brought back to the Committee in July when the data for quarter one of 2019/20 would be available.  The Chair indicated that this was the last Audit and Governance Committee meeting of the current Council term, and the Committee may not have the same membership going forward, so she felt it should be recommended to the new Committee that this be made a priority.

11.6           The Head of Corporate Services advised that an audit had been carried out in relation to the serious and organised crime framework and it was noted that the checklist had been presented at the last Audit Committee meeting.  This was a national initiative and it was a priority to audit key risk areas such as HR, finance, procurement and regulatory functions e.g. licensing and housing; this was included in the audit plan for the next six months.  The audit had resulted in recommendations around raising awareness of key policies such as the Whistleblowing and Bullying and Harassment Policies.  This would continue with the Gifts and Hospitality Policy which was currently being reviewed, the outcomes of which would be presented to the Committee in the six monthly update.  Staff awareness of the policies would be supported by bi-annual reminders of the policy documents.  The Home Office made reference to training for staff to recognise indicators of Officers working under duress or potential corruption and a recommendation had been made to complete an assessment of staff roles where this training would be beneficial.  With regard to HR and pre-employment/vetting checks, it was noted that Officers collected all of the required information but it was recommended that consideration be given to providing them with training to identify fraudulent IDs and documentation.  In addition, it was recommended that consideration also be given to whether certain roles required additional checks, for instance, credit checks.  Members were advised that the secondary employment form was part of the Council’s Code of Conduct and outlined expectations placed on Officers in terms of behaviours inside and outside the workplace.  One recommendation was that the Code of Conduct form should be amended to require staff to sign to demonstrate they had understood what they had read and would comply with the Code and that this should be rolled-out to all employees.  Another aspect of the audit had considered whether staff were able to raise concerns in confidence.  It was noted that there was a Whistleblowing Policy in place and whilst, training had been provided to staff as part of a general programme, it was recommended that more specific training should be carried out for staff and Members in relation to the type of concerns that should be raised and to provide assurance that they would be dealt with appropriately.  This would be taken into account as part of the review of the Whistleblowing Policy being carried out by the Counter Fraud Unit on behalf of the Council.

11.7           Members were informed that, although the Community Infrastructure Levy (CIL) audit had been given a limited opinion, this had been taken positively by the Head of Development Services who welcomed the value added by the recommendations which had been taken forward into an action plan.  As CIL was now being collected, it was important to agree a methodology for managing it, for example, Tewkesbury Borough Council was the recommended administrator for all three Joint Core Strategy authorities.  Whilst a new database had been purchased to manage the CIL function - and its functionality had been assessed as part of the audit - there were some issues in terms of lack of co-ordination to ensure that the basis of the work was effective, for example, monitoring procedures, reconciliation etc.  In response to the audit, a CIL Working Group had been established to take forward the audit recommendations in relation to the operational practices, and potentially to consider the Regulation 123 list which defined where funding for particular projects would be sourced i.e. through Section 106 monies or CIL income.  A Member questioned who sat on the Working Group and was advised it was an Officer group with representation from all departments involved with CIL i.e. Planning, One Legal, Revenues and Benefits and Finance.  In response to a query as to when this would be considered by Members, the Head of Development Services explained that this was about the operational elements and physical receipt of the money; the governance would be taken to the Executive Committee in due course.  The Head of Corporate Services confirmed that internal audit followed-up an audits which had been given a limited opinion so this would be brought back to the Audit and Governance Committee.  A Member drew attention to Page No. 81 of the report which set out that a demand notice for CIL income had been issued on 18 February 2019 and she questioned which of the authorities this had been issued by.  The Head of Development Services confirmed this had been issued by Tewkesbury Borough Council but the actual amount on the notice was zero as it related to a self-build property which qualified for relief; she clarified that no CIL money had been received to date.

11.8          Members were informed that the General Data Protection Regulation audit had also been given a limited opinion as a review of the privacy notices on the Council’s website had identified that some aspects of the Council’s services were not covered - for example, online forms, safeguarding, procurement - and it was recommended that a full review of the notices be undertaken.  The Head of Corporate Services went on to advise that the Internal Audit team also carried out corporate improvement work and Page No. 88 of the report gave a brief overview of what had been done during the period in relation to business continuity, the pool car scheme and a homeless waiver.

11.9           Attention was drawn to Appendix 2 to the report and Members were advised that this was generally positive; however, two recommendations were outstanding.  The first related to the Disabled Facilities Grants audit and obtaining evidence of completion of the Severn Vale Housing works and Members were informed that the Head of Community Services had provided an email from Bromford (previously Severn Vale) confirming that all works had been carried out and installed with the original proposals; however, this was insufficient and further verification was required e.g. installation certificates.  The second was a recommendation arising from the complaints audit which required the Council’s data sharing protocol with the County Council to be updated and it was noted that this had been given a new deadline of September 2019. 

11.10         Having considered the information provided, and views expressed, it was

RESOLVED          That the Internal Audit Monitoring Report be NOTED.