Agenda item

Report of the Assistant Director, Corporate Governance to detail the work undertaken by Internal Audit in the quarter ending 31 December 2016 and focuses on progress on internal audit coverage relative to the approved internal audit plan, including the number of audit reports issued and finalised – work undertaken by the external provider (Mazars).

The Committee considered the Internal Audit Progress Report 2016-7, Quarter 3, as presented by Anne Woods, Head of Audit and Risk Management.

Further to the Quarter 2 update presented at the previous meeting and the audit recommendations made in respect of the audit of the Procurement of Contracts under the OJEU Threshold, follow up work on the original two recommendations had been undertaken and the Committee was advised that the first recommendation that Central Procurement should periodically review spend reports per supplier was now in progress. The second recommendation regarding the recording of contracts and the introduction of a central online procurement portal had yet to be implemented, but it was reported that this was due to a delay in the implementation of a new e-procurement system for technical reasons and it was anticipated that the new system would be in place by the end of March 2017. It was confirmed that further work would be undertaken  in 2017/18, when more information was available and the new system was in place, to ensure that these recommendations were fully implemented.

With regard to the school audits and the high number of schools receiving ‘limited’ assurance, it was reported that the selection of schools being audited during the period did include a number where concerns had been raised by previous audits and there did not appear to have been an improvement in performance. The Head of Audit and Risk Management had met with the Director of Children’s Services and AD Schools and Learning, and work was taking place to establish next steps for improving performance across these schools. The Committee and Chair had expressed particular concern regarding the ‘Nil’ assurance arising from the audit of Stamford Hill school during Quarter 2; a follow up audit had been undertaken in December 2016 and the draft audit report was currently with the school for review. Of the 29 recommendations from the audit, 5 had been found to be fully implemented, 10 were partly implemented, 12 were not implemented and the deadlines for the others had not yet been reached. The AD Schools and Learning and Schools Improvement Team were working to support the school and manage the process of implementing the audit recommendations. As an interim measure, funding had been granted to the school to enable it to meet its statutory responsibilities, subject to a detailed budget and repayment plan being submitted by the school. Further decisions on next steps to be taken at the school would be made after meetings had been held between the school and Council officers.

The Committee noted that in the current economic climate it was to be anticipated that more schools may be encountering financial difficulties, and felt that the Council should be doing more to lobby Government regarding school funding. The Head of Audit and Risk Management noted that at the recent Children and Young People’s Scrutiny Panel there had been a general correlation between those schools with deficit funding and those achieving limited audit assurance ratings, suggesting that focussing on fundamental financial controls should help to ensure schools were able to manage their finances well. In response to a question from the Committee as to whether Council officers had a role in managing schools’ accounts, it was reported that there had previously been School Financial Advisors employed by the Council, but that this had not been the case for a number of years.  In response to a question from the Committee, it was confirmed that the Council had no oversight of Academy schools. In respect of budgets and monitoring reserves held by schools, it was reported that these were set out within the School Development Plans.

The Committee expressed concern regarding the audit findings relating to the Council’s procurement services, and asked who had responsibility for this area, and about the level of Member involvement in contract waivers. It was reported that the procurement function sat within Commercial and Operations, overseen by the AD Commercial and Operations. The Head of Audit and Risk Management advised that Cabinet would be required to approve contract waivers either where the contract value exceeded the level delegated to officers or for contracts of any value where a waiver was proposed for a second time.

The Committee asked about the implementation of the audit recommendations relating to procurement, and how this would be monitored.  The Head of Audit and Risk Management advised that updates on the implementation of the audit recommendations would be reported to the Corporate Committee as part of the follow up audit work. It was anticipated that the introduction of the new e-procurement system would help to address several of the issues identified within procurement, as the central procurement portal would mean that no spend could be undertaken without it being registered on the system. It was confirmed that audit work on how the system was working would be undertaken during the coming year to provide assurance around this area. In response to a question from the Committee regarding the implementation of the e-procurement system, Richard Grice, AD Transformation and Resources, advised that the system had been purchased, but that implementing it had been delayed by technical issues; it was now anticipated that this would be in place by the end of March 2017.

The Committee expressed particular concern regarding the failure of senior staff to comply with procurement procedures, and asked for the relevant Cabinet Member to be invited to the next meeting of the Committee to provide an update on the implementation of the outstanding audit recommendations.

Action: Chair / clerk

RESOLVED

That the Committee note the audit coverage and follow up work completed.