Agenda item
Quarterly Assurance Report
To note the work of Internal Audit for the period June 2014 to August 2014, the assurance rating of each audit finalised in the period and an overall assurance rating.
Minutes:
Minesh Jani (Service Head Risk Management) introduced, and highlighted key points, in the report which:-
· Summarised the work undertaken in the period June to August 2014.
· Set out the assurance rating of each audit finalised in the period together with an overall assurance rating. He also reported the following audit performance:
· Informed the AC that the report informed the annual internal audit opinion given at the end of each financial year.
Points highlighted by Minesh Jani included:-
· 18 audit assignments had been undertaken in the last 3 months 13 giving substantial assurance and 5 limited assurance. These had been focused in areas of moderate or extensive significance to the authority as defined in para 3.2 of the report.
· That performance of the Internal Audit Service to July 2014, as measured by the set Performance Indicators, was below target; with the detail set out at para 5.6 of the report summarised for AC members.
· The audits assigned limited assurance were summarised in detail for AC members:
1. Declaration of Staff Interests - Systems Audit
o Selected for audit because of the onus on staff, under the Employee Code of Conduct, to declare interests which conflicted with their employment by the Authority; and also the introduction of an online self-serve system to record staff Declarations of Interest (DOIs).
o Assigned limited assurance due to low percentage of staff found to complete DOIs; and also in a sample tested in a separate NFI audit 5 of 10 staff completed a DOI on secondary employment.
o Arrangements needed to check and monitor declarations and therefore regular HR reports to line managers recommended with an associated responsibility to monitor compliance.
A brief discussion followed which focused on clarification being sought and given on the following points:-
o Concerning the location of the 5 staff not declaring secondary employment; also whether staff working in their own time to top up their income should really be viewed as a serious concern. The staff were located in schools. DOIs were an important matter, and the laborious manual reporting/ monitoring system had been streamlined with the online system; this was now being improved with regular monitoring reports in each directorate
o Whether staff had been made aware of their obligation and the new online system and given clear advice as to completing a DOI. Staff received regular reminders via email and the intranet. A new form was being piloted with a view to going live in October and this was accompanied by clear advice and examples.
2. Photocopying and Printing Contract Monitoring - Systems Audit
o Selected for audit because of the Authority’s new 3 year rental agreement for supply of Multi-Functional Devices (MFDs) and a managed print Service Level agreement both of which came with high start up costs.
o Assigned limited assurance because contract monitoring arrangements were found not to be sufficiently robust, the supplier’s invoicing system was complex with risk of duplicate payments and errors, and a discrepancy between the number of MFDs on the supplier list and those on the LBTH asset register.
o Chris Holme (Acting Corporate Director Resources) commented that all the necessary steps to mitigate the risk in this area had been taken, and there were now regular contract monitoring meetings with Xerox and Agilisys, ???and systems now in place to manage usage and charging???. Were the area audited now he was confident the level of assurance would be substantial.
3. Debtors - Systems Audit
o Selected for audit to provide assurance that the control systems in this area were robust and assess potential consequences should control weaknesses be identified, in the context of the introduction of the Agresso finance system in April 2013.
o Assigned limited assurance due to findings relating to the implementation of the new system:-
ØReconciliations between the general ledger and the debtors system not performed on a timely basis.
ØReminders for overdue invoices not issued and therefore debt recovery action not taken in 2013/14.
ØUnallocated payments to accounts delaying debt recovery and creating potential for unnecessary debt recovery action.
ØAccurate information not supplied by Agresso system.
o Chris Holme (Interim Corporate Director Resources) commented that the audit findings were a symptom of the roll out of a brand new element of the new Agresso finance system. All the recommendations had now been implemented and much improved systems were now in place. NNDR collection had not been impacted.
A brief discussion followed which focused on clarification being sought and given on the following points:-
o Noting the Officer assurance that measures were now in place to address the weaknesses identified, why had the risks of the new finance system not been factored in before implementation. Officers had been aware of the risk but there had also been a need to sign off the contract with the ICT provider and not doing so risked litigation.
o Concern expressed about slow debt recovery arising from implementation of the Agresso system and that reminders to pay overdue invoices had not been sent. Recovery rates were very high and higher than the previous year which provided comfort that the weaknesses were being mitigated.
o The reason why NNDR and Council Tax had not been similarly impacted as these too were debtors.
4. Pest Control - Systems Audit
o Selected for audit to provide assurance that the control systems in this important area were robust and assess potential consequences should control weaknesses be identified.
o Assigned limited assurance because of audit findings:-
Ø Pest control services provided free to a number of properties due to inaccurate records as to ownership.
Ø SLAs with RSLs out of date and therefore prices too.
Ø Identified that approximately 50% of jobs undertaken April 2012 to July 2013 remained open on system records.
Ø Non-retention of supporting documentation for calculation of charges, with potential for under-charging.
Ø OAP entitlement to a free service open to abuse as no verification of householder OAP status undertaken.
An AC member proposed and it was agreed that discussion of the audit findings be deferred to the next meeting to ensure Officers from the service were present to answer questions the AC might have.
5. Kobi Nazrul Primary School
o Selected for audit to provide assurance that there were effective controls over administration and financial management, and assigned limited assurance because of audit findings set out in Appendix 2 to the report.
o AC members were informed that audits were underway at a number of schools and an annual report on schools would be received at the AC in December. This audit report had been provided as the audit was complete, however a management response to the audit findings would be provided at that point.???? Minesh is this correct???
o Clarification was sought and given as to whether Kobi Nazrul School had responded to the audit findings. The Head Teacher had welcomed the audit findings and agreed the recommendations would be implemented.
Treasury Management - Systems Audit
o Clarification sought and given as to why the audit had been assigned substantial assurance, given that in 9 of 20 transactions examined key information was not available. Commented also that it was difficult to believe the statement that this was due to bank non-retention after 6 months. Minesh Jani (Service Head Risk Management) responded that he was confident systems were in place for a segregation of duties, so that staff carrying out treasury management transactions could not also approve these. However key information to demonstrate the segregation had been missing, and a follow up audit would be needed to establish whether the segregation had been applied.
Budgetary Control - Systems Audit
o Clarification sought and given as to the proportion of the total number of budget holders comprised by the 96 budget holders not competing budget returns throughout the year, and similarly for the 341 budget holders not completing these for between 9-11 months. Also whether the problem related to a particular department. There were 1200 budget holders in total and work was being undertaken to improve performance on budget returns. There were currently 38 budget holders not providing a monthly return and these were evenly spread across the 3 main directorates (CLC, D&R and ESCW).
Tower Hamlets Homes - Key financial systems
Referencing the reporting that all of THH’s funds were invested with one organisation posing a risk for THH should it fail, clarification sought as to the amount invested and the name of the organisation it was invested with. Written response to be provided (Action MJ)
The Chair Moved the recommendation as set out in the reportand it was:-
Resolved
That the contents of the report, and assurance opinion assigned to the systems reviewed during the period, be noted.
Action by:
Minesh Jani (Service Head Risk Management
Supporting documents:
- 4.2 Audit Committee Quarterly Assurance Report_sept 2014, item 4.1 PDF 92 KB
- 4.2 Appx Audit Committee Quarterly Assurance Report_sept 2014, item 4.1 PDF 171 KB