Agenda item

To consider the attached (AGC-010-2018/19).

The Committee considered the internal audit monitoring report for the period from September to November 2018, which updated members on work undertaken by the Internal Audit Shared Service and the Corporate Fraud Team since the previous meeting and detailed the current position in relation to overdue recommendations arising from internal audit activity.

The Chief Internal Auditor reported that she was currently encountering difficulties with regard to the delivery of the Audit Plan for 2018/19, as a result of resource and capacity issues within the Internal Audit Unit. The Committee was advised that specialist external support had been engaged to deliver elements of the Audit Plan, but that it was likely that the deferral of some audit activity into 2019/20 would need to be sought, for which criteria had been developed for consideration by the Committee, alongside the seeking of additional resources from the Cabinet to facilitate the delivery of the Audit Plan in full.

Members were advised that five audits had been completed since the last meeting of the Committee, four of which had received moderate assurance and one of which (St. John’s Road, Epping - Redevelopment) had received limited assurance. The Committee queried why the review of the governance arrangements and project management processes employed for the St. John’s Road project had raised concerns that did not appear to have arisen in relation to other similar projects supported by the Council, including the development of the Epping Forest Shopping Park. The Chief Internal Auditor advised members that the project management of the Epping Forest Shopping Park development had been outsourced to specialist external consultants, but that the St. John’s Road project had been managed by an in-house project management team and that a number of learning points had been identified from this arrangement. The Committee raised concern with regard to the findings of recent audit activity with regard to software licensing, which it considered to be unacceptable for an authority of the size of the Council and should be addressed as a matter of urgency. Members expressed disappointment that none of the recent audits had received substantial assurance, but were advised that there were no underlying themes behind the findings of each report, although the Chief Internal Auditor would keep this situation under review.

The Committee endorsed the need for additional resources to be directed to the activities of the Internal Audit Unit to support the achievement of the audit plan, particularly in view of the level of assurance awarded to recent areas of audit. The Chief Internal Auditor emphasised that the development of the annual Audit Plan was designed to reflect all of the Council’s high-risk priorities and that the plan retained flexibility to react to developing situations that might arise during the year.

The Chief Internal Auditor reminded the Committee that it received details of all overdue recommendations and high-priority recommendations arising from audit activity, as part of its regular review of the Internal Audit Recommendation Tracker. Members were advised that there were currently nine issues included in the tracker, although none of these contained high-priority recommendations and that the progress of all outstanding recommendations was regularly monitored in liaison with the relevant service director to ensure completion at the earliest opportunity. The Committee was advised that many of the outstanding recommendations had not been completed as a result of resource and capacity issues within service areas. The Chief Internal Auditor reported that revised completion dates for the outstanding recommendations were agreed in consultation with the relevant service manager, on a risk-based arrangement. Members raised concern that the level of overdue recommendations had more than doubled since the last meeting of the Committee and that performance on the implementation of Internal Audit recommendations appeared to be in decline. The Committee requested that, for the purposes of assurance, evidence should be provided to support the inability of service managers to implement recommendations to an agreed deadline or the seeking of additional resources to address recommendations by a revised deadline. The Chief Internal Auditor agreed to consider these matters in the development of the recommendation tracker.

The Committee was advised that since September 2018, five Right To Buy applications had been prevented as a result of intervention by the Corporate Fraud Team, which had resulted in a discount saving of approximately £399,000 and ongoing rent revenue streams of around £200,000. The Corporate Fraud Manager reported that two Council properties that had been the subject of tenancy related fraud investigations, had been recovered, saving around £186,000. Members were advised that areas of potential fraud relating to Council Tax discounts and exemptions were currently being investigated, focussed on Single Persons Discount, Second Home Premiums and Student Discounts and that savings as a result of this work were currently around £32,000. The Corporate Fraud Manager reported that the Council was working with the Police Hub to establish information sharing protocols to assist joint investigations and that the investigation of social housing tenancy fraud and safeguarding concerns was currently ongoing The Committee was advised that the joint fraud service arrangements with Brentwood Borough Council was operating well and that a number of successful investigations had been concluded.

The Committee considered a revised version of the Council’s Anti-Fraud and Corruption Strategy, which incorporated amendments around the prevention of bribery introduced by the Public Contracts Regulations 2015 and strengthened anti-corruption elements in light of the United Kingdom Anti-Corruption Strategy for 2017 to 2022, which set out a long-term framework for tackling corruption. Members were advised that the Chartered Institute of Public Finance and Accountancy had identified that growth areas in public sector fraud also included business rates and cyber-crime and suggested that these issues should be afforded appropriate significance in the Anti-Fraud and Corruption Strategy, alongside the importance of the Council’s whistleblowing and reporting arrangements. The Corporate Fraud Manager reported that business rates fraud was already included within the Corporate Fraud Team Plan for 2018/19 and that specialist investigation experience would be necessary to assess and mitigate risk related to cyber crime.

The Committee considered that the Anti-Fraud and Corruption Strategy should specify the Council’s arrangements for mitigating fraud risk and identify relevant criteria and evaluation measures to determine the success of the Strategy and that the potential for fraud in the planning application process should be incorporated within Section 3 (Prevention) of the Strategy. Members also considered that the Strategy should be available to all stakeholders and contain links to associated policies and procedures.

RESOLVED:

(1)       That progress against the Internal Audit plan for 2019/19 and the work undertaken by the Internal Audit Unit and the Corporate Fraud Team for the period from September to November 2018, be noted;

(2)       That the Cabinet be requested to provide appropriate additional resources to facilitate the full delivery of the adopted Audit Plan for 2018/19, in light of slippage in the delivery of the Audit Plan for the current and previous year; and

(3)       That the Anti-Fraud and Corruption Strategy be further amended as agreed at the meeting and, subject to the prior circulation of the revised version of the Strategy to the Chairman of the Committee, be referred to the Council for adoption.