Agenda item - Internal Audit and Counter Fraud progress report.

Report of the Executive Director, Finance & Resources.

RESOLVED: That the Committee noted the report.

45. 1   The Audit Manager summarised the report for the second quarter of            the year up to September 2018.  He stated there were ten finalised   reports, half of which gave an outcome of reasonable    assurance and         four reports with partial assurance. The report also contained             information on counter fraud activities.

45.2    Ms Bushell asked about disaster recovery and wanted reassurance that the business continuity planning would be addressed. She also asked about the date of the last internal audit and who was responsible for this. The Audit Manager replied that 2017 was the date of the last report following a previous critical business continuity audit and that there was also a recent IT disaster recovery audit containing a number of continuity actions with a March 2019 deadline. He explained that business continuity fell under the Executive Director, Neighbourhoods, Communities & Housingarea.  The Executive Director, Finance & Resources confirmed that although this came under the Executive Director, Neighbourhoods, Communities & Housingarea, the Committee had discussed previously that the area of IT & D had not been robust and that they had now enlisted better expertise through the Orbis partnership, and therefore hopefully by March 2019 they would get some reassurance on this issue.   He also confirmed that the Council had a lot of different IT systems including life support systems within Housing and Social Care and they were hopeful that this would be improved soon since the level of cyber threat due to criminal elements was increasing.

45.3    Ms Bushell asked about the action tracking mentioned in the report on page 73 and how this was currently being addressed and whether it was possible for the Committee to have a “deep dive” – detailed audit investigation in what is occurring with Seaside Homes. The Audit Manager replied that it was a long term agreement and since some aspects did not work for the council in financial terms on a long term basis there was a real need to resolve these issues over the next twenty years.  He also confirmed that pieces of work had already been carried out on this issue over a number of years and that Housing were now reviewing these arrangements.  He added that Seaside Homes was an independent company which the Council could influence through elected members, but not dictate to. He added that this was an important fix but not one that could be completed in a couple of weeks. The Executive Director, Finance & Resources confirmed that finance officers had recently been supporting the Housing department in establishing stronger links between Seaside Homes and the council. He confirmed that both sides were currently locked into the constraints of the original financial and legal arrangements set up of for 499 homes that they were set up with.  He confirmed that new methods of working with the council and also with councillors were being established in order to improve the situation which was now more positive than when the audit had been completed.  The Chair added that there may be historic issues which may have an impact on revenue and thus a “deep dive” or detailed audit investigation into Seaside Homes was required.  Councillor Janio agreed with this, as did the Executive Director, Finance & Resources and he confirmed that this action should be added to the Action Log, but that the timing of the deep dive would need to be considered further.

45.4    Ms Bushell asked for assurance on the issue stated on page 75.  The Chief Internal Auditor replied that there was a distinction between audit days and delivery of audits within the audit plan and that this had been a relevant point since they had experienced issues with long term sick absence and had been able to manage this better due to the more recent introduction of Orbis. He added that if these sickness absences had occurred two years ago, there would have been a severe impact on the delivery of the BHCC audit plan, as there was no resilience at that time, but now they had been able to bring resources in from across Orbis. 

45.5    Councillor Sykes remarked on the wide cost parameters of the local delivery vehicle stated on page 66 of the report and asked about whether there had been a national policy change in this area and what lessons could be learned for new contracts that would be set up in the future.  The Audit Manager replied that the costs for the LDV project had been identified as a risk and any project should normally have a risk register and that with hindsight, financial arrangements should have been set up differently.  He added that there may have been optimism bias on the issue but that there now had to be a pause before going ahead in the future.  On the issue of the Orbis Budget Management Audit, the Chief Internal Auditor explained that whilst the review did only conclude partial assurance, there was clear evidence that the Finance service were tackling this issue and introducing improved arrangements.  It was further explained that the audit was carried out relatively early in the partnership and transition issues were believed to be a contributing factor.  The Chief Internal Audit also confirmed that a follow up review would be carried out in 2019/20 to provide assurance that appropriate actions have been taken to improve controls.

45.6    Councillor Gilbey queried the minimal assurance of the Brighton Centre and asked whether it was the database that was incorrect or just bad reporting of staff overtime.  The Audit Manager replied that it was a mixture of both since the unique work shift patterns of the staff plus the paper forms and rota systems added to the problem that the database had not calculated the payments correctly and thus the whole process had not worked effectively.  He confirmed that he had been given full assurance that this had all been corrected now.  In answer to the Chair’s query on the likelihood of a follow up, the Audit Manager confirmed there would be a follow-up report on this matter either now or in the last quarter of  2018/19 or in the new financial year 2019 / 2020.

45.7    RESOLVED: That the Committee noted the report.