Agenda item - Internal audit and corporate fraud annual report 2015-16

Report of the Executive Director, Finance & Resources (copy attached).

1)           That the Committee considers the internal audit annual report including the head of internal audit’s:

·         opinion on the council’s control environment

·         summary of the results of audit work for the year

·         self-assessment of the effectiveness of internal audit against the UK Public Sector Internal Audit Standards.

2)           That the Committee notes:

·         the council’s current arrangements for three areas of partial compliance against UK Public Sector Internal Standards

·         the proposals to further strengthen the council’s internal audit function

3)           That the Committee considers the implications for the Annual Governance Statement.

8.1         The Committee considered a report of the Executive Director, Finance & Resources that provided the Head of Internal Audit’s opinion on the council’s control environment, a summary of the results of audit work for the year and an assessment of the effectiveness of internal audit against the UK Public Sector Internal Audit Standards.

8.2         Councillor Littman enquired as to any recent developments in relation to overpayments identified by the council in respect of housing repairs carried out by its contractor Mears Ltd.

8.3         The Head of Internal Audit clarified that the matter had recently been the subject of a report to the Housing & New Homes Committee and that report detailed that overpayments made in the most recent 18 month period had been fully recovered. Investigations into possible overpayments potentially made before that period were continuing but that task would be more difficult. The Internal Audit team were continuing to look at capital spending as a whole.

8.4         Councillor Taylor noted that contract management had been given limited assurance and asked if this matter should be the subject of further review by the Committee. Referring to page 23 of the agenda, Councillor Taylor noted that one ‘no assurance’ report had been given and asked if further details of that could be provided.

8.5         The Head of Internal Audit answered that a specific Members training session on contract management could be arranged. The Head of Internal stated that he did would provide details of the no assurance report to Councillor Taylor after the meeting.

8.6         The Executive Director, Finance & Resources stated that work was underway on improvements to the council’s contract management process and a separate session could be set up should Members wish.

8.7         Diane Bushell asked how the Annual Governance statement addressed the risks detailed in the report.

8.8         The Head of Internal Audit stated that work was ongoing to address improvements to contract management procedures and he was aware this was seen as a key area for the Finance team. With regard to ICT, there was awareness on their behalf of the high risk areas and he was assured that action was being taken to address these.

8.9         Councillor Robins stated that it was his understanding that contract management would be scrutinised by the Procurement Advisory Board and the committee needed to be careful not to duplicate their work. Councillor Robins noted that the report detailed that 26 council properties had been recovered that had been rented by ineligible tenants and enquired as to whether this was indicative of social housing fraud in the city.

8.10      The Head of Internal stated that it was difficult to quantify precise levels of social housing fraud as it was unclear how many cases went undetected. The Internal Audit & Corporate Fraud team had extrapolated data from similar local authorities that indicated the rate would be higher than the current number and he expected that there would be an increase in the number of cases in the short-term due to the focus on the matter by the Housing and Audit services.

8.11      Councillor Morris stated that he had concerns regarding the confidence placed in the council’s Whistleblowing Policy and asked if an outside body should be appointed to oversee the process and handle reports.

8.12      The Executive Lead Officer, Strategy, Governance & Law stated that whistleblowing could be reported to any statutory agency. In terms of the council’s policy, confidentially was a fundamental aspect of the Whistleblowing framework and anonymity would always be respected. Over the past 12 months, incidents of Whistleblowing reporting had increased by 22 compared to the previous year and any evidence of criminality would necessitate the involvement of Sussex Police.

8.13      RESOLVED-

1)           That the Committee considers the internal audit annual report including the head of internal audit’s:

·         opinion on the council’s control environment

·         summary of the results of audit work for the year

·         self-assessment of the effectiveness of internal audit against the UK Public Sector Internal Audit Standards.

2)           That the Committee notes:

·         the council’s current arrangements for three areas of partial compliance against UK Public Sector Internal Standards

·         the proposals to further strengthen the council’s internal audit function

3)           That the Committee considers the implications for the Annual Governance Statement.