Meeting documents

To consider the attached report, which includes the following completed internal audit reports:-

·                     General Ledger

·                     Housing Benefits

·                     Taxi Licensing

·                     Building Control "to follow"

 

Contact Officer: Kate Mulhearn (01296) 585724

The Committee received a progress report on assurance work activity undertaken against the 2017/18 Assurance Plan that had been approved by the Audit Committee in July 2017.

 

The following matters were highlighted:-

 

Four reports had been finalised since the previous Committee meeting:

 

Name of review	Risk rating	Date of final report	No of recommendations made
			Critical	High	Medium	Low
General Ledger	High	15.3.18	-	1	3	3
Housing Benefits	High	15.3.18	-	2	-	2
Taxi Licensing	Medium	14.3.18	-	-	4	1
Building Control	Medium	14.3.18	-	-	3	4

 

General Ledger – a number of audit reports in recent years had highlighted issues with the Tech1 finance system including the initial implementation of the system, the design of processes and controls, and poor engagement and speed of response to requests for support.  System improvements had also been hindered by internal factors, primarily the level of work required following restructure to remodel the finance structures in line with organisational change and an under resourced team with appropriate expertise. The issues had not impacted on the integrity of the financial accounts, but had resulted in inefficiency, inconsistencies, manual work-arounds and a general lack of reporting to support good financial control.

 

The report provided a summary of the issues and actions being taken to address them and concluded that whilst progress was being made, a number of concerns remained, mainly around Tech1 consultant capacity and resource to meet the operational and development needs of AVDC.  Until significant progress had been made in addressing some long outstanding issues with existing processes and controls, there remained a high risk around the operational performance and functionality of the finance system.

 

Overall, the report had been classified as High Risk and had identified the following issues with recommended actions:-

 

·                    Balances within suspense accounts were not being cleared in a timely manner and there was a lack of clarity around responsibility and documented procedure for completing the process (Medium)

·                    Some interfaces were not reconciled to Tech1 including the Bartec system and some Uniform activity. Issues relating the Northgate/Tech1 interface had been reported in the Housing Benefits internal audit report.  A number of the system maps for the interfaces between the Tech1 system and the Council’s other sub-systems remain incomplete, with regular reconciliation not being consistently performed (Medium)

·                    There was insufficient monitoring over Tech1 user accounts and supplier access to the Tech1 system. Staff leaving the Council were not consistently having their user accounts deactivated in a timely manner (Medium)

·                    There was a lack of knowledge and restrictions on who was able to access and make amendments to the chart of accounts (Low)

·                    Insufficient journal narrative and back-up documentation was being recorded for journals on the Tech1 system and there were cases where the same member of staff was preparing and approving the journal for posting (Low)

·                    There was a lack of documented procedure for managing any updates or changes required for the Tech1 system (Low).

 

The restructure over the past year, staff capacity and insufficient consultancy support had impacted on progress in implementing the controls recommended during the 2016/17 audit, and this was reflected in the increase in risk rating compared to the previous year. There remained some fundamental processes and procedures that needed to be addressed.

 

Housing Benefits – since the prior year high risk report significant improvements had been made to processes and controls.  These improvements had led to the Council being paid back subsidy from the DWP as part of their 2016/17 subsidy return, instead of a significant subsidy loss in 2015/16.  The key areas of improvement were around increasing the quality checks performed each monthand monitoring of monthly subsidy forecasts to quickly identify any financial concerns and take prompt action to rectifying benefit cases.  This was supported by full team training.

 

However, there were still challenges, with the biggest concern being around housing benefit overpayments.  Consistent with the national picture, the total estimate of overpayment debt remained high, at £5.9m in February 2018 (2016/17: £6.5m). Of this, £4.12m relates to invoiced overpayment debt and £1.78m was being collected through on-going benefits. Two high risk issues were raised relating to housing benefit overpayments:

 

·                     As reported last year, there was a mismatch between housing benefit overpayment data held on Northgate (benefits system) and on Tech1 (finance system). During the year significant resources had been invested to reconcile these two systems and redesign the automated interface processes. Progress had been made to the point where the residual unreconciled balance had been reduced to 0.6% of the debt outstanding, but further work was still needed to automate the matching process and establish ongoing reconciliation procedures. (High)

·                     There were insufficient procedures and resources in place to support effective monitoring and recovery of housing benefit overpayment debt.  A business case had recently been approved for additional resource to focus specifically on recovery of housing benefit overpayment. (High)

 

Two low risk issues have been raised around training and more robust performance monitoring.

 

Taxi Licensing – the taxi licensing service had seen a significant increase in demand for both vehicle and driver licences following the introduction of the Deregulation Act 2015 with driver licence applications increasing five fold and vehicle applications three fold.  The organisational restructure had resulted in 50% of the staff within the taxi licensing service moving into roles in other departments within the organisation and a related period of recruitment and staff training.

 

The review assessed cases on the Council’s platform Uniform; which had been replaced by Salesforce which went live in November 2017.  The capabilities and functions of Salesforce were assessed in light of any design gaps found in Uniform to assess whether Salesforce would adequately mitigate these.  Overall, Salesforce would substantially improve the ability to retain evidence and compliance however, this would not cover all design gaps identified in this review.

 

The auditors had tested a sample of 20 applications and 15 service requests/regulatory actions and sanctions for the period April 2017 to January 2018 and identified the following issues:

·                    A lack of supporting evidence and records of action was retained to demonstrate whether drivers and vehicles were fit and proper and safeguarding checks were sound for both applicant and service requests (Medium)

·                    Enforcement activities were not documented centrally or monitored and new joint working protocols were not yet working effectively (Medium)

·                    Insufficient management information was collated and/or provided for scrutiny of the performance of Taxi Licensing (Medium)

·                    The sampling had identified 2 instances of errors over penalty points and 2 instances of untimeliness over regulatory actions and sanctions.  There had also been an issue identified with licences associated with expired visas however, Management have accepted they could not fully mitigate this risk in the short term (Medium)

·                    Not all Members of the Licensing Committee had been trained and the training provided did not include all of the key elements of safeguarding (Low)

 

Building Control – there was a national shortage of Building Control Inspectors and although the Council’s shortfall was being covered by 1.5 FTE consultants, the team was still under resourced.  The restructure over the past year had left the staff with changed responsibilities and the new team structures were currently being embedded.  Testing had identified the following areas of weakness:-

 

·                    There is a lack of documented policies and procedures and inconsistent processes are followed (Medium)

·                    Key Performance Indicators have not been reviewed to establish whether they are still relevant (Medium)

·                    There is no evidence of fees being reviewed at the end of the financial year as per CIPFA Guidance and no evidence that the service is breaking even (Medium)

·                    Building Control Financial Statements, as set out in the CIPFA Local Authority Building Control Accounting Guidance for England and Wales, are not prepared and approved by the Section 151 Officer (Low)

·                    CPD and training maintenance and updates are not evidenced by Managers (Low)

·                    The manual process for matching invoices and payment is inadequate and should be automated. Our testing identified one certificate that was issued without payment of invoice, and one instance where duplicate payments were made (Low)

·                    A Marketing and Income Generation Strategy has not been documented, approved and disseminated (Low).

 

2017/18 Internal Audit Plan work in progress

 

Members were informed that reviews of Accounts Payable and Payroll had been complete and would be reported to the Audit Committee in June 2018.

 

An advisory piece of work on Governance and Risk Management would be undertaken in June to review the draft 2017/18 Annual Governance Statement compared to the CIPFA Framework.

 

Changes to the 2017/18 Internal Audit Plan

 

The Annual Internal Audit Plan was kept under review to ensure it remained relevant and was flexible in responding to emerging or changing risks. With budget constraints, there was also a need to ensure work was prioritised so that it achieved the greatest value to the organisation.  Since the plan had been approved in July 2017, changes had been made to the reviews in relation to Accounts Receivable, Tech 1, Budget Management and Aylesbury Vale Estates.  Details of this were set out in the Committee report.  In addition, the Audit Committee had commissioned an  independent review of the Council’s governance arrangements for Aylesbury Vale Broadband. This had commenced in January 2018 and was due to report in May 2018.

 

Implementation of agreed audit actions

 

Internal Audit monitored the implementation of actions and recommendations raised by reviews to ensure that the control weaknesses identified had been satisfactorily addressed.  Actions arising from low risk audit findings were followed up by management and reviewed, but not validated by internal audit.

 

Progress on implementing the prior year actions for General Ledger and Housing Benefits was set out in the reports attached to the agenda.  A full report on outstanding and overdue actions would be submitted to the June 2018 Audit Committee meeting.

 

Internal Audit Plan and progress tracker

 

Progress and changes against the approved 2017/18 Annual Internal Audit Plan were detailed at Appendix 2 to the Committee report.

 

Members sought further information and were informed:-

 

General Ledger

·                     Under resourced team with appropriate expertise (p.71) – a new person would be starting on 9 April who would assist with financial systems work including General Ledger development and the Tech1 system.

·                     Suspense account not reported monthly (p.76) – Officers acknowledged the importance of implementing monthly reporting on the position of the suspense account to the Strategic Finance Manager to enable better oversight of the clearing of balances.

 

Housing Benefits

·                     Changes to the Benefits System – it was explained that the Council operated a discretionary housing benefits fund (£200,000) that could assist people, in certain circumstances, with HB payments.  The fund had been fully allocated for this financial year.

Members were informed that the Council had not seen a significant reduction in the housing benefit claims caseload recently which indicated that there were a relatively large number of low paid households in the Vale.  However, it was possible that the number of claimants would change when Universal Credit was fully rolled out.  

·                     Backlog of overpayments (manual reconciliation) (p.95) – that the overpayments information related to how overpayments / unpaid balances were recovered by the Council, rather than how the overpayments occurred in the first place.  Landlord invoices (e.g. VAHT) could often be more complicated which explained the lower reconciliation rate when compared claimant invoices for individuals.

·                     Invoiced overpayment debt (p.91) – an explanation was provided on the ongoing reconciliation procedures in relation to collecting overpayments, and in matching HB overpayments data held on Northgate (benefits system) and Tech1 (finance system).

·                     Loss of HB subsidy (p.92) – it was acknowledged that there had been a loss in the level of subsidy of approximately £91,000, which had been partly due to not fully implementing a software change.  This had highlighted a number of issues which had since been addressed. 

·                     Performance Monitoring meetings (p.99) – information was provided on the regular meetings that were held involving the Group Manager and the Assistant Director (Customer Fulfilment) to monitor housing benefit performance.  These meetings were held as part of a wider Sector plan, with information/actions then cascaded upwards and reported monthly to the Assistant Director. The Sector was also working to put in place key performance indicators and reporting by exception.         

 

Taxi Licensing

·                     Retention of evidence and action records (p.112) – that the target date of 30 June 2018 to train Officers and to ensure processes were put in place to make sure sample testing were conducted on at least a quarterly basis were realistic.

·                     Members expressed some concerns in relation to public safety / safeguarding issues associated with licensing taxi drivers, including the licensing of people who did not live in the Vale, or had a drivers licence issued in another country.  The Committee was informed that applicants for a taxi licence had to hold a UK drivers licence or have held an EU drivers licence for a minimum of 18 months to be eligible.  The Government had liberalised taxi licensing schemes over the last few years so licensing was not restricted to people who lived in the Vale.  However, the Council could introduce a local test for drivers which might discourage some people.  This issue was being discussed with local companies.  Taxi drivers were also responsible for obtaining a DBS check and providing the Council with a copy of it.  

·                     that the Council was properly resourced (Officer wise) and able to undertake its taxi licensing responsibilities.

·                     Residual Gaps following the migration process from Uniform to Salesforce (p.111) – that where there were some residual gaps following the migration to Salesforce, manual processes would be put in place to support enhanced data control and to address any resultant risks.     

 

Building Control

·                     that the Council’s Building Control service had operated for a number of years with an experienced small core of Building Control Officers.  A number of these people had recently retired or left the Council and efforts were being made to properly document policies and procedures to assist new staff and some temporary contractors who were working in this service area.  Throughout this transition period, staff had worked exceptionally hard to maintain a level of service, and general quality of building control work, that customers expected.  Members were also informed that private companies also provided building control services so people could choose to use these organisations rather than the Council service.

·                     Building Regulations Financial Statements (p.13, Supplementary agenda) – it was confirmed that the financial statement relating to the Building Regulations Chargeable and Non-chargeable account would need to be approved by the Section 151 Officer before the Council’s financial statements for the year were prepared.

 

General queries

·                     Staffing – that the Commercial AVDC programme had led to a major re-organisation of staffing across the organisation.  While there were still vacancies in a number of areas, active recruitment was ongoing with a range of strategies to fill them.  

·                     Aylesbury Vale Estates (AVE) – that an internal audit review of the governance arrangements over the investment in AVE would be undertaken in 2018/19, drawing upon the lessons learned from the review of Aylesbury Vale Broadband.

·                     General Ledger / Housing Benefit comparison – some concerns were expressed that there was a radical difference in implementing actions from last year’s reviews in these areas. i.e. very few actions had been implemented following the GL review whilst most actions had been implemented following the HB review.

·                     Members commented that it would be helpful to get a better understanding of the reasons behind a number of Strategic Development Management Committee meetings being cancelled over the last 6 months.  

 

RESOLVED –

 

That the progress report be noted.