Agenda item

The Chairman referred members to the briefing notes which had been circulated with the agenda.  He explained that whilst briefing notes were not usually discussed, he felt that, given the subjects matter, the committee should talk through them at the very least. 

Evaluation of Internal Audit provision

Lucy Cater, Head of Internal Audit (Operational), declared an interest in this item and left the meeting. 

Paul Jones, the Section 151 Officer explained that the Internal Audit was a service which had been delegated to the Joint Committee.  Audit Cotswolds provided internal audit to Cheltenham, Cotswold and West Oxfordshire Council’s, whilst Forest of Dean received its internal audit service from the South West Audit Partnership (SWAP).  SWAP is a Teckal company, wholly owned and controlled by its Members.  Since 2012, the GO shared services had been jointly audited by Audit Cotswolds and SWAP with a joint protocol in place which aimed to avoid the service areas being audited twice.  However, in practice, a number of GOSS services are audited twice, by internal audit and external audit and there were often third audits by either SWAP or Audit Cotswolds in order to gain assurances that ‘local’ processes were operating in accordance with the main system (e.g payroll) internal controls.  With an increasing number of shared services, this is not considered an efficient arrangement and therefore the proposal is that an independent evaluation of the two internal audit service providers is undertaken to enable the Joint Committee to decide upon the Internal Audit service provider for the partner councils.  Grant Thornton, external auditor for the partner councils will provide the Joint Committee with independent advice on the cost and quality offered by each internal audit provider.  This will be undertaken by a separate team to those that fulfil the external audit function.  The bids would be assessed against 40% cost and 60% quality and a proposal would be tabled with this committee in September.  He assured members that this would be a fair and transparent process and also took the opportunity to assure them that SWAP were a proven provider, and that he was a Director of the Company in his capacity as a member of the SWAP Board, as Chief Finance Officer for the Forest of Dean.  

In response to a member question, the Section 151 Officer said that in his opinion, Devolution would not influence the decision, as irrespective of whatever the devolution deal would be (unitary, elected Mayor, etc), the internal audit function would still be required.

Purchase Order Monitoring

The Deputy Section 151 Officer introduced this briefing which was the first formal update that had been produced for this committee.  GO Shared Services (GOSS) were able to generate a report (Appendix A) to identify non-compliance and the report was reviewed on a monthly basis, with additional training and support offered to staff, with the aim of improving performance.  Financial rules stated that the system should be being used and full compliance would enable Finance to be aware of all commitments. 

The following responses were given to member questions;

·         The percentages in the April 2016/17 table represented the percentage of all payments processed in April.  Only 28.94% had been made using the PO system.  Supplier payments had been broken down for the purposes of providing clarity, as some eligible payments had been made in respect of expenditure generated from the Property Services division (Uniform) and Cheltenham Borough Homes, who both used stand-alone work order systems which had no direct interface with Agresso.  Investigations were made into the possibility of an interface between the Uniform and Agresso.  The statistics showed that in April 2016, 32% of eligible payments were non-compliant.  

·         The briefing note did not include details of the values associated with the purchase orders as it was felt that this could skew the figures and it was noted that purchase orders were not required for sums below £100.

·         There was a variance in the number of payments that were processed from month to month and whilst no analysis of this had been undertaken, it was likely that this could be due to seasonality.

·         It was likely that a cultural change was required to address the majority of those that were not complying with the policy.  Some officers had given feedback to a survey, had cited the urgent need for supplies as the reason that a purchase order was not raised. 

·         Executive Board and the Senior Leadership Team had fully supported the implementation of the No Purchase Order, No Pay policy and service areas which were repeatedly non-compliant, would be reported to them in the first instance.

·         All suppliers that were known to the Council had been advised in writing, of the requirement for a Purchase Order Number.

·         The Senior Leadership Team would be asked if Purchase Order Compliance could be added to the appraisal form of relevant officers.   

Some members felt that the Council needed to adhere to the policy and refuse to process eligible payments that did not have a purchase order; suggesting that this would make suppliers more aware that this policy was in place.  This was something that councillors have been reluctant to enforce due to the cash flow implications of non-payment on local businesses.  

The point was made that some staff worked across a number of authorities and therefore a number of policies and that Internal Audit might like to communicate with partners, the suggestion that this policy be adopted by all.

The committee were satisfied that there was a mechanism in place to monitor the compliance, but felt that given the current level of non-compliance, it would be appropriate for further update to be tabled with this committee in six months (January 2017).  Officers also committed to presenting the information in graph format in addition to the table format shown.