Agenda item

To provide the Committee with an update of internal audit activity (report of the Head of Internal Audit – Assurance Lincolnshire enclosed).

Consideration was given to the Internal Audit Progress Report – March 2024, which updated the Governance and Audit Committee on the work of Internal Audit since the last report.

As noted at minute item 44, the Procurement Card Audit Management Response (agenda item 5) was considered alongside this item.

The Head of Internal Audit introduced the report and following main points were highlighted:

• The Performance Dashboard on page 5 of the report detailed the progress of the audit plan to date; all planned audits were underway and would be completed, or be in a draft form, by the end of March 2024;
• An update on internal audit activity on page 6 of the report presented a summary of the progress report, with one ‘limited’ assurance review and one ‘no’ assurance review;
• Responses had been received for two overdue high priority management actions; 
• Two financial audits had been postponed, which due to cyclical workloads, would be rescheduled appropriately to align with greater capacity within the Finance team;
• An outline of work undertaken and assurance opinions given were shown in a table at page 7 of the report; the majority of findings were positive with two ‘substantial’ and two ‘adequate’ opinions; and
• The summaries of work undertaken for each audit were outlined from page 9 of the report.

Members considered the report and made the following comments:

• Members queried the nature and consequences of the account coding issues raised during the Payroll Control Account Reconciliation audit review and asked for examples of when this had occurred and how often.
  • The Chief Finance Officer (PSPS) responded that incorrect code mapping had occurred within components of the monthly payroll file when these were interfaced with the ledger. This generally only applied to new items. Appropriate coding was subsequently identified to rectify the issue; and
  • The Senior Finance Business Partner (PSPS) added that although the issue occurred fairly frequently, the Payroll and Finance teams reviewed any issues on a regular basis.
• The Chief Finance Officer (PSPS) stated that a briefing note would be provided to the Committee which outlined examples of the issue.

• Members asked whether payroll reconciliations were completed on a monthly basis.
  • The Chief Finance Officer (PSPS) responded that payroll reconciliations for PSPS and the three authorities of the partnership were completed on a monthly basis. At the time of the meeting, the payroll reconciliations for January 2024 had been signed off and those for February 2024 were in progress.

• Members referred to the ICT Disaster Recovery audit and noted the comment that, ‘a schedule to carry out scenario-based disaster recovery exercises on an agreed periodic basis had not been developed’. Could further information regarding this matter be provided. 
  • The Chief Executive (PSPS) responded that the requested details would be ascertained and reported back to the Committee.

• Members referred to the Procurement Cards audit and queried the following:
  • How long were procurement cards in operation at SHDC?
  • Might non-compliance have occurred over a longer period than had been audited and which therefore necessitated further investigation?
  • In respect of the potential loss of VAT reclamation, clarification was requested as to whether this was a result of inadequate or a lack of receipts being submitted.
    • The Chief Finance Officer (PSPS) responded that:
      • The audited sample specifically focussed on fifty transactions where the description of the transaction and the presence of a receipt had been absent.
    • The Assistant Director – Corporate referred to the management response at agenda item 5 and stated that:
      • The context of the audit report had recognised the deficiencies of the procurement card process and the requirement that this area be strengthened;
      • The identified actions were already in hand and a new system had been launched across the partnership with additional controls in place, which included a ‘limit review’;
      • Whilst the period of procurement card use at SHDC could not be confirmed at the meeting, the Assistant Director – Corporate confirmed that they had been in use at ELDC for around 15 years, and this system was recognised as a quick and efficient mechanism for local government spending;
      • A retrospective review of transactions from April 2022 to February 2024 had been undertaken which had not identified any significant process deficiencies; a couple of issues were to be reviewed in detail however management were confident that no further inappropriate activity had taken place during that period, lessons had been learned and robust processes had been implemented.

• Members queried whether the significant un-coded payment card spend which had been allocated to the suspense account had been questioned.
  • The Chief Finance Officer (PSPS) responded that the matter had not been raised during the year.

• Members asked whether the unclaimed VAT value was known.
  • The Chief Finance Officer (PSPS) was unable to comment on the value.

• Members were pleased that staff had received training on the new system and requested that this be shared with the Committee. Both an assurance and an understanding of the operation of the new system was sought, from point of spend and management authorisation through to finance and accounts.
  • The Chief Finance Officer (PSPS) confirmed that training included the terms and conditions of usage of procurement cards, in addition to how transactions were processed. The training would be shared with Committee members

• Members requested that line managers be alerted at an earlier stage in the process where receipts had not been submitted.
  • The Chief Finance Officer (PSPS) responded that the software provider would be contacted to investigate whether this was possible.

• Members queried the regularity of management checks under the newly implemented system.
  • The Chief Finance Officer (PSPS) responded that:
    • The new digital system escalated issues to managers at set timeframes, and if not resolved, issues would be escalated to the S151 Officer;
    • During the initial implementation period, every transaction was being viewed and verified with feedback relayed to officers and managers where appropriate; after this period, a 10% random sample would be verified monthly; and
    • Additional staff resource had been acquired to ensure that the verification of all transactions could take place during the implementation period.

• Members queried whether the digital system was able to match the receipt with amount of spend. Concern was expressed if this was not the case.

• The Head of Internal Audit stated that both the Payroll and Procurement Card audits would be followed-up by the Internal Audit team, and findings reported back to the Committee as soon as possible.

AGREED:

That after consideration by the Governance and Audit Committee, the Internal Audit Progress Report and the Procurement Card Audit Management Response be noted.

The following officers left the meeting on completion of this item: the Assistant Director – Housing, the Assistant Director – Wellbeing and Community Leadership, the Assistant Director – Regulatory and the Chief Executive (PSPS).