Agenda item

24.1     The Audit Manager introduced the report. He explained that the number of completed audits for quarter is slightly lower than previous quarters. This is due to a number of reasons including the investigation activity the Internal Audit Team have carried out during the quarter and that a number of audits are at the draft report stage and are awaiting finalisation.

24.2     The Audit Manager summarised the completed audit outcomes of which three audits received an opinion of reasonable assurance, and one had an opinion of partial assurance. The partial assurance opinion was for the audit of Orbis Budget Management. The findings of this audit reflect the differences in financial management processes, and a follow up audit will be undertaken next year. The Audit Manager outlined the investigation work carried out during the quarter and confirmed that 100% of high priority actions from previous audits have been implemented. The Internal Audit Team has achieved all performance targets for the quarter. The Chief Internal Auditor continues to be able to provide reasonable assurance that the Council has in place an effective framework of governance, risk management and internal control.

Orbis Budget Management audit

24.3     The Committee asked for further information on why the Orbis Budget Management audit received a partial assurance opinion. The Committee also asked if this was linked to the Chartered Institute of Public Finance and Accounting (CIPFA) report on Surrey County Council’s (SCC) finance function.

24.4     The Chief Operating Officer responded that the audit looked at the budget management systems across the three organisations. Work is in progress to develop additional budget monitoring applications across Orbis to assist budget managers to get greater clarity in the financial information they receive. The work includes looking at the efficiency of the systems in use and whether further investment is needed. It is not a reflection of the mature financial management systems that already exist in each of the organisations. The audit was undertaken in the early stages of this work, and it is acknowledged that further progress is needed.

24.5     The Chief Internal Auditor added that Orbis managers are managing budgets and getting information across three different financial systems, which has to be integrated together. The opinion reflects the view that the financial information is not as clear as it should be for budget managers. The Finance Team are working to provide more clarity and to consolidate budget information. They also provide support to managers to help them understand the information they receive.

24.6     The Committee asked if further investment in systems would be needed. The Chief Operating Officer responded that the resources for financial monitoring are included within existing budgets. However, if further investment is required it will be subject to a business case being established. The Chief Finance Officer outlined that current work includes the creation of a centre of expertise for accounting and systems. The centre of excellence is looking at the different accounting practices that exist within each of the partners to establish best practice. The Chief Finance Officer commented that he is comfortable with the direction of travel to achieve improvements.

24.7     The Chief Operating Officer explained that the CIPFA report is a report on SCC’s financial resilience and the effectiveness of their finance function. It is not a reflection on the finance and support arrangements for East Sussex County Council (ESCC) and Brighton and Hove City Council (BHCC). It does not reflect the position of the Orbis service overall. The Committee asked if SCC staff are working for ESCC as part of partnership, and whether training and support is being provided. The Chief Operating Officer confirmed that support is being provided to SCC staff, including advice and support from David Kuenssberg, Director of Finance & Resources (BHCC) and Ian Gutsell, Chief Finance Officer (ESCC).

24.8     The Committee requested an update report on the implementation of the management actions from the Orbis Budget Management audit for the next committee meeting in March 2019. The Chief Operating Officer confirmed that an update report on the management actions will be provided for the next meeting, and that a follow up audit has been included in the Internal Audit Plan for next year.

Investigations – conflict of interest

24.9     The Committee asked if the undeclared conflict of interest would have come to light if the allegation had not been reported via the confidential reporting hotline. It also asked at what level of management the member of staff involved in the case worked. The Audit Manager responded that this case may not have come to light if it had not been brought to attention of the Team via the confidential reporting hotline. The Chief Internal Auditor explained that the member of staff involved was middle management and did not declare a conflict of interest. The Council does have a robust disclosure of interests system and a confidential reporting hotline, but there is little more the organisation can do if there are deliberate attempts to conceal conflicts of interest.

24.10   The Committee asked if the confidential reporting hotline is robust enough to deal with malicious allegations. The Chief Internal Auditor responded that it is robust enough to deal with malicious allegations. He explained that the Team carry out a preliminary assessment of all allegations with Human Resources and Management to establish whether there is any substance to the allegation. The Audit Manager outlined that in addition to the investigation report, an internal control report is produced to identify opportunities to improve processes and procedures. Sanctions may include disciplinary action and any criminal activity is reported to the Police.

24.11   Councillor Philip Daniel commented that there should be greater transparency around contract terms and conditions and the procurement process, which would help with exposing conflicts of interest. The Audit Manager Counter Fraud outlined that the Counter Fraud Team will be doing work on cultural education on declarations of interest. The Chief Internal Auditor confirmed that the Internal Audit Plan picks a number of contracts to audit each year, to ensure procurement processes have been adhered to.

24.12   The Committee RESOLVED to:

1) note the report; and

2) request an update report for the March 2019 Audit Committee meeting on the implementation of the management actions agreed in response to Orbis Budget Management audit.