Agenda item

Report of the Shared Services Director for Audit, Fraud, Risk and Insurance.

6.1       The Committee considered a report that summarised the work carried out by the Council’s Internal Audit service in the reporting period.

6.2       The Committee noted that in the areas audited internal control systems were generally  effective although five limited assurance reports had been issued as follows: three Tenant Management Organisations (TMOs) (Lilestone, Carlton Vale and Hide Tower); Use of Consultants; IT Disaster Recovery and Business Continuity. 

6.3       Six follow up reviews were completed in the period.  58% of medium and high priority recommendations had been implemented with his further 31% in progress of being implemented. 

6.4       The committee reiterated its concerns around the running of TMOs having previously discussed the limited assurances issued in respect of other audited TMOs.  Moira Mackie, Interim Shared Services Director for Audit, Fraud, Risk and Insurance, informed members that to date all TMOs that have been audited had received a limited assurance.  She explained that as required by their Management Agreement, each of the TMOs has two months to consider the contents of their ‘Five Year Review’ and TMOs are expected to report back to the Executive Director for Growth, Planning and Housing, on their acceptance or disagreement with the recommendations made and the proposed implementation timeframes.  If a TMO fails to improve then it can potentially be closed down although this involves a long statutory process.  The Council has previously closed down a TMO following evidence of fraudulent behaviour.

6.5       Moira Mackie advised that a follow-up audit of the largest TMO in Westminster (MEMO) was due to be issued in due course.  Governance and internal control systems had improved since the last audit following a considerable amount of resource being directed to helping the organisation improve its administration.

6.6       Moira Mackie commented that while individually each TMO does not have a significant management allowance there are reputational and potential safety issues for the City Council if they are not properly managed, such as if housing repairs are not undertaken in a proper and timely manner.  Members commented that the total management allowance provided to TMOs in Westminster amounted to approximately £1.5 million per annum.  Members were concerned that such large sums of money were being provided to organisations where those managing them are not professionals, there are significant opportunities for fraud whilst housing management has become more complex.

6.7       The Committee asked officers about the different options available to the Council to address the situation including whether TMOs should be wound down and a different way of managing the properties is introduced. The City Treasurer advised that any such organisations were established under statute and that while the Council often had ultimate rights to step in the major way to address the issues was through the use of influence, guidance and support and that the Council was reviewing the financial reporting of appropriate external bodies.

6.8       Bilateral to the work being undertaken by officers, the chairman undertook to raise the issue with the Leader of the Council. 

6.9       With regard to the limited assurance report provided to IT disaster recovery & business continuity, Members highlighted that as part of the City Hall decant it had been established that there are over 300 different computer systems in operation within the Council which members considered was not a helpful position for the authority to be in. Moira Mackie advised that as a bi-product of the decant from City Hall ICT is much more aware of such issues and this has facilitated a rationalisation of ICT systems.  In respect of the audit, some of the issues identified related to lapses where information had not been updated and was out of date.

6.10     Members noted the limited assurance report relating to the Tri-Borough review on the use of consultants.  Officers were referred to the fact that in previous meetings the committee was assured that the levels of consultants used by the Council would fall.  The City Treasurer advised that since last year the number of consultants had fallen by approximately 10% to 222.  In response to questions regarding the wider potential impacts of the new requirements for intermediary legislation (IR 35), the City Treasurer suggested that if the Council decides that the new rules apply to a consultant and they are deemed to be full-time employees of the authority then in certain circumstances some will pay more tax and national insurance contributions than presently.  This could result in some consultants deciding not to continue working with the Council which could result in a loss of expertise.

6.11    RESOLVED: That the results of the internal audit work carried out during the period be noted.