MPS Corporate Governance - MPS Audit and inspection strategy

Report: 9a
Date: 14 March 2008
By: Director of Strategic Finance on behalf of the Commissioner

Summary

The MPS is subject to audit and inspection, in particular by HMIC, Audit Commission and the MPA. This report proposes an MPS Audit and Inspection Strategy and associated Implementation Plan as a means of ensuring the MPS engages positively with these services and uses audit and inspections to improve the services it delivers.

A. Recommendation

That members note the MPS Audit and Inspection Strategy and Implementation Plan including the proposed discussion with the audit and inspection services on the draft protocol.

B. Supporting information

1. The MPS is subject to audit and inspection, in particular by the HMIC, Audit Commission and the MPA. At present, these services are dealt with by different parts of the MPS and there is variable co-ordination of access to the MPS by these services. This has resulted in:

• Management Board members not being sighted on the Service-wide implications of some recommendations;
• a lack of senior input/challenge to the findings of some audits and inspections;
• a lack of ownership for the implementation of recommendations accepted by managers in different parts of the organisation;
• lessons learnt not being integrated into the MPS’s corporate planning and performance framework to support continuous improvement across the MPS.

2. Positive engagement with the audit and inspection activity is an essential element of a robust corporate governance framework. In particular:

1. Organisational Structures and Processes
   Building on existing work and learning from best practice from the various inspection and audit services will allow the MPS to manage its risks more effectively and make more informed decisions on service and resource planning. Clearly defined processes will:

• facilitate a common understanding of the remit of audits/inspections;
• support positive engagement on agreeing findings and recommendations;
• support the monitoring and implementation of recommendations;
• support the improvement of our services and provide assurance on our internal control framework.

2. Reporting to MPA and Stakeholders
   Ownership and timely delivery of the findings and recommendations of audits and inspections will facilitate accountability to the MPA and other key stakeholders. In particular, it will provide reassurance on the MPS’s internal control and governance arrangements.
3. Standards of Behaviour
   Agreed and consistent arrangements for dealing with audit and inspection services will ensure both those services and the MPS understand what is expected of them, and what they can expect of others, in completing and delivering the audit/inspection. This will promote closer and more effective working.

3. In addition, audits and inspections provide a means of effective challenge which supports service improvements and the delivery of value for money outcomes. The MPS’s engagement with, and response to, audit and inspections will be considered by the Audit Commission in reaching its annual conclusion on its ‘Value for Money’ judgement on the MPS.

4. In September 2007 a time limited Audit and Inspection Working Group was established with the aim of co-ordinating existing work and developing an integrated strategy for dealing with audit and inspection activity across the MPS. The Working Group includes representatives from Finance Services, the Inspection, Liaison and Analysis Unit and business managers from other Business Groups.

5. The Working Group has to date concentrated on developing:

• a strategy and implementation plan;
• a protocol for engagement with audit and inspection services;
• internal processes to manage the MPS response to audit and inspections and the implementation of agreed recommendations;
• progress reports on the delivery of audit and inspection programmes.

Strategy and Implementation Plan

6. A proposed Audit and Inspection Strategy and Implementation Plan is set out in Appendices 1 and 2 respectively.

Draft Audit and Inspection Protocol and Guidance

7. A proposed draft protocol is attached at Appendix 3 together with internal guidance to staff. The protocol builds on the best practice currently in place with some/all of the inspection and audit services. Management Board, having considered the draft protocol, have agreed that discussions take place with all the audit and inspection services to finalise and adopt the protocol. This will ensure consistency of standards in terms of what the MPS can expect of the services and what they can expect of the MPS.

8. Many of the principles set out in the draft protocol could also be applicable to scrutinies by the MPA or London Assembly. This activity is, however, outside the scope of this strategy.

Internal Processes

9. Building on the standards and expectations set out in the protocol, guidance is being developed to assist Business Groups manage audits and implement recommendations.

10. Finance Services and ILAU will also work with Business Groups and their Quality Assurance Units to raise and test standards across the MPS in respect of compliance with internal control systems.

Monitoring Progress

11. Ownership of audit recommendations and their implementation is a key element of the strategy in terms of embedding audits and inspection lessons into business as usual and delivering continuous improvement.

12. At present, the Performance Board receives monthly reports on the implementation of high-risk MPA audit recommendations. Senior management is not, therefore, sighted on the progress against the full audit and inspection programmes, the volume and category of audit recommendations and any potential barriers to delivery on the part of the MPS. If the MPS is to learn from and embed improvements within the Service it is important that senior management is aware of progress against the agreed programmes of audit and inspection so that, where appropriate, remedial management action can be taken within the MPS.

13. Progress reports are, therefore, being developed on the delivery of agreed audit and inspection programmes based, in part, on the standards set in the protocol as finally agreed. These reports will be considered by the Performance Board on a quarterly basis and will provide information on:

• level of audit assurance;
• category of audit recommendation and number of recommendations agreed by management;
• percentage of draft reports issued on time;
• percentage of responses to draft reports on time;
• percentage of final reports issued on time;
• percentage of operational plan delivered in the year;
• percentage of recommendations agreed;
• percentage of recommendations implemented;
• Service Managers’ satisfaction score;
• emerging trends/cross-Service issues.

14. Following Management Board approval (20 February 2008) to the Strategy and Implementation, work will now focus on:

• discussions with the relevant audit/inspection services to reach agreement on a final protocol;
• the development of internal processes and guidance and progress reports.

C. Race and equality impact

There is no race and equality impact arising directly from this report. However, the proposed strategy, as part of a robust corporate governance framework, is expected to promote the MPS’s values and facilitate service improvements.

D. Financial implications

The financial implications of individual audit and inspections will normally be contained within existing budgets. Any additional resources required to implement recommendations will be subject to the MPA/MPS’s normal approval process.

E. Legal Implications

1. The audit and inspection regime within which the MPS must operate is set down under various legislation and regulations.

2. In respect of the MPA Internal Audit Service, the MPS must also have regard to the MPA’s Standing Orders and Financial Regulations. In particular:

• Internal audit shall have authority to:
  • enter at a reasonable time any Authority premises or land;
  • have access to records, documents and correspondence relating to any transaction of the Authority;
  • review any activity of the Authority and the Service;
  • require and receive such explanations as are necessary concerning any matter under examination;
  • require any employee or contractor of the Authority or officer of the Service to produce any asset under his/her control for which the Authority is responsible.
• The Director of Internal Audit, on behalf of the Treasurer, shall be informed immediately by the Commissioner, irrespective of whether the matter is the subject of a criminal investigation, of any loss or financial irregularity or suspected irregularity, or of any circumstance which may suggest the possibility of losses or irregularities, including those affecting cash, stores and other property for which the Authority is responsible.
• The Chief Executive, Treasurer and Director of Strategic Finance (on behalf of the Commissioner) will agree the draft internal audit plan with the Director of Internal Audit prior to approval by the Corporate Governance Committee.
• The Commissioner will have the responsibility for identifying and leading implementation of recommendations from internal audit reviews. The Commissioner will report progress in implementation of internal audit recommendations to Corporate Governance Committee as required.

3. Under the MPA’s Financial Regulations:

• the Authority’s Corporate Governance Committee oversees the arrangements for internal and external audit
• the Director of Internal Audit reports to the Chief Executive and the Treasurer in relation to their respective responsibilities and has independent access to members through the Corporate Governance Committee
• the Director of Internal Audit will also liaise closely with the Director of Strategic Finance and have a right of direct access to the Commissioner

F. Background papers

None

G. Contact details

Report author: Anne McMeel, Director of Strategic Finance, MPS

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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