Internal Audit progress report

Report: 6
Date: 23 March 2009
By: Director of Internal Audit

Summary

The report summarises the work of Internal Audit for the period April 2008 to March 2009. It also summarises the results of significant Internal Audit work to date and the adequacy and effectiveness of control in MPS systems where Internal Audit has issued final reports since April 2008.

A. Recommendation

That

1. members note the progress made in achieving the 2008/09 Internal Audit Plan; and
2. note the current Internal Audit evaluation of the adequacy and effectiveness of internal control in the MPS.

B. Supporting information

Progress against the 2008/09 Internal Audit Plan

1. Work is underway on 93% of the systems audit programme and we are aiming to achieve the 90% target for completion of the systems audits to report stage by the year-end.

2. Four of the planned five B/OCU reviews are in progress and will be at report stage by the year-end. One OCU audit of the Firearms Unit will not now take place as we have completed a recent systems review in this area.

3. We are currently advising on the key areas of work published in our systems development programme at the start of the year. We are also on target to complete those follow up reviews that are due in 2008/09. 37% of the original follow up programme has been carried forward to next year, as the reviews are now no longer due (the timing of a follow up review is dependent on the date of issue of the original review).

4. A list of the final systems audits and follow-up reports we have issued since the publication of my Annual Report is attached at Annex.

Opinion on the adequacy and effectiveness of MPS systems

5. In my Annual Report for 2007/08 I noted that, on the scale where 1=excellent control and 5=unacceptable control, the MPS had an overall score of 2.8 (3.1 for systems audits and 2.4 follow-ups). At this stage of the year for 2008/09 the equivalent score is 2.8 overall (3.0 systems audits and 2.5 follow-ups).

6. It is disappointing to note that the annual assurance score is not likely to show an improvement on last year’s position. We continue to find that in general adequate control frameworks for systems under review are in place but controls are not consistently applied and are in a number of areas ineffective. Key areas for improvement in control include: authorisation, reconciliation, supervision and review and compliance with regulations. Basic financial controls at BOCU level are also not showing a consistent level of improvement.

7. We have conducted a number of reviews in high-risk areas where the adequacy of the control framework is falling below an acceptable level. We are working with MPS senior management to ensure that appropriate action is taken to address promptly these areas of concern that have been raised during the year.

Internal Audit recommendations

8. Table 1: Recommendations Made and Accepted in 2008

Table 2: Recommendations Implemented in 2008

Fraud prevention and awareness

9. The initial series of fraud awareness events being run in conjunction with the MPS Finance Directorate and the Audit Commission is underway and planned to be completed by the end of March 2009. Feedback from attendees has been positive.

10. The fraud awareness events are the first stage in a fraud prevention workplan. Current work underway includes:

• Revising and updating guidance on the prevention and detection of internal fraud (to be completed March 2009).
• Completing a fraud risk assessment (target: March 2009). The fraud risk assessment will support my overall risk planning and identification of where and when to use scarce audit resources, as well as supporting work to improve fraud prevention and detection.
• Devising arrangements in consultation with the MPS to capture data on internal fraud, theft and losses in order to establish the extent of any problem and inform future fraud risk assessments and audit fieldwork (target: June 2009).

11. I intend to report progress and the outcome of the above work to the next meeting of this committee. Further planned work includes

• Consulting with the MPS and the Audit Commission on measuring the change in the level of fraud awareness as a result of the initial programme.
• Subject to a positive response to the initial series of events, to arrange further fraud awareness events for those unable to attend the initial round.
• Considering with the MPS and the Audit Commission how to build on the initial series of workshops and roll out a fraud awareness and prevention programme across the MPS.

Current investigations

12. We have taken on fifty-five new cases since the 1 April 2008. This is slightly down on previous years and is a consequence of diverting resources to our work on Amex cards and the fact that the National Fraud Initiative (NFI) is conducted on a biennial basis and produces a number of smaller cases in alternate years.

13. We have received six calls to date this year on the Right Line, the MPS telephone hotline for reporting wrongdoing; this is one more than last year. The MPS confidential e-mail reporting facility has been launched and is accessed directly from the home page of the MPS Aware system. An on-line facility on the MPA website to enable members of the public to report internal fraud within the MPA and MPS continues to receive regular hits, however, to date all the reports received relate to external fraud and have been re-directed to the MPS.

14. In February we received the data matches relating to the MPA and MPS from the Audit Commission as part of the National Fraud Initiative (NFI). We are currently assessing and prioritising the matches to identify those worthy of investigation. There are a total of 18,988 matches to be resolved, which is a significant reduction on the 52,116 matches received from the last exercise in 2006/7. The matches have been prioritized and are being followed up quickly in an attempt to identify any fraud – progress will be reported to future meetings.

15. In a previous report I referred to the Office of Fair Trading (OFT) investigation into construction cartels. A list of over one hundred companies were identified in the OFT’s interim report, some of whom have been contracted to the MPA. Along with other bodies we have been seeking further information from the OFT. The OFT will not release information in advance of their final report which is expected to be published in June 2009. When the information is released we will follow up any issues relating to MPA contracts.

16. The Amex investigation is the subject of a separate report to this meeting. We are expecting to complete our part of the work by the end of March/early April 2009. We are aware of one specific major investigation in relation to Amex that is likely to be progressed shortly.

17. Following our fact finding report around the £30m of MPA funds deposited in the Icelandic bank, Landsbanki, presented to the November 2008 Finance and Resource Committee, KPMG were commissioned to conduct an external review. KPMG presented their findings and recommendations to the 5 March Finance and Resource Committee. An Action Plan to address the recommendations will be approved at the next Finance and Resource Committee and the Corporate Governance Committee will then monitor progress on a quarterly basis.

18. We have also taken on a case relating to the suspected over-claim of fees by a linguist. This investigation is likely to be progressed more quickly than the cases dealt with in our previous linguist exercise as all the relevant information is now held electronically rather than in hard copy files at police stations.

Advisory and systems review activity

19. We are advising MPA and MPS officers on the development of the Procurement Strategy for 2009 to 2012 and its supporting implementation plan. We are also represented on the MPA Officer Group established to support the work of the Olympic and Paralympic sub-Committee. We are advising on the interface of payroll and MetHR, the Developing Resource Management Projects and the revised MetaFor project. We have also been invited to contribute advice to the Improving Policing Information (IPI) Programme and are to advise on the Transforming HR project as it reaches its critical stage.

20. We contribute to the work of the MPS Suppliers and Tenderers Risk Assessment Group (STRAG). STRAG considers the commercial risks associated with suppliers and alerts senior personnel responsible for major or business critical contracts to the potential for financial failure. The group has increased the frequency of its meetings from monthly to weekly as a response to the current financial instability in the market.

21. We are also assisting in the review of the effectiveness of the MPA Corporate Governance Committee being carried out by the co-opted member for audit on the Committee. The review is being conducted against the standards laid down by CIPFA for Audit Committees and the outcome will be reported to the June Committee meeting.

Liaison with Risk Management and inspection and review activity

22. My Deputy has recently met with the Director of Business Performance and the MPA Treasurer to discuss current progress with the implementation of our recommendations for risk management within the MPS. This included reviewing the current MPS corporate risk register and agreeing the arrangements for MPA oversight of risk management within the MPS (subject of a separate report to this Committee meeting). The Internal Audit Follow-up report on Risk Management will be submitted to the Committee in September this year.

23. We continue to work with the internal inspection review bodies. We are actively involved in the Internal Inspection and Review Group aiming to ensure internal review activity is properly co-ordinated and duplication is avoided. The protocol between the MPS and Internal Audit is now in place and, along with the MPS, we are working to the agreed principles aimed at ensuring maximum benefit is gained from audit work.

External liaison

24. My Deputy represents Internal Audit on the MPS External Inspection and Review Group and we are working with the Audit Commission, HMIC and MPS Finance Services to ensure that a co-ordinated work programme of inspection and review activity is carried out in 2009/10.

25. In line with the professional standards laid down for Internal Audit, the Head of London Fire Brigade Internal Audit has recently completed a peer review of our audit process and concluded that the appropriate standards were met. The Audit Commission are also currently conducting their triennial review of MPA Internal Audit and the outcome will be reported in my Annual Report in June.

26. We are currently updating our protocol with the Head of Audit at the Home Office to promote joint working where appropriate and to agree the boundaries of our respective areas of responsibility in auditing those systems that are of interest both to the Authority and the Home Office.

27. I meet regularly with the other heads of audit in the GLA family to discuss issues around commonality of reporting and comparing internal audit performance. I also continue to Chair the National Group of Police Authority Auditors in England and Wales.

28. My Assistant Director (Forensic Audit) continues to work actively as a member of the steering group of the London Public Sector Counter Fraud Partnership. The partnership is the largest such partnership in the UK and has over 120 partners representing local authorities, NHS and similar bodies in London. He also chairs the Partnership’s crime prevention working group.

Staffing

29. I have thirty-five staff in post. We are currently recruiting to fill two auditor vacancies and an administrative support officer vacancy. To ensure we are able to deliver this year’s programme we continue to engage two part-time contractors from the commercial sector.

C. Race and equality impact

1. Our diverse workforce sets a good example to the MPS. The MPA’s commitments in relation to equality and diversity are considered in all audits and investigations carried out by Internal Audit.

2. We monitor the behaviour of our staff through questionnaires to auditees on a range of matters related to audit and investigative fieldwork. This helps to ensure that any diversity issues are quickly identified and addressed.

D. Financial implications

There is a risk of loss, fraud, waste and inefficiency if Internal Audit recommendations are not effectively implemented. Savings and recoveries made as a result of audit work enable funds to be directed towards core policing activities.

E. Background papers

None

F. Contact details

Report author: Peter Tickner, Director of Internal Audit, MPA.

For information contact:

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

Appendix 1

Internal Audit Systems and follow up reviews

Systems audit reports

• Accounts Control SO15
• Pay Reconciliation
• Systems Supporting Financial Reporting
• Business Performance Management
• Cash Security and Disbursement
• SCD Child Protection OCU
• Lewisham BOCU
• Use and Control of Firearms
• Crime Related Property
• External Data Communications
• Financial and Accounting Advice
• Strategic Planning, Budgetary Planning and Performance Management
• Management of Additional Funding
• Vehicle Removal and Statutory Charges
• VAT – Accounting and Control
• Police/Police Staff Support Outside the UK
• Camden BOCU
• CO15 Traffic OCU
• Creditor Payment System
• Equalities and Diversity Application and Monitoring
• Diplomatic Protection - Funding and Control
• Major Enquiries System – HOLMES
• Health and Safety Legislation Implementation
• Police/Police Staff Support Outside the UK
• Fees and Charges System
• Accounts Control Professional Standards (C)
• Covert Human Intelligence Systems
• Police Specialised Training – Leadership Academy
• Security Vetting and Clearance
• Induction and Assessment of New Recruits
• Building Security

Follow up audit reports

• Management Training and Development
• Catering Sales and Trading
• Catering Special Events
• Imaging Services, Identification Services, DNA and Fingerprints
• Tower Hamlets BOCU
• Haringey BOCU
• Human Resource Planning
• Systems Supporting Visual Identification
• Attendance Management
• Police Operational Training
• Systems for Intelligence and Detection
• Common Police Services (Support Inside the UK)
• Traffic Criminal Justice System
• SCD7 Serious and Organised Crime
• Greenwich BOCU
• Resourcing and Management of Specials
• Provision and Disposal of Fixtures and Fittings for Covert Properties
• Islington BOCU
• Complaints, Monitoring, Statistics and Records
• Public Relations – Funding and Control
• Hackney BOCU
• Bexley BOCU
• Management of Outsourced Transport Services
• Kingston BOCU
• Waltham Forest BOCU
• Major Incident Response
• Energy Policy and Procedures
• Pay Reconciliation
• TPHQ OCU

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