Internal Audit progress report

Report: 16
Date: 14 September 2009
By: Director of Internal Audit

Summary

The report summarises the work of Internal Audit for the period April 2009 to September 2009. The report also highlights 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 2009.

A. Recommendation

That

1. members note the progress made in achieving the 2009/10 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 2009/10 Internal Audit Plan

1. Work is underway on 71% of the systems audit programme and we are expecting to achieve the 90% target for completion to report stage by the year-end.

2. Two of our eight planned B/OCU reviews are underway. We plan to postpone the audit of the Violent Crime Directorate as the OCU business and financial systems are now administered by TPHQ which has been subject to a recent audit review. The remaining five BOCU reviews will now take place in the third and fourth quarters of the year. This will follow the implementation of the changes to the Finance and Resource structure under the MPS Developing Resource Management Programme.

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 2009/10. 25% 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 final report).

4. A summary of the final systems audits and follow-up reports we have issued since the publication of my 2008/09 Annual Report is attached at Appendix 1.

Opinion on the adequacy and effectiveness of MPS systems

5. In my Annual Report for 2008/09 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 2.5 follow-ups). At this stage of the year for 2009/10 the equivalent score is 2.6 overall (2.9 systems audits and 2.4 follow-ups).

6. It is encouraging to note that the overall assurance score has improved for this year to date. In particular, the majority of our follow up audits are indicating that action is being taken to address our recommendations and the overall adequacy of these systems has improved as a result.

7. We are developing our methodology for categorising our recommendations by control issue. The key areas for improvement emerging from our analysis of the final audit reports issued to date this year are primarily around; management supervision and review, reconciliation, the standard of record keeping and the appropriate authorisation of transactions.

Implementation of Internal Audit recommendations

8. The analysis of recommendations made, accepted and implemented in the calendar year 2008 and 2009 to date is included at Appendix 2.

9. There has been an increase in the number of 2008 high risk recommendations implemented with 85% having now been implemented. However, the implementation rate of 65% for medium risk recommendations made in 2008 has not changed since the publication of my 2008/09 Annual Report.

10. The overall acceptance rate of 97% for 2009 continues to exceed our target of 90%. The overall implementation rate of 36% for 2009 needs to be put in context in that a number of final reports have only been issued in the last couple of months and the agreed action is not yet due. Progress on the implementation of high risk recommendations is addressed in a separate report to this meeting.

Fraud prevention and awareness

11. Our fraud prevention officer continues to develop a range of strategic and policy documents in relation to internal fraud and corruption. Whilst a good conduct and anti-fraud policy approved by the Full Authority has been in place since 2001 we have worked to develop the documents suggested as best practice. A fraud risk assessment has been completed and a fraud strategy is being developed. Both will form part of the reports provided to the next meeting of this committee to inform the Internal Audit programme of work for the next financial year. A replacement internal notice for MPS employees on the prevention and detection of internal fraud has also been drafted and circulated within the MPS for comment. Final sign-off by the MPS is expected imminently.

12. To maintain the highest standards in our fraud prevention and investigative work we are conducting a self-assessment against the CIPFA Red Book 2 ‘Managing the Risk of Fraud’.

13. The final version of the report by the Audit Commission on the outcome of the Fraud Awareness workshops conducted earlier this year is awaited. The draft report and immediate feedback from attendees was very positive. Upon receipt of the final version of the report a programme to maintain the impetus of the initial events will be drawn up for delivery (subject to funding) in the final quarter of this year.

Current investigations

14. We have taken on sixty-six new cases since the 1 April 2009 (the equivalent figure for 2008 is thirty-five cases). The increase is due to the biennial National Fraud Initiative (NFI), which produces a higher volume of minor cases.

15. Our work on examining expenses claims against Amex cards is complete and activity is confined to supporting the MPS Directorate of Professional Standards in progressing criminal cases. A meeting has been arranged for September to ensure that the lessons learnt from the Amex work have been identified and addressed. Data relating to the replacement Barclaycard system for the first year of operation has recently been run against our software analytical tool and the results are being analysed and followed up.

16. Work is underway in relation to an MPS linguist. The linguist has been arrested and charged with six counts of fraud under the 2006 Fraud Act on the basis of a sample of claims submitted by Internal Audit to the MPS Directorate of Professional Standards. The criminal case continues. Internal Audit is working to establish the extent of the funds claimed with a view to considering civil recovery action. A wider look is being taken of claims submitted by other linguists.

17. Follow up work on the report by the Office of Fair Trading into the operation of cartels in the construction industry continues to be stalled pending the publication of the report (due in the third quarter of 2009). A number of the named companies have been awarded contracts by the MPA.

18. Our work on the 2008/09 NFI is also drawing to a close. No significant fraud has been identified as a result of the exercise. This conclusion appears to mirror the experiences of other police authorities. One benefit from the exercise is improvement to MPS data quality as errors have been rectified. The major remaining task is the cleansing of data relating to about six hundred and sixty National Insurance Numbers for employees where the accuracy is uncertain.

Advisory and systems review activity

19. We contributed to the development of the Procurement Strategy for 2009 to 2012 and its supporting implementation plan. We are advising on the interface of payroll and MetHR, the Developing Resource Management Projects, the Linguistics programme 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.

Liaison with Risk Management and Inspection and Review Activity

21. My Deputy has recently met with the Director of Business Performance to discuss current progress with the implementation of our recommendations for risk management within the MPS. As part of this follow up review we also intend to adopt the current CIPFA guidance on risk management to determine the level of risk maturity in the MPS.

22. 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. We are also working in liaison with the Quality Assurance Team in the Directorate of Resources to support the effective implementation of the protocol between the MPS and Internal Audit. Finance Services are currently reviewing the protocol to ensure it continues to support the agreed aim of ensuring maximum benefit is gained from audit work.

External liaison

23. The Audit Commission have finalised their review of MPA Internal Audit and found that we are compliant with the standards laid down in the CIPFA Code of Practice for Internal Audit in Local Government. The Commission also concluded that the Internal Audit Service is effective and that they were able to place reliance on our work in 2008/09. The detailed report is presented as a separate item to this meeting.

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. 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

26. I have thirty-six staff in post. Two auditors recently joined the Directorate in September and we currently have three vacancies; a senior auditor, an analyst and an administrative officer.

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

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