Terms of reference and membership

Report: 2
Date: 28 September 2000
By: Clerk

Summary

The Panel is invited to note its terms of reference and membership.

A. Supporting information

Background

1. This Panel was established at the meeting of the Authority on 26 June 2000 following consideration of a report into a proposed decision-making structure for the Authority. The overall structure is shown in the diagram at Appendix 1.

Membership

2. The membership of the Panel was agreed as follows:

• Sir John Quinton (Chair)
• Roger Evans (Deputy Chair)
• John Biggs
• Elizabeth Howlett

Terms of reference

3. The report proposed that the Audit Committee or Panel should aim to provide an important part of corporate governance by bringing an independent appraisal of how effectively the MPS achieves regularity, probity and value for money. It will principally oversee the work of internal and external audit. Terms of reference were proposed as follows:

1. to advise the Authority on the appropriate arrangements for internal audit and the appointment of external auditors;
2. to approve internal and external audit programmes and fees;
3. to review the management letter and any reports from the external auditor and report with recommendations to the Authority;
4. to oversee the provision of an adequate and effective internal audit and to approve reports on progress against the work plan and consider appropriate action;
5. to satisfy itself generally as to the effectiveness of the control systems in operation;
6. to review the Authority’s annual accounts and make recommendations as appropriate to the Authority for their approval.

B. Recommendation

That the terms of reference and membership of the Panel be noted.

C. Financial implications

There are no direct financial implications arising from this report.

D. Review arrangements

It is already agreed that there be a detailed review of all Committees in December 2000.

E. Background papers

The following is a statutory list of background papers (under the Local Government Act 1972 S.100 D) which disclose facts or matters on which the report is based and which have been relied on to a material extent in preparing this report. They are available on request to either the contact officer listed above or to the Clerk to the Police Authority at the address indicated on the agenda.

• Agenda Report ‘Proposed Committee Structure’ - MPA 26 June 2000

F. Contact details

This report was prepared by the Secretariat.

For information contact:

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

Appendix 1

1. Background

• In 1994 the MPS discovered that a former deputy head of Finance had stolen over £5 million from a covert operation. In anticipation of the subsequent Public Accounts Committee hearing, an Audit Committee was set up within the MPS for the first time, the post of Director of Internal Audit (DIA) created and the scope of Internal Audit was widened to cover the whole of the MPS, including covert expenditure. This was to give Parliament the confidence that the MPS was taking adequate measures to ensure that such a major fraud could not happen again.
• The appointment of the Director of Internal Audit in November 1995 placed the emphasis within Internal Audit on high level risk based systems audits and advice on control to those running or developing systems or processes within the MPS. An independent review of the need for Internal Audit by Price Waterhouse reported to the MPS Audit Committee in April 1996 recommending between 40 and 45 Internal Audit staff for systems audits, advice and reviews of the then OCUs. After discussion with the Audit Committee the Receiver agreed the case for an increase to 30 staff plus the use of the existing contract with Price Waterhouse.
• The DIA identified an investigation gap between the work undertaken by CIB, the Fraud Squad (SO6) and senior management in relation in particular to civil staff and contractors early in 1996. CIB had the task of investigating errant police officers and paid little attention to civil staff fraud or corruption. In consequence, many cases had either not been progressed or the discipline boards had been held up for years awaiting police enquiries. The Audit Commission report 'Protecting the Public Purse' -'Combating Fraud and Corruption in Local Government' (published in 1993 and updated in 1998) also charged Internal Audit departments to develop anti-fraud/corruption strategies and to investigate allegations of fraud prior to referral to the police.
• In order to fulfil these responsibilities the Forensic Audit Branch was created in June 1997, with the appointment of a retired Fraud Squad Detective Superintendent to manage the branch. In the 1998 budgetary round it was agreed that the Internal Audit budget for 1999/2000 should be increased from 30 staff to 36 staff, to allow for 6 posts in the Forensic Audit Branch.
• At the request of the Permanent Secretary of the Home Office, following a presentation by the DIA on 23 October 1998, a case was made for the resources for more investigative staff within the Forensic Audit Branch. This case was subsequently agreed and Internal Audit’s staffing level was set at 43. However, no additional funding was provided for these posts and the DIA agreed to fund them from within the budget based on 36 staff. This was possible as the Directorate has experienced considerable difficulty in filling posts and was carrying a number of vacancies.

2. Current staffing

• The DIA has recently re-structured the Directorate within the staff level of 43. The main changes were the creation of a Deputy Director post at Grade 6, relinquishing a Grade 7 post and creating a Grade 9 Administration and Support Manager. The Proactive Research Unit (part of the Forensic Audit Branch) was also re-allocated to the IS/IT Systems Audit Branch to deal primarily with the work that will be generated by the National Fraud Initiative.
• The Directorate is structured in line with the Internal Audit Strategy. The Systems Audit Branches carry out the system audits reviews, BOCU audits and provide control and systems development advice with the Forensic Audit Branch conducting investigations into fraud and abuse. The current organisational structure is shown at ANNEX A.
• The systems audit staffing level is based on the audit need, which is determined by using a risk assessment methodology. The twenty three systems auditors are required to give 100% systems audit coverage within the five year cycle, provide the necessary control advice and to audit each of the BOCUs over a five year period.
• The need for the work conducted by the ten members of the Forensic Audit Branch continues to increase. A total of 231 cases have been reported since its inception of which 59 are in progress. The Directorate is also now committed to participating in the National Fraud Initiative managed by the Audit Commission. The level of resources for this activity will be dependent on the number of potential cases of fraud that are highlighted and will need to be revised as time goes on. However, at this stage the DIA intends to manage this work using the resources of the Proactive Research Unit and the Forensic Audit Branch.
• The Directorate also has a contractual agreement with PwC for the provision of audit services. This agreement encourages the partnership approach and has helped to restrict the impact of recruitment difficulties. Agency staff are also used and two staff are on secondment to the Directorate from other government departments.

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