Minutes

Minutes of the Audit Panel held on 26 October 2000 held in Room AG16, Romney House, 43 Marsham Street, Westminster SW1P 3PY.

Present

Members

• Sir John Quinton (Chair)
• John Biggs
• Elizabeth Howlett

MPA staff

• Peter Martin (Treasurer)
• Peter Tickner (Director of Internal Audit)

Also in attendance: Jon Hayes (Audit Manager - District Audit) and Kash Pandya (District Auditor - District Audit)

Plus one member of the press and public.

Part 1

1. Apologies

(Agenda item 1)

Apologies were received from Roger Evans (Deputy Chair).

2. Terms of reference and membership

(Agenda item 2)

Members received a report outlining the Audit Panel's Terms of Reference and membership of the Panel.

Resolved:
the Terms of Reference and Membership of the Panel be noted.

3. External audit arrangements

(Agenda item 3)

Members received a report describing arrangements for External Audit following the establishment of the MPA.

Resolved:
the External Audit arrangements be noted.

4. External audit

(Agenda item 4)

A presentation was given by the District Auditor, Kash Pandya, who was leading the external audit in the MPA. He introduced Jon Hayes, who would be the audit manager. Before the establishment of the MPA, the MPS had been subject to external audit by the National Audit Office (NAO) in line with central government departments and related bodies. The MPA, as a local authority came under the auspices of the Audit Commission for external audit purposes. The change would present several challenges for the MPS.

• accounts would have to be produced by September and opinion given by December;
• the public had right of access to information, and could ask questions of, and challenge external audit; and
• external audit had wide powers of reporting.

The District Auditor added that the external audit would be rigorous, it would update the MPA on its progress (so that its findings would not come as a surprise), and it would maintain good relations with the MPA and MPS. Some elements of its work would be subcontracted to KPMG, which would bill District Audit for the work. The external audit plan would be presented to the next Audit Panel in late January or early February.

On being asked about proposed relations with Internal Audit, the Panel was told that the two teams had met, and in order not to duplicate work, would have bi-monthly meetings. In answer to a question on auditing sensitive or confidential parts of the MPS, the District Auditor stated that some members of his staff would be security cleared, but as a rule he found auditors did not need to get involved in operational matters.

It was observed that there was a need for the Audit Panel to watch out for overlaps in auditing, for instance the HMIC report on best value. The Treasurer said the appropriate committee to look at each HMIC report would be decided by the Chair's Coordination and Urgency Committee, but they were unlikely to be referred to this Panel. It was noted that the District Audit Police Conference on 9 November 2000 would included sessions on working with the HMIC, and audit in a public forum.

Resolved:

1. the presentation be received; and
2. the external audit plan be presented to the next Audit Panel.

5. Internal audit arrangements

(Agenda item 5)

The Panel received a report outlining the changed accountabilities for internal audit. The Director of Internal Audit had reported to the Receiver. Following the setting up of the MPA, financial arrangements for the MPS, including provision of internal audit, had moved into the local government environment. The Authority had delegated the executive responsibility to the Treasurer and established the Audit Panel to oversee the internal audit arrangements. The Director of Internal Audit now reported to the Treasurer, and his staff were under the direction and control of the Authority rather than the Commissioner. Internal audit was currently provided by directly employed staff, supplemented by contracted staff, but best value imperatives required the MPA to review its delivery in due course. There might also be discussions with the GLA and other functional bodies about options for cooperation in the delivery of common financial services, such as internal audit.

Resolved:
the current responsibilities for, and means of delivery of, internal audit be noted.

6. Internal audit strategy

(Agenda item 6)

A report was received on the Internal Audit Strategy. The strategy had been developed by the Director of Internal Audit, and drew on existing objectives, until MPA developed its own. It had been endorsed by the former Audit Committee of the Metropolitan Police Committee. The Director of Internal Audit stated that Appendix 1 was a strategy document for his staff and senior members of the MPS, as well as MPA.

The Chair suggested that the wording of paragraph 4 of Appendix 1 be changed from 'the Director of Internal Audit will provide .... an assurance on the adequacy and effectiveness of internal control within the MPS' to 'the Director of Internal Audit will provide .... an assurance on the degree of adequacy' ....'

It was suggested that the approach could be too mathematical, but Members were informed that work was prioritised, but not regarded as formula driven.

Resolved:

1. the Audit Panel endorse the Strategy for Internal Audit set out in Appendix 1; and
2. the Strategy be approved for publication to all key stakeholders.

7. Internal audit risk assessment and programme 2000/2001

(Agenda item 7)

The annual internal audit programme was determined by a risk-based needs assessment that identified the priorities for audit over a period of five years. The Panel received a report explaining the risk analysis methodology and programme of work.

Members asked about vexatious complaints, but were informed that some complaints were received from MPS employees, but few from the public, though this could change.

Resolved:

1. the Audit Panel endorse the risk-based approach and Audit Needs Assessment; and
2. the Audit Panel endorse the 2000/2001 Annual Plan, which had been approved by the previous Audit Committee of the MPS.

8. Internal audit budget

(Agenda item 8)

The Panel received a report that set out the current position on Internal Audit staffing and budget and made proposals for next year's budget. The Treasurer stated that the budget for Internal Audit contained funding for a staff of 36, but not for the approved staffing level of 43 posts. This position has been reconciled in practice because of the high level of vacancies. However, the budget came under pressure because more costly contractors have been used in order to carry some work. The Members were informed that vacancies were hard to fill because of the level of wages offered, the location of Internal Audit (in Putney), and the high calibre of staff required by the Director of Internal Audit.

Some Members had reservations about continuing recruitment if Internal Audit was going to be reviewed (as discussed under agenda item 5). The Treasurer stated that the review was some way away, and its results could not be foreseen. Members were informed that without staff the programme of work could not be completed, there were risks in having insufficient financial control within the MPS, especially as it was moving from one financial environment to another.

Members expressed concern that the funding for additional staff would affect the precept. The Treasure stated that an enhanced Internal Audit budget would be small in context of the whole police budget. The Director of Internal Audit stated that internal audit recommendations had resulted in significant cash savings, and Members were asked if they would be happier if they were provided with an informal paper, which outlined the financial savings, made by internal Audit.

Resolved:

1. that Members be provided with an informal paper giving the benefits that would be obtained from employing more staff;
2. that the Internal Audit budget for 2001/02 be based on funding for 43 staff with a corresponding reduction in the funding for external consultancy at a net addition of £97,000 subject to approval in the overall budget process; and
3. that additional consultancy days be employed to meet shortfalls in staffing within the total Internal Audit budget.

9. Accounts

(Agenda item 9)

A report was presented which set out the Panel's responsibilities in respect of the Authority accounts, and promising a report on the opening balance to a future meeting.

Resolved:
the report be noted.

10. Dates of future meetings

(Agenda item 10)

The Treasurer proposed an annual cycle of Audit Panel meetings as follows:

Late January/early February

Agree programme of work for the next 12 months

Early/mid-June

Internal audit/annual report

Early/mid-September

Receive accounts (before submission to the Full Authority)

Late November/mid-December

Receive management letter from External Audit

Resolved:
that the proposed timetable for meetings be accepted.

11. Exclusion of press and public

(Agenda item 11)

A resolution was put to exclude the press and public from the meeting during the item 'Internal Audit Progress Report', as it was likely to disclose exempt information as described in Schedule 12a(9) of the Local Government Act 1972 (as amended) relating to:

Local Government Act 1972 (as amended) Schedule 12(a)(9)
'any item proposed, or to be proposed by or to, the Authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services'

Resolved:
that the press and public be excluded from the meeting during the agenda item 11 because it discloses or is likely to disclose exempt information as described in paragraph 1 of schedule 12(a)(9) of the said Act as indicated.

12. Internal audit progress report
(Summary of Exempt Item)

(Agenda item 12)

Members received a report on the progress with the Internal Audit programme of work for 2000/2001. At the next Audit Panel the paper would be presented in two parts, with only sensitive material being dealt with in the closed session of the meeting.

It was suggested that Audit Panel Members might like to see the executive summaries, with key recommendations of some Internal Audit reports.

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