Internal audit progress report

Report: 5
Date: 13 December 2001
By: Director of Internal Audit

Summary

This report summarises the current position regarding progress against the 2001/2002 Internal Audit Plan. As a result of staff shortages and the cutting back of Internal Audit's budget for 2001/2002 it is anticipated that 65% of the original audit plan will be covered.

A. Recommendations

1. Members to note that there will be a significant shortfall in planned Internal Audit work for this financial year which will impact on the Director of Internal Audit's ability to provide a robust opinion on the adequacy and effectiveness of internal control in the MPS in 2001/2002.
2. Approval be given to postpone the audits listed in the Appendix 1.

B. Supporting information

Progress against the 2001/02 Internal Audit Plan

1. The Audit Panel has approved the postponement of nine audit reviews this year to date. Since the Audit Panel last met in September I have had to re-direct a number of resources away from the planned programme. I have also not been able to employ contractors to meet staff shortages because savings on the internal audit budget have been utilised to help ensure that the MPA's overall directly controlled expenditure is contained within budget. I am, therefore, proposing that a further ten audit reviews (itemised in the attached Appendix 1) are postponed. The main reasons for this are as follows:

MPS Star Chamber

2. At the Commissioner's request and with the approval of the Treasurer, we are supporting the work of the MPS Star Chamber in identifying potential savings for this and next years' budgets. I have loaned one of my most experienced Senior Auditors to the Finance Directorate for one month to assist in costing out budget proposals. We are assisting the Star Chamber Finance Task Force set up to monitor progress being made on achieving the savings identified. We are also directly assisting with the work that is being carried out to review the major outsourced contracts for potential savings.

Vehicle recovery contract

3. We continue to support the MPS team dealing with vehicle recovery following the liquidation of the vehicle recovery contractor. A number of financial records relating to the MPS contract have since been recovered from the former premises of the contractor and have now been evaluated by my staff. We are engaged in providing the supporting documentation and analysis for a counter-claim that should exceed the liquidator's claim on the MPA.

4. I reported to the last Audit Panel meeting that I had issued an emerging findings note to the Treasurer and Director of Resources on the changes made to the vehicle removal contract. The Director of Resources is taking the report forward and has initiated appropriate action.

Staffing and consultancy budget

5. At its February 2001 meeting the Audit Panel agreed that any underspend on Internal Audit Pay due to staff vacancies could be used to fund the use of internal audit contractors to help with the programme. I will be significantly underspent on my pay budget due to my continuing staff shortages. I had intended to employ contractors in this quarter for that purpose. However, in the current financial difficulties of the MPS I have agreed with the Treasurer to put this on hold. This means that I cannot now contract out eight audits as I had originally planned.

6. I have also lost one of my most experienced Senior Auditors to the private sector in this quarter. I currently have 30 staff in post from a complement of 43. The recruitment and retention review approved by HR Committee in November will help address my recruitment issues. We are currently running a recruitment campaign advertising with the new salary ranges. However, any new recruits will not be appointed in this financial year.

7. As a consequence of these cumulative reductions in the original plan it is possible that I may not know about significant risks that would affect my annual opinion on the adequacy and effectiveness of financial and business controls in the MPS.

8. The Treasurer has also agreed, as a contribution to the major savings exercise required to balance the Authority's total budget next year, to forego the budget increase (£100,000) to fund the full year effect of the recent salary review. The implications of this are being assessed and measures will be taken to protect high priority audit work.

Current review work - including investigations

9. My paper on the control framework for contract award and management based on problems identified in the course of our audits was accepted by the Finance, Planning and Best Value Committee in October. Our work on such problems is continuing and I have drafted a good practice guide to supplement the control framework paper for the financial evaluation aspects during the letting and management of major outsourced contracts.

10. Our recently started review of the Contract Management of Information Systems (IS) is being adapted in scope to support the Star Chamber work on major outsourced contracts, three of which are managed through the IS Client Unit. Early indications are that there is scope for some significant savings.

11. Since my last report we have completed our examination of the cleaning contract for one area of the MPD and a cleaning contractor. As a result the procurement process is to be re-run to ensure compliance with EU requirements and to meet changing needs within the MPS. We have commenced an examination into a transport contract and as a result have been able to advise on bringing the contractor into regulatory compliance and a reduction in future costs of around £35,000 per annum. Other aspects of the contract are continuing to be examined. We have resumed work on a further outsourced contract and are supporting the civil recovery of overpayments of just under £400,000 based on our investigation work. We have also worked on a number of cases involving the loss of cash and overclaiming of overtime.

12. We are also conducting a major review of the budgetary control framework. This work will help to address the current issues around the budget and will also inform the devolved financial management process as it develops. In addition we have issued the following systems audit final reports since the last Audit Panel meeting:

• Custody Records & Procedures Follow – up
• Financial Accounting & Advice
• Temporary Imprest Account Control
• Fees & Charges
• Local Procedures and Minor Works
• Transport & Travel Arrangements Follow-up
• Creation, Storage, Security and Disposal of Electronic Documents

Responses to audit reports in high risk areas

13. Responses have not yet been received to a number of medium risk reviews, although the only outstanding review in the Director of Resources' area of responsibility has now been received. The Director of Resources has agreed to raise the remaining outstanding review responses with the appropriate MPS Management Board member.

Implementation of high risk recommendations

14. I have written to the relevant members of Management Board seeking confirmation of the number of high-risk recommendations that have been implemented for reports issued in the first half of this year. I also requested an update on those high-risk recommendations that remained outstanding from last year. I will give an oral update at the Audit Panel meeting on the responses received.

Liaison with other bodies, partnerships and joined-up working

15. We are continuing to build our relationships with a number of bodies in order to share good practice, exchange information and promote closer working. I have met with the Heads of Audit within the GLA family and we have agreed to meet on a quarterly basis to discuss how best we can work together in future. In the last month my Deputy has attended the National Group of Police Authority Internal Auditors and a group made up of representatives from the English metropolitan police authorities. We are working closely with both groups to develop with them shared benchmarking criteria. We have also joined the London Team Against Fraud and are fully participating in the work of the Public Sector Counter-Fraud Partnership set up by the Fraud Squad and local authorities in London.

C. Financial implications

None at this stage.

D. Background papers

None.

E. Contact details

The author of this report is Peter Tickner, Director of Internal Audit, MPA.

For information contact:

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

Appendix 1: Audits to be postponed

1. Museums
2. Public Relations
3. Publications
4. Reprographics
5. Complaints, Monitoring, Statistics and Records
6. Efficiency Planning
7. Support Services Co-ordination and Supply
8. Benevolent, Relief and Welfare Funds
9. Provision of Legal Advice and Services
10. Management and Consultancy Service

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