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Hayley McGrath, Corporate Governance Manager, attended the meeting to present
the report and assist the Committee with its enquiries. The Committee heard that
Colchester Borough Council (the Council) ran a comprehensive internal audit
programme which was managed by an external contractor, TIAA. Two reports would
be presented to the Committee during the course of the year, a final report
containing a summary of the previous year, and a mid-year update to keep the
Committee appraised of the progress of audits that had been carried out, together
with any recommendations which had been made.
A comprehensive internal audit programme had been provided through the year, with
19 areas being audited, and 12 of these achieving a ‘substantial assurance’ rating,
the highest rating it was possible to achieve, compared to 11 audits which had
achieved this rating the previous financial year. The ‘limited assurance’ ratings which
had been given had risen from 1 to 2 compared to the previous financial year, and
details of these were outlined in the Officer’s report. As a result of the audit work, 3
urgent recommendations had been made, which was the same number that were
made in the preceding financial year. The overall opinion of TIAA was that the
Council operated an effective system of internal control. The 2 audits which had
received a ‘limited assurance’ rating were on a similar theme, and were in relation to
procurement and contracts.
A Committee member was pleased to note the high level of assurance which had
been achieved, and considered that this was evidence of good levels of control
within the Council with no significant problems, and the failings which had been
noted were in compliance areas, and not across the whole area of the audit.
Considering the limited assurance ratings which had been received, however, they
expressed unease at the way the procurement system was operating, and requested
further details in respect of the concerns raised during the audit, wondering what
steps the Council needed to take strategically to deal with these concerns. Hayley
McGrath confirmed that one of the issues experienced by the Council was in relation
to the central control of suppliers. The council delivered a very broad range of
services, and each service area was responsible for procuring its own goods and
external services. When each service area was considered individually, no set
expenditure thresholds were breached, but when the spend of all the service areas
was combined, the Council’s thresholds were breached, and what was currently
missing was a central control and assessment of combined spend across the
organisation. Fiona Dodimead, Director of Audit for TIAA, confirmed that it was
difficult for the Council to monitor spend with a devolved service, and the Committee
heard that some Councils dealt with this via a central register which required
additional support.
In respect of the issues which had been raised in relation to the maintenance of
registers, Hayley McGrath confirmed to the Committee that a lot of the items in
question had originally been purchased via a framework and services became used
to using a particular supplier. The frameworks used were national frameworks which
expired, and services were continuing to use the same supplier after the expiration of
the framework, when a new framework should have been implemented or new
resourcing was carried out via a tender process. As things currently stood, no central
checks were available to determine when frameworks had expired and contracts
therefore needed to be addressed.
The Committee considered the recommendation which had been made by TIAA in
relation to the maintenance of a central catalogue in support of the Councils aim to
use local suppliers wherever possible. The intention to secure additional social value
through the use of local suppliers was considered, and it was suggested that there
was an inherent problem when determining what element of the cost of the contract
was to be ascribed to the key deliverable service being procured, and how much of
the cost of the contract was then associated with additional social value. As the
auditors had made a recommendation in relation to local suppliers, were they
concerned that this presented an issue for the Council? Fiona Dodimead confirmed
to the Committee that the Council had made a policy decision in relation to where
procurement was to be directed. It was considered that the policy either had to be
complied with, or modified to ensure that its intentions were clear and capable of
being met.
The Committee sought the advice of TIAA to see if they were able to offer any
guidance on how to approach the procurement issues, and it was also suggested
that a recommendation be made that the Committee consider the area further, later
on in the municipal year. Fiona Dodimead confirmed that it was for the Council to
decide how it arranged its services, and the audit would only highlight potential risks
that were identified. Hayley McGrath suggested that the Council’s Procurement
Policy could be referred to the Committee later in the municipal year, at the same
time as the Committee considered the Council’s ethical governance policies, a
suggestion that was welcomed by the Committee.
A Committee member noted that the internal audit report had highlighted referred to
a culture in the Council of not including the procurement team in the procurement
process, and questioned by there had been no recommendation on this point. Was
the culture ingrained in the Council, or had it arisen as a result of the Covid-19
pandemic? Hayley McGrath explained that the Covid-19 pandemic did have an
impact on staff communication, and in addition to this the management responsibility
for the procurement team had been moved within the council, coinciding with the
loss of a procurement officer. Although the procurement process had been
highlighted as an issue, what was not reflected was the large number of contracts
which passed through the procurement team in a year. the audit which had been
carried out of the procurement process had been requested by a manager from
another service area, and the culture surrounding procurement was to be addressed
as part of a review of the service.
A Committee member commented on the lack of information in the report concerning
the steps which were taken to ensure supplier viability or key supplier continuity.
Hayley McGrath confirmed to the Committee that these issues were addressed as
part of the procurement process, together with supplier resilience, ethical standards
and the provision of social value. In response to a question from a member of the
Committee, Olufolake Mustafa, Audit Manager for TIAA, advised the Committee that
matters such as staff access to Council systems after they had left the organisation
were monitored, but the reason that these matters did not form part of the overall
audit report was because no exceptional circumstances had been found.
RESOLVED that:
- Internal audit activity for the period 1 April 2021 to 31 March 2022 be noted,
- Colchester Borough Council’s Procurement Policy be referred to the
Committee at its meeting in November 2022.