Agenda item

This report informs Members of the results of a recent internal audit investigation into the procurement of an external consultant. 

Members considered a report which informed them of the results of a recent internal audit investigation into the procurement of an external consultant.

The Deputy Chief Executive and Director of Corporate Services explained the background to the internal audit investigation and the reasons why the internal audit review had been instigated.  He clarified that, although the word “illegal” had been used during the meeting, a failure to follow council procedures did not mean that the action taken was illegal.  The officer concerned had the authorisation to make the payments. 

The Chief Executive gave an update on the action that she had taken since the internal audit investigation.  She stated that the Veritau report had not indentified any fraud and she had commissioned a Police investigation and this had confirmed that there was no evidence of fraud.

[Councillor Flinders stated that he did not believe that consideration of the internal audit report in public to be in the public interest or in the interests of council-tax payers and left the meeting at 6.20pm]

The Head of Internal Audit stated that the auditors could find no documentary evidence to demonstrate that the council’s contract procedure rules had been followed.  This was, however, an internal matter and there had been no fault on the part of the independent consultant.  Improvements had already been implemented to strengthen control measures and further improvements were planned.

In response to a question from Members, the Head of Internal Audit confirmed that Veritau was satisfied that sufficient work had been carried out to show that the work that had been paid for had been carried out.  He also confirmed that no evidence of fraud had been found and that the matter had been referred to the police who had confirmed that conclusion.

In response to a further question the Head of Internal Audit confirmed that a previous internal audit report, which had been presented to the Audit and Governance Committee, had identified issues surrounding the use of consultants and that processes since that time had been strengthened.

Officers were asked if the work referred to in the report in respect of Lendal Bridge had been carried out.  The Deputy Chief Executive and Director of Corporate Services stated that, whilst not certain, he would have expected that this work had been done.

Clarification was sought regarding the paragraphs in the report which were redacted.  Members were informed that this was because this related to matters that were still subject to audit investigation.  Officers confirmed that these issues did not specifically concern the situation under discussion.

Referring to the number of breaches, officers were questioned as to why these had not been identified during the period of the contractual relationship.  The Head of Internal Audit stated that the Council had arrangements in place in respect of failures to follow procedures and contract procedure rules.  The Deputy Chief Executive and Director of Corporate Services explained the overall level of procurement activity within the Council and stated that the focus was inevitably on higher sums.  Work was ongoing to increase compliance activity but there were limits on the resources available to conduct this compliance. Officers outlined the arrangements that were in place during the procurement process, including the segregation of duties and responsibilities and limits on authority to incur expenditure.

Referring to the reference in paragraph 2.7 of the Internal Audit Report, clarification was sought as to whether historical information on tender processes was held beyond a year.  Officers stated that this had referred to documentation during the procurement route and not the actual contract. 

Members questioned whether a similar situation could arise in the future.  They were informed that a guarantee could not be given that every purchase made in the Council would be in accordance with procedures.  The organisation was large and complex.  Monitoring arrangements had, however, been strengthened and when breaches were identified action would be taken, including HR procedures if appropriate.

Officers were asked about the possibility of all expenditure going through the procurement team and whether this would also result in economies of scale.  Officers explained some of the issues that this cause, including making it difficult to make day to day purchases to enable effective service delivery.

Whilst some Members suggested that there was a need for further investigation, others stated that the investigation should not be extended and that the committee should focus on monitoring the improvements that had been introduced.

Councillor Steward proposed and Cllr Kramm seconded the following recommendation:

(i)      That the report be noted

(ii)      That, in view of the ongoing work by Veritau in respect of the redacted information in the Internal Audit Report, an update be given on the further work that was taking place after this had been concluded.¹ 

(iii)     That, in respect of paragraph 2.19 of the Internal Audit Report, the Executive be asked to consider whether further work was required to identify whether the work referred to represented value for money².

On being put to the vote the recommendation was declared

carried and it was

Resolved:  That the above recommendations in respect of the internal audit report on Procurement of Consultants be approved.