Sandy Pacek Project Manager – Squares and Business Development by jls43972

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									Sandy Pacek
Project Manager – Squares and Business Development


Dear Sandy,

FINAL INTERNAL AUDIT REPORT - REVIEW OF PERFORMANCE INDICATORS
(PIs) 2008/09

INTRODUCTION

This review forms part of the agreement between Deloitte & Touche Public Sector
Internal Audit Limited and the Greater London Authority (GLA) and is part of the
2009/10 internal audit plan. The review entailed an evaluation of the systems and
controls operating over the collection of data and the calculation of the GLA’s
Performance Indicators (PIs). The following PIs were examined:

•   F2 Invoices Paid;
•   F6 Value for Money; and
•   E1 Environmental Responsibility


The review assessed the adequacy and effectiveness of controls put in place to:

•   manage the collection of data;
•   confirm the adequacy and reliability of the source data;
•   calculate and check the accuracy and completeness of the data;
•   support the production of the PIs; and
•   ensure that the Authority is able to report performance indicators in a timely
    manner and in accordance with Audit Commission requirements.




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AUDIT FINDINGS

General

Results of this review confirm the Authority maintain satisfactory documentation to
support the calculation of each of the PIs. Clear lines of responsibility exist with
regard to PI production. Each of the PIs is clearly stated in the Corporate Health
Indicator Guidance that was last reviewed and finalised in April 2009. The guidance
defines each of the PIs, the calculation, the frequency the PI should be calculated, the
target (where applicable) and the responsible officer. The Authority did calculate all
PIs in accordance with the definition. Audit review and recalculation of the E1 figures
found that there were a number of errors. However, this only resulted in a slight
difference to the overall PIs.

Each PI has attached a Performance Indicator Audit Management Form, entitled the
Data Quality form (the DQ). Forms are signed by the officer responsible for data
capture, the data validation officer and a service manager. The DQ details each of
the values that make up the Performance Indicator. For example, E1 Environmental
Responsibility is constructed of several different indicators. These are broken down
into waste and recycling; energy, (water, electricity and gas); green procurement and
vehicle emissions. However, excluding F2, neither the DQ nor the Corporate Health
Indicator Guidance includes a breakdown of the figures (and formulas) used to
calculate the PI. Audit believes that to help maintain a clear audit trail, a breakdown
of the figures used to calculate the PI should be detailed in the DQ.

To help ensure the correct figures have been used and to facilitate their review,
management should include in the DQ a breakdown of the figures used to
calculate the PI or at a minimum, the numerator and denominator.




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DETAILED FINDINGS

The detailed findings in relation to each Performance Indicator are outlined below:

F2 Invoices Paid – Percentage of invoices for commercial goods and
services paid by the Authority within 30 days of receipt or within the
agreed payment terms.

The PI was calculated in accordance with the Corporate Health Indicator Guidance
definition, and following discussion with officers and completing walkthroughs it was
evident that the methodology behind the calculation was correct. For the 2008/09
financial year, the Authority achieved an outturn of 88.2%. The target for paying
commercial goods and services within 30 days of receipt of invoice was 90%.
Despite falling short by 1.8%, the Authority did achieve the F2 target in Quarters
One and Two.

Review of the F2 DQ, walkthrough and discussions with the responsible officer
found that sufficient documentation was retained to validate the PI figures. A
sample of monthly prompt payment reports was reviewed, as well as each of the
quarterly figures and the annual report listing all invoices paid in periods one to
twelve. Audit calculations of each of the samples matched the values that were
calculated by the Finance Manager.

We sample tested 20 invoices throughout April 2008 to March 2009, and found
three exceptions. The stamp date (equivalent to the document date when running
reports) is used as the date the invoice was received. Three of the invoices
sampled did not have a stamp date. Review of the supporting documentation and
discussion with the Finance Manager established that when an invoice is being
queried (but not officially in dispute) the document date is the date the invoice was
first queried i.e. when the finance team query with the officer who raised the order
regarding the goods received notification (GRN). It was only evident for one of the
exceptions when the document date was retrieved. For the remaining two
exceptions it was not evident from any of the supporting papers where the date was
taken from.

In the event that an invoice is being queried (but is not officially in dispute),
the document date should be taken from the first date the invoice was queried
and all supporting documentation retained on file. Officers responsible for
receipting invoices and updating Open Accounts should be informed or
reminded of the correct procedures to take regarding queried invoices and
updating the document date.

In addition to these test findings, there was also one exception with regards to the
payment date of one invoice. We could not find the relevant payrun documentation
to support the date that this invoice was paid, as stated in the prompt payment
report. This transaction is being queried with the Finance Manager, as the
underlying reason for this exception has not been determined (and remains the case
at the time of issue of this report).




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F6 Value for Money – The total net value of ongoing cash-releasing
value for money gains that have impacted since the start of the 2008/09
financial year:

The Principal Accountant is responsible for the collection and recording of the
information. The Senior Project Officer is responsible for compiling the return. This
is a new National Indicator, but we have been advised by management that the GLA
is not required by CLG to officially report its outturn, given its significantly different
remit to local authorities and has therefore not been the guiding principle in data
collection. From the results of testing and through discussion with relevant officers
we cannot confirm that there is a clear understanding of how this indicator is to be
calculated. Summary review of the guidance, against information supplied, revealed
that the information may be overstated, due to the apparent inclusion of items not
allowable under the PI’s definition. However, there is also a risk of understatement,
due to a lack of understanding of the definition, which is quite complex. Details of
these exceptions are summarised below. The complexity is added to by the nature
of the GLA i.e. it is a strategic body, not responsible for the provision of traditional
services. This makes assessing Value for Money (VFM) very difficult. A number of
elements to this indicator relate to the assessment of cash flows against gains and
losses in productivity.

We obtained evidence that suggests that the outturn figure for the indicator has not
been calculated in accordance with the definition. The definition states the indicator
is calculated by comparing the real cost of services at different intervals. Officers
have calculated the indicator by comparing this year’s original budget against last
year’s budget adjusting for non cash items. The effect of inflation does not appear
to have been considered. Gains from treasury income have been included; this is
prohibited in the guidance. Reductions in staff expenditure have been included in
the VFM calculation. These reductions in staff expenditure have not been linked in
any way to the productivity of the GLA. Please note that it is accepted that the GLA
is a strategic body without readily identifiable outputs. However, reduction of staff
expenditure has to be linked to productivity for such reductions to be considered a
VFM gain.

Management should ensure that F6 is calculated in line with the latest
approved guidance. Officers should review the related guidance to ensure
gains and losses can be included as VFM gains and losses per the approved
definition. The Principal Accountant should liaise with officers from the
Business Development team to develop a logical method of linking cash flows
to the authority’s productivity.

The scope of this indicator is very large. Officers obtain the underlying source data
for the indicator from the financial accounts. Officers do not undertake any self
check to confirm the outturn figure is in keeping with the definition.
Outturn figures should be verified by reviewing source data against the
approved definition.

The Principal Accountant is the named officer for data collection and quality issues.
Officers did not supply us with a copy of written procedures designed to assist
individuals in carrying out their duties effectively and in respect of calculating the



                                                                            Page 4 of 12
PIs. Relevant collection officers were not following any prescribed guidance setting
out how the information was to be presented to external and internal audit. The
information presented was not complete. It was difficult to follow and we could not
make any assessment of the information without first sitting down with relevant
officers. We were not supplied with a completed file and no signed cover sheet was
produced. Staff members supplied an audit trail; however some supporting working
papers were absent.
All workings for this indicator should be presented in a clear and easy to
follow file, with a signed lead sheet. There should be guidance on compilation
of the PI and the expected supported working papers to be held on file.

E1 Environmental Responsibility

A number of different areas comprise the environmental responsibility indicator.
These are waste produced; waste recycled; green procurement; water; energy; CO2
emissions and vehicle emissions.

Env 1 and 2 – Waste produced and recycled

The collection, disposal, recycling and data collection of waste is contracted out to
Bywaters and the East London Community Recycling Partnership (ELCRP). On a
monthly basis the contractors provide the Authority with the waste and recycling
statistics, whereby the Facilities Management Team verify and consolidate all the
data and upload it onto the GLA Intranet.

Following audit review and calculation of the contractor figures it was found that
there were a number of errors and inconsistencies with the GLA figures. The sum
for total waste; total waste recycled and dry recycling varied between the GLA and
audit figures. Only organic waste collection (kg) had a matching value.

Consolidation of Bywaters and ELCRP figures into the GLA template should
be prepared and reviewed by different officers. This will help ensure that any
errors or anomalies are identified and rectified. In addition, the values used to
calculate the PIs should be broken down and reviewed by different staff
members. This will help ensure accuracy of the PI.

Env 3 – Green Procurement

It was confirmed by the Facilities Officer that this performance indicator cannot be
calculated as they do not have the required information. It is perceived that once
the SAP system has been implemented (expected in late 2009) that additional
information will be required to be input when raising purchase orders. This
additional information will allow the Facilities Officer to calculate the percentage of
spend on green products; broken down by product category and/or green strand
(water and energy efficiency).

The Facilities Officer should liaise with the Project Manager for Business
Development and the Finance Manager to help ensure that the new SAP
system has built-in controls that will require all officers raising purchase
orders to include all necessary information regarding green products.


                                                                          Page 5 of 12
Env 4, 5 and 6 – Water, Energy and CO2 Emissions

The maintenance contractor, Norland, records daily meter readings for electricity,
gas and water in their log book. At the weekends, it is the security staff that carry
out this task. Norland provides the Authority with the daily meter reading figures at
the end of every month and a summarised version of the monthly figures. Audit
review of the 2008/09 financial year figures found that for April 2008, the daily and
summarised figures did not reconciled. Subsequently, all the PIs under this area
are incorrect. These findings were queried with Norland and they have provided the
Authority with a revised version. However, these figures still appear incorrect.

On receipt of the monthly consumption figures provided by Norland, Facilities
Management should evidence its review of the figures. Where variances or
anomalies are identified, these should be queried and resolved with the
contractor in a timely manner.

There is no clear audit trail or sufficient supporting documentation to substantiate
the calculation for ‘percentage of energy from renewable sources’. The calculation
of energy from renewable sources was performed by an Accredited Scheme entitled
the CIBSE Certification Limited. Calculations for this were performed as part of the
‘Display Energy Certificate (DEC)’, which indicates how much energy is being used
to operate the City Hall building. Figures used to calculate the PI were retrieved
from the Assessor. However, it is not evident which figures were used to calculate
the PI and it is not evident that a responsible officer from the GLA reviewed the
figures and calculations. Audit calculations were performed with the assistance and
guidance of the Buildings Infrastructures Manager, and the figure of 1.1% was
calculated. The DEC provides a figure of 1.2%.

A clear audit trail with documentation and calculations used to derive the PI
should be maintained by the responsible GLA officer.

Env 7 – Vehicle Emissions

The GLA Transport Team carries out a staff travel survey every two years. The last
staff survey was carried out in January 2008. Therefore, the figures may no longer
accurately reflect the 2008/09 position. The 2008 survey was carried out using an
online application specifically designed for surveys (entitled Survey Monkey). The
survey was then distributed to all staff via email. A total of 361 staff members
completed the survey out of a possible 707, representing a 51% response rate.

The online survey application provided the collection officer with a summary of
responses to each of the questions and a spreadsheet of all the raw data. All
calculations are performed by the application, but were cross-checked with the raw
data.

One of the indicators – staff using air travel for business (%), is under review and
may be removed. It has therefore not been calculated and reported in the audit
management form.



                                                                        Page 6 of 12
Conclusion

We would like to take this opportunity to thank the Financial Services, Facilities
Management and Business Development teams for their assistance provided during
the course of our work.

Management’s responses to the recommendations raised within this letter will be
included in the final version.

If you have any queries regarding the issues raised, please do not hesitate in
contacting Nathanael Winckler (Audit Manager) or Francesca Bates (Senior
Auditor).




Richard Neal
Engagement Manager




                                                                     Page 7 of 12
Type Ref   Details                             Complete Comment          Reserved Resolved Original   Final
PI   F2    Invoices Paid                       √        See detailed     √                 88.2%      88.2%
                                                        findings and
                                                        recommendations.

PI   F6    Value for Money                     √        See detailed     √                 £2.615m
                                                        findings and
                                                        recommendations.

PI   E1    Environmental Responsibility        √        See detailed     √                 219769     215884
                                                        findings and
           Env 1 – Total Waste (kg)                     recommendations.

PI   E1    Env 2                               √        See detailed     √                 84.7       84.9
              a) Total waste recycled (%)               findings and
                                                        recommendations.

PI   E1       b) Dry recycling (kg)            √        See detailed     √                 139632     136597
                                                        findings and
                                                        recommendations.

PI   E1       c) Organic waste (kg)            √                                           46588      46588


PI   E1    Env 4 – Water                       √        Incorrect          √               359,088    349,931
           a) Total Water (m³)                          summarised April
                                                        08 figures used

PI   E1    b) Grey (borehole)/recycled water   √        Incorrect          √               356,439    347,271
           (m³)                                         summarised April
                                                        08 figures used



                                                                Page 8 of 12
Type Ref   Details                            Complete Comment            Reserved Resolved Original    Final
PI   E1    Env 5 – Energy                     √        Incorrect          √                 3,539,040   3,560,040
           a) Total electricity consumption            summarised April
                                                       08 figures used

PI   E1    b) Total gas consumption           √        Incorrect          √                 1,387,349   1,415,010
                                                       summarised April
                                                       08 figures used


PI   E1    c) Percentage of energy from       √        Insufficient       √                 1.2%        1.1%
           renewable sources                           supporting
                                                       documentation




                                                               Page 9 of 12
Internal Audit Report - Review of Corporate Health Performance Indicators 2008/09: Management response


PI        Internal Audit Recommendation                          Management Response

General   To help ensure the correct figures have been used Noted, this will be implemented for 2009/10
          and to facilitate their review, management should
          include in the DQ a breakdown of the figures used to
          calculate the PI or at a minimum, the numerator and
          denominator.

F2        In the event that an invoice is being queried (but is Noted, this will be implemented for 2009/10
          not officially in dispute), the document date should
          be taken from the first date the invoice was queried
          and all supporting documentation retained on file.
          Officers responsible for receipting invoices and
          updating Open Accounts should be informed or
          reminded of the correct procedures to take regarding
          queried invoices and updating the document date.

F6        Management should ensure that F6 is calculated in    Due to the status of the Authority as a strategic organisation
          line with the latest approved guidance. Officers     there are very limited instances of measurable outputs, unlike a
          should review the related guidance to ensure gains   standard local authority who provide services direct to the
          and losses can be included as VFM gains and losses   public. The inability to tie cash savings to measurable outputs
          per the approved definition.                         negates the use of the guidance for GLA purposes. CLG have
                                                               confirmed that the GLA is under no obligation to report its
                                                               outturn for this indicator publicly. The information that has been
                                                               produced to date has been part of internal monitoring
                                                               processes, as reflected in the inclusion of a relevant section
                                                               within the quarterly budget and performance monitoring
                                                               reports.
F6        The Principal Accountant should liaise with officers We will examine the feasibility of this and carry out the exercise


                                                                       Page 10 of 12
PI          Internal Audit Recommendation                          Management Response

            from the Business Development team to develop a where possible / appropriate.
            logical method of linking cash flows to the authority’s
            productivity.

F6          Outturn figures should verified by reviewing source As above:
            data against the approved definition.                  Due to the status of the Authority as a strategic organisation
                                                                   there are very limited instances of measurable outputs, unlike a
                                                                   standard local authority who provide services direct to the
                                                                   public. The inability to tie cash savings to measurable outputs
                                                                   negates the use of the guidance for GLA purposes. CLG have
                                                                   confirmed that the GLA is under no obligation to report its
                                                                   outturn for this indicator publicly.
F6          All workings for this indicator should be presented in Noted, this will be implemented for 2009/10.
            a clear and easy to follow file, with a signed lead
            sheet. There should be guidance on compilation of
            the PI and the expected supported working papers to
            be held on file.

E1       – Consolidation of Bywaters and ELCRP figures into We will review this recommendation and establish whether this
1&2        the GLA template should be prepared and reviewed is a good use of officer time given the very small variance in
           by different officers. This will help ensure that any between the reported and auditor adjusted figure.
           errors or anomalies are identified and rectified. In
           addition, the values used to calculate the PIs should
           be broken down and reviewed by different staff
           members. This will help ensure accuracy of the PI.

E1 - 3      The Facilities Officer should liaise with the Project Noted, we will look into adding this into the blueprinting
            Manager for Business Development and the Finance process for SAP.
            Manager to help ensure that the new SAP system
            has built-in controls that will require all officers


                                                                         Page 11 of 12
PI        Internal Audit Recommendation                        Management Response

          raising purchase orders to include all necessary
          information regarding green products.

E1    – On receipt of the monthly consumption figures          Facilities management already carry out contract review
4,5&6   provided by Norland, Facilities Management should      meetings with the supplier, where any issues are raised.
        evidence its review of the figures. Where variances
        or anomalies are identified, these should be queried
                                                     Additional Internal Audit Comment:
        and resolved with the contractor in a timely manner.
                                                     We were unable to evidence that the discrepancies had been
                                                     identified and discussed with Norland at the time of audit.
E1    – A clear audit trail with documentation and A utilities spreadsheet with individual meter readings for the
4,5&6   calculations used to derive the PI should be whole financial year provided for this indicator, it is not clear
        maintained by the responsible GLA officer.   what further documentation internal audit expect us to retain.

                                                               Additional Internal Audit Comment:
                                                               Although we evidenced the supporting documentation, the
                                                               calculation of the PI and how this was derived was not
                                                               evidenced, and reperforming of the calculation produced a
                                                               different figure, which was not explained.




                                                                    Page 12 of 12

								
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