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									                           AUDIT SUB-COMMITTEE

                 Minutes of the meeting held on 29th June 2005


               Councillor Mrs I Buckley (Chairman)
               Councillor Julian Grainger (Vice-Chairman)
               Councillors Grace Goodlad, Mrs Anne Manning, Tony Owen
               and Rod Reed

               Councillors John Canvin, Russell Mellor and Brian Toms were
               also present.

1         NEW MEMBERS

           The Chairman welcomed Councillors Mrs Anne Manning and Rod
Reed to this their first meeting of the Audit Sub-Committee.


          An apology for absence was received from Councillor Woods.


          There were no declarations of interest.

4         MINUTES

            Reference was made to Minute 37 - Minutes - and the Sub-Committee
reiterated its request that a report be submitted to the next meeting on the
approach to the scrutiny of payments by Members. Reference was also made to
Minutes 43(f) and (g) and the Chief Internal Auditor undertook to provide an
update for Members in relation to the new tendering and approval process es and
on the implementation on the policy for mobile phone usage, respectively.

           RESOLVED that the Minutes of the meeting held on 23 rd March 2005,
excluding those containing exempt information, be confirmed.


          No questions had been received.


          RESOLVED that the present position be noted.

29th June 2005


           A report was received from the Council’s external auditors, Baker Tilly,
setting out the audit and inspection work which was planned to be undertaken in
accordance with the Audit Commission’s Code of Audit Practice and the planned
approach for the audit period from April 2005 to March 2006 for this Authority.
Representatives from Baker Tilly attended the meeting, presented the report and
answered Members’ questions thereon.

           The risks that were considered relevant to 2005/06 and the planned
audit work were documented in the report in relation to the sections on the
statement of accounts and statement on internal control, value for money
conclusion on the use of resources and on the risks emerging from the national
agenda. Following the Council’s classification as a “good” Council in the
December 2004 Comprehensive Performance Assessment (CPA) update, there
would be a reduction in the amount of inspection carried out during the year. This
had been reflected in the total audit and inspection fee which, based upon the
external auditor’s assessment of risk and the audit resources required to deliver
the plan, had been set at £239,251 which was a total reduction of £65,329 from
the previous year’s fee and was 13% below the fee scale mid-point for a “good”

            The Sub-Committee considered a number of issues referred to in the
report. Members reiterated their concern as to the basis for calculating some key
performance indicators and felt that in future there was a need to identify the
difference between a natural variation and a change in performance based over a
period of time. The external auditors’ representatives commented that as part of
the new CPA framework, the Audit Commission was currently consulting local
authorities regarding a new approach and methodology for performance
indicators. The Sub-Committee felt that the views expressed on this aspect
should be included as part of this Council’s response. A Member drew attention
to the reference in the report to the need for arrangements to manage and
improve value for money and, in questioning how this would be achieved, recalled
that at the last meeting (Minute 42) information had been requested on the value
for money component in the Audit Plan. In response, the Director of Resources
referred to the self-assessment of the Council’s approach to value for money
which was currently being carried out in relation to the processes for improving
value for money and which was due to be completed and submitted to the Audit
Commission by 31st July 2005 as part of the new CPA framework.

           The report had also drawn attention to the fact that this Authority had
not been fully complying with the requirements of the Race Relations
(Amendment) Act 2000 and that remedial action was planned for 2005. The
external auditors’ representatives commented that the need for the Council to
consider race relations in the provision of its services formed a very important
operational part of the Council’s Corporate Performance Assessment. Members

                                                          AUDIT SUB-COMMITTEE
                                                                   29th June 2005

recalled that this issue had been referred to in the Annual Audit and Inspection
Letter which had been considered at the last meeting (Minute 39) and that further
details regarding the reported deficiencies had been requested. The Director of
Resources referred to the deficiencies in this area which had been highlighted in
the Benefit Fraud Inspectorate report last year. Members were informed that the
Director of Legal and Democratic Services had indicated that the Council was not
adequately discharging its statutory duty of identifying and reviewing the
implications of its policies on people of different races, consulting adequately on
those policies, nor publishing the results and monitoring the effects of those
policies. However, he considered that progress had been made over the last 12
months in terms of monitoring staff composition and access to training etc under
the Act and that the Council was complying with its workforce monitoring
requirements. The Director was working with Members on the production of an
Equalities Statement and it was indicated that a report on this matter would be
submitted to the Sub-Committee’s next meeting in November 2005.

           RESOLVED that

           (1) the Sub-Committee’s congratulations be recorded to the Internal
Audit Section for its work relating to the Council’s improved CPA rating;

           (2) the above views in relation to the future calculation of
performance indicators be included as part of this Council’s response to the
consultation exercise currently being carried out by the Audit Commission; and

            (3) a detailed report be received from the Director of Legal and
Democratic Services at the next meeting in relation to this Authority’s compliance
with its statutory duties under the Race Relations (Amendment) Act 2000.

           Report DR05080

           A report was received from the Director of Resources outlining the
recent Internal Audit activity across the Council and updating Members on matters
which had arisen since the Sub-Committee’s last meeting.

           Apart from actual time spent against the Audit Plan, the audit
performance indicators which had been agreed by Members were currently all on
track and had been reported regularly to the Director of Resources. Since the
submission of the last progress report, a total of 212 days had been worked
against the planned 246 days requirement which equated to 86% against a
benchmark requirement for Internal Audit of 90%. In response to Members’
questions, it was indicated that this variation was attributable to staff turnover and
sickness and to time which had been allocated on investigations and on seven
audits which had been undertaken at secondary schools on behalf of the Learning
Skills Council. The Director of Resources commented that he was satisfied that

29th June 2005

these factors had not impaired the performance provided by the Internal Audit
Section. It was noted that the schools’ audit programme was proceeding in
accordance with the plan. Details were set out of the latest position on the status
of high priority audit recommendations and it was noted that a follow-up audit was
to be carried out on contract SLAs during the next quarter. Arising from the
information set out relating to those investigations which included priority one
recommendations, comments were made that Member decisions on SEN
transport appeals were not consistent and that consideration was required by the
Director of Education and Libraries to providing them with either a briefing session
or training.

          In response to concerns expressed by Members over the need for
improved communication and training with regard to addressing persistent
problems of compliance with Financial Regulations, the Director of Resources
commented that adequate financial training was in place but that it needed to be
targeted more effectively to relevant staff.

           In relation to performance management, the overall controls used in
examining service plans had been found to be adequate. It was recognised that
more consistency in assessment was required and, as a consequence, Internal
Audit had recommended and management had accepted a corporate approach
that encompassed all aspects of good planning, good practice, monitoring and
updating plans, guidance notes, publication and consultation. Members
supported the concept of a corporate audit and requested an update on the
progress of performance management.

           The current position in relation to housing benefit counter-fraud was
also set out and showed that £206,000 had been granted to the Authority in award
money. The Chief Internal Auditor indicated that, in conjunction with the London
Borough of Greenwich, the intention was to produce future information in
graphical form illustrating the number of cases involved and the offenders

            RESOLVED that the current position against the 2005/06 Audit Plan
be noted.

            Report DR05085

           The Director of Resources submitted a report summarising the internal
audit reviews which had been undertaken in 2004/05 across the Authority with the
exception of schools. (The Annual Schools’ Audit Report had been considered by
the Sub-Committee in November 2004 (Minute 25).) This report assisted the
Council in meeting the new accountability requirements under the Accounts and
Audit Regulations 2003 whereby the Chief Executive and the Leader of the
Council were required to sign an annual statement on the system of internal

                                                            AUDIT SUB-COMMITTEE
                                                                     29th June 2005

control. Members reviewed the draft statement on the system of internal control
which had also been circulated to the meeting of the General Purposes and
Licensing Committee held earlier in the evening as part of that Committee’s
consideration and approval of the statutory accounts for 2004/05.

           Over the year 2004/05 a total of 2,078 chargeable days had been spent
against a budget of 2,211 days which represented 94% achievement against the
Service Plan target of 90% and compared with a 96% achievement in 2003/04.
The Internal Audit Section had achieved a 66% rate for chargeable hours in
2004/05 and other performance indicators which had been agreed as part of the
annual business plan had also been within expectations.

           In total 151 audit reports had been issued in 2004/05, including school
audits. In addition, a total of 24 selected document reports had been issued and
reported to Members. A table was set out of the audits which had been reported
to this Sub-Committee and it was indicated that all priority one recommendations
had been followed up and monitored for implementation. The audits which had
been considered inadequate in whole or in part had been highlighted and, in
response to Members’ questions relating to the Links and Chargeability Social
Services and Housing Management Information System, the Director of
Resources reported that a report on this issue was to be submitted to the
Executive in July. In conclusion from the Internal Audit work which had been
undertaken in 2004/05, the system of internal control that had been in place in
Bromley for the year ended 31st March 2005 accorded with proper practice and
could be relied upon.

           Following further discussion by Members, it was

           RESOLVED that the report of the Director of Resources be noted and
that consideration be given in future to the advantages and disadvantages of
incorporating themed audits in the Audit Plan.

           Report DR05083

            Further to Minute 28 (10.11.04) the Sub-Committee received a report
from the Director of Resources providing an update on the Risk Management

            Since last autumn good progress had been made on the development
of a refined corporate risk register and the latest version was submitted which had
been adopted by each departmental management team. It was indicated that the
risk register would not identify all risks and that it would take a further two to three
years for the Council to develop a full risk register to include all risks which had
been identified in workshops. Work was continuing with regular monitoring of the

29th June 2005

key risks and with further development of operational risks being highlighted
through the business planning processes.

           In order to provide continued impetus to this process, it was suggested
that a Member should work with the Risk Management Group to act as a
champion for risk throughout the Council and with other Members and to provide
a high level steer on other risks and potential emerging risks from a Member

           Members felt that good progress had been made on this matter and

          RESOLVED that the report be noted and that the Chairman, Councillor
Mrs Buckley, be appointed to serve as the Member representative on the Risk
Management Group.

11         SELECTION OF DOCUMENTS 2005/06
           Report LDS05111

            The Sub-Committee gave consideration to the continuation of the
existing arrangements for the selection of documents and to a suggested
Members’ rota for 2005/06.

           Some Members felt that the continuation of this system did not
represent the most effective use of resources which, if it were to be discontinued,
could be diverted into expanding risk management work. Alternatively, some
other Members, in supporting the continuation of the system, were of the view that
it enabled Members to focus and target attention on particular issues. Following
discussion, it was

           RESOLVED that

           (1)   the selected document process be discontinued with immediate
effect; and

           (2) the Director of Resources be requested to report back to the next
meeting on a suggested new approach for replacing the selection of documents
process, including the results of audit testing on the creditor system.

           Report DR05081

           The Director of Resources reported on each of the documents which
had been selected for audit examination at the last meeting of the Sub-
Committee. Time taken for the payment of invoices was one of the Audit
Commission’s performance indicators. An assessment was included of “adverse
findings” based on three categories of red, amber and green where red

                                                       AUDIT SUB-COMMITTEE
                                                                29th June 2005

represented the most cause for concern having regard to both the materiality and
the significance of the findings from the testing which had been undertaken.

          (a)   Document 858: Executors of Mr H (Debtor’s Invoice)
                Resources Department
                (Marking: Green)

           This transaction had been instigated in order for the Authority to
recover the Residential Care Home costs settled on behalf of the late Mr H.
Although the claim was appropriate, an error had been found in the original
calculation of monies to be reimbursed to the Authority and steps had been taken
immediately by the Resources Department to recover the monies concerned.

          (b)   Document 859: St Anthony’s RC Primary School
                Resources Department
                (Marking: Green)

          Arising from the Service Level Agreement held between the school and
the Property Division, this related to invoices for various works which had been
completed on behalf of the Property Division. The invoices had been correctly
processed, the recharge which had been made to the school had been correctly
invoiced and the debt had been paid within the required period.

          (c)   Document 860: Damovo UK Limited
                Legal and Democratic Services Department
                (Marking: Amber)

           This related to non-recurring telephony costs which were bona fidé and
had been processed satisfactorily in accordance with Financial Regulations.
However, Internal Audit had identified that the credit note which had been
attached to the invoice had not been entered on the Oracle system. This action
had subsequently been carried out and had been offset against a Damovo invoice
in early May 2005 although a risk remained that the credit note’s value might not
have been realised. A recommendation had been made by Internal Audit to
separate credit notes from invoices and this had been accepted for immediate
implementation by management.

          (d)   Document 861: Cypher
                Education and Libraries Department
                (Marking: Amber)

           This invoice had been paid in settlement of the supply of non-fiction
books which had been purchased for the Authority’s libraries. Whilst the invoice
had been found to be bona fidé and an official order had been correctly raised,
control weaknesses had been discovered relating to the prompt payment of the
invoice, the recording of information on both the Libraries’ GEAC system and the

29th June 2005

 Council’s Oracle financial systems and the apparent lack of a signed copy of the
SELPIG Libraries Stock Purchasing Consortium Agreement. A total of four
recommendations had been made to address these weaknesses and these had
all been accepted by management.

          (e)   Document 862: Environmental Evaluation
                Resources Department
                (Marking: Amber)

          This was the fourth instalment under the £41,200 contract which had
been agreed between the Authority and Environmental Evaluation to undertake
the necessary Type 2 Asbestos Surveys on an indicative portfolio of properties
under the control of the Valuation and Estates Division. A number of control
weaknesses had been identified involving the incorrect recording of invoice
numbers on the Oracle financial system, failure to adhere to internal audit
procedures for tender submissions and inclusion of inappropriate wording within
the Tender document and in relation to the Batch Certification List which had been
signed by someone other than the Certifying Officer. A total of six
recommendations had been made by Internal Audit to address these weaknesses
and these had all been accepted by management.

          (f)   Document 863: Refugee Housing
                Social Services and Housing Department
                (Marking: Amber)

          Payment had been made for the cost of accommodation for four
asylum seekers for residing at Graham Chiesman House. Value for money had
been achieved and the transaction had complied with the Home Office Asylum
Support Regulations. The invoices had been processed promptly and approved
appropriately in accordance with Financial Regulations.

          (g)   Document 864: Neopost
                Legal and Democratic Services Department
                (Marking: Green)

           This payment related to the ongoing replenishment of the office
franking machine within the Legal and Democratic Services Department. Whilst
this payment had been processed in accordance with the Council’s procedures
and guidance, a recommendation had been made by Internal Audit relating to the
lack of documented internal procedures for this process and that finding had been
accepted by management.

                                                         AUDIT SUB-COMMITTEE
                                                                  29th June 2005

             (h)   Document 865: Field Studies Centre - Petty Cash Imprest
                   Environmental and Leisure Services Department
                   (Marking: Green)

           Payment had been made to the Imprest Account held by the Bromley
Field Studies Centre for the reimbursement of various supplies required for which
value for money had been achieved. Internal Audit had made a recommendation
which had been accepted arising from some of the petty cash vouchers having
not been signed by the person receiving the cash and for which there was a risk
that the recipient might claim that the cash had never been paid. One claim was
for the supply of 34 bus passes and was in excess of £250 but, contrary to
Financial Regulation 8.3, prior approval had not been obtained from the Head of
Environment and Leisure Services Finance. There had also been an issue on the
need for segregation of duties between the petty cash reconciliation process and
the payment of cash and this had been accepted by management.

          RESOLVED that the position of the above selected documents and the
explanations provided be noted.


             RESOLVED that the Press and public be excluded during
consideration of the items of business referred to in the following Minutes as it is
likely in view of the nature of the business to be transacted or the nature of the
proceedings that if members of the Press and public were present there would be
disclosure to them of exempt information.

                             The following summaries
                                  refer to matters
                           involving exempt information

14           EXEMPT MINUTES: 23RD MARCH 2005

             The exempt Minutes of the meeting held on 23 rd March 2005 were


            The Sub-Committee noted this first full annual report on all the
investigations which had been carried out in 2004/05 and the impact on planned

29th June 2005


           The Sub-Committee noted the findings of a report arising from a recent
Internal Audit investigation.

                                                             MRS I A BUCKLEY
The meeting ended at 11.20pm.


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