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Report for: INFORMATION

Contains Confidential or Exempt Information

No

Title Quarter 1 Audit & Investigation Performance Report

Member Reporting N/A

Contact Details Mike Pinder, Head of Audit & Investigations, ext. 2350

For Consideration By Audit Committee

Date to be Considered 21 September 2017

Implementation Date if Not Called In

21 September 2017

Affected Wards All

Keywords/Index Audit & Investigation Performance Report

1. Details of Recommendations

1.1 To note the report on the Quarter 1 update.

Summary The attached report the work undertaken by the Audit and Investigation Shared Service team to the end of Quarter One.

If the recommendations are adopted, how will residents benefit?

Benefits to residents and reasons why they will benefit, link to Values

Dates by which they can expect to notice a difference

Internal Audit activity provides independent assurance to the Chief Executive, Members and Senior Officers on the adequacy of the internal control environment in Hounslow Council. This aids Members and Officers in ensuring that we are continually learning from experience. All counter fraud activity assists the Council in its value of spending money wisely. Every pound lost through fraudulent behaviours is a resource or asset diverted away from services provided to those who are in genuine need.

Ongoing

2. Background

2.1 This report outlines the performance of the Audit & Investigations Shared Service from April 1 to the 30 June 2017.

2.2 Internal Audit and Investigations activity within the Council is delivered under a

shared service arrangement with the London Borough of Ealing.

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3. Reason for Decision and Options Considered

The Audit Committee is presented with details in the attached report.

4. Key Implications

4.1 The performance of the audit team (including the Strategic Audit Partner) is measured by:

The shared service KPIs for delivery against the audit plan for each quarter are (based on draft reports issued):

Quarter 1 – 15% of 17/18 audits delivered (draft report issued) Quarter 2 – 35% of 17/18 audits delivered (draft report issued) Quarter 3 – 65% of 17/18 audits delivered (draft report issued) Quarter 4 – 100% of 17/18 audits delivered (draft report issued)

4.2 The performance of the fraud team during the year is measured by:

The number of cases where fraud is established; and

The amount of money identified for recovery In addition to these performance indicators, the benefits of counter fraud work are reported within Appendix B.

5. Financial Details

a) Financial Impact on the Budget

In terms of the impact on the Internal Audit and Investigation service budget, there are no impacts on the basis that all services are delivered within existing budgets.

b) Comments of the Director of Finance and Corporate Services

The Director of Finance and Corporate Services liaises closely with the Head of Internal Audit and Investigation on the progress of specific cases.

6. Legal (to be completed in conjunction with the Legal Department)

a) Legal Details

All Local Authorities are required to make a proper provision for Internal Audit in line with the 1972 Local Government Act and Accounts and Audit Regulations 2015 (as amended). The Public Sector Internal Audit Standards (2017) also require the proper planning of audit work. Local authorities are required to demonstrate proper stewardship of public funds in line with the 1972 Local Government Act. The London Borough of Hounslow utilises a fraud and investigation team to assist in its safeguarding of public funds and the recovery of funds that have been misappropriated.

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c) Comments of the Head of Governance

The Director of Finance and Corporate Services, as the Council’s Chief Finance Officer, continues to have a personal statutory responsibility concerning the proper administration of the council’s financial affairs notwithstanding any appointment to perform the internal audit and investigation function.

7. Value for Money

Internal Audit seeks to provide value for money both in terms of the delivery of the service and through reviews of individual auditable areas. The investigation team provides good value for money to the Council and residents: the presence of the team helps prevent fraud by acting as a visible deterrent.

8. Sustainability Impact Appraisal

Not applicable.

9. Risk Management

Internal Audit activity is directly influenced by the Council’s risk management processes.

10. Links to Council Priorities

Efficient use of Council resources.

11. Equalities, Human Rights and Community Cohesion

No direct implications arising.

12. Staffing/Workforce and Accommodation implications

None

13. Property and Assets

None.

14. Any Other Implications

None.

15. Consultation

None.

16. Timetable for Implementation

Not applicable.

17. Appendices

Appendix A – Internal Audit Performance Report 1 April – 30 June 2017. Appendix B – Counter Fraud Performance Report 1 April – 30 June 2017.

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18. Background Information

Counter Fraud Plan 2016/17 https://democraticservices.hounslow.gov.uk/documents/s122820/Counter%20Fraud%20Plan%202016-2017.pdf Internal Audit Plan 2016/17 https://democraticservices.hounslow.gov.uk/documents/s122853/Draft%20Internal%20Audit%20Plan%202016-2017.pdf

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APPENDIX A

LONDON BOROUGH OF HOUNSLOW INTERNAL AUDIT PERFORMANCE REPORT 1 April – 30 June 2017 21 September 2017

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1. Internal Audit Performance as at 31 June 2017 1.1 This report provides a progress update on the work of internal audit to the 31

June 2017. 1.2 Reports and status of reports which were outstanding from 2016/17:

Audit Title

Scope

Audit Status

1 HB Law o Governance o Contract Monitoring o Billing Process

Finalised (Limited Assurance)

2 Housing Benefit Risk Based Verification

o RBV Assessment o Monitoring

Finalised (Reasonable Assurance)

3 Anti-Social Behaviour o Strategy o Working in Partnership o Needs Analysis o Proactive and Reactive Work o Prosecution and Confidentiality o Community Trigger o Training and Awareness o Monitoring and Performance

Finalised (Reasonable Assurance)

4 Uplifts in Residential and Nursing Care

o Governance o Uplifting Rates Process

Finalised (Limited Assurance)

5 IT risk diagnostic Use of IT Risk Diagnostic to identify risk areas in IT.

Revised draft report issued.

6 IT governance and third party management

Review of the mechanisms that are currently in place to provide IT governance and management of third party providers who provide IT services on behalf of the Council.

Revised draft report issued.

1.2 As indicated in the table above, there were two limited assurance reports:

1) HB Law – Contract Management. Two high level findings around performance monitoring and feedback from stakeholders.

2) Uplifts in Residential and Nursing Care. There were two high level findings relating to procedures and defining roles and responsibilities.

1.3 The 2017/18 Plan was approved by the Audit Committee in February 2017. The

plan presented was indicative and can be subject to revision during the year to take account of changing priorities and emerging risks, which is aligned with good internal audit practice.

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1.4 The following table shows progress against the 2017/18 audit plan, illustrating

the status (draft/final/in progress etc) of each review:

Audit Title

Scope

Audit Status

1 Delivery of DLO Services (FM360)

Capability to deliver services Not started

2 Budget for 2 pieces of specific Lampton 360 assurance

Scope to be determined Not started

3 Continuous auditing and monitoring phase 1

2 cycles of key financial systems testing during 2017/18 – will include specific issues raised during 16/17, key financial testing programme and the transfer of financial systems to the new service provider.

ToR in draft

4 Continuous auditing and monitoring phase 2

Not started

5 Savings Plans – monitoring of delivery (including budgetary control)

Review of delivery against agreed savings plans and budget monitoring arrangements.

Not started

6 Health & Safety Review of compliance with legislation – areas not covered by 16/17 review, eg. gas safety; housing stock

ToR agreed, fieldwork scheduled

7 Data Protection Readiness for 2018 legislation (GDPR). Will be conducted across shared service.

Not started

8 Workforce planning Focus review on key risk business areas – eg. including the Occupational Health Unit; delivery following implementation of savings plans

ToR agreed, fieldwork scheduled

9 Highways Contract Specialist review: commercial assurance; PFI scheme

Draft report

10 Commissioning Arrangements

Review of arrangements for commissioning of adult services from external providers

Not started

11 Care Homes Contract/Performance management of external care homes

Fieldwork in progress

12 Children and Adults – budget management

Management and control of budgets. Shared service review

Scoping meeting held

13 Leaseholder Services Review to focus on Section 20 processes Not started

14 Service Charges Establishment of service charge levels in Council properties

Not started

15 Temporary accommodation

Strategy for managing temporary accommodation demands

Not started

16 Budget allocated based on ICT risk diagnostic work

Focus on high risk areas following ICT risk diagnostic

Not started

17 Cyber security Conducted across Shared Service Not started

18 Update of the assurance map

Update of the assurance map for 2018/19. Not started

19 Contract management - review of draft policies

Review of new contract management policies.

Fieldwork in Progress (Phase 1 – Complete; Phase 2 - ToR agreed, fieldwork scheduled).

20 Fortnightly waste collection

Project assurance review that looks at planning for transition to fortnightly waste collection.

Fieldwork in progress

21 Invoicing Care Providers

Review of invoicing processes, including within Children’s, Housing & Adults

Not Started

22 Procurement Compliance

Ongoing sample testing of compliance with procurement policies and procedures across the Council.

Fieldwork in progress

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23 Building Control Review of processes, including application and receipt of monies paid to the Council

ToR in draft

24 Bridge Road depot – financial management /probity

General financial management/administrative review.

Draft report

25 Personal Budgets Administration of personal budgets for children and adults

Not started

26 Housing for Care Leavers

Best value review of post-18 care arrangements, including accommodation

Not started

27 Children out of Borough

Compliance with legislation for children fostered or in care homes out of Borough

Not started

Schools

New Probity Audits being designed. In Design

1.5 Key performance indicators (KPIs) have been established to measure the

delivery of the audit service across the shared service. These are how we measure our performance to ensure that all audits on the plan for each Council are delivered by the end of the financial year. The shared service KPIs for delivery against the audit plan for each quarter are (based on draft reports issued):

Quarter 1 – 15% of 17/18 audits delivered (draft report issued) Quarter 2 – 35% of 17/18 audits delivered (draft report issued) Quarter 3 – 65% of 17/18 audits delivered (draft report issued) Quarter 4 – 100% of 17/18 audits delivered (draft report issued)

1.6 The table below provides a summary of progress in terms of the number of reports at draft or final stage and those in progress:

Audit Status Number of reviews Percentage Completion

Draft report* 2 7

Fieldwork in progress 4 15

ToR agreed, fieldwork scheduled

2 7

ToR in draft 2 7

Scoping meeting held 1 4

Not started 16 60

Total 27 100

1.7 * The percentage of draft reports is slightly behind the target of 15% for q1. We

are confident at this stage that the planned work can be completed. The amount of work in progress is also indicative of this.

Follow-Up Work 1.8 Internal Audit carries out a review of the progress in implementing

recommendations raised. High risk recommendations are followed up as they become due to allow the Committee to be made aware of progress against high risk priority recommendations on a regular basis. The status of high risk recommendations due to be implemented by June are outlined below:

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Table 3

Number of High Risk Recommendations due to be implemented

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Number of High Risk recommendations fully implemented 3

Number of High Risk recommendations partially implemented

9

Not implemented 0

1.9 Adequate progress was considered to have been made on the partially

implemented recommendations. Progress on these will continue to be monitored against revised implementation dates. Any instances of non-implementation will be reported to future meetings of the Audit Committee.

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Appendix B

LONDON BOROUGH OF HOUNSLOW COUNTER FRAUD TEAM PERFORMANCE REPORT Quarter 1 1 April – 30 June 2017 21 September 2017

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1. Introduction

1.1 This report details the performance of the Audit & Investigations Shared Service

in respect of the delivery of investigation services on behalf of the London Borough of Hounslow. The purpose of the report is to provide Audit Committee members and management with an update on the work undertaken by the Shared Service to quarter 1 (1 April to 30 June 2017) and highlight key issues for the attention of Members.

1.2 The service achieved a total of 17 proven cases to the end of June 2017 against a target of 68 for the year. Within this the team also identified in excess of £181k in losses, representing in the region of £123k (notional) and £58k (actual) for the Council as a whole.

2. Background

2.1 As previously reported to the Committee, Internal Audit & Investigation services are delivered by the Internal Audit and Investigations Shared Service, which has brought together the Internal Audit and Investigation resources of the London Boroughs of Hounslow and Ealing.

2.2 The Shared Service, hosted by the London Borough of Ealing, enhances the Internal Audit and Investigation services delivered to the two boroughs, by bringing together a wealth of experience, improving overall service resilience, whilst also providing the opportunity to share best practice and harmonise counter fraud processes.

2.3 The Shared Service is responsible for the investigation of all types of suspected fraud within the Council, including but not limited to:

Corporate fraud matters in relation to offences committed by employees;

Procurement fraud by employees, Contractors or other third parties;

Fraud within schools;

Housing tenancy related fraud; Council Tax fraud, including Council Tax Reduction, discounts and exemptions; and

Blue Badges.

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3. Detail

3.1 Performance 1 April – 30 June 2017 3.1.1 The table below shows the number of new cases reported to the fraud team

from 1 April to 30 June 2017. 3.1.2 The table below provides a summary of cases open and closed during the

quarter: Summary of open/closed cases (Table 1)

Case Numbers

Open Cases (end quarter 1)

135

New Cases added (during quarter 1)

89

Cases Closed (during quarter 1)

103

3.1.3 Table 2 provides ‘new offences’, which is a breakdown on new cases reported

for the period: New offences (Table 2)

Case type Fraud alleged Total Sub-total

Council Tax 38

Council Tax Discount 10

Council Tax Reduction Support Data

26 Other 2

Tenancy 13

Occupancy 5

Right To Buy 3

Sub-let 5

Parking 21

Blue Badge 21

Deception 6

Benefit 2

Employment 2

Instrument of Payment 1

Planning 1

Financial investigation 2

Planning 2

Other 7

Other 7

Corruption 2

Other 2

3.1.4 At the end of the period there were 135 open cases. It should be noted that cases will frequently and necessarily run for a number of months, so that the number closed does not correlate directly to those opened (shown in Table 1 above) in the same period.

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3.1.5 Audit & Investigation must have reasonable and sufficient grounds to conduct a criminal investigation. Cases will be screened out, or not progressed with, for a variety of reasons including: that there is a more appropriate agency to deal with the allegation; that the allegation has no merit (including cases that are suspected of being malicious); or cases where after initial enquiries it is apparent that there are insufficient grounds to warrant further action. Only a proportion of the allegations received will progress to a full investigation. Resource is required to adequately address each stage of this process.

3.1.6 Table 3 below shows the number of cases completed during the period 1 April to 30 June 2017, including those passed to other agencies (such as Department for Work and Pensions, Police or other London Borough) and those for which no further action was taken following initial enquiries. Cases closed 1 April – 30 June 2017 (Table 3)

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Council Tax 53 Council Tax discount 10 8 2 Council Tax Reduction 41 7 24 10 Other 2 1 1

Tenancy 17 Application 1 1 Occupancy 6 1 4 1 Right To Buy 5 5 Sub-let 5 4 1

Parking 18 Blue Badge 18 9 9

Deception 6 Benefit 3 1 1 1 Employment 1 1 Planning 2 1 1

Other 7 Other 7 3 4

Corruption 1 Conflict 1 1

Business rates 1 NNDR 1 1

Total 13 59 31

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3.1.7 The details of the 31 investigations completed between the 1 April and 30 June 2017 are detailed in table 4 below.

Completed investigations 1 April - 30 June 2017 (Table 4)

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Council Tax C-Tax discount 2 2 18,000 365 CTRS 5 5 4 7,914 2,292

Tenancy Occupancy 1 1 104,900 Right To Buy 5 Sub-let 1

Parking Blue Badge 1 8 7 644

Deception Benefit 1 1 50,210 Planning 1

Corruption Conflict 1

Total 14 17 15 123,544 58,489 2,292

Sections 3.1.4 – 3.1.6 below provide an explanation of the sanctions, notional and actual loss columns in Table 4 above:

Sanctions 3.1.8 Allegations involving ‘Council Tax’ resulted in: identified losses of £8,279; the

acceptance of 4 Council Tax Reduction Scheme financial penalties amounting to £2,292; and the ending of 1 Council tax discount.

3.1.9 A ‘Deception’ case involving a historic welfare benefit fraud case (now

investigated by DWP) resulted in a proved loss of totalling £50,210 and a prosecution.

3.1.10 ‘Parking’ cases resulted in 8 proven instances of Blue Badge misuse. 1 case was prosecuted and 6 written warnings were issued to first-time offenders.

3.1.11 A ‘Tenancy’ allegation resulted in the rejection of a Right-to-Buy application. Notional loss proved - £123,544.

3.1.12 The notional loss is the amount the underlying asset would have been worth to

the Council.

3.1.13 In the Annual Fraud Indicator 2011 the National Fraud Authority estimated a notional loss for a misused Blue Badge of £92.

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3.1.14 8 Blue Badge cases have been proved and 7 sanctioned, providing a notional saving of £644.

3.1.15 The Right to Buy scheme helps eligible council and housing association tenants in England to buy their home with a discount, in London, of up to £104,900. A Right to Buy sale that proceeds based on the provision of incorrect information results in a loss to the authority of a valuable asset at a fraction of its true value.

3.1.16 The rejected Right-To Buy application gives a notional saving of £104,900.

3.1.17 In their Protecting the Public Purse 2012 publication the Audit Commission identified an average annual notional cost of £18,000 to house a family or individual in temporary accommodation. This average notional cost has been used to estimate the nominal cost to the public purse of housing a tenancy fraudster.

3.1.18 The council property recovered as the result of a council tax investigation provides a notional saving of £18,000.

3.1.19 The total of these notional savings to 30 June 2017 is £123,544.

Actual Financial loss proved - £58,489.

3.1.20 Proved fraudulent loss for the period, including cases where fraud was proved but a sanction was not imposed, totalled £58,489. This loss is subject to on-going debt recovery action against the subjects of the investigations.

3.1.21 This is a direct financial loss to the Council as a result of fraud. It is not possible in all cases to impose a legal sanction, for example if there is insufficient evidence for a realistic prospect of conviction, if it is not in the public interest to prosecute or the subject of the investigation cannot be traced.

3.1.22 The column for ‘additional £ billing’ of £2,292 represents fines imposed following

anti-fraud sanctions.

3.2 Performance 3.2.1 As outlined within the previously presented Counter Fraud Plan, the Shared

Service had a target of achieving 68 proven cases within the year. The team have achieved 17 proven cases to the end of June, which is in line with the target.