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

Transcription

1 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. Page 1 of 12

2 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 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. Page 2 of 12

3 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). Page 3 of 12

4 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

5 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

6 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 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 . 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

7 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

8 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 findings and recommendations m PI E1 Environmental Responsibility Env 1 Total Waste (kg) See detailed findings and recommendations PI E1 Env 2 a) Total waste recycled (%) See detailed findings and recommendations PI E1 b) Dry recycling (kg) See detailed findings and recommendations PI E1 c) Organic waste (kg) PI E1 Env 4 Water a) Total Water (m³) Incorrect summarised April 08 figures used 359, ,931 PI E1 b) Grey (borehole)/recycled water (m³) Incorrect summarised April 08 figures used 356, ,271 Page 8 of 12

9 Type Ref Details Complete Comment Reserved Resolved Original Final PI E1 Env 5 Energy a) Total electricity consumption Incorrect summarised April 08 figures used 3,539,040 3,560,040 PI E1 b) Total gas consumption Incorrect summarised April 08 figures used 1,387,349 1,415,010 PI E1 c) Percentage of energy from renewable sources Insufficient supporting documentation 1.2% 1.1% Page 9 of 12

10 Internal Audit Report - Review of Corporate Health Performance Indicators 2008/09: Management response PI Internal Audit Recommendation Management Response General F2 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. 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. Noted, this will be implemented for 2009/10 Noted, this will be implemented for 2009/10 F6 F6 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. 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. 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. The Principal Accountant should liaise with officers We will examine the feasibility of this and carry out the exercise Page 10 of 12

11 PI Internal Audit Recommendation Management Response F6 F6 E1 1&2 E1-3 from the Business Development team to develop a logical method of linking cash flows to the authority s productivity. Outturn figures should verified by reviewing source data against the approved definition. 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. 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. 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 where possible / appropriate. As above: 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. Noted, this will be implemented for 2009/10. We will review this recommendation and establish whether this is a good use of officer time given the very small variance in between the reported and auditor adjusted figure. Noted, we will look into adding this into the blueprinting process for SAP. Page 11 of 12

12 PI Internal Audit Recommendation Management Response raising purchase orders to include all necessary information regarding green products. E1 4,5&6 E1 4,5&6 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. A clear audit trail with documentation and calculations used to derive the PI should be maintained by the responsible GLA officer. Facilities management already carry out contract review meetings with the supplier, where any issues are raised. Additional Internal Audit Comment: We were unable to evidence that the discrepancies had been identified and discussed with Norland at the time of audit. A utilities spreadsheet with individual meter readings for the whole financial year provided for this indicator, it is not clear 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