The Head of Regional Internal Audit presented a report which updated the Committee on the work undertaken by Internal Audit relating to the Arbed scheme, as requested by this Committee on 28 January 2022.
He explained that at the request of the former Chief Executive in 2018, the Council’s Internal Audit team conducted an audit review to ascertain the extent to which the Council’s policies and procedures had or had not been applied in respect of the Arbed funded scheme in Caerau for the period September 2012 to April 2013. Concerns were raised by the then Chief Executive specifically relating to an apparent absence of an audit trail and whether there would be any circumstances that would explain this.
He added that to provide assurance that there was no evidence that these issues were widespread, Internal Audit undertook a further review of the procurement and governance aspects of 10 externally funded schemes from 2018 onwards. This report was presented to the Governance and Audit Committee in January 2021. An audit opinion of reasonable assurance was given and only four minor recommendations were made. No significant issues were identified. It was found that, from the sample selected and reviewed, the concerns arising from a previous externally funded Arbed scheme had not been replicated. Further background was at section 3 of the report.
The Head of Regional Internal Audit stated that the document published on the Council’s website on 26 January 2022 was attached at Appendix A and outlined the findings and conclusions from the work undertaken by Internal Audit in relation to the Arbed scheme. The report identified several significant concerns relating to the governance, decision making, procurement, monitoring and control aspects of the Arbed Scheme and the conduct and role of a Councillor as a Director of Green Renewable Wales Ltd. The report therefore made recommendations, all of which have been implemented by the Council. He added that the report was shared with the police in August 2019 but it was determined that no action was needed to be taken by themselves. Recently a senior investigating officer within the Economic Crime Unit has reviewed the internal audit report and documents again and has confirmed that they support the assessment made in 2019. There has been no change in circumstances and no fresh evidence which would impact on that decision.
The Head of Regional Internal Audit outlined the wider issues in respect of governance, decision making, and procurement and these were subject to further audit as part of the 2020/21 audit plan. This report identified the 10 schemes reviewed and the findings and recommendations made as a result of the work. It was found that, from the sample selected and reviewed, the concerns arising from a previous externally funded Arbed scheme had not been replicated.
Documentation was available to support compliance with the Council’s Contract Procedure Rules and the involvement of Corporate Procurement when engaging contractors. There was also evidence of supplier monitoring, reporting and governance across all the projects. An audit opinion of reasonable assurance was given, that is that key controls exist but there may be some inconsistency in application. As a result, only 4 minor recommendations were made. The full audit report was presented to the Governance & Audit Committee in January 2021.
The Head of Regional Internal Audit added that Appendix B summarised the 11 audits undertaken within the same service area which administered the Arbed scheme, that related to either capital schemes, grant funded schemes, project management and/ or procurement as well as strengths and weaknesses identified. These audits had been undertaken during the period November 2011 to October 2021.
He also highlighted the comments from Audit Wales as per the report.
A Member asked in relation to 3.1 of the report that the former Chief Executive requested a review and why this was the case. She was aware of correspondences among Chris Elmore MP and the Leader concerning delays on this almost 12 months prior due to what appeared to be ongoing investigations by Officers. Could it be confirmed whether that was the reason. The Head of Regional Internal Audit stated that the email that was received by his counterpart before he was in post prompted the investigation into certain aspects of the scheme in relation to the audit trail and procurement for example. He confirmed that Internal Audit had no correspondence of complaints prior to this and therefore were unaware of such complaints.
A Member followed on from this and asked if reasonable assurance could be given that processes were in place to prevent this happening in the future, as the Council may be at risk of compensation claims. The Head of Regional Internal Audit explained that an Audit was undertaken on 10 recent schemes and assurance was given that the ARBED scheme was a one off and issues experienced were not replicated or observed in any of the other schemes.
A Member asked why the document from the police confirming that they were content that no further action needed to be taken, was not included in the report as this would have given additional assurances to the public. The Head of Regional Internal Audit explained that the document was only received after the report was published.
A Member asked in relation to correspondence sent to the Chief Executive and the Monitoring Officer, why this would not have been sent to the Leader. The Head of Regional Internal Audit explained that it was sent to key officers as this was normal practice, drafts were not normally sent to Members and as this was in the very early stages it was not necessary to do so.
A Member asked if confirmation could be given regarding Green Renewable Wales Ltd on whether or not an invalid VAT number was found. The Head of Regional Internal Audit explained that this was true, however the GRW Ltd were effectively overseeing and sub-contracting work out and so a payment was never made by the Council using the invalid VAT number.
A Member stated that it seemed evident that the Contract Procedure Rules were not followed and that it was a conscious decision made. She asked if this could be confirmed. The Head of Regional Internal Audit agreed that it was clear that the CPRs were not followed but it was not clear whether it was intentional or not. Members of the Committee shared the same concerns in that due process was not followed, but reassurance was given in that these issues were in fact not seen before, nor had been replicated since.
The Lay Member asked if there was any indication on the motivation behind what happened, whether deliberate or not, and was there any information on this. The Head of Regional Internal Audit explained that Officers involved were consulted on this and asked various questions as to how and why. One of the key things that was evident was that the funding from Welsh Government that contributed towards these schemes had a very short time span in which it needed to be spent, and that may have led to some of the issues along the way in terms of process not being followed.
A Member commented on the delay of receiving the report before the Committee, and that it almost did not make it before the new term of office. He made the suggestion that reports be seen by the Governance and Audit Committee as soon as practicable to ensure due process.
A Member asked if it were possible to perform an Audit on this department on a yearly or bi yearly basis and if it were in the scope of the Regional Internal Audit service to do so. The Head of Regional Internal Audit explained that the Audit plan was to cover all areas of the Council and departments across the Council. It was not possible to focus on one area as that would take the focus and resources away from effective audit of the rest of the Council.
RESOLVED: That the Committee: