Mark Niblock, Chief Internal Auditor, introduced his report that provided Members of the Audit and Risk Management Committee with the outcome from an Internal Audit review, following a referral made to Internal Audit, regarding concerns that the Council had paid invoices to a company for consultancy services, that was listed on “Companies House” as dissolved and the VAT registration number used by the company was invalid.

The report informed that an initial review of concerns relating to the payment of consultancy services to Forge House Associates Limited had been undertaken by Officers within the Financial Management Team in January 2019, and as a result of the review it was recommended that Internal Audit undertake further work in relation to concerns raised. This work had been completed by Internal Audit in early February 2019.

The findings from the Internal Audit review identified that despite the Council’s procedures being followed correctly in relation to the validation of the change in bank details, ensuring the supplier invoices were arithmetically correct and that the VAT registration number was quoted on the supplier invoices, the Council had paid invoices to a company in good faith that no longer legally existed and whose VAT number has been declared invalid by the tax authorities.

The report further informed that the Internal Audit review had identified additional actions to correct the current VAT position and strengthen internal controls to prevent a reoccurrence. One recommendation in particular, that had been made and implemented during the review was to commission Internal Audit to undertake detailed reviews, to provide management with assurances regarding the efficiency and effectiveness of the systems in operation in respect of (i) the verification of the validity of supplier VAT registration numbers; and (ii) the appointment and employment status of interims/contractors.

Members highlighted concerns regarding procedures, actions and decisions in respect of this matter that were under the purview of the Chief Internal Auditor, the Director of Finance and Investment (S151) and the Chief Executive.

The Chair pointed out that a Member of the Audit and Risk Management Committee (also Member of the Employment and Appointments Committee) had raised concerns regarding this appointment at an early stage in the contract / selection process.

Members expressed views on areas of concern relating to the payments, control procedures and communication between Officers undertaking the day to day processing, Senior Management and the Chief Executive. These included, specifically:

• the taking up, and checking of references;
• when, and by whom the irregularities had been identified;
• when, and by whom the irregularities had been reported;
• whether system procedures were sufficiently robust, or just not followed;
• a ‘disconnect’ in communications between Officers – given that the issue had been considered by senior officers on 16 January, and that the employment appointment had been actioned by the Chief Executive on 24 January;
• why all contractors were not paid via the Council’s payroll and were not managed using HMRC’s IR35 tax procedures.

The Director of Governance and Assurance informed that there had been a  ...  view the full minutes text for item 61