Agenda Item No. 12
The Vale of Glamorgan Council
Audit Committee: 21st November 2016
Report of the Head of Finance / Section 151 Officer
Purpose of the Report
To provide Members with an update on the progress being made in respect of addressing the weaknesses in the overall control environment with regards to Waste Management, in particular the management of contracts.
That Members consider the content of the report to ensure they are satisfied that improvements to the overall control environment are evident.
Reason for the Recommendation
To keep the Audit Committee informed.
On the 16th November 2015, the Audit Committee received the Head of Audits outturn report which covered the period April to August 2015. The report made reference to significant control issues in respect of Waste Management. As a consequence the Audit Committee resolved that "the Action Plan currently being overseen by the Corporate Management Team regarding the implementation of a number of recommendations to improve the overall control environment and the outcome of the Council's Contract Management Guidance and Toolkit be brought before a future meeting of the Audit Committee".
As this issue was considered to be of significant importance, reference was also made to this matter in the Council's Annual Governance Statement 2015/16. The AGS stated that:-
"Significant issues have been identified and reported to the Audit Committee which relates to the Internal Audit reviews undertaken within Waste Management. The overall findings of the reviews demonstrate that the Council has been exposed to unacceptable levels of risk as regards to the operation of the Waste contracts. Waste contracts were being allowed to be operationally effective without there being a signed, legally binding contract in place. In addition, the timeliness of awarding contracts needs to be effectively project managed to enable mobilisation of contracts to meet contract commencement timetables. As a result of the Internal Audit findings and conclusions, a number of recommendations have been made and a Management Action Plan produced to address the significant control weaknesses identified. The Council's Corporate Management Team is actively overseeing the implementation of a number of these recommendations to improve the overall control environment and the Council's Audit Committee will be kept apprised of future developments. In addition, the Council's Contract Management Guidance and Toolkit is being reviewed and updated and Corporate Management Team has agreed that this will form part of the mandatory training being rolled out on Project Management
Relevant Issues and Options
At its meeting held on 22nd February 2016, Audit Committee received an update report which provided Members with a response to their request for further information specifically relating to the control weaknesses identified in the waste recycling review. The report provided Members with the assurances that the contract relating to the Co-Mingled Waste had subsequently been signed by both parties.
As a consequence of the issues highlighted within the Co-Mingled Waste Contract, Internal Audit have undertaken reviews of a number of other Waste Contracts covering the areas of contract management, procurement and the monitoring of Contracts.
In respect of the Waste Contracts, a total of nine reports were issued covering the following contracts:-
Co-Mingled Waste (Casepak Contract);
Household Waste Recycling Centres (BIFFA);
Food and Green (Biodegradable) Waste (Cowbridge Compost).
All the above identified significant control issues in respect of the areas examined, these included contract management, contract procurement and contract monitoring. As the issues identified where similar across all three contracts and the three areas examined, a summary of 14 recommendations was produced for management response. Management within both Visible Services and Legal Services have agreed and provided their management responses to the recommendations made. It can also be confirmed that all three contracts have now been signed and sealed.
The main significant control issues identified included:
Very poor time management with the procurement processes commencing within a matter of weeks before the contract was due to end / commence.
No formally legally binding contract in place prior to the commencement of the contract period.
Non retention of key documentation.
Approval processes flawed with Cabinet approval being obtained in retrospect in some cases.
Discrepancies between key contractual documentation (ITT information missing from Contract or vice versa).
Due to the severity of the issues identified and in accordance with the Council's policies and procedures, disciplinary action was instigated.
As a result of the significant weaknesses identified in Waste Management Contracts and at the request of the Managing Director and Corporate Management Team, a number of cross-directorate contracts were selected for review. The overall objective of the review was to provide the Managing Director and Corporate Management Team with the necessary assurances that the issues identified within Waste were not replicated throughout other service areas across the Council. As a consequence the following contracts were selected for review:-
Highways Emergency and Permanent Repairs Contract
Schools Demountable Classrooms
Residential Care Services.
In respect of the two Highways contracts examined, the issues identified were very similar to those of Waste. A total of 16 recommendations to improve the control environment have been made and a management response is awaited. The contract relating to the Schools Demountable Classrooms identified once again, very similar issues as those highlighted within Waste and Highways. A management response has been received stated that all recommendations are agreed and will be implemented with immediate effect.
The examination of Children's Residential Care Services Contract did not identify the same issues as those listed above. The areas of concern related more to the operation of the contract rather than the procurement itself, these included exceeding authorisation limits and issues relating to contract variation. Three recommendations have been made and a management response is awaited. It was identified that the procurement of this Contract was undertaken in accordance with the Council's Policies and Procedures and the timescales applied where such that each element was completed and authorised prior to the commencement of the Contract. This process successfully cumulated in a signed and legally binding contract being produced before the contract start date.
As stated in paragraph 2 above, Corporate Management Team is actively overseeing the implementation of a number of these recommendations to ensure that improvements to the overall control environment are made and as such, attached at Appendix A is the updated Action Plan for Members' information.
Resource Implications (Financial and Employment)
None as a direct consequence of this report.
Sustainability and Climate Change Implications
None directly from this report.
Legal Implications (to Include Human Rights Implications)
Provision of an adequate and effective Internal Audit function is a legal requirement under the Accounts and Audit (Wales) Regulations 2014 as amended from time to time.
Crime and Disorder Implications
Pursuing initiatives to prevent, detect and deter crime is encompassed within the terms of reference under which the audit function operates.
Equal Opportunities Implications (to include Welsh Language issues)
None as a direct consequence of this report.
The work of audit is intended to assist in the achievement of all corporate and service objectives.
Policy Framework and Budget
The proposals in this report are in accordance with the policy framework and budget.
Consultation (including Ward Member Consultation)
No further consultation is proposed.
Relevant Scrutiny Committee
Corporate Performance and Resources
Helen Smith - Operational Manager - Audit
External Audit - Wales Audit Office
Carys Lord - Head of Finance / Section 151 Officer