Auditor’s report at East Cambs Council raises concerns over supplier contracts and issues warning that ‘bank mandate fraud poses a high risk’
PUBLISHED: 18:21 22 July 2020 | UPDATED: 18:21 22 July 2020
Sample testing of new suppliers to East Cambridgeshire District Council and changes to existing suppliers bank details, identified a “lack of consistency in the supporting documentation held” says an auditor’s report.
Of 25 new suppliers identified, in two cases there was no supporting documentation and in 14 cases full evidence was not held to support the bank details of the new supplier.
“Testing of 12 changes to existing suppliers’ bank details identified that in three cases there was no supporting documentation held and in seven cases evidence to support the change was not complete,” says the report.
“This was identified as a weakness in the previous audit in the financial year 2018/19.”
The council was warned there remains a “continued risk that incorrect or fraudulent details” could lead to a payment error.
Auditors LGSS warned: “Bank mandate fraud poses a high risk which must not be underestimated and controls in this area must be robust – as such this weakness has resulted in a limited assurance opinion on compliance.
“A review is required to ensure that it enforces the requirement to ensure all relevant documentation has been received and checks made to ensure the accuracy of new and existing supplier details before payments are made.”
LGSS warned the council this was particularly important in the present climate when such fraudulent attempts have increased across local government.
Auditors also looked at extensions to existing contracts and whether East Cambs Council was compliant with regulations.
“The key risk is that value for money may not be achieved through existing contracts being extended for unreasonable periods with the result that opportunities to test the market are foregone,” says LGSS.
They also warn that repeated use of the same contractors without rotation and / or competition increases the risk of fraud, corruption and poor value for money.
A sample of five contracts were selected for testing where the expiry date of the contract had passed but payments were still being made.
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There was little or no supporting documentation provided to evidence compliance “and, as such, the spend is essentially off contract and, as such, the continued use of these suppliers was outside of any existing contractual agreement”.
LGSS says that where contracts were extended, they had not been recorded in the central contracts register and therefore the council has not met the requirements of the Local Government Transparency Code which requires the council to publish all contracts with a value equal to or exceeding £5,000.
The annual audit also inspected how debtors are managed - the council raises over 4,000 sundry debtor invoices annually with a total value in excess of £4.5 million.
Testing of a sample of 20 debts confirmed that “generally they are being actively pursued” however in three cases recovery action taken is being queried with officers who have yet to respond.
Auditors also looked at a sample of 25 homelessness cases that confirmed that the council had complied with the requirements of the Homelessness Reduction Act.
However, the documentation examined to support individual applications did not provide satisfactory evidence of the identity of the applicant as in two cases only a driver’s licence was provided to support identification and in a further two cases there was no identification seen.
“If this control is not being applied then there is a risk that a homeless duty may have been awarded to an applicant with no recourse to public funds,” says LGSS.
“The council needs to ensure that all required checks are completed and evidenced to the required standard.
“The council places a heavy emphasis, where possible, on the prevention of homelessness but recognises its duty to provide temporary accommodation until a household can be found suitable accommodation.”
LGSS says the council is fortunate to have a number of options available that do not necessitate the use of expensive bed and breakfast accommodation, which has not been used as temporary accommodation for a number of years.
However, their review had identified a need for the council to update a number of key strategies and policies to ensure that they reflect the current homelessness legislation contained in the Homeless Reduction Act and the Government’s Rough Sleeping Strategy.
“Based on the outcome of audit testing, an opinion of satisfactory assurance has been given for the design and compliance with controls.” says LGSS.
Auditors use five descending categories to determine the outcome of their work ranging from substantial assurances to good, satisfactory, limited to a final ‘No’.
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