The Deputy Director of Resources presented the Annual Governance Statement 2011/2012. A copy of the Statement was attached to the submitted report. Under the 2007 CIPFA Framework for Delivering Corporate Governance in Local Government, the Council was required to review its governance arrangements, at least annually, to ensure continued compliance with best practice. The Framework adapted six core principles of good governance for the Local Government Sector and recommended that all Councils should comply with them.
The Annual Governance Statement was compiled following a review by the Governance Team of the effectiveness of the Councils systems of internal control and governance arrangements. This involved the most senior officers within Services, as well as officers with specific responsibilities for Internal Audit, Risk Management and the professional conduct of Officers and Members.
Middlesbrough Council operated in conjunction with more than one hundred partners in a range of contractual, strategic project and delivery arrangements. A review of the Councils partnerships was undertaken and reported last year. During the year under review, the arrangements had remained largely unaltered. However it was anticipated that there would be significant changes in the coming year, particularly in the areas of health and benefits management.
The Council outsourced most of the back office functions to Mouchel in June 2001, originally for ten years with an option to extend the contract for a further five. An extension was agreed in 2011/2012 for most of the outsourced services however the Accountancy, Valuation and Asset Management teams were returned to the Council on 1 June 2011.
The Deputy Director of Resources reported that the transfer had gone well and staff were now working in different teams within service areas to support them directly. The consultation period had just started on a review of the finance staff structure in order to provide more flexibility and cost efficiencies.
A significant internal control issue raised in the 2009/2010 Statement and the actions taken during 2011/2012 to address it, was highlighted. Internal Audit had identified weaknesses in key administration and management processes within Safeguarding in Children Families and Learning. The issue related to Direct Payments and robust administration and recovery procedures were now in place and were signed and checked by the Service Manager. Any money not spent by service users for the purpose for which it was awarded had been reclaimed.
In 2011/2012 two significant internal control issues had been highlighted and action plans put in place to address them. The first was a sophisticated creditors fraud in which the perpetrator posed as a legitimate supplier and arranged for bank payments to be redirected. The fraudster used information from the monthly reports listing payments to suppliers with a value of over £500 which were published on the Councils website. This was a wide scale fraud involving other Local Authorities, Health Authorities and the private sector and a national task force was investigating. Several arrests had been made and the investigation was ongoing. Most of the money taken from Middlesbrough Council had been repaid.
The Council had now removed the creditor numbers from the monthly report and was therefore no longer fully compliant with statutory requirements. However, the Council had informed the Government as to the reasons for this. The other Tees Valley Authorities had taken the same action. Procedures with regard to amending suppliers bank account details had been reviewed and revised. There had been a further attempted fraud, which had been thwarted by the procedures now in place.
The second issue was that claims for European Regional Development Funding (EDRF) had not been made for several quarters. Government North East (GONE) had been abolished and the responsibilities for EDRF claims had been transferred to another Government Department. Whereas previously claims had taken four to six weeks, they were now taking four to six months. The Councils claims had to be made through Tees Valley Unlimited on a quarterly basis. However the Government Department had indicated that they would not accept new grant claims until earlier ones were completed and therefore the quarterly claims had not been submitted.
It was confirmed that all of Middlesbroughs claims had now been submitted to Tees Valley Unlimited. There were some issues in relation to ineligible spending which amounted to approximately £2000 on claims of £1.5 million. It was anticipated that the Authority would know by September whether all the monies claimed had been received.
RECOMMENDED as follows that:
1. The Annual Governance Statement 2011/2012 be noted.
2. The Internal Control issues highlighted in the Annual Governance Statement 2011/2012 be noted.