Agenda item

The Chairman of the Committee presented a summary of the final report of the Audit Task Group (‘Audit Group’) into causes of how the Council arrived at the Section 24 Notice under the Local Audit and Accountability Act 2014. The Chairman highlighted that the recommendations contained in the final report would provide important learning points for the Council for undertaking future projects of similar nature.

The Chairman reported that the Audit Group undertook a thorough investigation of the matter which entailed reviewing various background documents, including, amongst other things, minutes of meetings of the project board that was set up by Bromsgrove District Council (BDC) in the autumn of 2019 to implement the BDC’s new accounts and finance management system, the enterprise resource planning (“ERP”) system. Other related relevant information in respect of the implementation of the ERP by BDC was also reviewed and interviews conducted with various Officers involved in the implementation of the ERP system. It was noted that the suppliers of the ERP system, TechOne, did not wish to be interviewed as part of this Audit Group investigation.

The Chairman reported that it was the Audit Group’s view that the main reason for the Council receiving a Section 24 Notice from external auditors on 31 October 2022 was due to the failure of the cash receipting module of the ERP system and the consequent inability to access financial information on the ERP system which led to the non-delivery of the 2020-21 Statement of Accounts.

It was highlighted that a number of related failures in the ERP project were identified as part of the investigation, and these included:

·       The tender scoring documentation which would detail why TechOne was chosen in 2019 to implement the new ERP system was not available to the Audit Group.

·       The supplier of the ERP system, TechOne, did not have a suitable cash receipting solution in place and the Council appeared to be the first organisation in the country to work with TechOne on developing a bespoke, untried cash receipting solution.

·       There was no clear programme of training for staff on the ERP system and the Council’s staff had to rely excessively on self-training in order to learn the system.

·       There was no recognised project management framework used by the Council in implementing the new ERP system.

·       The former Section 151 Officer did not attend any ERP system implementation project meetings.

·       Eleven out of sixteen key finance staff left the Council during the initial stages of the new ERP system going live and this left considerable gaps in skills. Exit interviews did not provide clear answers as to the reasons why these members of staff left or whether the difficulties with the ERP system accounted as one of these reasons.

·       There was a failure to provide reports to the Audit, Standards and Governance Committee on progress in the implementation of the ERP system.

The Chairman highlighted that the Council was fully cooperative in allowing this investigation to be undertaken and that no culture issues were identified as part of the review that were deemed to contribute to the failures associated with the ERP system implementation. The Chairman took the opportunity to thank Officers involved in the review for their effort in helping Members to access and scrutinise such an amount of documentation.

The Chairman reported that the recommendations of the Audit Task Group were split into two with the ten recommendations relating to general improvements that the Council should be making in its management of projects and a further five recommendations relating specifically to the ERP system.

Following the presentation of the Audit Task Group Final Report, Officers and Members discussed the report and the following was noted:

·       The Head of Worcestershire Internal Audit Shared Service noted that the observations contained in the Audit Task Group report were accurate and correlated with the issues known to internal audit.

·       The External Auditor commented that the Audit Task Group report represented a step in the direction of fulfilling one of the five key recommendations issued by the auditors as part of the Section 24 Notice, which related to undertaking a comprehensive review of the financial ledger implementation and ensuring lessons were learned for future key projects.

·       The Interim Director of Finance commented that the process of submitting the Accounts for 2021/22 was expected to be more challenging than for 2020/21. This was as the amounts held in suspense would need to be reconciled for the full 52 weeks for 2021/22 whereas this was an issue for only the last 6 weeks of 2020/21 as the Council moved to the new ERP system on 8^th February 2021.

·       It was explained that the Council had not faced financial penalties due to late submissions of Accounts. However, Section 24 Notice represented a reputational damage to the Council. If a public interest report was issued to the Council, this would represent an even more severe reputational damage. It was highlighted that whilst there were no direct financial penalties, the Council would likely face an increase in the audit fee charge as a result of additional work required to audit Council’s accounts.

RESOLVED that the Audit Task Group Final Report be approved and that the Report and its recommendations be submitted for consideration by Cabinet at its next meeting.