Agenda item

(To receive an update from Fiona Thompson, Service Manager – People, which updates the Committee on the latest situation with the payroll function)

Consideration was given to a report which provided the Audit Committee with an up-to-date briefing on the payroll position and the steps being taken to address any risk of an inaccurate payroll. 

Members were guided through the report and it was highlighted that since March 2018, improvements in monthly payroll administration had continued as expected.  However, it was disappointing that there were still a number of improvement actions which required progression.  It was reported that these improvements remained the single highest priority for the People Management Service.

Members were provided with the opportunity to ask questions to the officers present in relation to the information contained within the report and some of the points raised during discussion included the following:

·         It was noted that it had gone from low to limited assurance and so there had been an improvement, but it was still far from where members would like the assurance level to be.

·         It was noted that there had been close working taking place between LCC People Management, audit colleagues and Serco and there was confidence that an appropriate plan was in place.  However, there were a significant number of actions which could be closed down once the historic pay validation (Pay Statements Project) work was completed.

·         It was expected that an improvement would be seen when the audit team returned to carry out a follow up audit, however whether this would be enough to get to a substantial level of assurance was not known.

·         It was commented that the fact that there had been improvements gave some assurance that things were moving in the right direction but the progress had been slow, and goal posts kept moving which was a worry from an assurance perspective.

·         In relation to the Pay Statements Project, there had been 2020 overpayments identified and they would all be investigated.  It was noted that just over £1million had been recovered and around £0.5million still outstanding.  However, it was expected that more would be added to the list as the validation continued.

·         The development of itemised payslips to ensure employees were better able to confirm their payments and deductions (particularly for multiple employments) was a key control, and it was a high priority to get these resolved.  Members were advised that work on this would be starting next month.

·         It was queried when error or oversight developed into fraud.  Members were advised that all issues of overpayments were the responsibility of the manager.  Monthly payroll budget reports were provided to schools prior to the payroll being run which they were required to monitor.  Schools had the responsibility to notify payroll when a member of staff left.  Where there were overpayments, there was an established process which had to be followed.  It was also noted that another set of communications was planned to go out in the coming weeks as there continued to be late notifications of leavers to the payroll service.

·         Members also queried whether the Council was at risk of sending incorrect reports to HRMC if people were being over paid, then the amounts of tax and national insurance being deducted would be incorrect.  It was noted that this would need to be processed through payroll.

·         It was noted that one issue still to be resolved was underpayments to the pension fund, and members were advised that the Council intended to make good any underpayments to the Pension Fund which were a result of the historic payroll issues.

·         Contact would be made with any ex-employees who had received an overpayment.

·         It was commented that it seemed like the Pay Statements project was a massive piece of work.  It was acknowledged that it was an extremely complex project, and that there was no other organisation that had taken on this type of project.  It was noted that the authority was expecting that it would soon be in be in a position where pay statements for fire and rescue could be issued, once assurance was provided by Serco on the final data quality checks.

·         It was noted that frequent meetings were held with the Director responsible for People Services, and additional resources had been committed to this project.

·         It was noted that 58% of the outstanding audit actions had been closed off, and 16% of the remaining actions from the 2017 and 2017 audit reports were linked to the Pay Statements Project.

·         It was queried what grounds the Committee could have for assurance, and members were advised that there was a Pay Statement Board meeting arranged with Serco for the following day.  The completion date of September/October was based on a number of decisions.  Serco had been unable to give a very analytical plan of what actions had been done.  It was noted that assurance had not been given on the Pay Statements work by the Audit Team, but Audit were engaged with the project and were in a position to monitor the direction of travel.

·         Members were advised that system fixes and workarounds were in place to prevent those types of errors which had been seen in the first couple of years from occurring.  It was also noted that a very good payroll manager was now in place which provided confidence that things would move in the right direction.

·         It was queried whether submissions to HMRC had been incorrect if pay slips had been incomplete, and whether the authority was in discussion with HMRC on this.  Members were advised that it may trigger a compliance visit, however, HMRC had risk assessed the authority as low.  It was also noted that HMRC officers had visited the Council to speak with the County Finance Officer prior to Christmas, but this was mainly regarding VAT.

·         Members were re-assured that employees who were leaving were not continuing to be paid as there were now manual controls in place.  A very clear policy about the need to notify payroll of leavers was in place, as was a clear process once payroll was notified.  If payroll received late notification of leavers from the manager/school, the recovery of overpayments procedure was implemented.

·         It was noted that the recovery of overpayments involved predominantly historic payroll.

·         Members were advised that controls had been designed into the system.  However, an absolute guarantee that the controls were working effectively could not be given at this time.

·         It was queried whether the number of mis-payments which had been resolved could instead be shown as a figure rather than a percentage.

·         It was noted that the assurance opinion was a judgement made by internal audit.  When it was first assessed, the low opinion was very low, but it was noted that the assurance had just tipped into limited and that now key progress was being made and it was felt that there was sufficient evidence of that progress to move to limited.

·         It was noted that a lot of issues were related to getting the system controls tightened up, but also a big issue had been dealing with the historic cases.

·         It was queried when the Committee could expect another payroll report and members were informed that officers were due to report back in September.  However, it was suggested whether the November meeting would be a more realistic target.

·         It was noted that there was some information and data which could be provided to the Committee on trends to reflect the reductions seen in the number of payroll errors.

RESOLVED

            That the report be noted and the Committee be provided with statistical information as part of the update to the September meeting.