Internal Audit Report HIGHWAYS CONTRACT MANAGEMENT …

Internal Audit & Risk delivering for

1

Internal Audit Report

HIGHWAYS CONTRACT MANAGEMENT

Client - Duncan Sharkey, Director of

Place

Governance Opinion

Adequacy of System Substantial

Compliance Good

Organisational Impact Moderate

Report Issued 05/01/18

Follow Up due 05/07/18

Audit Committee schedule 30/01/18

APPENDIX D


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Executive Summary

1 Background

1.1 As part of the 2017/18 Audit Plan an audit was undertaken on the contract management

of the Highways, Street Lighting and Network Infrastructure contract (‘highways

contract’). The contract management function is undertaken by the Highways Client

Services Manager, with the support of 5 team managers (and other staff) managing

specific works undertaken by the contractor such as Bridges, Street Lighting, traffic

schemes, etc.

1.2 Highway infrastructure is the Council’s most valuable asset, providing a transportation

network for both businesses and individuals, and is key to supporting the 5 main themes

of the Council's Corporate Plan.

1.3 In April 2014 the Council entered into a 7 year Term Service Contract with Ringway

Infrastructure Services Limited (‘Ringway’). The contract includes the possibility of

contractual extensions up to the maximum term of 10 years. The Contract value over the

full 10 years was for a maximum of £200M depending on Capital schemes and other

works (Cabinet report 27/11/13 refers).

1.4 The service commissioned an external consultant (Jimmie Connolly Consulting Ltd) to

review contract management (i.e. to provide a completely independent review) and a

report was issued in March 2017. The consultant concluded that “in general, the contract

is well managed, performing as required and self-monitoring of the Contactor, Ringway, is

adequate”. This audit seeks to build on the work done by the consultant (rather than

duplicate it), and will follow up on the progress to implement the recommendations

made.

1.5 A further independent review has also recently been commissioned by the service to

inform the contract extension decision (report expected shortly). This review has been

undertaken by a Highways and Transport specialist who has a good understanding of

NEC3 term contracts.

1.6 The service processes works orders through its Confirm system (infrastructure

management system capturing details of each asset) which links with Ringways IT system.

Both Highways and Ringway staff have access to Confirm.

2 Audit Approach / Scope and Key Risks

2.1 The objectives of this audit were to review that:


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• There is effective implementation/progress of the agreed recommendations stated

within the ‘Strategic Review of Term Service Contract for Highways, Street Lighting

and Network Infrastructure’ report dated 31/03/17 (Consultants Review).

• Contractual Key Performance Indictors (KPIs) are fit for purpose, checked for

integrity, regularly monitored, concerns are raised with the contractor and

improvement action taken (KPIs).

• There is appropriate management monitoring of the budget and effective controls

over income and expenditure (Finances).

� That plans to strategically review the contract are in place (contract end date is

31/03/20 with an option to extend for a further 3 years.

2.2 The audit was primarily based on discussions with key officers, reviews of relevant

documentation and examination of performance/activity reports. Limited compliance

testing was undertaken to provide assurance that internal controls are operating as

described (testing focussed on this financial year).

2.3 Contract spend (actuals) is detailed below:

Financial Year £million

2014/15 £14.9

2015/16 £18.3

2016/17 £21.4

2017/18 (Apr – Sept 17) £12.3

2.4 The service maintains:

Key Asset Length/Number Value

Carriageways (Roads) 1,251 kilometres £1.6 billion

Bridge Structures 763 £750 million

Porte Cocheres 280 £16.8 million

Street lights 56,000 £156 million

Road Gullies 61,000 £30 million

Footways and Redways 1,860 £330 million

Road Gullies 61,000 £30 million

2.5 Project management was not reviewed in this audit (projects are subject to separate

audits and gateway reviews; the Portfolio Office and various Project/Programme Boards

also provide challenge and oversight).


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2.6 Within the Council Plan Highways is identified as a: Key Priority – “Highways

(acknowledging the importance of our road network, to review the Council’s pothole

policy and approach to road/pathway maintenance).”

2.7 Corporate Risks:

• Medium Term Financial Challenge

• Organisational capacity at a time of increasing demand and declining resources

• Planning for cohesive growth

• Reliance on partnerships to deliver key outcomes


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3 Internal Audit Opinion and Main Conclusions

3.1 Main conclusions

Adequacy of System: SUBSTANTIAL

Compliance: GOOD

Organisational Impact: MINOR

3.2 This audit provides a high level contract management review. The awaited independent

Highways and Transport contractor’s report (critical friend) is expected to provide a more

specialist/deep dive review.

3.3 Contract management was found to be robust and well embedded. Although the auditor

did not speak to Ringway staff, all MKC Highways staff interviewed during the course of

the audit reported that they had very good relationships with contractor staff. Team

managers have a good general understanding of the contract and the client officer had

significant knowledge of the contract, resulting in the smooth running of services.

Although the audit report includes a number of recommendations the overall success of

the contract to date is to be commended.

3.4 It is pleasing to note that the vast majority of the independent consultant’s

recommendations (report dated 31/03/17) have now been implemented.

3.5 Work is currently underway to inform the report that is to be issued to Cabinet members

for the January meeting that will discuss the contract extension/retender. This includes

benchmarking and KPI data.

3.6 Plans are in place to review KPIs in January 2018 (this is a review by both the service and

Ringway to review measures and contractual targets). Improvements are being discussed

but KPIs are generally considered fit for purpose. Where KPIs were not hitting target,

action plans were in place. A monthly performance dashboard is produced. However, the

dashboard and performance report formats could be further improved to enable clearer

reporting and the resulting challenge at operational and strategic meetings.

3.7 A detailed spreadsheet has been developed to aid the payments validation/approval

process. A further spreadsheet assists with forecasting (‘budget tracker’). These are both

produced monthly for review by Budget Managers and Project Managers, providing

clarity and visibility around costs.


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3.8 The audit determined that there is an over-reliance on information provided by the

contractor where no (sample) testing had been completed to verify data/information

provided by them (these all have financial implications). This included:

• KPIs (validation checks need to be extended to cover more areas

• Annual inflation cost adjustments

• Overheads

• Actual cost validations (open book accounting)

• Schedule of Rates price adjustments

• Verifying correct procurement processes undertaken (correct numbers of

quotes/tenders received for subcontracted works)

Note: Officers stated that plans were in place prior to the audit to commence some

checks.

3.9 Confirm system access reports were not available within audit timescales; this is to be

picked up by an external consultant and the service will then review access controls.

3.10 Main recommendations

Based on the work undertaken we have made recommendations in the following areas:

• Provide further challenge of Ringways costs, such as overheads, RPI increase/decrease

figures, cost reviews (open book process), etc.

• Review KPIs and extend checking of performance reported by Ringway.

• Improve performance reports to enable greater focus on areas needing improvement

• Ensure Ringway comply with procurement requirements for sub contracted works (or

record reasons why this is not possible)

• Improve access controls on Confirm

Detailed agreed actions are listed within the Management Action Plan (MAP) at the end of

this report.


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DETAILED FINDINGS

4 Control Objective (1) - There is effective implementation/progress of the agreed

recommendations stated within the ‘Strategic Review of Term Service Contract for

Highways, Street Lighting and Network Infrastructure’ report dated 31/03/17

Consultants Review).

Governance System Not applicable

Compliance Substantial

Organisational Impact Minor

4.1 The report included a total of 33 recommendations. One of these recommendations

concerned following up unanswered emails and questions – as no recommendations

were specifically made for these they have not been included in this section.

4.2 There was evidence that the vast majority of these had been implemented/progress

made. Where (part) recommendations had not been implemented the service gave

reasonable explanations why, or had made other changes to mitigate risks.

4.3 Only one recommendation from the report remains outstanding. This concerns the

agreement of overheads (the contract provides for this to be done six monthly).

Overheads for 15/16 and 16/17 had been reviewed by Finance but further data had been

requested to ensure that only allowable costs were included (estimated costs are paid

monthly). See Management Action Plan 1.

4.4 A further recommendation was that the appointment of a quantity surveyor should be

considered to provide more focussed contractual and commercial input; The service are

currently looking to do this.

5 Control Objective (2) – Key Performance Indicators are fit for purpose, checked for

integrity, regularly monitored, concerns are raised with the contractor and

improvement action taken (KPIs).

Governance System Substantial

Compliance Good


5.1 The contract provides for an annual or six monthly review (annual review has been

selected). KPIs are currently being reviewed (workshop being held in January alongside


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Target Cost workshops). The aim of the review is to ensure KPIs are locally focussed,

rather than simply applying the 12 Midlands Highways Alliance (MHA) KPIs.

Note: There is also no KPI for social value yet this was a key objective within the contract

and there are no sub-contractor KPIs (recommended by the consultant).

5.2 KPIs were found to be fit for purpose (21 in total). For example:

• 12 were for benchmarking purpose (providing comparisons with similar local

authorities under the MHA); whilst 9 were local performance measures (specific to

MKC needs)

• 14 were monthly indicators (therefore providing timely measurement); 6 were

annual (1 internal culture/effectiveness survey and 5 externally sourced surveys -

road condition surveys and a customer survey); 1 was seasonal (winter

maintenance)

• 1 new KPI had been introduced for customer enquiries (demonstrating

review/improvement); others had minor changes (contract change note issued in

June 2016)

• There was evidence that targets had been reviewed (made more or less challenging,

as appropriate)

• 1 KPI had been selected as a corporate performance measure, and is reported to

Overview & Scruting Planning Committee (customer satisfaction with Highway

standards)

5.3 Ringway submits monthly KPI reports. Reports were clear (for example each KPI was RAG

rated and the target was stated against this month’s performance, last month’s

performance and year to date performance). Where KPIs do not hit target performance

an ‘Action Plan’ box is inserted into the performance report (actions were SMART).

5.4 A monthly KPI Dashboard is produced for Highways management by Ringway for

Operational Board and Strategic Board (services cover the whole of Highways, not just

Ringway performance). The dashboard has recently been changed and further changes

are planned to ensure maximum improvement. It is expected that the contract will be a

dashboard on its own.

5.5 There is an opportunity to discuss KPIs at monthly Operational Board meetings (standard

agenda item) and at the quarterly Strategic Board meetings. The Midlands Highways

Alliance (MHA - local authority group) KPIs feed upwards for comparison1; the service

reports that MKC KPIs are among the top performing in the group – details are to be

reported to Cabinet shortly. Further benchmarking opportunities continue to be

developed (including value for money workshops).

1 The MHA is also currently reviewing its KPIs (including clearer definitions regarding their

calculation). This will feed into the MKC KPI review in January.


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5.6 Further benchmarking of KPIs is being undertaken for the January 18 Cabinet report (see

Control Objective 4, Contract Extension).

5.7 Review of the dashboard and Performance report noted:

• Some KPIs regularly did not hit target.

• Performance reports included details of specific jobs where it was not possible to

hit target for a valid reason

• Month on month performance is not easy to decipher on the dashboard (year to

date averages are stated and improvement from the previous month shows as

green – even where it fails the target).

• Target figures are not stated on the dashboard (although they are on Performance

reports)

• There are some measures where no target appears to have been set (such as annual

highway condition)

• Some annual KPIs have monthly measurements but there is no indication if this fits

expected trends and target is expected to be achieved (if trend is below that

expected then action may need to be taken to improve performance)

• It was not always clear others

It is noted that work to improve the dashboard and associated KPIs was ongoing prior to

the audit. However, the focus needs to be on failing KPIs and the action being

taken/planned to improve them – to find this out the reader has to wade through reams

of information and data. See Management Action Plan 5.

5.8 KPI good/poor performance feeds into the ‘pain/gain’ mechanism (see Control Objective

3, Finances).

5.9 KPI validation checks have improved/received new focus since the appointment of a new

Highways Programme and Performance Manager being appointed from 21/08/17. Since

then detailed checks have commenced on two KPIs in particular. It is expected that these

checks will be expanded into other areas in the near future. See Management Action

Plan 6.

5.10 The contract includes the production of a ‘Yearly Term Report’ but this has not been

provided by Ringway. This report should be approved by the Operational Board prior to

the commencement of each year (2consists of Performance Management Plan, Budget

Plan, Service Delivery Plan and Resource Plan). See Management Action Plan 7.

2 See contract volume 2, para 13 Contract Management.


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6 Control Objective (3) - There is appropriate management monitoring of the budget and

effective controls over income and expenditure (Finances).


Compliance Satisfactory


6.1 The total ‘gain’ (savings) provided by the contract for 16/17 was calculated at £1.139m

(contractor’s share was £522.5K based on a KPI calculation score of 95%, with a 10%

reduction for this). At the time of the audit final sign off had not yet been agreed by all

budget managers.

6.2 The contract is an ‘open book’ contract whereby MKC can interrogate Ringway’s financial

data to validate costs. However, in practice Highways staff do not have access to

Ringway’s financial system3 and no in depth cost validation/interrogation exercise is

undertaken (total cost data is downloaded by the accountant but this is for payment

purposes only). See Management Action Plan 3.

Note: This review is different to the monthly application process – it is a review of

Ringway’s actual costs which lead into payments and the pain/gain calculation.

6.3 All highways, street lighting and infrastructure works are now directed to Ringway under

the terms of the contract (the capital spend programme is approved and monitored by

Cabinet). Specialist works are sub-contracted (this particularly applies for bridges) and

Ringway are expected to obtain 3 quotes for higher value works. However, audit testing

of 2 such works determined that only 1 quote had been provided to MKC officers; the

values of these works were £605K and £186K. See Management Action Plan 4.

6.4 No market testing has been completed to ensure that works undertaken by Ringway

remain competitive (5.5 refers). See Management Action Plan 8.

6.5 The Senior Finance Business Partner meets with Budget Managers on a monthly basis

(and BPC is regularly updated to reflect discussions/decisions). She reported to audit that

revenue and capital expenditure (including savings targets) is on-track to be within

budget although there are some pressures for street lighting energy costs and severe

weather allocation (a £200K reserve is available for this).

6.6 There are currently c100 users of the highways management system Confirm (which

include a number of Ringway staff), with 13 different group permissions. Audit review

identified some users who had left the Council. Details of the permissions within each

group was requested so that testing could be undertaken on permissions and system

3 Ringway have recently improved their system security so that access can now be enabled

(network controls improved by introducing a virtual private network). There is an opportunity to raise cost queries on an ongoing basis and at Commercial meetings.


11

controls within those groups (such as separation of duties) but this was not provided

within timescales needed for the audit. See Management Action Plan 2. However, an

officer has been appointed with responsibility to manage this.

Each month a detailed spreadsheet is created from Ringway’s proposed payment

schedule by the Accountant (Resources Directorate) to provide information to budget

managers for validation/checking purposes. Whilst this spreadsheet provides a valuable

tool it is relatively complicated to generate by someone not experienced with the process

(risk of IT issues, errors not detected, etc.) and therefore creates risks when the key

officer is absent from work. Without further training no other person in the team could

currently undertake this task in his absence. See Management Action Plan 9.

Note: Order and variation data is not provided on this spreadsheet – to view this

information officers must refer to the Budget Tracker (separate spreadsheet – see below).

Variations are also not input on Confirm.

6.7 A further key control is the Budget Tracker spreadsheet. This is created by Ringway

shortly after the payments application is received and enables project leads and budget

managers to interrogate latest cost information on a team by team and project by project

basis. This spreadsheet is the process by which pain/gain payments are calculated.

6.8 Inflation adjustments (‘inflation indices’): The contract provides for annual price increases

which Ringway have applied but the information requested to verify these has not been

received (different percentages both positive and negative apply to different

workstreams). See Management Action Plan 10.

6.9 Final calculations for overhead costs are currently being agreed (Management Action Plan

1 refers).

6.10 See also 5.10 regarding the annual Term Alliance Plan (Management Action Plan 7 refers).

7 Control Objective (4) - Plans to strategically review the contract are in place

4 (Contract

Review)


Compliance Good


4 Contract end date is 31/03/20 with an option to extend for a further 3 x yearly

extensions.


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7.1 The contract provides for extensions to be considered at the end of years 3, 5 and 7

(these are for periods beyond 31/03/20). The year 3 review is being reported to Cabinet

in January 2018 (on forward plan).

7.2 Work is currently being undertaken to inform this decision including further

benchmarking (for example with other local authorities who have similar contracts with

Ringway) and value for money information.

7.3 One condition for contract extension is that expenditure does not exceed £200m over the

10 year contract lifecycle. This is currently not forecasted. Total spend for 2016/17 was

£21.4m. See Management Action Plan 11.5

7.4 Six KPIs relate to the contract extension; five of these have been met; one relates to

street lighting which has slightly underperformed.

7.5 The service has commissioned a critical friend review. This report will inform the review

(going forward this will done annually).

7.6 Value for money is being reviewed as part of a project with Cranfield University and the

Service Director.

7.7 The efficiency of the contract will be monitored by the Strategic Board on an ongoing

basis.

8 The Management Action Plan also includes some additional issues of a more general

nature or where they do not fit strictly within the aforementioned control objectives

(General Comments).

8.1 Issues included:

• Limited Client Officer resource

• Absence of Contract Management Plan

• Lack of recording of contract risks

• No reports available to provide management oversight of 10% work inspections

Lease and licence by Ringway for occupation of depot still not signed (legal discussions

continue).

See Management Action Plan 12-17.

5 See 2.3 for details of increasing annual spend.

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an

d

reco

rds

ke

pt

of

che

cks

ma

de

(a

nd

fin

din

gs)

.

Fu

rth

er

con

sid

era

tio

n w

ill

be

giv

en

to

em

plo

yin

g/a

pp

oin

tin

g a

Qu

an

tity

Su

rve

yo

r to

do

this

.

Ag

ree

d

Th

is i

s a

bu

dg

et

ho

lde

r/p

roje

ct

ma

na

ge

rs

resp

on

sib

ilit

y.6

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r/

Se

nio

r

Fin

an

ce

Bu

sin

ess

Pa

rtn

er

(fo

r a

ctio

n

By F

ina

nce

Bu

sin

ess

Pa

rtn

er)

31

/01

/18

(on

go

ing

)

6 C

ert

ain

fin

an

cia

l in

form

ati

on

is

on

ly v

isib

le t

o M

KC

Fin

an

ce p

art

ne

r a

nd

He

ad

of

Se

rvic

e d

ue

to

co

nfi

de

nti

ali

ty/D

ata

Pro

tect

ion

.

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

15

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

4.

Fin

an

ce –

qu

ote

s fo

r su

b-c

on

tra

cte

d s

pe

cia

list

wo

rks

Pro

ced

ure

s re

qu

ire

th

at

3 t

en

de

rs/q

uo

tes

are

re

ceiv

ed

fo

r

sub

-co

ntr

act

ed

wo

rks.

Te

stin

g o

f tw

o s

uch

wo

rks

de

term

ine

d o

nly

on

e q

uo

te w

as

rece

ive

d b

y M

KC

off

ice

rs

(wo

rks

va

lue

d £

18

6K

an

d 6

05

K).

RIS

K:

Be

st v

alu

e n

ot

ob

tain

ed

.

Imp

ort

an

t

Pu

rch

asi

ng

re

qu

ire

me

nts

to

be

cla

rifi

ed

(fo

r

bo

th R

ing

wa

y a

nd

MK

C o

ffic

ers

).

Off

ice

rs m

ust

en

sure

th

at

Rin

gw

ay a

dh

ere

to

ag

ree

d p

urc

ha

sin

g p

roce

du

res

be

fore

ord

ers

are

com

mit

ted

.

If t

he

re i

s a

re

aso

n f

or

no

t fo

llo

win

g p

roce

sse

s

the

n t

his

wil

l b

e c

lea

rly r

eco

rde

d a

nd

au

tho

rise

d

by t

he

He

ad

of

Hig

hw

ays.

Qu

ote

s/te

nd

ers

mu

st b

e o

bta

ine

d a

nd

ke

pt

on

file

.

Ag

ree

d

Co

mm

issi

on

ing

role

be

ing

revie

we

d.

Re

info

rce

thro

ug

h t

arg

et

cost

s a

nd

com

mis

sio

nin

g

wo

rksh

op

s.

He

ad

of

Hig

hw

ays

Imm

ed

iate

ly

5.

KP

Is –

fo

cus

of

pe

rfo

rma

nce

re

po

rt a

nd

da

shb

oa

rd

Th

e p

erf

orm

an

ce r

ep

ort

an

d t

he

da

shb

oa

rd i

ncl

ud

e m

an

y

KP

Is w

ith

su

pp

ort

ing

da

ta a

nd

in

form

ati

on

. It

is

no

t e

asy

to id

en

tify

ke

y i

ssu

es

in o

rde

r to

fo

cus

att

en

tio

n o

n

imp

rove

me

nt.

Sta

nd

ard

Fa

ilin

g K

PIs

an

d k

ey i

ssu

es

wil

l b

e m

ad

e c

lea

rer

wit

hin

ke

y r

ep

ort

s so

th

at

ma

na

ge

me

nt

can

focu

s o

n c

ha

lle

ng

e,

sup

po

rt a

nd

im

pro

ve

me

nt.

De

ve

lop

me

nt

of

serv

ice

are

a d

ash

bo

ard

s fo

r

sha

rin

g w

ith

se

nio

r m

an

ag

em

en

t.

Wh

ere

po

ssib

le,

an

nu

al K

PIs

wil

l b

e f

ore

cast

ed

(fo

r e

xam

ple

aft

er

mid

-ye

ar

po

int)

.

Ag

ree

d

On

go

ing

de

ve

lop

me

nt

of

da

shb

oa

rds

to

en

sure

use

of

bu

sin

ess

inte

llig

en

ce

info

rma

tio

n in

uti

lise

d t

o e

nsu

re

serv

ice

imp

rove

me

nts

are

re

ali

sed

.

He

ad

of

Hig

hw

ays

(Pe

rfo

rma

nce

Ma

na

ge

r)

31

/03

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

16

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

6.

KP

Is –

va

lid

ati

on

ch

eck

s

So

me

va

lid

ati

on

ch

eck

s a

re c

om

ple

ted

to

ve

rify

th

e

acc

ura

cy o

f K

PI

rep

ort

ing

fro

m R

ing

wa

y a

nd

th

ere

are

pla

ns

to f

urt

he

r e

xte

nd

th

ese

(a

ne

w p

ost

ho

lde

r h

as

rece

ntl

y b

ee

n a

pp

oin

ted

to

th

e H

igh

wa

ys

Pro

gra

mm

e a

nd

Pe

rfo

rma

nce

Ma

na

ge

r p

ost

).

Ris

k:

KP

Is a

re r

ep

ort

ed

in

corr

ect

ly a

nd

de

cisi

on

s m

ad

e (

or

lack

of

act

ion

) re

lati

ng

to

th

ese

ma

y b

e w

ron

g/n

ot

ap

pro

pri

ate

.

Sta

nd

ard

KP

I va

lid

ati

on

ch

eck

s w

ill

be

exp

an

de

d t

o c

ove

r

mo

re K

PIs

(w

he

re a

pp

rop

ria

te).

No

te:

Wh

ere

it

is f

ou

nd

th

at

reli

an

ce c

an

be

pla

ced

on

re

po

rte

d f

igu

res

the

n l

ess

ch

eck

s ca

n

be

ap

pli

ed

; ch

eck

s ca

n a

lso

be

ch

an

ge

d f

rom

mo

nth

to

mo

nth

(sa

mp

le c

he

cks

com

ple

ted

,

va

ryin

g t

he

KP

Is c

he

cke

d e

ach

mo

nth

).

Ag

ree

d

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

(Hig

hw

ays

Pe

rfo

rma

nce

Ma

na

ge

r)

28

/02

/18

7.

Fin

an

ce &

KP

Is –

Ye

arl

y T

erm

Re

po

rt

No

‘Y

ea

rly T

erm

Re

po

rt’

is c

urr

en

tly p

rod

uce

d (

con

sist

s o

f

Pe

rfo

rma

nce

Ma

na

ge

me

nt

Pla

n,

Bu

dg

et

Pla

n,

Se

rvic

e

De

live

ry P

lan

an

d R

eso

urc

e P

lan

).

RIS

K:

Op

po

rtu

nit

y l

ost

wh

ere

by a

use

ful to

ol is

no

t u

tili

sed

to r

efl

ect

on

pa

st p

erf

orm

an

ce a

nd

lo

ok t

o t

he

fu

ture

(im

pro

ve

d m

an

ag

em

en

t in

form

ati

on

an

d c

o-o

rdin

ati

on

of

pla

ns)

.

Sta

nd

ard

An

an

nu

al

‘Sta

te o

f th

e N

ati

on

’ re

po

rt t

o b

e

pro

du

ced

an

d r

evie

we

d b

y S

tra

teg

ic B

oa

rd

(le

ad

ing

in

to f

utu

re c

on

tra

ct e

xte

nsi

on

re

vie

ws)

.

Ag

ree

d

“Lit

e v

ers

ion

” to

be

de

ve

lop

ed

fo

r

17

/18

wit

h a

vie

w

to f

urt

he

r

de

ve

lop

me

nt

for

18

/19

(R

ing

wa

y

to p

rod

uce

).

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

31

/03

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

17

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

8.

Fin

an

ces

– m

ark

et

test

ing

All

hig

hw

ays,

str

ee

t li

gh

tin

g a

nd

in

fra

stru

ctu

re w

ork

s a

re

dir

ect

ed

to

Rin

gw

ay u

nd

er

the

te

rms

of

the

co

ntr

act

. N

o

ma

rke

t te

stin

g h

as

be

en

co

mp

lete

d t

o e

nsu

re R

ing

wa

y’s

cost

s re

ma

in c

om

pe

titi

ve o

ve

r ti

me

.

Ho

we

ve

r, t

he

cli

en

t o

ffic

er

ga

ve

th

e a

ud

ito

r a

ssu

ran

ce

tha

t co

sts

are

re

gu

larl

y e

xam

ine

d a

nd

te

ste

d w

he

re n

ot

tho

ug

ht

to b

e b

est

va

lue

(n

o r

eco

rds

ma

inta

ine

d).

Ris

k:

Va

lue

fo

r m

on

ey n

ot

ob

tain

ed

.

Sta

nd

ard

Ma

rke

t te

stin

g w

ill b

e c

om

ple

ted

on

a r

an

do

m

sam

ple

of

wo

rks/

pro

ject

s th

rou

gh

ou

t fu

ture

ye

ars

to

en

sure

Rin

gw

ay’s

pri

ces

rem

ain

com

pe

titi

ve

.

No

te:

Inte

rna

l V

fm e

xerc

ise

to

be

un

de

rta

ke

n i

n

lin

e w

ith

Cra

nfi

eld

wo

rk (

wit

h i

np

ut

fro

m S

erv

ice

Dir

ect

or)

an

d B

uck

s b

en

chm

ark

ing

in

itia

tive

t0

be

fo

llo

we

d u

p.

Ag

ree

d h

ow

eve

r

this

is

on

ly y

ea

r 3

of

a t

en

de

red

con

tra

ct i

n t

he

op

en

; w

e w

ou

ld

exp

ect

to

sta

rt a

form

al p

roce

ss in

lin

e w

ith

pro

cure

me

nt

stra

teg

y f

or

the

con

tra

ct.

Als

o w

e

ma

inta

in a

Sa

vin

gs

an

d

Eff

icie

nci

es

reg

iste

r.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

31

/03

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

18

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

9.

Fin

an

ces

– p

ay

me

nts

sch

ed

ule

A p

aym

en

ts s

che

du

le i

s cr

ea

ted

by t

he

Acc

ou

nta

nt

to

acc

om

pa

ny a

nd

sh

ow

Rin

gw

ay’s

mo

nth

ly in

vo

ice

sum

ma

ry b

rea

kd

ow

n f

igu

res

(an

d p

rovid

e c

ost

co

de

fin

an

cia

l d

ata

).

Th

ere

are

no

pro

cess

no

tes

do

cum

en

tin

g h

ow

to

cre

ate

the

sp

rea

dsh

ee

t. A

lth

ou

gh

th

e S

en

ior

Fin

an

ce B

usi

ne

ss

Pa

rtn

er

ha

s a

su

mm

ary

kn

ow

led

ge

of

the

pa

ym

en

t

sch

ed

ule

, a

de

tail

ed

kn

ow

led

ge

is

req

uir

ed

to

un

de

rta

ke

the

pro

cess

.

Fu

rth

erm

ore

th

e s

pre

ad

she

et

do

es

no

t p

rovid

e o

rde

r a

nd

va

ria

tio

n d

ata

/in

form

ati

on

to

en

ab

le t

he

act

ua

l co

sts

to

be

co

mp

are

d a

ga

inst

th

ese

(th

is n

ece

ssit

ate

s th

e o

ffic

er

loo

kin

g d

eta

ils

up

on

Rin

gw

ay’s

Bu

dg

et

Tra

cke

r

spre

ad

she

et)

.

Co

st v

ari

ati

on

s a

re n

ot

inp

ut

on

Co

nfi

rm.

Ris

k:

Err

ors

, o

ve

r p

aym

en

ts,

pa

ym

en

t d

ela

ys.

La

ck o

f

vis

ibil

ity a

rou

nd

ord

er

an

d a

ctu

al

cost

.

Sta

nd

ard

Th

e c

on

sult

an

t b

ein

g e

mp

loye

d t

o a

ssis

t w

ith

Co

nfi

rm i

mp

rove

me

nts

wil

l b

e r

eq

ue

ste

d if

an

alt

ern

ati

ve

fix

ca

n b

e c

rea

ted

fo

r th

e m

on

thly

pa

ym

en

ts s

pre

ad

she

et

ge

ne

rate

d b

y t

he

Acc

ou

nta

nt

(co

sts

wil

l n

ee

d t

o b

e t

ake

n i

nto

acc

ou

nt)

.

At

the

ve

ry l

ea

st o

rde

r a

nd

va

ria

tio

n d

ata

sh

ou

ld

be

in

clu

de

d in

th

e C

on

firm

re

po

rt d

ow

nlo

ad

ed

into

th

is s

pre

ad

she

et.

Th

e p

roce

ss u

sed

to

cre

ate

th

e s

pre

ad

she

et

wil

l

be

do

cum

en

ted

to

en

ab

le t

he

pro

cess

to

be

(bro

ad

ly)

foll

ow

ed

in

th

e a

bse

nce

of

the

ke

y

off

ice

r. F

urt

he

rmo

re,

a s

eco

nd

off

ice

r w

ill b

e

tra

ine

d t

o c

arr

y o

ut

this

ta

sk.

Go

ing

fo

rwa

rds,

va

ria

tio

n d

ata

wil

l b

e r

eco

rde

d

an

d m

ain

tain

ed

in

Co

nfi

rm.

Ag

ree

d.

Re

qu

ire

s fu

rth

er

inte

rro

ga

tio

n/e

xp

lan

ati

on

of

pro

cess

to

un

de

rsta

nd

if

a

lea

ne

r p

roce

ss

can

be

cre

ate

d.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

An

d

Se

nio

r

Fin

an

ce

Bu

sin

ess

Pa

rtn

er

(fo

r a

ctio

n b

y

Fin

an

ce

Bu

sin

ess

Pa

rtn

er)

31

/03

/18

10.

Fin

an

ces

– a

nn

ua

l in

fla

tio

n i

ncr

ea

ses

Infl

ati

on

in

cre

ase

s h

ave

be

en

ap

pli

ed

by

Rin

gw

ay b

ut

the

se h

ave

no

t b

ee

n s

am

ple

ch

eck

ed

by a

n M

KC

off

ice

r.

RIS

K:

ove

r/u

nd

er

pa

ym

en

ts.

Sta

nd

ard

Ch

eck

s w

ill

be

ap

pli

ed

on

a s

am

ple

ba

sis

to

en

sure

th

at

infl

ati

on

co

sts

ha

ve

be

en

co

rre

ctly

ap

pli

ed

.

In f

utu

re t

his

wil

l b

e d

on

e a

nn

ua

lly,

as

incr

ea

ses

are

ap

pli

ed

.

Ag

ree

d

(QS

ma

y d

o in

futu

re)

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

(wit

h

ass

ista

nce

fro

m F

ina

nce

if r

eq

uir

ed

)

28

/02

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

19

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

11.

Fin

an

ces

– m

on

ito

rin

g t

ota

l co

ntr

act

va

lue

Th

ere

is

no

pro

cess

in

pla

ce t

o m

on

ito

r to

tal sp

en

d o

n t

he

con

tra

ct t

o e

nsu

re i

t d

oe

s n

ot

exc

ee

d t

he

£2

00

m o

ve

r it

s

10

ye

ar

life

. T

ota

l sp

en

d f

or

20

16

/17

wa

s £

21

.4m

.

RIS

K:

Th

e a

uth

ori

ty w

ou

ld b

e o

pe

n t

o l

eg

al ch

all

en

ge

as

it

is n

ot

op

era

tin

g t

o t

erm

s is

sue

d i

n t

he

OJE

U n

oti

ce.

No

te:

Mo

nth

ly a

pp

lica

tio

n s

tate

s cu

mu

lati

ve

co

ntr

act

spe

nd

Sta

nd

ard

Co

ntr

act

sp

en

d w

ill

be

mo

nit

ore

d t

o a

lert

th

e

He

ad

of

Hig

hw

ays

if i

t is

exp

ect

ed

to

exc

ee

d t

he

£2

00

m o

ve

r 1

0 y

ea

rs a

s a

dve

rtis

ed

un

de

r O

JEU

rule

s.

Ag

ree

d.

Th

is i

s vis

ible

bu

t

no

t fo

rma

lly

rep

ort

ed

. It

co

uld

be

in

clu

de

d in

ye

ar

en

d r

ep

ort

.

Ad

vis

e t

o b

e s

ort

fro

m

Pro

cure

me

nt/

Leg

al

tea

ms.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

31

/03

/18

12.

Ge

ne

ral

Co

mm

en

t –

cli

en

t o

ffic

er

reso

urc

e

Du

rin

g t

he

au

dit

th

e H

igh

wa

ys

Se

rvic

es

Cli

en

t M

an

ag

er

sta

ted

th

at

he

ha

d i

nsu

ffic

ien

t ti

me

to

fu

lly d

isch

arg

e a

ll

resp

on

sib

ilit

ies

con

cern

ing

co

ntr

act

ma

na

ge

me

nt

(he

is

als

o t

ea

m m

an

ag

er

for

Hig

hw

ays)

.

Co

nsi

de

rati

on

is

be

ing

giv

en

to

ap

po

inti

ng

a d

ep

uty

/cli

en

t

off

ice

r. T

his

off

ice

r ca

n a

ssis

t a

nd

als

o c

ove

r fo

r th

e C

lie

nt

Ma

na

ge

r in

his

ab

sen

ce.

RIS

K:

Se

rvic

es

no

t p

rovid

ed

to

sta

nd

ard

s re

qu

ire

d b

y

con

tra

ct,

pa

ym

en

t q

ue

rie

s n

ot

reso

lve

d,

etc

. (l

ea

din

g t

o

po

or

con

tra

cto

r re

lati

on

ship

s a

nd

cu

sto

me

r

dis

sati

sfa

ctio

n).

Sta

nd

ard

Re

sili

en

ce i

ssu

es

con

cern

ing

th

e H

igh

wa

ys

Se

rvic

es

Cli

en

t M

an

ag

er

wil

l b

e r

eso

lve

d.

Ag

ree

d.

Hig

hw

ays

Pe

rfo

rma

nce

Ma

na

ge

r is

be

ing

tra

ine

d.

Ne

w s

tru

ctu

re

wil

l p

rovid

e t

his

ad

dit

ion

al

sup

po

rt a

nd

lif

t

Cli

en

t Se

rvic

es

Ma

na

ge

r o

ut

of

hig

hw

ays

de

tail

.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

01

/04

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

20

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

13.

Ge

ne

ral

Co

mm

en

t –

Co

ntr

act

Ma

na

ge

me

nt

Pla

n

Th

e c

on

tra

ct its

elf

is

ext

rem

ely

le

ng

thy

an

d d

eta

ile

d;

the

Hig

hw

ays

Se

rvic

es

Cli

en

t M

an

ag

er

ha

s b

uil

t u

p a

va

st

de

pth

of

kn

ow

led

ge

ove

r re

cen

t ye

ars

. H

ow

eve

r, t

he

re is

curr

en

tly n

o d

ocu

me

nta

tio

n r

eco

rdin

g k

ey p

oin

ts (

for

inst

an

ce a

‘C

on

tra

ct M

an

ag

em

en

t P

lan

’ a

s re

com

me

nd

ed

by t

he

Co

rpo

rate

Pro

cure

me

nt

Te

am

).

Ris

k:

Ke

y c

on

tra

ct i

nfo

rma

tio

n i

s n

ot

reco

rde

d (

ma

de

acc

ess

ible

to

oth

ers

).

Sta

nd

ard

Ke

y i

nfo

rma

tio

n r

ela

tin

g t

o t

he

co

ntr

act

wil

l b

e

sta

ted

/cla

rifi

ed

in

a d

ocu

me

nt

to i

nfo

rm o

the

r

off

ice

rs c

arr

yin

g o

ut

the

cli

en

t o

ffic

er

role

in

th

e

ab

sen

ce o

f th

e k

ey o

ffic

er)

. T

his

in

clu

de

s w

he

re

ke

y c

on

tra

ct c

lau

ses

are

to

fo

un

d.

Pro

cess

ma

ps

to b

e in

pla

ce f

or

all

pro

cess

es.

Ag

ree

d.

“De

pa

rtm

en

tal

po

licy

an

d

pro

ced

ure

s

ma

nu

al”

to

be

wri

tte

n.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

30

/06

/18

14.

GE

NE

RA

L –

co

ntr

act

ris

ks

Th

ere

is

a r

isk m

an

ag

em

en

t p

roce

ss f

or

ind

ivid

ua

l p

roje

ct

risk

s; h

ow

eve

r, t

he

re i

s n

o r

isk r

eg

iste

r fo

r w

ide

r co

ntr

act

risk

s. F

or

inst

an

ce t

his

co

uld

in

clu

de

co

ntr

act

ext

en

sio

n/r

ete

nd

er,

cli

en

t o

ffic

er

cap

aci

ty c

on

cern

s,

resi

lie

nce

of

Acc

ou

nta

nt,

ve

rifi

cati

on

iss

ue

s (s

uch

as

ove

rhe

ad

s a

nd

in

fla

tio

n in

cre

ase

s),

etc

.

‘Str

ate

gic

ris

ks’

is

a s

tan

din

g i

tem

on

th

e S

tra

teg

ic B

oa

rd

ag

en

da

bu

t th

ese

are

no

t ca

ptu

red

an

d r

eg

ula

rly r

evie

we

d

(ris

ks

fro

m t

he

MK

C s

pe

cifi

c p

ers

pe

ctiv

e a

lso

ne

ed

con

sid

era

tio

n).

RIS

K:

Co

ntr

act

ris

ks

ma

y n

ot

be

pro

pe

rly

con

sid

ere

d a

nd

mit

iga

ted

.

Sta

nd

ard

Co

ntr

act

ris

ks

wil

l b

e f

orm

all

y r

eco

rde

d a

nd

revie

we

d a

t re

gu

lar

inte

rva

ls (

incl

ud

ing

at

Str

ate

gic

Bo

ard

).

Ag

ree

d

A r

evie

w o

f ri

sk

reg

iste

rs o

n

Gra

ce h

as

alr

ea

dy

be

en

sta

rte

d.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

31

/01

/18

In

tern

al

Au

dit

& R

isk

de

liv

eri

ng

fo

r

21

Re

f.

Issu

es

& R

isks

Ag

reed

Ac

tio

n

Man

ag

em

en

t

Co

mm

en

ts

Man

ag

er

Resp

on

sib

le

& T

arg

et

Date

15.

Ge

ne

ral

Co

mm

en

ts -

in

spe

ctio

ns

10

% o

f re

act

ive

wo

rk i

s in

spe

cte

d b

y M

KC

off

ice

rs,

an

d t

he

clie

nt

off

ice

r co

nfi

rme

d t

his

is

do

ne

(in

spe

ctio

n r

eco

rds

are

cre

ate

d m

an

ua

lly f

rom

Co

nfi

rm r

eco

rds)

. H

ow

eve

r,

the

re i

s n

o v

isib

ilit

y o

f th

is a

s n

o r

ep

ort

s a

re a

va

ila

ble

on

Co

nfi

rm.

Ris

k:

10

% i

nsp

ect

ion

s a

re n

ot

com

ple

ted

by o

ffic

ers

,

evid

en

ce o

f fi

nd

ing

s (a

nd

an

y t

ren

ds)

no

t e

asi

ly

dis

cern

ible

.

Sta

nd

ard

Insp

ect

ion

re

po

rtin

g c

ap

ab

ilit

ies

in C

on

firm

wil

l

be

in

ve

stig

ate

d b

y t

he

ext

ern

al co

nsu

lta

nt

(Da

mo

n P

ass

).

Th

is a

spe

ct c

an

th

en

be

ma

na

ge

d t

o e

nsu

re t

ha

t

the

re

qu

ire

d n

um

be

rs o

f p

ost

in

spe

ctio

ns

are

carr

ied

ou

t (a

nd

an

y tr

en

ds/

issu

es

can

be

ea

sily

ide

nti

fie

d).

Ag

ree

d

Syst

em

re

po

rt

no

w s

et

up

to

be

pro

du

ced

mo

nth

ly.

Hig

hw

ays

Cli

en

t Se

rvic

e

Ma

na

ge

r

05

/01

/18

16.

Ge

ne

ral

– l

ea

se a

nd

lic

en

ce

Th

e le

ase

an

d l

ice

nce

fo

r R

ing

wa

y’s

occ

up

ati

on

of

the

de

po

t h

as

stil

l n

ot

be

en

sig

ne

d.

RIS

K:

Th

ere

ma

y b

e le

ga

l im

pli

cati

on

s/re

spo

nsi

bil

itie

s n

ot

cla

rifi

ed

(lo

w r

isk).

Sta

nd

ard

Th

is w

ill b

e r

ais

ed

at

Str

ate

gic

Bo

ard

an

d w

ill b

e

foll

ow

ed

up

un

til

reso

lve

d.

Ag

ree

d

He

ad

of

Hig

hw

ays

31

/03

/18

17.

Ge

ne

ral

– o

rde

r a

uth

ori

sati

on

Th

ere

is

curr

en

tly n

o f

ina

nci

al

ceil

ing

fo

r o

rde

rs (

the

se a

re

pro

cess

ed

on

th

e C

on

firm

syst

em

an

d n

ot

via

SA

P).

Sta

nd

ard

Re

con

sid

er

ord

eri

ng

pro

cess

on

Co

nfi

rm t

o

en

sure

co

mp

lia

nce

wit

h S

che

du

le o

f D

ele

ga

tio

n

an

d F

ina

nci

al

Re

gu

lati

on

s.

Ag

ree

d

He

ad

of

Hig

hw

ays

31

/03

/18

AP

PE

ND

IX 1

GL

OS

SA

RY

AN

D D

EF

INIT

ION

S

22

The thre

e e

lem

ents

consid

ere

d w

hen d

ete

rmin

ing a

n a

ssura

nce o

pin

ion

are

:

1

Co

ntr

ol

En

vir

on

me

nt

/ S

ys

tem

As

su

ran

ce

Th

e a

de

qua

cy o

f th

e c

ontr

ol en

vir

on

me

nt

/ syste

m is p

erh

aps t

he m

ost im

po

rta

nt

as t

his

e

sta

blis

hes t

he

ke

y c

on

tro

ls a

nd

fre

qu

ently s

yste

ms ‘po

lice

/ e

nfo

rce

’ g

oo

d c

on

tro

l o

pe

rate

d b

y in

div

idu

als

.

As

se

ss

ed

L

eve

l D

efi

nit

ion

s

Su

bsta

ntia

l S

ub

sta

ntia

l go

ve

rna

nce

me

asu

res a

re in

pla

ce t

hat

giv

es c

on

fid

en

ce t

he

co

ntr

ol en

vir

onm

en

t o

pe

rate

s e

ffe

ctive

ly.

Go

od

Go

ve

rna

nce m

ea

su

res a

re in

pla

ce

with

only

min

or

co

ntr

ol w

ea

kne

sse

s

tha

t p

resen

t lo

w r

isk to

the

contr

ol en

vir

on

me

nt.

Sa

tisfa

cto

ry

Syste

ms o

pe

rate

to

a m

od

era

te le

ve

l w

ith

so

me

co

ntr

ol w

ea

kn

esse

s t

ha

t p

resen

t a

med

ium

ris

k to

the

co

ntr

ol e

nvir

on

men

t.

Lim

ite

d

Th

ere

are

sig

nific

an

t con

tro

l w

ea

kne

sse

s t

ha

t p

rese

nt a

hig

h r

isk t

o th

e

co

ntr

ol en

vir

onm

en

t.

No

A

ssu

ran

ce

Th

ere

are

fun

dam

enta

l co

ntr

ol w

ea

kn

esse

s t

ha

t p

rese

nt a

n u

na

cce

pta

ble

le

ve

l o

f ri

sk t

o t

he c

on

tro

l e

nviro

nm

en

t.

2

C

om

pli

an

ce

As

su

ran

ce

Str

on

g s

yste

ms o

f co

ntr

ol sh

ou

ld e

nfo

rce

co

mp

lian

ce

wh

ilst e

nsu

rin

g ‘e

ase

of

use

’.

Str

on

g s

yste

ms c

an b

e a

bused

/ b

yp

assed

and

the

refo

re t

estin

g a

sce

rtain

s t

he

exte

nt

to

wh

ich

th

e c

ontr

ols

are

be

ing

co

mp

lied

with

in

pra

ctice.

Op

era

tio

na

l re

alit

y w

ith

in t

esting

a

cce

pts

a le

ve

l o

f va

ria

tio

n f

rom

ag

ree

d c

ontr

ols

wh

ere

cir

cum

sta

nce

s r

eq

uire

.

As

se

ss

ed

L

eve

l D

efi

nit

ion

s

Su

bsta

ntia

l T

estin

g h

as p

rove

n th

at

the

con

tro

l e

nvir

onm

en

t h

as o

pe

rate

d a

s

inte

nd

ed

with

ou

t e

xce

ptio

n.

Go

od

Te

stin

g h

as id

en

tifie

d g

oo

d c

om

plia

nce

. A

lth

oug

h s

om

e e

rro

rs h

ave

be

en

d

ete

cte

d th

ese

we

re e

xce

ptiona

l a

nd

accep

table

.

Sa

tisfa

cto

ry

Th

e c

on

trol en

vir

on

me

nt h

as m

ain

ly o

pe

rate

d a

s in

ten

ded

alth

ou

gh

e

rro

rs h

ave

bee

n d

ete

cte

d t

ha

t sh

ou

ld h

ave

bee

n p

reve

nte

d / m

itig

ate

d.

Lim

ite

d

Th

e c

on

trol en

vir

on

me

nt h

as n

ot

op

era

ted

as in

ten

de

d.

Sig

nific

ant

err

ors

h

ave

be

en

dete

cte

d a

nd

/or

com

plia

nce

le

ve

ls u

nacce

pta

ble

.

No

A

ssu

ran

ce

Th

e c

on

trol en

vir

on

me

nt h

as fu

nd

am

en

tally

bro

ken

do

wn

and

is o

pen

to

sig

nific

an

t e

rro

r o

r a

bu

se

. T

he s

yste

m o

f co

ntr

ol is

esse

ntia

lly a

bse

nt.

3

Org

an

isa

tio

na

l Im

pa

ct

Th

e o

ve

rall

org

anis

atio

na

l im

pa

ct

of

the f

ind

ing

s o

f th

e a

ud

it w

ill b

e r

epo

rte

d a

s m

ajo

r,

mo

de

rate

or

min

or.

All

rep

ort

s w

ith

ma

jor

org

an

isa

tion

al im

pact

will

be r

ep

ort

ed

to

SM

T

alo

ng w

ith

th

e r

ele

va

nt D

irecto

rate

’s a

gre

ed

actio

n p

lan

.

Org

an

isa

tio

na

l Im

pa

ct

Le

ve

l D

efin

itio

ns

Ma

jor

Th

e w

ea

kn

esse

s id

en

tifie

d d

urin

g th

e r

evie

w h

ave

le

ft t

he

Cou

ncil

ope

n to

sig

nific

an

t ri

sk.

If t

he

ris

k m

ate

ria

lises it

wo

uld

ha

ve

a m

ajo

r im

pact

upo

n

the

org

an

isa

tio

n a

s a

wh

ole

Mo

de

rate

T

he

we

akn

esse

s id

en

tifie

d d

urin

g th

e r

evie

w h

ave

le

ft t

he

Cou

ncil

ope

n to

m

ed

ium

ris

k.

If t

he

ris

k m

ate

rialis

es it

wo

uld

ha

ve

a m

od

era

te im

pa

ct

up

on

th

e o

rga

nis

ation

as a

wh

ole

Min

or

Th

e w

ea

kn

esse

s id

en

tifie

d d

urin

g th

e r

evie

w h

ave

le

ft t

he

Cou

ncil

ope

n to

lo

w r

isk.

Th

is c

ou

ld h

ave

a m

ino

r im

pa

ct

on

th

e o

rgan

isa

tion

as a

wh

ole

.

4

Fin

din

gs

pri

ori

tisa

tio

n k

ey

W

hen

asse

ssin

g f

ind

ing

s, re

fere

nce is m

ad

e to

th

e R

isk M

an

ag

em

en

t m

atr

ix w

hic

h

asse

sse

s t

he

im

pa

ct a

nd lik

elih

oo

d o

f id

en

tified

ris

ks a

risin

g fro

m th

e c

on

tro

l w

ea

kne

ss

fou

nd

. F

or

ease

of re

fere

nce

, w

e h

ave

use

d a

hig

h/m

ediu

m/lo

w s

yste

m t

o p

rio

ritise

ou

r re

com

men

da

tio

ns,

as fo

llow

s:

E

SS

EN

TIA

L

Fa

ilure

to a

dd

ress t

he

w

ea

kn

ess h

as a

hig

h

pro

ba

bili

ty o

f le

ad

ing

to

th

e

occu

rre

nce

or

recu

rre

nce

of

an

ide

ntifie

d h

igh

-ris

k e

ve

nt

tha

t w

ou

ld h

ave

a s

erio

us

imp

act o

n t

he

ach

ieve

me

nt

of

se

rvic

e o

r o

rga

nis

atio

nal

ob

jective

s,

or

ma

y lea

d to

sig

nific

an

t fina

ncia

l/

rep

uta

tio

na

l lo

ss.

Th

e im

pro

vem

en

t is

critica

l to

th

e s

yste

m o

f in

tern

al

co

ntr

ol an

d a

ctio

n s

ho

uld

b

e im

ple

men

ted

as q

uic

kly

a

s p

ossib

le.

IMP

OR

TA

NT

F

ailu

re t

o r

esp

on

d t

o th

e

fin

din

g m

ay lea

d t

o t

he

o

ccu

rre

nce

or

recu

rre

nce

of

an

ide

ntifie

d r

isk e

ven

t th

at

wo

uld

ha

ve

a s

ign

ific

ant

imp

act o

n a

ch

ieve

men

t o

f se

rvic

e o

r o

rga

nis

atio

na

l o

bje

ctive

s,

or

ma

y lea

d to

m

ate

ria

l fin

an

cia

l/

rep

uta

tio

na

l lo

ss.

Th

e im

pro

vem

en

t w

ill h

ave

a

sig

nific

an

t eff

ect

on t

he

syste

m o

f in

tern

al co

ntr

ol

an

d a

ctio

n s

ho

uld

be

p

rio

ritise

d a

pp

rop

ria

tely

.

ST

AN

DA

RD

T

he

fin

din

g is im

po

rta

nt to

m

ain

tain

goo

d c

on

trol,

pro

vid

e b

ett

er

va

lue

fo

r m

on

ey o

r im

pro

ve

e

ffic

iency.

Fa

ilure

to

ta

ke

actio

n m

ay d

imin

ish t

he

a

bili

ty t

o a

ch

ieve

se

rvic

e

ob

jective

s e

ffe

ctive

ly a

nd

e

ffic

iently.

Ma

na

ge

me

nt sh

ou

ld

imp

lem

en

t p

rom

ptly o

r fo

rmally

ag

ree

to a

cce

pt

the

ris

ks.


23

Circulation Details:

Client:

Issued to:

Date

Lead Auditor

Status of report

Audit Committee Date

Director of Place

Highways Client Service Manager

Head of Highways

Service Director, Public Realm

Senior Finance Business Partner

CC: Corporate Director Place

Ringway Infrastructure Services (Schemes

Contract Manager)

Service Director Finance and Resources

Finance Business Partner

Portfolio Holder – Cllr Gowans

05/01/2018

Cheryl Perry

FINAL

18/01/2018

Internal Audit Report HIGHWAYS CONTRACT MANAGEMENT …

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