Auditors warn low staff numbers leave Falkirk Council vulnerable to fraud

Low staff numbers in Falkirk Council’s finance team could leave it vulnerable to fraud, external auditors have warned.

Last year allegations relating to procurement decisions and the awarding of contracts within the council’s procurement department prompted additional investigation by the external auditors, involving forensic experts, amid concern that the allegations, alongside the lack of capacity within the Corporate Fraud Team, created a greater risk.

Although the team from Ernst & Young stressed that no evidence of wrongdoing had been found during the investigation, the detailed study did find “red flags” that highlight weaknesses in the council’s procurement process.

The external auditors noted long term sick absence from the Corporate Fraud Team – which has just two investigators.

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They also noted “concerns about the level of support for fraud investigations at Chief Officer level”.

The final audit, which will be published along with the annual accounts later this month, states : “We outlined procurement as an area of significant risk within our Annual Audit Plan.

“Due to the nature of the allegations received in 2019/20 and 2020/21,along with the internal control weaknesses identified, our audit work hasfurther considered the effectiveness and appropriateness of the Council’sarrangements for the prevention and detection of fraud and corruption in theprocurement function.

“Our work has included a focused review drawing upon advice from ourforensics specialists to design additional audit procedures.”

In particular, they have asked the council to look at the way it deals with “invoice splitting”, to address the risk that the combined value of smaller purchases exceed individual authorisation thresholds.

Director of corporate services Stuart Ritchie assured members that this work is now underway.

The auditors from Ernst & Young highlighted the lack of capacity in the finance team in the annual audit report, which was discussed by councillors yesterday.

Both Mr Ritchie and the council’s chief finance officer, Bryan Smail, will also leave the council in March when he retires.

The leader of the council, Cecil Meiklejohn said she shared the auditors concerns about staffing levels at a meeting of the audit committee on Monday.

The council’s chief executive, Kenneth Lawrie, admitted that he does not want to see any more cuts to the finance team, which has been affected by a drive to make savings over several years now.

He told members: “I do pay very close attention to what EY have said about the finance team capacity.

“Over the years, we have cut back significantly in corporate areas – finance, HR and others – and this year we are not bringing forward cuts in these areas because you do need core capacity.

“These are really important issues which we are very aware of.”