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Local Authority Internal Audit Virtual Forum

24 August 2022

Please note:

All Institute responses are boxed and highlighted blue
Where the chair comments in that capacity this box is highlighted in yellow
For confidentiality, the identities of all delegates/attendees are anonymised

Institute's welcome

Good afternoon, everybody. I am Liz Sandwith, Chief Professional Practice Advisor at the Chartered IIA UK and Ireland.

The topic for today is ‘Modern Slavery Regulations’. Ten years ago, if you had asked what people associated with the word slavery, the chances are that they would have said the transatlantic slave trade or the 17th and 18th century abolitionist William Wilberforce, rather than anything linking slavery to the present day. Yet the UK, and virtually every country in the world, now face the challenge of modern-day slavery. Despite the efforts of many statutory and voluntary sector bodies to raise awareness, there are still many people in the UK who do not understand that slavery is still with us now, and in many very unpleasant forms. Modern slavery is a crime and as a result it is often hidden but because it is all around us, it is often referred to as being ‘hidden in plain sight’.

The Modern Slavery Act, introduced in England and Wales in 2015 now provides the legal and policy framework for responding to modern slavery. The Act has recently been the subject of both a government-sponsored independent inquiry and a separate inquiry by the House of Commons Home Affairs Select Committee. Government’s response to these two inquiries is expected to lead to a number of policy changes.

The Act consolidates slavery and trafficking offences and introduces tough penalties and sentencing rules. The Act also addresses the role of the organisation in preventing modern slavery from occurring in the organisation and their supply chain.

The Act imposes a duty on all commercial organisations, either incorporated or a partnership supplying goods or services (wherever incorporated or formed) with global turnovers of £36 million and above, providing they carry on business in the UK; to publicly report steps they have taken to ensure their operations and supply chains are trafficking and slavery free. This applies to qualifying businesses with year-ends from 31 March 2016.

By increasing transparency, the expectation by government is that modern slavery will be tackled with greater urgency by organisations. While legal penalties for breach are limited, organisations should expect campaigning pressure groups to monitor their compliance, with the reputational risks associated with public scrutiny from such groups.

I am joined today by:

Piyush Fatania, Chair for today and a member of the Institute’s Council
Derek Jamieson, Regional Director, Chartered IIA UK and Ireland

Chair's opening comments

Thank you and good afternoon everyone.

It seems hard to imagine in 2022 that we’re talking about slavery. As Liz alluded to a moment ago, it tends to conjure up an image of the distant past, before there were such things as democracy, human rights legislation or even the United Nations. And yet, whilst all these things exist, so to does the scourge of slave labour. As Liz mentioned, the act of enslavement could be taking place in plain sight, for example, down at the car wash we use. The Guardian said in a recent report that it would be wrong to assume that because work or manufacturing has taken place thousands of miles away, and workers are being paid, that they are not being exploited. The people who make clothes, shoes and a myriad of other goods and services that we buy, could be the subject of inhuman and exploitative practices.

The question that comes to me is do our councils know that the goods and services that they buy are not the by-product of slavery but given the wide range of goods and services that they procure, councils are uniquely placed, placing them at the forefront of the fight against modern slavery and around 140 councils have already voluntarily compiled the transparency statements. The LGA is encouraging others to follow suit with a range of guidance and support for those wishing to submit a statement, including a simple aide memoire and a list of links to published council transparency statements.

Now, Councils are currently under no legal obligation to publish these statements, but this is about to change with the Government’s announcement that public sector organisations, including councils and Fire and Rescue Services which have a budget of £36m or more, will be included in the amended provisions of the Modern Slavery Act.

There are a variety of different ways in which local authorities have already responded to modern slavery in their area for example, by focussing on five broad themes:

providing support to child victims
providing support to adult victims
community safety and disruption activity
ensuring supply chains are free from modern slavery
effective internal structures and working with external partners to tackle modern slavery.

As the type and complexity of forms of modern slavery have grown, so too has the need for a wider response from local government. It has become ever clearer that many departments within every type of local authority, however big or small, may need to be involved in campaigns, referrals and assessments – whether social care, housing or regulatory services.

Let’s hear from our speaker today Jacky Griffiths who is the People, Culture and ESG Lead at Grant Thornton. Jacky leads Grant Thornton’s ESG risk and assurance services, supporting organisations to understand their ESG frameworks and related controls to meet strategic goals and regulatory requirements.

Key takeaways

Slides from the session are attached here. Notes below are supplementary.

Jacky Griffiths, Lead People, Culture and ESG, Grant Thornton.

Today I wanted to give you a flavour about the 2015 Modern Slavery Act and your role as an internal auditor in this topic and share with you some of the audits I’ve been doing over the last two and a half years with clients of different size and complexity, to get people more comfortable with audits in this space.
In 2021 we were involved in a modern slavery review with a UK based business which was widely publicised in the mainstream media using sweatshops in Leicestershire. Even in the 21^st century in the UK, it is happening.
How do we help our organisations manage this risk and educate our organisations about the risks of modern slavery, including within the supply chain?
There is a lot of unseen people and data that reflect what the case is, but fundamentally there are too many people caught up in modern slavery scenarios.
Local authorities are required to report child and consenting adults potentially caught up in modern slavery.
It’s here and not going away. We all have a role to play in getting the numbers down.
Some local authorities are already reporting a Modern Slavery and Human Trafficking statement. By producing the statement, these local authorities are emulating good practice and transparency.
This is a systemic issue and waiting until such times as the amended legislation is in effect before starting reporting, means that you’ll need to hit the ground running and to put all of this in place takes time and effort, including for the implementation of policies and processes, but having conversations about what the organisation should be doing is helpful.
If an organisation is required to provide a statement but has not completed any work in this area or can’t fulfil the requirement, they should provide a statement which states they have taken no such steps.
There is a danger of a lack of substance behind the statement, particularly those who may publish a statement on their website which looks very good and when you unpick what the organisation is doing, you find they have no or little substance behind the narrative.
The amended legislation will require better, more detailed narrative included within the statement.
The Statement will require approval and sign off at the highest level in the organisation.
The statement will need to appear on the organisation’s website. The statement needs to be front and centre per the legislation.
As internal auditors, we need to consider: how do we get ahead of the curve and help our organisations? Are there reviews and controls in place? Where is modern slavery on the audit plan? It’s about helping the organisation prepare and getting the systems and processes in place and mapping the supply chain and unpicking that, which is complex, throughout the various tiers, all the way down to suppliers’ suppliers. We need to go much deeper to unpick the risks.
I would encourage you to talk to your organisation as they should have policies and procedures in place to help prevent modern slavery and deliver awareness training. It takes time to change behaviour. What needs to be put in place to help people understand this complex issue?
Whistleblowing forums should be in place and formalised regarding modern slavery cases.
In terms of what we audit, we’ve looked at transparency statements, supply chain and how organisations understand risks around onboarding suppliers. How are they getting assurance on their supply chain?

Chair's closing comments

Thank you, that was really fascinating. My experience is that councils up and down the country have faced financial pressures for many years and unless something is mandatory and not discretionary, it usually gets put on the back burner. Now I know this is likely to change with the amended Modern Slavery Act, which will make it a legislative requirement on councils.

Often when something is new, it’s usually internal audit who are asked to come in and help with this, how they should implement this and what they should do with it, so I’m glad you’ve shared with us some practical guidance on how internal audit can be involved – that’s been really useful.

The only fly in the ointment for me is the question of how realistic it is to map all of the councils suppliers and then their suppliers, just in terms of the numbers and of course the changes over of the course of time, makes it seem like painting the Forth Bridge – it’s the kind of job that could go on in perpetuity and I wonder practically how realistic it is and whether cash-strapped councils will devote enough resources into doing this.

I also wonder if this is an area for joint working, like safeguarding, where councils work together and have a safeguarding board which is chaired by a county or unitary council member. So, I wonder if there’s something that councils can do together around this. But thank you very much Jacky. It is a fascinating area and certainly prompts a lot of questions.

Institute's closing comments

Thank you all.

As usual, notes, chat comments and the slides shared today will be placed on our web pages in the next day or two.

Our programme of forums and topics for the second half of 2022 have now been uploaded to the website. We will shortly send out a meeting invitation so you can ensure the Forums are in your diary.

We have two sessions in the calendar for September. Our topic for the September session on 21 September 2022 is Risk in Focus 2023 – a walkthrough of the hot topics and key risks in the RiF 2023 report and then on the 28^th September we’re looking at Risk Appetite and Risk Tolerance.

The following links may be useful:

Technical Guidance on Modern Slavery

Tackling Modern Slavery (Council Case Studies)

Don’t forgot our Annual Conference is 18-19 October 2022 so time to start booking, it will be in London at the QE2 centre, there is an in-person option and/or a hybrid option.

Thank you everyone, see you in September.

Thank you for attending. As always, if you have any ideas or suggestions for what we might include in future agendas, please contact Liz Sandwith.

Q&A and chatbox comments

Q: Does the statement need to be a standalone one or could it be included in the annual governance statement?

A: It must be clear, visible and easy for people to see. Whether it needs to standalone depends on how robust the other statements are. What you don’t want is for it to be lost. In good practice and if you look at the corporate companies that are doing it now, they’ve got it as standalone, but there’s nothing that says you must have it as standalone. It’s about the visibility and how accessible it is on your website and how quickly it can be accessed.

Q: If 7 out of 10 organisations did not have their statements transparent / you had to go deep to find it, does it mean most of the organisations are not interested in fighting modern slavery or do they not want to address the issue?

A: That’s a good question. It’s a mixed bag. It’s a lot for organisations to take this seriously and put in place to ensure that the risk is managed. I think that some of the companies that we’ve been talking to will do the bare minimum to get their statement out there, because they must comply. But enlightened good organisations which take this seriously go up a level and put in place some good stuff and have good processes behind the scenes to be able to support the statement in case of a spot-check.

Q: You mentioned in your slides that if they haven’t done anything they should be honest and say they haven’t done anything yet, so could they be equally honest and say ‘We’re on a journey and we’ve done xyz but still have things to do and provide a plan for what they will do, is that possible?

A: That is possible and the legislation says that if you do qualify, based on the threshold, you should provide the information from the slides on your transparency statement. If you can’t you must say you can’t and why not. It is a journey that people are on. It’s better to say you don’t have anything and you’re dealing with it, than put something up that has no substance.

Q: Mapping the suppliers of suppliers to a council sounds like an onerous task. Is this realistic? I would be grateful if Jacky can provide any guidance on this.

A: Organisations struggle with this. It’s about mapping out what you can for your Tier Ones. They’re the easier ones. Although I was doing a presentation for an employer lawyer recently and I was saying it was easier to do Tier Ones and they were saying sometimes it isn’t because sometimes they are not in the UK, therefore how easy is it for you to get over to China for example. There are organisations out there where you could get them to visit and map out your tiers in different countries. Again, that’s a cost and in a constrained environment that’s not always possible. You could give it to your sustainability team, your procurement team or put in place a working group. There are different ways you could approach this, but fundamentally it’s about getting an understanding of the people closest to you that are providing you with services. That’s why we’re saying unpick now, rather than wait until the legislation comes as it can be so complex to be able to do that.

Q: I know our council has provided training for Environmental Health officers and social care staff to help spot the signs of modern slavery, while they conduct their work visiting establishments or areas where there is recognised risk. I notice our transparency statement is not updated annually, should I be chasing this up, given we do at least have one?

A: The suggestion, because again it’s not mandated is that you do update this annually, because things change, you put new things in place, your supply chain changes, your organisation updates its structure; nothing is stagnant. If you go on to corporates that are covered by it now, you will see that they go back three or four years, and you can see the progress the organisation has made. So yes absolutely, I would go back to them and say we need to review this and update it.

Q: I assume one of the key mechanisms would be to look at the statements of our suppliers, if they meet the reporting threshold - so we could draw some assurance from these? Is that a reasonable approach?

A: If you’ve got suppliers that meet the criteria and need to produce a transparency statement, that is a level of assurance, but it’s about whether there is substance behind that statement that you’d then need to unpick. It’s a starting point and about how deep you go, but you can start with that.

Q: When is it expected that the legislation will apply to Councils?

A: We thought it was coming in this year, but it hasn’t yet. The consultation was over a year ago, so probably next year, but that’s not yet been confirmed. Don’t wait until it comes before you do anything.

Q: In the organisations you’ve worked with, has ownership for modern day slavery risks been an issue? It sounds like a lot of focus currently rests with the Procurement colleagues and talks mainly about supply chains. Are there any good practice processes for how the Head of Procurement would be expected to identify and report on the wider spectrum of modern slavery risks that might be spotted by officers out on the ground e.g. by Trading Standards, or Social Workers in Adults/Children’s services?

A: Yes you’re right in that the procurement function is a big part in capturing the risk because of the supply chain, but it doesn’t rest solely with them, because finance get involved, other functions get involved in choice of suppliers, so everyone who’s involved has a responsibility to unpick the risks that might come out of that. Good practice would be to consider the whole system impact, it’s not one function or individual which is responsible for doing this; it’s about making this a part of your wider organisation conversations, because if everyone is trained, everyone can spot and report issues. It’s about looking at your risks and controls against all the different components and populations that touch this. That’s another thing to look at – how does the organisation address that?