Agenda item

The Committee will receive a report providing the Head of Internal Audit and Corporate Anti-Fraud’s interim annual report on the adequacy and effectiveness of the Authority’s  internal control arrangements based on the work of Internal Audit during 2016/17 which has been prepared in accordance with the Public Sector Internal Audit Standards.

The Committee received a report providing the Head of Internal Audit and Corporate Anti-Fraud’s interim Annual Report on the adequacy and effectiveness of the Authority’s internal control arrangements based on the work of Internal Audit during 2016/17 which had been prepared in accordance with the Public Sector Internal Audit Standards.

The report contained:

(i)         An opinion on the overall adequacy and effectiveness of the Authority’s framework of governance, risk management and control

(ii)        A summary of the audit work undertaken to formulate the opinion

(iii)       Details of key control issues identified, particularly in the context of the Annual Governance Statement

(iv)       The extent to which the work of other review or audit bodies had been relied upon

In order to align the annual Internal Audit Report to the Annual Governance Statement and the signing of the Statement of Accounts, it was more appropriate that the Head of Internal Audit and Corporate Anti-Fraud’s opinion was provided reflecting all the work undertaken at the point of the approval of the AGS and the Accounts and for this reason the Committee was encouraged to consider this as an interim report. 

The meeting noted that the Head of Internal Audit and Corporate Anti-Fraud was able to provide an adequate assurance opinion.  This opinion was based upon the work undertaken to date together with management’s implementation of recommendations and the agreed annual programme of risk based audit coverage.

Whilst the overall indicative opinion was positive, there were some key issues arising that Senior Management were required to consider relating to the continued impact of Future Council, the implications of changed structures, new and changing systems and an increased workload for many managers which impacted upon the ability to maintain reasonable and effective controls in some areas of activity.  It was accepted that the Future Council arrangements had required a change in the risk appetite and the next stage was to ensure that the new arrangements were embedded.  This had been acknowledged and discussed with Senior Management during the year but it was nevertheless important for officers to remain alert to and focussed on maintaining an appropriate, risk based and effective framework of controls.

Key issues arising from all completed audits had been reported throughout the year within the quarterly Internal Audit reports and these were summarised within the report now submitted.

The implementation of audit report recommendations remained an issue.  Overall, at the point of follow up, and over the year, only 45% of recommendations had been implemented by the date agreed by management and monitoring of report recommendations would continue to be a priority for the Service.

The current audit plan was focussed on supporting management to consider the approach to controls in the context of reduced resources.

In the ensuing discussion, and in response to detailed questioning, the following matters were highlighted:

·         Any changes in assurance opinion would be reported to the meeting in September when the AGS and Accounts were considered.  It was not, however, anticipated that there would be any changes

·         It was acknowledged that there had been massive changes within the Authority and these had contributed, in part, to the delay in implementing audit recommendations.  It was hoped that in 2017/18 and subsequent years, there would be a change programme within the Council which would show improvements in terms of the control framework and a better implementation of recommendations

·         The Service Director Finance, the Executive Director Core Services and the Head of Internal Audit and Corporate Anti-Fraud presented regular reports on outstanding recommendations to the Senior Management Team and they were confident that a more rigorous approach to the escalation issues was being promoted.  Arising out of this reference was made to the following:

o   Members were still, nevertheless, concerned about the failure to address recommendations within the agreed timescales and in response the Head of Internal Audit and Corporate Anti-Fraud briefly commented on the action taken to address these issues including the consideration about moving away from ‘recommendations’ to ‘agreed management actions’ on the basis that this enforced management ownership of such actions

o   Concern was expressed that the delay in implementing recommendations could be further exacerbated by the significant financial challenges facing the authority. 

·         It was noted that not all the audit days allocated within the plan had been achieved largely as a result of vacancies within the service and the overrun of other work but this was not sufficient to jeopardise the ability to give a reasonable opinion.  All staff were now in place and the Head of Internal Audit and Corporate Anti-Fraud was confident that the service could deliver the plan for the Council and for clients.  Arising out of this discussion he made reference to

o    the adoption of a new Indicator to measure the performance of the service

o   The completion of a relatively small number of pieces of work (and the reasons for that) and to the fact that other work undertaken still contributed to the overall picture of assurance

o   The changing nature of audit particularly in relation to challenge, consultancy and critical friend role

·         Referring to Appendix 3 ‘Details and Outcome of other Audit Activities not producing a specific Assurance Opinion’, the Head of Internal Audit commented on the expertise in balancing activities detailed within the Internal Audit Plan with the requirements of the Senior Management Team.  Some activities were clearly at the ‘margins’ of core audit activity but still contributed to the ability to issue adequate assurance.  The Service was, of course, cognisant of the need to ensure that the priorities were correct

·         It was noted that in relation to Core System Reviews, the outcome of risk assessments was discussed and agreed with the Section 151 Officer.  External Audit was also consulted on the risk assessment and the proposed coverage.  A fundamental review of the risk assessment process was to be undertaken in the future as some areas had not been reviewed for some time.  Arising out of the discussion and concern expressed, the Service Director Finance, in his capacity as Section 151 Officer, stated that any issues would have been flagged up via exception and compliance reports and by other checks and balances in place.  Ms A Warner (KPMG) outlined the way in which issues would be highlighted via the External Audit role.  She commented that Barnsley’s approach was similar to that adopted by many other Local Authorities

RESOLVED:-

(i)        that the assurance opinion provided by the Head of Internal Audit and Corporate Anti-Fraud on the adequacy and effectiveness of the Authority’s framework of governance, risk management and control be noted;

(ii)       that the key issues arising from the work of Internal Audit on the context of the Annual Governance Statement be noted; and

(iii)      that the satisfactory performance of the Internal Audit functions for 2016/17 be noted.