Agenda item

The Head of Internal Audit and Corporate Anti-Fraud will submit a report providing a comprehensive overview of the key activities and findings for the whole of the second quarter together with additional details of audits completed up to the end of October 2016.

The Head of Internal Audit and Anti-Fraud submitted a report presenting a comprehensive overview of the key activities and findings of Internal Audit based on the Division’s work for the whole of the second quarter of the financial year together with additional details of audits completed up to the end of October, 2016.

The report covered:

·         The issues arising from the completed Internal Audit work undertaken within the period

·         Matters that had required investigation

·         An opinion on the ongoing overall assurance Internal Audit was able to provide based on the work undertaken regarding the adequacy and effectiveness of the Authority’s internal control environment

·         Progress on the delivery of the Internal Audit Plan for the period to the end of the second quarter of 2016/17

·         Details of Internal Audit’s performance for the quarter utilising performance indicators

Reports issued and the Internal Audit work completed during the quarter had raised no fundamental recommendations.

Internal control assurance opinion overall remained adequate based upon the results of the work undertaken during the quarter.

Of the 31 recommendations followed up, 32% had been implemented by the original target date with a further 52% implemented after that date.  A revised implementation date had been agreed by management in relation to the 16% that had not been implemented.

In relation to the Audit Plan, actual days delivered was broadly in line with the profiled days at the end of the reported period.

Overall, Divisional performance remained satisfactory with only the chargeable time performance indicator being slightly below the profile due to the number of training days being higher than expected.

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

·         Reference was made to the revisions agreed with management to the Audit Plan together with the reasons for this and appendices to the report gave details of the specific work that had been completed during the reporting period

·         The Head of Service explained that a minority (but increasing amount) of time was spent on ‘other audit activities’ which did not produce a specific assurance opinion but that these nevertheless actively contributed to the assurance given in respect of other areas including, for example, contract management and procurement, safeguarding arrangements  and financial management (procurement) and payment processes.

·         Reference was made to the number of audit days utilised against the Audit Plan and arising out of this, particular mention was made to the time that had been spent moving to a new document management system, the work on corporate services and the restructure of the division which had had an impact on the number of days allocated

·         Reference was made to the audit of Commissioning, Procurement and Contracts and to the reasons for the deferral to 2017/18.  This was at the request of management and was to allow sufficient time for revised processes to be embedded.  Arising out of the above, there was a discussion as to whether or not the council had sufficient or appropriate commercial expertise.  It was acknowledged that this was an area where the Council had not performed as strongly as would have been hoped largely because of the difficulties of obtaining the right staff with the correct skill set required within a rapidly changing world.  This matter was being addressed and would be kept under review both by management and by this Committee

·         The Head of Service commented that he was comfortable with the rationale for the deferral of various audits

·         In relation to the Performance Indicators:

o    particular reference was made to the Indicator ‘percentage of final audit reports issued within 10 working days of completion and agreement of the draft audit report’ and whether or not this was ‘meaningful’. 

o   the Head of Internal Audit outlined the data available that enabled the Service to monitor performance and commented that reporting systems were in the process of being developed further to ensure that data produced was truly meaningful and efficient. 

o   Conversations had been held with the software developers who had outlined how the information system could be interrogated and exploited.  The Service was looking to develop Performance Indicators for 2017/18

·         In response to specific questioning, the Head of Internal Audit and Corporate Anti-Fraud gave details of the operation of the protocol applied to the follow-up of recommendations in audit reports.  It was noted that any issues of significance would be referred as a matter of urgency to the Senior Management Team.  At the moment, he had no specific concerns in relation to any delays in follow-up reports

·         There was a detailed discussion of the potential implications of the savings target to be applied to Internal Audit as part of the 2017/18 budget process and to whether or not the Service would remain sufficiently robust.  It was noted that a restructure was to be undertaken but would be undertaken in such a way as to ensure that the audit approach would provide as much assurance and coverage as possible.  A further report would be submitted in due course and this report would also track the size of the audit service against the size and reduction of the Council as an organisation.  The Director of Finance, Assets and IT gave an assurance that despite any Service reduction, sufficient resources would be retained to ensure that satisfactory assurance could be given

·         The Head of Service gave the Committee and update of the system changes that were to be introduced as part of the audit process

·         Reference was made to the way in which audits were ‘commissioned’ and to the discussions held with Managers prior to the commencement of the audit

·         The high level and importance given to training and development was noted

RESOLVED:

(i)      that the issues arising from the completed Internal audit work for the period along with the responses received from management be noted;

(ii)     that the assurance opinion on the adequacy and effectiveness of the Authority’s Internal Control Framework based on the work of Internal Audit in the period to the end of October 2016 of the 2016/17 audit year be noted;

(iii)    that the progress against the Internal Audit Plan for 2016/17 for the period to the end of October 2016 be noted; and

(iv)    that the performance of the Internal Audit Division for the second quarter be noted.