Agenda item

Members considered a report upon:

a)     The overall opinion on the internal controls of the City Council for 2016/17;

b)     Internal Audit’s progress against the agreed audit plan;

c)     Internal Audit’s performance against local performance indicators.

The report gave an overall opinion on the adequacy and effectiveness of the City Council’s internal controls during 2016/17 which was ‘Reasonable – Adequately controlled although risks identified which may compromise the overall control environment; improvements required; reasonable level of assurance’.

The second part of the report detailed the performance of the Internal Audit Section and how well its key targets in the year were met.  89% of the approved audit plan was completed in the year against a target of 77%. A big thanks to staff in the team who worked well to achieve this.

During the year, 35 reviews were undertaken, 7 received ‘Good’ audit opinions, 22 received ‘Reasonable’, 5 received ‘Unsatisfactory’ and 1 received ‘Unsound’ opinions.  2 Community Centre accounts were audited, both of which were unqualified.

In addition to planned work, the team undertook ‘special investigation’ reviews.  2 special investigations were undertaken during 2016/17.  These arose for a number of different reasons, including information passed straight to the Section regarding allegations against members of Council staff, potential fraud, theft or non-compliance with Council Policy/procedures.

Internal Audit runs seminars on what Financial Regulations and Contract Standing Orders mean, why they are in place, what they are about and to whom they relate. 9 sessions were delivered to 95 delegates during 2016/17.

Despite not having a full complement of staff for the whole year, 89% of the approved audit plan was completed against a target of 77%; (77% completed in 2015/16).  A total of 80 audit reviews were planned during the year with 63 being completed to at least draft stage by the end of the year.  (The total number of jobs in the plan was adjusted from 80 to 71 to reflect the fact that managers were not able to accommodate the audit during the year).

Although 200 days were planned for special investigations during the year, 95 productive days were actually spent auditing specials and unpaid work, 105 days less than allocated within the plan which mean more planned audit work could be undertaken.

Getting draft reports out this year took 13 days against a target of 10.  Final reports were sent out within 3 days of receiving agreed management comments.

In 2016/17 the Audit Section continued to send out evaluation questionnaires to managers after an audit review had been undertaken in their area, which gave them an opportunity to feedback on the performance, professionalism and the audit process in general. Following the finalisation of reviews, 35% of questionnaires were returned (35% in 2015/16) with 100% of managers stating they were satisfied with the audit process and that it added value to service provision, which is reassuring.

The Audit Team had an establishment of 9 staff (including the Chief Internal Auditor). The section is split into two teams which cover the whole of the Council’s systems, establishments and staff, each managed by an Audit Manager. During the year the team was supported by a secondment from Grant Thornton to help achieve the plan.

The Policy Finance Committee (1998) requested that on-going consideration be given to the sufficiency of internal audit resources. With a full complement of staff the audit resource is only just about sufficient to provide assurance on the Council’s internal control environment, but given the experiences of staff changes in the last couple of years, the Chief Internal Auditor will have to monitor the situation closely and use a range of options to ensure appropriate audit coverage is provided. The Chief Internal Auditor will endeavour to provide adequate and appropriate audit coverage throughout the Council although prioritisation is required, given the reduced resources within the team. The current level of resources is just about adequate to meet the continuing needs of service led demands. However, the level of resources needs to be assessed in line with Internal Audit’s on-going involvement with The Measure, performance indicators, the changing risk profile of the Council and auditing grant claims not reviewed by the external auditor.

Members raised a number of issues:

·        Concerns were raised over the current level of internal audit resources and should we record that if anything happened (sickness, etc.) the team may not have sufficient resources? -  Members were informed that with more audit staff the team could do more and a couple of posts had been lost. The current level of resources in the Team was just about adequate to provide assurance.

·        Does the team use consultant auditors? – This has not been explored in great detail, however, last year a resource in another local authority had been utilised and during the year the team was supported by a secondment from Grant Thornton to help achieve the plan, which had been a positive experience.

·        In terms of unsatisfactory opinions in relation to audit reviews (5 in 2014/15 and in 2016/17) - are these the same 5 and are we consistently underperforming? – Members were advised that generally different work is carried out each year. If it is necessary to go back and carry out a follow up review and if it hasn’t changed the Service Manager is invited in to explain.

Agreed

To note and endorse the Annual Internal Audit Report 2016/17 and overall Audit Opinion.