Agenda item

Members considered a report upon:

a)    The overall opinion on the internal controls of the City Council for 2017/18;

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 2017/18, 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.  84% of the approved audit plan was completed in the year against a target of 80%. A big thanks to staff in the team who worked well to achieve this.

During the year, 40 reviews were undertaken, 11 received ‘Good’ audit opinions, 23 received ‘Reasonable’, 6 received ‘Unsatisfactory’.  There were no Unsound opinions.

In addition to planned work the team also undertook ‘special investigation’ reviews.  3 special investigations were undertaken during 2017/18.  These arose for a number of different reasons, including information passed straight to the Section regarding allegations against members of the Council staff, potential fraud, theft or non-compliance with Council policy/procedures for example.  These reviews were typically time intensive and on occasions difficult to prove.

Internal Audit ran seminars on what Financial Regulations and Contract Standing Orders mean, why they were in place, what they were about and to whom they related.  9 (9 in 2016/17) sessions were delivered to 175 delegates during 2017/18 (95 in 2016/17).

Despite not having a full complement of staff for the whole year, 84% of the approved audit plan was completed against a target of 80%; (89% completed in 2016/17).  A total of 81 (80) audit reviews were planned during the year with 68 (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 82 to 81 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, 70 productive days were actually spent auditing specials and unplanned work, which meant more planned audit work could be undertaken.

Getting draft reports out this year took 14 days against a target of 10.  Final reports were sent out within 4 days of receiving agreed management comments.

In 2017/18 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 performance, professionalism and the audit process in general. Following the finalisation of reviews, 32% of questionnaires were returned (35% in 2016/17) with 100% of managers stating they were satisfied with the audit process and that it added value to service provision, which was reassuring.

The Audit Team had an establishment of 8 staff (including the Chief Internal Auditor).  The section was split into two teams which covered the whole of the Council’s systems, establishments and staff, each managed by an Audit Manager.  During the year the team was supported by an apprentice to help achieve the plan.

The Policy Finance Committee (1998) requested that on-going consideration be given to the sufficiency of internal audit resources.  Audit staff resources had been reduced over the last few years which meant that fewer audit jobs could be undertaken in the audit plan which resulted in the provision of less assurance across all service areas. With a full complement of staff the audit resource was 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 would have to monitor the situation closely and use a range of options to ensure appropriate audit coverage was provided.  The Chief Internal Auditor would endeavour to provide adequate and appropriate audit coverage throughout the Council although prioritisation was required, given the reduced resources within the team.  The current level of resources was just about adequate to meet the continuing needs of the service led demands.  However, the level of resources needed 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.

Discussions included the following:-

·         Although there was a 100% satisfaction rate, this was only out of the 32% who returned the audit evaluation questionnaires, Is there more that can be done to encourage them to return them? – The Audit team send out the questionnaire, finalise reports but the onus is on the service manager to respond. It was recommended that the minutes be forwarded to the Chief Executive to progress the issue with the number of non-returned audit evaluation questionnaires by service managers.

·         Concerns were raised over the current level of internal audit resources and it started to look worrying that the department did not have enough resources – Over 100 days had been offset by an unplanned vacancy. The Chief Internal Auditor commented that the team had not been involved so much in specials recently which had given more opportunity to do planned work and helped to achieve results.    

·         Was everyone in the Audit team qualified? – Unqualified members of the team would generally be enrolled on AAT.  Professionally and fully qualified members of the team included the Chief Internal Auditor (CIPFA & ACCA), 2 managers (CIPFA & ACCA), 2 Principal Auditors (IIA).  One of the Principal Auditors is part qualified (ACCA).  Qualities required were good professional etiquette and being willing and able to learn.  The team also ran a programme which delivered internal audit training to around 40 plus organisations. The team supported individuals to achieve their qualifications and once achieved they were required to work for the Council for a minimum of three years.

·         Page 111, paragraph 10 – in the past external audit has relied on the work of internal audit. Is this line incorrect, do they rely on the work of internal audit?  Due to the changes in accounting standards external audit cannot request work from internal audit but if there is work already being carried out it can be dovetailed in. Lately external audit has taken more of a substantive audit approach but they continued to liaise.

·         This was the fourth year running that there had been a reasonable opinion, what would make it a good opinion? -   This was difficult to answer as the team did not audit the same things every year.  With a population of over 600 services being audited there was a requirement to check to ensure compliance with policy and sound financial management across the board.   Training was developed with the Assistant Head of Finance across the schools and also corporate training was carried out.  There was an attempt to influence operational managers but this was not in the team’s remit.

Agreed

1.         Minutes of the Audit Committee to be forwarded to Chief Executive to progress the issues raised regarding returns of audit evaluation questionnaires by Service Managers.

2.         To note and endorse the Annual Audit Report 2017/18 and overall Audit Opinion