Agenda item

This report details the work completed by Internal Audit in 2022/23 and the overall level of assurance for the Council’s internal control environment to support the Annual Governance Statement (AGS).  The AGS is included on the agenda for this committee and will be published on the Council’s website in due course alongside the final accounts.

From the Internal Audit work undertaken in 2022/23, it is the Interim Head of Internal Audit’s opinion that Internal Audit can provide only Limited Assurance in relation to the system of internal control, and that the internal controls within financial and non-financial systems operating throughout the year were unsatisfactory in some cases.

The Audit and Governance Committee is asked to note the Head of Internal Audit Report 2022/23 (Appendix 1) and the overall Limited level of assurance of the Council’s systems of internal control.

Dave Phillips, Head of Internal Audit introduced the annual report to the Committee, noting the report was an annual requirement in line with the Public Sector Internal Audit Standards. The report gave the council an overall Limited Assurance level, and highlighted the key issues based on the work undertaken by Internal Audit.  Some were recurring issues and the challenge was to progress these.  An update on those outstanding issues would be included in the Annual Governance Statement update report due to come to the Committee in October.  Updates on the implementation of Internal Audit recommendations were also included in the report and the council had made some good progress on actioning recommendations.

The Committee noted the limited assurance level had not been a surprise in previous years but queried the higher level of nil assurance reports, indicating a downturn during the reporting period, and what this implied about the improvement environment generally.

Officers noted there were areas of improvement; for example, corporate governance had been upgraded from unsatisfactory to satisfactory.  It was found while top level governance had improved, the lower levels still required improvement. Many of the previous year’s reports were working through the backlog of historic recommendations which had taken some time, due to issues such as staff turnover or recommendations requiring systems change work to be completed. The Limited Assurance level had been expected due to the issues unearthed during the opening the books exercise in 2022/23 and the Section 24 recommendations and interim reports by the external auditors. Improvements in engagement with the Annual Governance Statement (AGS) process had been made across the organisation. Engagement with internal audit reports had generally improved compared with the previous year and CMT was monitoring this closely. A session with Mazars was planned to improve the process. Officers noted plans to bring the AGS to Committee before the summer in 2024 and hoped it would show assurance improvements but noted there were still areas requiring improvements such as financial and HR systems. Audit reports also tended to be backward looking, due to the nature of gathering evidence, so were not as reflective of recent improvements.

The Committee raised concerns around limited/non-engagement by teams and queried if this was due to capacity or cultural issues. The Committee asked for an approximate breakdown of slow engagement versus complete non-engagement. The Committee also queried the report citing ‘further strengthening of financial internal controls have taken place’ despite the assurance being down in comparison with the previous year.

Officers advised that of 80 Internal Audit reports planned there were 2 or 3 where non-engagement had been an issue.  This had been raised at the CMT focus group. Staff were reluctant to engage due to capacity and a culture of teams working in silos, which was something the organisation was working to improve. Internal Audit planned to implement a calendar of audits for the year to provide greater notice to management.  There was work to be done to change organisational perception of audit to something that was useful and positive.  The planned workshop with CMT on engagement improvement and building relationship between Mazars and managers would support this.  The Committee agreed showcasing improvements and how engagement with internal audit could be an effective tool would be useful to take forward.  Officers confirmed any non-engagement was reported to CMT, which was ultimately reported to Audit and Governance Committee, which could then invite the officers to attend meetings. The Committee requested the issues raised be included in future reporting.

The Committee RESOLVED to: note the Head of Internal Audit Report 2022/23 (Appendix 1) and the overall Limited level of assurance of the Council’s systems of internal control.