Agenda item

This report details the work completed by Internal Audit in 2019/20 and the overall levels of assurance for the Council’s internal control environment to support the Annual Governance Statement (AGS).

The Head of Internal Audit introduced the item by highlighting that his annual report had only provided limited assurance. It was described how there had been a steady pattern over the last five years with the number of limited assurance finalised internal audits having increased whilst those judged substantial had declined. Over half of all internal audits (52%) during 2019/20 had a Limited or No assurance outcome.

It was described how from the outcome of internal audits conducted in 2019/20, it had been demonstrated that Key Financial and ICT systems were considered to be operating appropriately. However, the same could not be said for Operational and Departmental Systems along with Schools. With regard to the audits for both, over 60% showed issues. As a result, action plans had been agreed and were being followed-up. Many actions were reported as having been implemented but the rate of progress was slowing demonstrating that staff were under pressure.

Any areas of particular weakness were to be carried forward and featured in the Annual Governance Statement. These areas were contracts, financial management in social care teams, energy recharges to external organisations, privacy notices relating to the collection of personal data, schools in financial deficit with some weak financial control and the claiming, approving and recording of staff expenses. In order to bring greater focus to addressing areas of weakness, it had been agreed that action plans would have to be signed by the relevant Executive Director, they would then be responsible for the implementation of the action plan.

The Head of Internal Audit would also more frequently attend Departmental Leadership Team (DLT) meetings to discuss issues being reported to the Committee.  The Head of Internal Audit would also be attending Executive Leadership Team (ELT) meetings prior to Committee meetings to ensure awareness of all the issues being raised. Assurance was given from already having attended two ELT meetings and a Corporate Leadership Team meeting where there was support for all the action being taken.

In response to a Member question, the Head of Internal Audit clarified that political oversight of the rise in the limited assurance categorisation was through the Committee to which the Cabinet Member for Finance and Resources was usually in attendance.

The Head of Internal Audit, in a response to a Member question, clarified that the issue regarding staff expenses did not concern fraudulent activity. Rather this was related to issues such as claiming after the permitted timeframe had expired, incorrect categorisation and claiming incorrectly where not entitled. It was confirmed to the meeting that the Council had a whistleblowing policy which was supported by a third party organisation to which disclosures could be made. The reference to union involvement was simply acknowledgement of the agreement that any change to the staff expenses policy also had to be agreed with representative unions.

In response to a Member question, the Head of Internal Audit, explained that where more than half of audits had obtained a limited assurance, this had to be reflected in the overall rating. Thought would have to be given to how examples of individual assurance reports could be shared with the Committee. It was confirmed that here was a correlation between those schools in deficit and those with limited or no overall assurance reports. It was being seen how this contributed to the overall deficit position.

It was explained that whilst there had been a lot of work to implement the requirements of the Guide to the General Data Protection Regulation (GDPR), the Council was a large organisation and it needed to be ensured that this had been implemented appropriately right across the organisation. Where it was becoming clear this had not happened, it was being picked-up and addressed. 

In response to a Member question regarding why the issue on energy charges had remained unresolved for a year, the Head of Internal Audit explained that a contributory factor may have been a restructure that had occurred, with the responsible service being transferred. This had caused a disconnect which should have been identified.

The Head of Internal Audit clarified, in response to a further Member question, that reports regarding whistleblowing disclosures were made to the Ethics Committee and therefore had an established procedure for being reported in the public domain.  The follow-up of outstanding management actions arising from audit activity would continue until all key recommendations were implemented with support to be gained through attendance at DLT meetings.

It was discussed whether it was appropriate to determined that the operation of Key Financial Systems was generally effective. The Head of Internal Audit highlighted that this judgement was made based on the outcome of the internal audit work on the big financial systems such as Business rates, Council tax, Housing benefit, Housing rents, Debtors, Creditors, Pensions etc, most of which were working well. It was stressed that the judgement did not generally take other factors into consideration.

RESOLVED: The Committee AGREED to note the Head of Internal Audit Annual Report.