Agenda item

To present the report of the Internal Audit Manager on the work of the Internal Audit Section from 1 April 2014 to 31 December, 2014.

The report of the Internal Audit Manager on the work of the Internal Audit Section from 1 April, 2014 to 31 December, 2014 was presented for the Committee’s consideration.

The Internal Audit Manager highlighted the following considerations –

•           There were no reviews in the period which resulted in a Red Assurance opinion.

•           A follow-up review of each of two previously reported red opinion reports – Logical Access Controls and Segregation of Duties and Third Sector Scheme -  were undertaken and in the case of the former it concluded that management had demonstrated little progress in implementing actions agreed to address the audit recommendations within the original agreed timescales  although it is recognised that a number of the items are linked to the response to the Information Commissioner’s report and could take some time to fulfil. In the case of the Third Sector Scheme, the follow up review found that good progress is being made in addressing the issues raised in the original IA report.

•           An audit of Homelessness undertaken as part of the approved internal audit periodic plan for 2013/14 resulted in an overall Red/Amber opinion as did an audit of the Teachers’ Payroll which also identified control weaknesses unaddressed from previous annual key controls payroll reviews from 2012/13 and 2013/14. Both areas will be subject to follow-up reviews the findings of which will be reported to the Audit Committee.

•           An advisory review of the arrangements for the sale, billing and payment of maritime diesel also identified a number of control weaknesses.

•           To date, 27 Final reports have been issued from the 2014/15 Internal Operational Plan, 74% have resulted in a positive assurance opinion (Green or Green/Amber) and 26% in a negative opinion (Red or Red/Amber).

•           The Committee has previously been made aware of an attempted Creditor related fraud against the Council and others. On 25th January, 2015 the Internal Audit Service received an e-mail response from the Police confirming that in line with West Midlands Police Fraud allocation and investigation policy, no further investigation will take place at this time.

•           In respect of recommendation tracking, the percentage implementation rate at 14 January, 2015 was 61% of High and Medium recommendations. The performance in relation to recommendations other than those in Education is 79%. An analysis of outstanding audit recommendations was provided at Appendix B to the report.

•           In respect of ongoing audit concerns, the current position in relation to the areas identified as such is documented at section 6 of the report. These areas will continue to be of concern for Internal Audit until all significant recommendations have been implemented and assurance can be provided that the frameworks and systems are in place, have been embedded are robust and are effective.

The Committee considered the report and the following matters were noted –

•           That an explanation had been given in mitigation of the delay in implementing the IA recommendations subsequent to the review of Logical Access Controls and Segregation of Duties. The Interim Head of Resources and Section 151 Officer further clarified that a lack of resources has been an issue in the I.T. Service meaning that progress in taking matters forward has been slower than it would have been if the service had been fully resourced. The Officer confirmed that a new Head of I.T. Service has by now been appointed and will set about addressing the outstanding audit recommendations. The Committee noted and accepted the Officer’s clarification.

•           That the report brings to the fore issues relating to internal controls and the need to strengthen those in several areas as well as highlighting a number of generic governance issues around policies and procedures linked to compliance, duplication, disregard and/or lack of awareness thereof which the Committee noted was a recurring theme and which it deemed to be a matter of poor housekeeping which Management might be expected to fulfil as a core function.

•           That as part of its brief to monitor Management responsiveness to Internal Audit findings and recommendations, and in light of the areas of ongoing audit concern at section 6

where progress for the most part was noted as slow, and the rate of implementation of internal audit high and medium recommendations which at 61% was judged unsatisfactory, the Committee considered whether it was now time for it to exercise its prerogative in calling managers directly to account for non-compliance and non- implementation.

•           The Committee deliberated and agreed, that as a signal of its intent to take a more rigorous approach to implementation and to be assured that internal audit review results are being given appropriate attention, it would in the first instance seek to examine the issues raised by the internal audit review of arrangements for the sale, billing and payment of maritime diesel. To that end it was also agreed that the relevant Head of Service be asked to account for how the situation had arisen and to explain directly to the Committee what remedial measures are being taken to action the internal audit recommendations made.

•           That with reference to referrals, the Committee was disappointed by the decision by West Midlands Police not to pursue the attempted creditor related fraud against the Council and others. The Committee took the view that had it succeeded the fraud could have had serious implications as regards potential loss of public money.

The Deputy Chief Executive in response to the Committee’s concerns regarding lack of progress on areas of ongoing audit concerns reported that internal audit review reports are now made available to the Senior Leadership Team thus ensuring that Senior Management is made aware of any emerging issues in a timely way. While progress has been made on the areas documented under section 6 of the report further work is required to ensure that the Authority becomes more effective in those areas and that does in part entail a change of culture which can take time to bring about.

It was resolved to accept the report of the Internal Audit Manager and to note its contents.

ACTIONS ARISING:

•           Internal Audit Manager on behalf of the Audit Committee to request the Head of Service (Economic and Community Regeneration) to attend the next meeting of the Audit Committee to account for  how the situation with regard to the arrangements for the sale, billing and payment of maritime diesel had arisen and the steps being taken to address Internal Audit recommendations.

•           Internal Audit Manager on behalf of the Audit Committee to convey in a letter to the North Wales Police and Crime Commissioner, the Committee’s disappointment at the decision taken by West Midlands Police not to further investigate the attempted creditor fraud against the Council and others.