Agenda item

To present the report of the Head of Audit and Risk.

The report of the Head of Audit and Risk providing an update as at 31 January, 2023 on the audits completed since the previous update to the Committee as at 30 November, 2022 was presented for the Committee’s consideration. The report also set out the current workload of Internal Audit and its priorities for the short to medium term going forward. Members of the Committee were provided with copies of the four pieces of assurance work completed in the period in relation to the UK Community Renewal Fund (Grant Audit) (Reasonable Assurance); IT Vulnerability Management (First Follow-Up) (Reasonable Assurance), Council Tax Direct Debit Error (assurance opinion not applicable) and Galw Gofal (Partnership Governance Arrangements) (Limited Assurance) under separate cover.

The Head of Audit and Risk provided an overview of the report including a summary of the outcome of the work completed and the areas of work currently in progress as at the table at paragraph 23 of the report. She referred to the recruitment challenges which the Service was experiencing in seeking to fill two vacant posts at Senior Auditor level and she confirmed that the service is continuing to deliver the Annual Internal Audit Strategy for 2022/23 as approved by the Committee with priority being given to reviewing the red and amber residual risks not yet reviewed or not reviewed in the last two years. Three strategic risks remain to be reviewed before the end of the year.

In considering the report, the Committee discussed the following matters –

·      The audit of the Local Government Pension Scheme which had been prompted by concerns raised during the Teachers’ Pensions audit. Further assurance was sought that the issue of gaps in teachers’ pensionable service had been resolved and errors corrected.

The Head of Audit and Risk confirmed that Internal Audit had conducted an audit of Teachers’ Pensions last year which examined what had caused the problem with the administration of teachers’ pensions and whether the arrangements to accurately pay pension contributions and account for teachers’ pensionable service information to the Teachers Pensions Service are effective. The issues/risks raised by the audit were incorporated in an Action Plan the progress of which is due to be followed up by Internal Audit.

The Director of Function (Resources)/Section 151 Officer advised that the issue was not isolated to the Isle of Anglesey with widespread problems of inaccuracies/gaps in teachers’ service records having been reported. He explained the arrangement for submitting information to the Teachers’ Pension Service (TPS) which involved the preparation of two data files the one in relation to the monthly service record and the other in relation to employee and employer contributions. Although the TPS validates the information it receives, issues arose with the reporting of discrepancies which meant that errors were not actioned. An additional resource to deal with pension queries and records has since been obtained. The TPS is implementing a new data collection process whereby the information which the Council is required to submit is consolidated into one single file. However, issues with upgrading the Council’s system have meant a delay of several months in the submission of information to the TPS. The Council has reverted to the previous system and is now in the process of catching up; once the software issues have been successfully resolved, it is hoped records can be updated and any gaps addressed. It should be noted that all contributions deducted from teachers’ pay have been paid into the pension scheme and that an annual return of information and declaration of pension contributions is submitted which is subject to external audit verification.

In response to further questions, the Section 151 Officer clarified that while Gwynedd Council is responsible for payroll records pre-dating 1996, Anglesey Council will provide assistance where it can. The Teachers’ Pension scheme is an unfunded scheme administered by the Department for Education; the liability for the scheme lies with the UK Government. Unlike the Teachers’ Pension Scheme, the Local Government Pension Scheme is a funded scheme with the Council and employees making contributions into a fund calculated at a level intended to balance the pension’s liabilities with investment assets. In the past the fund’s liabilities exceeded the value of its assets meaning the Council was contributing additional funding to cover the past deficit on the fund as well as future service costs. The valuation that will take effect from April, 2023 shows a slight increase in the employer contributions to cover future service costs as Anglesey’s part of the fund is now 110% funded with the value of the assets exceeding the liabilities. The Council is liable for its share of the Gwynedd Pension Fund, but that liability is unlikely to crystallise as the fund is ongoing and employer contribution adjustments control the level of under or overfunding.

·      The staffing position within Internal Audit and the potential impact of the two vacant posts on the Service’s assurance provision. Questions were asked about the steps that could be taken to overcome current recruitment challenges.

The Head of Audit and Risk advised that while the Service will again run the recruitment process for the two vacant posts within the section, in the meantime it is utilising the budget savings to commission additional external support in complex areas including technical IT audit from the IT Audit Team at Salford Council. She assured the Committee that the progress made on delivering the Internal Audit Strategy for 2022/23 meant that she would be in a position to provide an annual audit opinion.

·      The Council Tax Direct Debit Error. While the Committee accepted that steps had been taken and improvements made to ensure that the error would not be repeated, assurance was sought that the Council has in place appropriate processes to prevent its accounts being emptied and the funds transferred to the wrong beneficiary and/or destination.

The Director of Function (Resources)/Section 151 Officer explained the processes in place for direct debit collection and for making payments including the checks involved for each transaction. As the Internal Audit review confirms, the Council Tax direct debit error was the consequence of human error made possible by unique circumstances over the Christmas and New Year bank holiday period whereby the direct debit files for three payment due dates were processed in advance causing confusion and error. As a result of the incident, the Service is implementing a more robust authorisation process so that an independent officer checks all Council Tax and NNDR direct debit files prior to their release with all the checks to be supported by documentation. The Section 151 Officer also outlined the swift action that was taken to rectify the situation as confirmed by the Internal Audit review and what that had entailed. The Section 151 Officer said that he was confident that the Council has appropriate processes in place to prevent its accounts from being emptied and monies transferred to an unauthorised destination.

·      The Internal Audit Limited review of the Galw Gofal (Partnership Governance Arrangements).  (This report was taken at the end of the meeting in closed session as it was resolved that under Section 100 (A) (4) of the Local Government Act 1972, the press and public should be excluded from the discussion of the report on the grounds that it involved the disclosure of exempt information as defined in paragraph 14 of Schedule 12A to the said Act).

The Head of Audit and Risk clarified that it was recommended that the matter be considered in private session as the review refers to the business affairs of the Council which could prejudice the interests of the Council commercially, financially, and legally. Additionally, Galw Gofal provides services to other organisations which raises issues of commercial sensitivity. She referred to the scope of the review which examined whether Galw Gofal’s partnership governance is fit for purpose to ensure governance, performance and financial stability are adequate, and to its outcome in a Limited Assurance opinion. The audit review raised five issues/risks which have been incorporated within an Action Plan and agreed by the Partnership Board. She confirmed that there were no concerns about the service being provided to individuals or about the use that the Isle of Anglesey County Council’s Housing Service makes of Galw Gofal as an out of hours call centre, but there were issues around GDPR compliance, and a number of governance control weaknesses were identified in connection with data protection obligations.

The Head of Adults’ Services and Mr Nick McCavish, the Galw Gofal Regional Strategic Manager provided assurance that the matters raised by the audit are being addressed and they outlined the steps being taken to expedite that process. The Regional Strategic Manager advised that those matters are being prioritised and while it is expected that most of the issues/risks raised will be addressed within timescale, evaluating the value for money aspects of the partnership may take longer as he would wish that undertaking to be conducted thoroughly and comprehensively. The Committee was further advised that the review had found no data protection breaches with the robustness of data protection arrangements and controls being the main issues raised.

In considering the Internal Audit review report, the Committee deemed that it raised important questions about the governance of partnerships generally and it concurred with the comment made in the review that the outcome prompts a need to consider and review governance and data protection arrangements of the other partnerships that the Council is involved in according to their level of risk. The Committee thought that it should be giving time to reviewing the effectiveness of partnership governance as part of its work plan. The Committee further highlighted a lack of clarity around lines of responsibility within the Galw Gofal Partnership which it considered needed to be addressed as part of ensuring good governance.

The Regional Strategic Manager confirmed that the Section 101 agreement will set out the responsibilities of each organisation within the partnership.

It was resolved to accept the update report and to note Internal Audit’s assurance provision and priorities going forward.

No further action required.