Agenda item

To present the Internal Audit progress report for Quarter 1 2016/17.

The report of the Head of Internal Audit on the work of the Internal Audit service during the period from 1 April, 2016 to 30 June, 2016 was presented for the Committee’s consideration in line with the requirements of the UK Public Sector Internal Audit Standards and the CIPFA UK Standards whereby the Head of Internal Audit is required to report periodically to the Committee on the Internal Audit Service’s performance relative to the 2016/17 Audit Plan.

The Internal Audit Manager reported on the following aspects of the Service’s performance:

•           That there were 6 audit projects of varying complexity in respect of 2015/16 that were not completed or issued by 31 March, 2016 and constitute work in progress as listed in paragraph 3.1.1 of the report.

•           A schedule of performance targets for the period ending 30 June, 2015 is contained in Appendix A to the report and shows that 24.19% of planned audits have been completed at this stage against an annual target of 80%.

•           A schedule of all audit assignments completed during the year to date including work in progress for 2015/16 is provided in Appendix C to the report and this summarises the audit opinions and recommendations in respect of each area reviewed. Since 1 April, 2016, two final reports have been issued from the 2015/16 Internal Audit Operational Plan and six from the 2016/17 Plan.

•           Two of the planned audits completed during the first quarter have been assessed as not providing positive levels of assurance. The Housing Benefit Key Controls and the Building Regulation Fees Inspection and Enforcement Regimes were both assessed as providing Limited Assurance.

•           Internal Audit recommendations are rated as High, Medium or Low according to the perceived risk as defined in Appendix B to the report. The percentage implementation rate as at 30 June, 2016 was 72% of High and Medium recommendations having been recorded as implemented.

•           A schedule of the 3 follow up audits conducted during the first quarter is provided at Appendix E to the report and demonstrates the number of recommendations accepted and implemented by Management along with the revised audit opinion.

•           The special investigations undertaken by Internal Audit during the period amount to 37.70 days and are outlined in Appendix F.

•           An analysis of the Internal Audit Service’s performance for the first quarter of the 201617 financial year shows that performance levels are currently on target.

The Committee considered the information presented and noted the following:

•           The Committee noted that the audits in relation to two areas (Housing Benefit and Building Regulation Fees Inspection and Enforcement) found weaknesses in the key controls in those areas meaning that the arrangements for the effective governance and the management of risk in these areas could not be deemed to be reliable. The Committee sought clarification of the actions being taken to rectify the situation and in the case of the latter; the Committee noted that the shortcomings go the root of the service. The Head of Function (Resources) and Section 151 Officer said that the Housing Benefit system is a complex system which manages a volume of information and as such cannot provide complete assurance that it can always be 100% accurate. Consideration is being given to acquiring an electronic system to scan paper documents and correspondence and to allocate tasks to the Team’s members. Of the 12 audit recommendations issued, 10 were accepted by Management and of those, 7 have been implemented and the remaining 3 will be actioned by September. With regard to Building Regulation Fees Inspection and Enforcement, the new Head of Service for Regulation and Economic Development is currently reviewing the Service’s administrative processes. The Committee noted that it would be prudent for it to keep a watching brief on both areas to ensure that the audit recommendations are implemented.

•           The Committee noted that with regard to certain service areas as indicated in Appendix D there has been slippage over a number of years on the agreed date for implementing audit recommendations with in some cases, no management commentary to account for the delay or to provide assurance that the matter is in progress and will be completed by a specific date. The Committee sought clarification whether this was due to services having to catch up on unactioned recommendations and whether there is a mechanism for chasing up Management in instances where no demonstrable progress has been made within the specified timeframe. The Committee further noted that where there is commentary by Management it can be vague or  non-committal as regards setting a deadline, and is therefore unhelpful in terms of the Committee being able to track progress and/or establish whether there are any issues preventing recommendations from being implemented. The Committee was informed that the implementation rate for High and Medium rated recommendations is now up to 72%.The system by which implementation is recorded is not especially user friendly and recommendations that have been implemented may not always show up as such on the system. In cases where the follow up audit shows that the recommendations have not been implemented, the Committee does have recourse to calling the relevant Head of Service to account. Furthermore, there is a case for better educating staff about the reporting process so that they are clearer in what they report, that they know to whom the information is presented, and the weight placed on the information.

•           The Committee noted consequently that all Management need to be aware that the reporting procedure to the Audit Committee is important and needs to be effective in communicating the position of services in taking action on audit recommendations and that staff need to understand that it is also a public process meaning that inaccurate reporting can be misleading. The Committee was informed that the SLT is kept informed about the implementation of audit recommendations on a quarterly basis; the message regarding the importance of providing proper updates to give an accurate picture needs to cascade down from the SLT to Head of Service level and therefrom to managers and staff.

•           The Committee noted with regard to school audits that those completed during the year to date have resulted in a Reasonable or Substantial audit opinion and it took assurance from the improvement this evidenced whilst recognising also that some outstanding issues remain in relation to schools’ governance arrangements as shown by Appendix D. The Committee suggested it would be worthwhile reminding the Lifelong Learning Directorate of the importance of schools maintaining accurate and up to date records and of complying with agreed processes and procedures. (Councillor John Griffith wished it to be noted in this context that he is a serving governor of Ysgol Llanerchymedd and Ysgol Bodedern and Councillor Peter Rogers also referred to his position as a school governor.)

•           The Committee noted that the follow up audit of sundry debtors had as with the original audit,   resulted in a Limited assurance opinion and it sought an explanation for the lack of improvement. The Committee was informed that the recommendations of the original audit are in the process of being implemented and that the service has lost staff over a period of time meaning it has not had the resources to be able to fulfil certain elements of the work. The Revenue and Benefits Team is currently undergoing review and restructure and once that is completed, the service’s processes and procedures will be looked at and tasks will be re-assigned within the team thereby releasing resources to undertake on a regular basis, aspects of the work that are not regularly carried out at present.

•           The Committee was satisfied from the information presented and the updates provided verbally that the internal control, risk management and corporate governing processes that are in place to manage the achievement of the Authority’s objectives are functioning satisfactorily, and that where weaknesses have been identified, remedial action is being taken or is planned.

It was resolved to accept the report and to note its contents.

ACTION ENSUING: Head of Function (Resources) and Section 151 Officer to raise  with the SLT the importance of effective and timely communication by Management in providing a clear and accurate picture of the position of services with regard to implementing audit recommendations.