The report of the Interim Audit Service Manager is attached.

Contact:  Katie Williams 07584 217067

The Committee received the report of the Interim Audit Service Manager – copy attached to the signed minutes - which provided members with an update of work undertaken by Internal Audit in the three months since the November Audit Committee. 64% percent of the revised plan has been completed (see Appendix A, Table 1), which is below previous delivery records (73% 2021/22; 79% 2020/21).

The Interim Audit Service Manager informed the meeting that two good, three reasonable and two limited assurance opinions had been issued and that the seven final reports contained 85 recommendations, none of which were fundamental.  Minor revisions had been made to the planned activity however this had not led to a change in the number of days required. 

The Interim Audit Service Manager explained that productivity had been impacted and audit’s were taking longer to complete due to capacity issues in some service areas, these issues had been raised with the Section 151 Officer.  There had also been an issue with the external contractors who had been delayed in starting their work however assurances had been received that the planned work would be completed by year end where the service area is engaging with the audit process. 

Concern was raised that it appeared that some officers were not prioritising audit despite its importance, and assurances were sought that the audit team were getting cooperation across all service areas of the Council and that there was better recognition of the importance of the audit function. In response, the Executive Director of Resources (Section 151 Officer) felt that the concerns raised were well made and highlighted the exact issue that was being faced and that was reflected in the report. 

He explained that capacity was an issue across the Council at the moment as a lot of the work within some service areas had been delayed or put on hold due to covid and the backlog that that had then been created which was now being worked through, along with the changes that have been made whereby a number of services have been impacted by new initiatives and new areas of work requirements that have been placed on them and then at the same time along comes the internal audit team saying we have this plan to work through.  He reported that they were trying to balance those issues together and what was really important was that the audit plan had sufficient coverage across the organisation to ensure that at the end of the year an audit opinion could be provided and against that backdrop, consideration of what the actual outcomes were of the audit work that had been done so far. If every audit that was completed was coming back as a good or reasonable, that would require a different consideration than if all of the audits coming back were limited or unsatisfactory. 

He reported that there was going to be pushback from services quite reasonably and quite widely and in order to manage that they would try and adjust and accommodate those requests where possible but there came a point when these requests could not be accommodated any further and that the work would have to be undertaken.  So it was a mix of that and what the report was trying to flag was that that was a consideration that they had to work through and there was a risk as part of that that there could be some work that would not be completed on time.

These issues were being raised with himself as Section 151 Officer and in turn, in conversations with various officers across the organisation to justify and recommit to the importance of ensuring this work was completed.  The view at the moment was that the audit plan could still be completed by year end and would give sufficient coverage to ensure that an audit opinion could be formed, however it was still a risk.

Further concern was raised around the staffing levels of audit and the experience within the team as experienced officers were leaving and being replaced by trainees, along with contractors being employed to fill the gaps. The Committee sought reassurance that the audit team were capable of doing the required work.  In response, the Executive Director of Resources (Section 151 Officer) explained that they had worked very hard to ensure that the team was experienced and despite the new starters and trainees, they ensured that the most experienced officers were undertaking those audits where the highest level of assurance was required, and any issues would be flagged with himself. 

He informed the meeting that when external contractors were employed, the Council specified that they wanted experienced auditors who were experienced in particular areas and this could be an advantage as they would bring a different insight which could be helpful.  Obviously, if there were more people in the audit team this could provide wider coverage and make delivery of the audit opinion by the end of the year easier, but it would not necessarily make it better.  In response to a query the Executive Director of Resources (Section 151 Officer) explained the reason for the delay in contractors starting work but reassured the Committee that the work was still to be delivered over the period.

The Interim Audit Service Manager confirmed that regular meetings were held with the external contractors and that work was underway.  Assurance had been received that the work would be completed by year end.  She addressed the issue of recruitment which had been challenging but she reassured the Committee that although there were gaps in the team, the quality of the audit was their prime concern and that all work was supervised by an experienced auditor.  Members offered their support in raising awareness with senior officers the importance of audit, especially around the key system areas, and, whilst this support was appreciated, it was not yet required.

A brief discussion ensued around the capacity of the Council to deliver its functions due to the reducing capacity and how to address this.  The Executive Director of Resources (Section 151 Officer) responded to concerns around audit pressures and whether the internal control environment was strong and robust with strong governance around it.  He explained that the service was not looking to review every area as that would not be appropriate, but it was about ensuring they were looking at those areas that gave confidence that the control environment was working appropriately.  He reported that the audit plan would change over time as the organisation changed the way in which it worked.

The Executive Director of Resources (Section 151 Officer) responded to concerns around the impact that covid was still having on the work of some service areas and he reported that the back log was however coming to an end.  A query was raised as to whether there was a correlation between those services still affected by covid and a lack of capacity.  In response the Executive Director of Resources (Section 151 Officer) emphasised that each case was considered on a case-by-case basis. 

A brief discussion ensued around managers’ perception of the audit function.  The Executive Director of Resources (Section 151 Officer) explained that audit was not there to go in and find a problem but more to understand and clarify any issues and to set out solutions and this independent view could add a lot of value to the service.  Concern was raised that Internal Audit were being encouraged to step back and not go into particular service areas because it was too difficult.  It was their job to ensure the controls in place were functioning correctly and it was worrying if they were not getting cooperation from managers which suggested that there was something that was not quite right in the department.  It was up to Internal Audit to ensure that the processes and procedures were followed and that is what should give the Committee comfort there wasn’t any malfeasance going on.

In response to a query, the Interim Audit Service Manager explained that the target was 90% of the plan completed by year end.  She felt that although it was a challenge, she was confident that it would be achieved.  If there were areas they felt were ‘no go’, this would be raised with the Executive Director of Resources (Section 151 Officer) or the Chief Executive and ultimately would report to Committee that no assurance could be provided in that area because they could not engage in an audit.  However, as they did not want to be in that position, they would work with the business to get that audit completed.

In response to a further query, the Executive Director of Resources (Section 151 Officer) explained that there would be a point whereby the internal control environment became a Strategic Risk, if Internal Audit fell below a certain level and he agreed to look into this.

RESOLVED:

To note the performance of Internal Audit against the 2022/23 Audit Plan.