The report of the Head of Audit is attached marked 10.

Contact:  Ceri Pilawski (01743) 257739

14.1   The Committee received the report of the Head of Audit - copy attached to the signed Minutes - which provided Members with details of the work undertaken by Internal Audit for the year ended 31 March 2017.  It also reported on delivery against the approved Annual Audit Plan and included the Head of Audit’s opinion on the Council’s internal controls as required by the Public Sector Internal Audit Standards (PSIAS).

14.2   The Head of Audit reported that final performance had been good with the revised plan being delivered in excess of the 90% delivery target.  She continued that payroll was the largest financial system in the Council, the audit had not been completed in 2016/17 but she was satisfied that the data provided for completion early 2017/18 was robust and provided confidence. 

14.3   The Head of Audit drew attention to Section 5.8 of her report and the tables showing a comparison of the assurance levels and categorisation of recommendations.  Members noted a 3% increase in the higher levels assurance compared to the previous year, offset by a 3% decrease in limited and unsatisfactory opinions.

14.4   The Head of Audit referred Members to section 5.16 of her report which noted the fundamental recommendations made in the year. Hardware replacement remained at an unsatisfactory level with improvements still being embedded that were not reflected fully in the control environment.  The Hardware Replacement Programme was to be aligned to the overall IT strategy with a revised implementation date of 30 June 2017.

14.5   Members noted that three recommendations, less than 1% of all recommendations made had been rejected by management.  The Head of Audit continued that this was not cause for concern where the risk had been recognised and compensating controls were in place.

14.6   The Head of Audit referred Members to section 5.20 which listed 14 audit IT reviews which received unsatisfactory or limited assurance and further supported qualification of her opinion. 

14.7   Members attention was drawn to section 5.22 which listed a number of internal audit reviews conducted to ensure that appropriate controls were in place and operational to counter the risk of fraud.  In general sound controls were found to be in place. 

14.8   Members noted section 5.24 which set out examples of additional work undertaken by Internal Audit to add value to the Council. In response to a query the Head of Audit explained that Internal Audit would take on the role of critical friend to ensure that applications for funding were robust.

14.9   The Head of Audit explained that on the basis of work undertaken and management responses received she had qualified her overall opinion of the Council’s internal control environment.  The reason for this was primarily based on the continuing numbers of the internal audit assurances provided on the IT infrastructure and a number of application systems.  She continued that she accepted that this had been the case for some time and significant resources had been allocated to manage the risk with improvements being reported, she accepted that it would take several years for the necessary improvements to be implement and sufficiently embedded to attain the appropriate assurance levels. 

14.10   Members considered the table in section 5.29 which demonstrated Audit Performance by measuring achievement against the plan where the target had been 90% for 2016/17 and 99% had been delivered.  Also ensuring compliance against Public Sector Internal Audit Standards. The percentage of customers satisfied with the overall service target had been set at 80% and 89% had been achieved.

14.11   Members discussed the situation with IT and causes for concern and reassurance, and commented that there was a clear direction of travel although it may take years for the situation to be fully resolved.  They expressed concern that the Accounts would continue to be qualified until the situation changed.  The Head of Audit assured Members that the Audit Opinion did not directly impact on the Council’s accounts and it was not the accounts that were the subject of her qualified opinion.   Members observed that IT was an important focus for the Audit Committee and they expressed confidence in the process outlined but asked that the Committee be kept informed of progress and achievement in relation to timescales for implementation.

14.12   Members considered Table 4 in Appendix A, Unsatisfactory and limited assurance opinions since February 2017 listed by Service Area.  The Head of Audit agreed to circulate a complete list of all unsatisfactory assurances. She suggested that Members may be minded to suggest topics for future meetings or training events.

14.13   Members discussed the issue of the Finance Sales Ledger and considered if the concerns raised would be addressed by the new financial IT system.

14.14   RESOLVED: 

A.     That performanceagainst the AuditPlan for the year ended 31 March 2017 be noted.

B.     To note that Internal Audit had evaluated the effectiveness of the Council’s risk management, control and governance processes, taking into account public sector internal auditing standards or guidance, the results of which could be used when considering the internal control environment and theAnnual GovernanceStatementfor2016/17.

C.    To note theHead of Audit’squalified year end opiniononthe Council’s internal control environmentfor2016/17on the basisofthe work undertakenand managementresponses received.  However the Committee is concerned that this is the fifth year that the Head of Audit’s opinion is qualified.