Agenda item

To provide the Committee with a periodic report on the Internal Audit function for the period October 2020 – January 2021 as required by the professional standards.

Minutes:

The Committee had before it a report submitted by the Council’s Internal Audit Manager (A.1) which provided a periodic update on the Internal Audit function for the period October 2020 to January 2021. That report was split into two sections as follows:-

 

(1)    Internal Audit Plan Progress 2020/21; and

(2)    Quality Assurance Improvement Programme (QAIP).

 

(1)       INTERNAL AUDIT PLAN PROGRESS 2020/21

 

It was reported that a total of nine audits had been completed since the previous update to the Audit Committee in October 2020. Eight of the nine audits completed had received a satisfactory level of assurance. One audit (Princes Theatre) had received an overall opinion of ‘Improvement Required’.

 

Fieldwork had been completed on a further three audits with the draft report yet to be negotiated, namely:-

 

·           GDPR – Data Sharing Agreements;

·           Fleet Management; and

·           Impact on Governance – COVID-19.

 

Fieldwork was ongoing on another eight audits with a final four audits allocated and started during February 2021. Three of those four related to the revenues and benefits service unit and had purposely been left as late in the financial year as possible due to the impact that issuing Covid-19 business grants had made on that service.

 

Members were informed that consultancy and advice continued to be provided on the corporate Digital Transformation, Office Transformation and Project Management projects where required. There were no significant issues to report at this time.

 

Quality Assurance

 

Members were aware that the Internal Audit function issued satisfaction surveys for each audit completed. In the period under review 100% of the responses received had indicated that the auditee had been satisfied with the audit work undertaken.

 

Resourcing

 

It was reported that the Internal Audit section was currently working with an establishment of 3 ‘Full Time Equivalents’ with access to a third party provider of internal audit services for specialist audit days as and when required.

 

The Committee was informed that the Internal Audit Team had recruited an apprentice in October 2020. However, due to the on-going impact of COVID-19, that apprenticeship subsequently had been put on hold and would be reassessed later in the year. The Internal Audit Team continued to support the Emergency Planning function as required.

 

Members recalled that at their meeting held in October 2020 it had been expected that the Internal Audit Plan would be on track to be complete earlier than anticipated. However, since the end of the third quarter and the start of the latest Covid-19 lockdown, it had been a challenge for some services to provide enough resource to support the audit. As a result Officers had been risk assessing each audit in order to determine the level of work needed and negotiating with the relevant service unit managers on resource requirements in order to ensure that Internal Audit could complete enough work to still be able to provide an overall opinion. Limitations to the scope of that audit were then reported in both the Draft and Final Audit Reports.

 

Outcomes of Internal Audit Work

 

The Public Sector Internal Audit Standards (PSIAS) required the Internal Audit Manager to report to the Committee on significant risk exposures and control issues. Since the last such report nine audits had been completed and the final report issued. Three audits had received a ‘Substantial Assurance’ audit opinion and four had received an ‘Adequate Assurance’ audit opinion. One audit had received an ‘Improvement Required’ audit opinion and the other remaining audit had not required an opinion to be made.

 

Princes Theatre – ‘Improvement Required’ Audit Outcome

 

1.      Management Examination of Reconciliations

 

It was reported that reconciliations between systems were required and undertaken in order to ensure that all payments had been received correctly and allocated to the correct accounting codes. At present those reconciliations were being carried out by the Operational Services support team and therefore any discrepancies were not being viewed and approved by Theatre Management Officers.

 

Agreed Audit Action: Reconciliations are to be viewed by a member of theatre management to evidence reconciliations have been completed accurately and promptly. There should also be evidence of this check being carried out.

 

2.      Inadequate Till System

 

Members were informed that The Essex Hall bar in Clacton Town Hall used tills to record bar sales when it was used for events and hire. Those tills were stand alone and did not offer the analytics available to most till systems used in the industry. In addition, those tills could not be connected to the Council's network and so the full functionality and office based reporting were not available.

 

Agreed Audit Action: Replacement till system to be installed, tested and working in liaison with IT in time for Theatre re-opening. Till system to have full stock tracking functionality, back office interrogation and analysis and other suitable features as required for robust modern financial and stock processes.

 

3.      Lack of Stock Takes

 

The Committee was advised that no formal stocktaking was undertaken so it was difficult to ascertain if, or how much, shortfall of stock there was. This could be caused by either wastage, fraud/theft, leakages or stock incorrectly logged.

 

Agreed Audit Action: Once the new till system was installed, regular stocktakes and line checks were to be undertaken to ensure stock management was carried out in a consistent and robust manner. Audit and accountancy were to advise and assist as required.

 

Periodic stock takes were to be undertaken manually in the short term until the new till system was implemented.

The Council’s Theatre General Manager (Technical) (Kai Aberdeen) attended the meeting and addressed the Committee on the issues listed above. He then responded to Members’ questions on those matters.

 

Management Response to Internal Audit Findings

 

Members were aware that there were processes in place to track the action taken regarding findings raised in Internal Audit reports and to seek assurance that appropriate corrective action had been taken. Where appropriate, follow up audits had been arranged to revisit significant issues identified after an appropriate time. There were two high severity issues overdue (by less than three months) which both related to either Planning Enforcement or Housing Allocations.

 

Update on previous significant issues reported

 

Housing Allocations

 

It was reported that the outstanding action for Housing Allocations related to the implementation of a new Housing Allocations system. The latest update from the service was that the system was at its final stages of testing. Internal Audit had used the days available in the follow-up review to support the service in implementing the new system and to ensure that as many different scenarios were tested as possible before going live.

 

Planning Enforcement

 

Members were advised that the Planning Enforcement Follow-Up audit was now in progress. The Auditor was currently reviewing whether all previous issues had now been addressed and would gather evidence to support the actions implemented.

 

There was also currently one major action outstanding regarding the update of the Planning Enforcement Policy. A draft policy was currently being reviewed by the Council’s legal services team. The policy would then be submitted to the Planning Committee to be formally approved and adopted.

 

Impact on Governance – COVID 19

 

The Committee recalled that it had been reported at its meeting held in October 2020 that Internal Audit would undertake a review on the impact of governance within the Council due to COVID-19. An external consultant had been commissioned to undertake the work due to the Internal Audit Manager’s involvement with the emergency planning response, which would ensure that the review remained independent. That work was now close to completion and was currently being assessed. It was anticipated that the outcomes of the review would be reported to the meeting of the Committee scheduled to be held during March 2021.

 

(2)       QUALITY ASSURANCE IMPROVEMENT PROGRAMME (QAIP)

 

Members had before them the latest QAIP update as set out in Appendix B to the Internal Audit Manager’s report.

 

The Committee was reminded that the Internal Audit function was required to be assessed externally every five years on its compliance with the Public Sector Internal Audit Standards (PSIAS). This had last been undertaken three years ago and actions from that assessment had been implemented. Within the five year assessment period, Internal Audit was required to undertake a periodic self-assessment against the PSIAS in order to develop a QAIP.

 

It was reported that the QAIP had been reassessed and the agreed actions had been updated where the Internal Audit Team were now compliant where they had previously been not. One area to highlight where Internal Audit was only partially compliant related to ‘risk appetite’. Aligning the risk appetite of Internal Audit and Risk Management remained outstanding as an opportunity to liaise with Senior Management and the Fraud and Risk Manager to assess the complexities of risk management across all departments had not presented itself over the past year.

 

Having considered and discussed the contents of the Internal Audit Manager’s report and its appendices:-

 

It was moved by Councillor Fairley, seconded by Councillor Alexander and:-

 

RESOLVED that –

 

(a)    the contents of the report be noted;

 

(b)    the contents of the Quality Assurance Improvement Programme be noted;

 

(c)    the outstanding action for Housing Allocations (the implementation of a new IT system) be added to the Committee’s Table of Outstanding Issues; and

 

(d)    the Committee endorses the agreed Audit Actions in relation to the Princes Theatre as they will also support and protect staff going forward.

 

 

 

 

 

Supporting documents: