Agenda item

To provide the Committee with a periodic report on the Internal Audit function for the period June 2022 – August 2022, as required by the professional standards.

 

 

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 June 2022 to August 2022 together with an update on the Internal Audit Charter for approval by the Committee, as required by the professional standards. That report was split into two sections as follows:-

 

1)    INTERNAL AUDIT PLAN PROGRESS 2022/23

 

It was reported that the Housing Strategy audit was the only audit that remained outstanding from the 2021/22 Internal Audit Plan. That audit had originally been delayed due to the sad passing of the Executive Officer for Housing Projects. The service had not been able to recruit to the post since then and were still currently recruiting to that position. Therefore, the audit had been moved into the 2022/23 Internal Audit Plan with a view to completing the audit later in the year.

 

Members were made aware that a total number of five audits had been completed during June 2022 to August 2022. One report in this period had received an overall opinion of ‘Improvement Required’ (Depot Operations) with the other four receiving satisfactory assurance opinions with no significant issues being identified.

 

A further 14 audits from the 2022/23 Internal Audit Plan had been allocated, eight of which were currently at the fieldwork phase.

 

The Committee was informed that the Internal Audit team were currently in the ‘Key Systems’ phase of the plan where all financial and core service systems and processes were reviewed. Though, it was unanticipated that there would be any significant issues as historically they had been well managed, it was very important to ensure that those systems and processes continued to work as expected and remained well controlled.

 

The Chairman asked the following questions relating to the matters above:-

 

(1)    Will the proposed Recycling and Waste audit look at the waste generated by the Council itself and by its external service providers?

(2)    What will the proposed Freeport East audit be examining?

 

The Internal Audit Manager (Craig Clawson) responded along the following lines:-

 

(1)    Yes.

(2)    This audit would at the governance arrangements.

 

Quality Assurance

 

Members were aware that the Internal Audit Team 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

 

The Committee was informed that Internal Audit was currently working with an establishment of 3fte with access to a third party provider of internal audit services for specialist audit days as and when required. The Council had advertised twice for the vacant Audit Technician post, but unfortunately had not been able to appoint to that post.

 

The Internal Audit Manager was a member of the Essex Audit Group, which was made up of all Heads of Internal Audit across all district and borough councils in Essex including Essex County Council and Southend and Thurrock unitary authorities. All members of this group were finding it difficult to recruit. As a result of this the Internal Audit Manager, with other members of the group, were devising a plan to allow apprentices to work within different Councils across Essex for short periods of time in order to gain experience that they would not receive working for one organisation. This was to try to provide a better quality of training and experience across the board whilst the apprentice studied.

 

The Chairman and members of the Committee asked the following questions relating to the matters above:-

 

(1)    Where and how was the Audit Technician post advertised?

(2)    Would it have been worthwhile to go to the expense of using a specialist recruitment company given the ongoing cost to this Council of using a third party provider of internal audit services plus the cost of moulding an Apprentice into a qualified Audit Technician?

(3)    Is the current establishment sufficient to enable Internal Audit to operate effectively?

 

The Internal Audit Manager (Craig Clawson) responded to those questions along the following lines:-

 

(1)    TDC website and online.

(2)    No guarantee of a successful appointment plus an Apprentice can be trained in the Council’s “housestyle”.

(3)    Yes.

 

Outcomes of Internal Audit Work

 

The Standards required the Internal Audit Manager to report to the Audit Committee on significant risk exposures and control issues. Since the last report five audits had been completed and the final report issued. The Public Sector Internal Audit Standards required the reporting of significant risk exposures and control issues.

 

Assurance	Colour	Number this Period	Total for 2022/23Plan
Substantial		1	1
Adequate		3	3
Improvement Required		1	1
Significant Improvement Required		0	0
No Opinion Required		0	1	One consultative engagement in 2022/23 to date

 

For the purpose of the colour coding approach, both the substantial and adequate opinions were shown in green as both were within acceptable tolerances.

 

Issues arising from audits completed in the period under review receiving an ‘Improvement Required’ opinion and which required reporting to Committee were:-

 

Depot Operations

 

Although there was only one significant issue reported within this audit, there were a number of operational issues identified which required management attention across all risk areas identified within the audit. This had a weighted influence on the overall assurance opinion of the report. Those issues would be followed up by Internal Audit with the service in the normal way.

 

It was noted that many of the findings identified within the audit were longstanding issues that would take time to resolve. The changes currently occurring and planned future changes had an impact on the culture, structure and day-to-day operations of the depot. The service had been working with Internal Audit and would continue to do so going forward. Significant issues identified were:

 

1.   Lack of Stores Stock Takes

 

In order to manage and control stock and check the integrity of the stock system against system error or potential theft, stock takes were necessary to ensure what was recorded on the system matched with the physical stock. An ad-hoc stock take of a few random lines had been undertaken during the audit, which had identified a few discrepancies. Internal Audit had been advised that there were no regular stock takes - either by checking a number of lines or a complete one. A lack of resource had been provided as the main reason due to the manual methodology of other tasks taking time.

 

Risk:

 

“Without regular stock takes, it is problematic to know stock records are correct which would identify any errors in the system or if stock is being removed without authorisation.”

 

Agreed Action:

 

“To actively manage stock, regular stock takes are to be introduced, at a minimum frequency of a month.

 

Current software to be used to monitor stock, but stocktakes will be continued using any replacement software, following current review of options.”

 

The Chairman and members of the Committee asked the following questions relating to the matters above:-

 

(1)    Is there sufficient staff resource now in place to enable regular stock takes to be undertaken?

(2)    What is the current position with regard to the introduction of the new software system?

(3)    Have the staff at the Depot engaged in the implementation of the new systems and procedures?

 

The Corporate Director (Operations & Delivery) (Damian Williams) responded to those questions along the following lines:-

 

(1)    This was being rectified through a staff restructure.

(2)    A decision was expected in October 2022 as to which IT system the Council would proceed with. It was hoped to ‘go live’ with the new system in January 2023.

(3)    Yes, they have.

 

Management Response to Internal Audit Findings

 

The Committee was reminded 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.

 

The number of high severity issues outstanding was as follows: -

 

Status	Number	Comments
Overdue more than 3 months	0
Overdue less than 3 months	0
Not yet due	3

 

Update on previous significant issues reported

 

The Corporate Director (Operations and Delivery) provided an update on the progress of agreed actions relating to the Housing Repairs and Maintenance audit, as had been reported at the previous meeting of the Committee.

 

The Chairman and members of the Committee asked the following questions relating to the matters above:-

 

(1)    How has the implementation of the agreed actions progressed?

(2)    Has the recent office accommodation review negatively impacted on the amount of storage of equipment etc.?

 

The Corporate Director (Operations & Delivery) (Damian Williams) responded to those questions along the following lines:-

 

(1)    Relevant staff have been re-trained. Further progress will be dependent on the new software package.

(2)    No, it has not.

 

The Head of Customer and Commercial Services also attended the meeting to provide an update on agreed actions previously reported to the Committee arising from an audit of Careline, including updates on staff recruitment and the likely positive outcome of a recent TSA audit.

 

The Chairman asked the following question relating to the matters above:-

 

What is the current position relating to recovering debt from Careline customers and is it being closely monitored and pursued?

 

The Head of Customer and Commercial Services (Mark Westall) responded along the following lines:-

 

There was £15,000 still outstanding from an external national organisation but fully confident that this would be paid in due course. A change in the allocation of staff duties was being made to ensure that Careline accounts were continually monitored.

 

2)    INTERNAL AUDIT CHARTER

 

The Committee was aware that a requirement of the Public Sector Internal Audit Standards was for the Committee to review and approve the Internal Audit Charter on an annual basis. The Council’s Charter had last been updated and approved in September 2021. As there had been no changes to standards or processes since the last review, it was felt that no amendments were required.

 

After detailed discussion it was RESOLVED that –

 

(a)    the contents of the report be noted;

(b)    the Internal Audit Charter, as set out at Appendix B to the Internal Audit Manager’s report, be approved; and

 

(c)    the Corporate Director (Operations & Delivery) and the Head of Customer & Commercial Services be required to attend a meeting of the Committee in approximately six months’ time in order, respectively, to give further updates relating to the Housing Repairs and Maintenance/Depot Operations audits and the Careline audit.