Agenda item

Report of the Internal Audit Manager - A.1 - Report on Internal Audit

To provide a progress report on the Internal Audit function for the period January 2026 – February 2026 and to seek approval of the Audit Committee for the Internal Audit Strategy and Operational Plan 2026/27.

 

Minutes:

The Internal Audit Manager provided his periodic report on the Internal Audit function for the period January 2026 – February 2026 along with the Internal Audit Strategy and Operational Plan for 2026/27.

 

It was reported that a total of seven audits had been completed since the previous update in January 2026. Six audits were still in fieldwork, and one audit (Electoral Services) had been deferred due to the upcoming Essex County Council elections in May 2026. Six of the seven audits had received a satisfactory overall opinion of ‘Adequate’ or ‘Substantial’ Assurance. The Council Tax audit had received an overall opinion of ‘Improvement Required’.

 

The 2026/27 Operational Plan had been developed using a risk-based approach, informed by the Council’s Corporate Objectives and Corporate Risks, horizon scanning from other government bodies, and best value standards issued by the Ministry of Housing, Communities and Local Government (MHCLG). The plan had been shaped through engagement with Corporate/Assistant Directors, Heads of Service and service areas to identify activities that would benefit from independent review, including opportunities for efficiency improvements, enhanced use of technology, or areas that had not been subject to audit for a significant period due to their historically lower risk profile. Local Government Reorganisation (LGR) had been considered and with the now announced Government’s ‘minded to’ decision, audit days had been added to the audit plan specifically for LGR without an accurate understanding, as yet, of how those days would be allocated.

 

Members were reminded that it had been discussed at the previous meeting of the Committee (Minute 22 referred) as to the merits, risks and consequences in undertaking the five-year external assessment required under the Global Internal Audit Standards given the upcoming Local Government Reorganisation. Further understanding was required before reporting back to the Committee. It was highlighted that additional details would be provided to the June 2026 meeting of the Committee.

 

It was reported that the Accounts and Audit Regulations 2015 required that “a relevant authority must undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes, taking into account public sector internal auditing standards or guidance”.

 

Principle nine of the Global Internal Audit Standards had required the Internal Audit Manager to “Plan Strategically” and that therefore they must have implemented the following:-

 

·         The Chief Audit Executive (CAE) must develop and implement a strategy for the Internal Audit Function to support the strategic objectives and success of the organisation and align with the expectations of the board, senior management and other key stakeholders.

·         An internal audit strategy is a plan of action designed to chieve a long-term or overall objective. The internal audit strategy must include a vision, strategic objectives, and supporting initiatives for the internal audit function toward the fulfilment of the internal audit mandate.

·         The CAE must review the internal audit strategy with the board and senior management periodically.

 

Questions by Members:

Answers:

It is encouraging to hear that a structured two?year plan is now in place. From our perspective, will there be defined milestones that allow us to monitor progress, particularly regarding the reduction of debt as a percentage? Additionally, could we receive quarterly updates on the recovery plan, including key performance indicators that track the percentage reduction in arrears?

(Craig Clawson) We will bring this matter back through the normal follow?up process, as it has been raised as part of a significant issue. Once a formalised plan is in place, we can determine the preferred frequency of updates. This would be for the Committee to agree with Richard Barrett.

 

(Richard Barrett) As Craig mentioned, we have undertaken extensive internal discussions within the department. From an assurance perspective, the recovery process is phased. When Council Tax bills are issued, the sequence progresses from the initial bill to a first reminder, then a second reminder, followed by a summons and ultimately a liability order. As the process advances, additional recovery options become available. For example, once a liability order is obtained, we can work with HMRC, including the option to recover debt through an attachment on earnings.

 

Following the Covid pandemic, we were left with a substantial volume of unsummoned debt at the reminder stage. One part of the recovery “conveyor belt” had moved forward, resulting in a significant amount of debt already under summons or liability order. This created a backlog within the recovery phase that now needs to be addressed, which is the focus of our current discussions to ensure income is brought in.

 

The financial implications will be reported to Cabinet as part of the Quarterly Financial Reports. Regarding the recovery plan outlined in report A.1, we will not be in a position to confirm its completion until a period of 12 to 18 months has passed. Therefore, it is appropriate for regular updates to be provided either through the Internal Audit Manager’s report or within the Table of Outstanding Issues report.

In relation to the current debt level of 16% and the intention to reduce it to an “acceptable level,” could we receive confirmation in writing of what that acceptable benchmark will be, so that we have clarity on the target being worked toward?

(Craig Clawson) In terms of assessing overall debt levels and attempting to benchmark them against other councils, it is challenging because not all authorities disclose their total debt position. This makes it difficult to establish a reliable comparative benchmark. From our perspective, the key indicator is that the percentage continues to decrease as a result of the work being undertaken. Once all reasonable avenues have been explored, we would expect to see a more pronounced reduction. It is also possible that some portion of the debt may ultimately need to be written off as part of the wider process, although that is not yet clear. There are numerous strands to consider, but as long as the overall debt level is reducing, it demonstrates that the service’s efforts are having a positive impact and helping to maintain the debt at a manageable level going forward.

 

(Richard Barrett) To add to that, our in?year debt recovery rate is currently around 97–98%. This relates to new debt generated within the current financial year, which is distinct from the 16% figure referenced earlier, which reflects historic debt from previous years. For benchmarking purposes, the most meaningful comparison is our pre?Covid performance, as that provides a realistic and internally consistent baseline. We will ensure that this information is provided to the Committee so that appropriate assurance can be given.

With regard to resourcing, particularly considering the current vacancy and the pressures associated with LGR, what contingency arrangements are in place to ensure the full delivery of the 400?day plan? Is there a consolidated approach that aligns both internal and external audit resources to support delivery across the programme? We would also welcome clarity on how assurance will be provided that the plan can be delivered in full.

(Craig Clawson) One factor to note is that the apprenticeship within the department is nearing completion. Once that concludes, we will begin the recruitment process for the vacant post, which will strengthen our resourcing position and support full delivery of the plan by ensuring the team is fully staffed. In addition, we have access to external audit provision, including specialist support, should it be required. We have not needed to draw on this resource in the past year or two, as our internal establishment has remained stable; however, the option remains available if circumstances change.

 

Overall, we have sufficient resilience within the service to deliver the plan, and at this stage I have no concerns regarding our ability to meet the requirements in full.

With regard to the Disabled Facilities Grant and the Housing Repairs and Maintenance work, are you confident that these areas can be fully concluded prior to Local Government Reorganisation? Additionally, are there any procurement?related risks that the Committee should be aware of?

(Craig Clawson) In terms of closing off the audits that are currently outstanding, I am confident that they will be completed well in advance of LGR. Regarding Housing Repairs and Maintenance, it is such a large and complex area that the audit scope evolves each year, meaning we may not examine the same elements annually. It is therefore possible that issues may arise before LGR, but this will depend on the specific areas reviewed. We will continue to work closely with the service to ensure that everything is in the best possible position as we approach that period.

 

At this point in the meeting, Councillor Fairley requested the Committee to note that, although the external five?year assessment and its deferral had been discussed at the previous meeting, it remained a matter of concern. She asked that it be formally recorded that the Committee continued to have reservations regarding the potential for external criticism arising from the deferral, as well as any limitations this may impose on the Council in the period leading up to LGR.

 

Questions:

Answers:

In relation to the Internal Audit Strategy, do you consider the current coverage of emerging LGR?related risks—particularly those affecting shared services, data migration, and transitional governance—to be sufficient? Would it be appropriate to establish a dedicated LGR workstream within the strategy, and could you provide further detail on how this is being approached?

(Craig Clawson) At this stage, as the scope of our involvement is still developing, we have allocated audit days without yet defining the specific areas they will cover. Once this aligns with the requirements of LGR, we will report back to the Committee with details of the work to be undertaken. When our role is fully confirmed, we will prepare and present a dedicated work programme.

 

(Richard Barrett) The point raised earlier regarding housing repairs is equally relevant to LGR. It is essential that we have our “house in order” before entering the new Unitary Council, ensuring that key outstanding issues are resolved in advance. In relation to the Annual Governance Statement, we have discussed the need for a separate risk register to provide a coherent structure and place us in a strong position. We must also consider the objectives we are working towards for 1 April 2028, based on current timescales. Significant work is required over the coming months, and the Committee will play an important role in ensuring these targets are achieved.

 

(Craig Clawson) There is also an audit within the plan relating to service plans, through which each department is required to set out its objectives for the next few years in preparation for LGR. This review will provide insight into those planned outcomes and assess whether departments are on track to achieve them.

The plan references a review of Artificial Intelligence (AI)?related risks. Could you clarify which systems and processes this currently applies to, and outline how the Audit Team is equipped to assess and test AI within those areas?

(Craig Clawson) I am not certain that we—or indeed anyone—are fully equipped at this stage to comprehensively test AI. However, we are approaching this area through a consultative review, considering several key aspects. Information governance is a primary focus, including questions around what types of data can or should be input into AI systems and whether appropriate policies are in place to ensure responsible use. We are also exploring where AI may offer the greatest benefit across different service areas.

 

I will shortly be attending an event specifically examining how AI can support Internal Audit functions and enhance service delivery. From an assurance perspective, the pace of development in this field is extremely rapid, and we are working to ensure that our cyber security and information management arrangements remain robust. While AI presents significant opportunities, it also introduces new risks, and we are actively working to understand and manage those.

 

 

 

It was moved by Councillor Fairley, seconded by Councillor Morrison and RESOLVED that the Committee:-

 

(a)  notes the periodic update and the action tracking report and requests that services capture, as part of the service planning process, the timely resolution of outstanding Internal Audit / Governance matters ahead of 1 April 2028; and

 

(b)  approves the proposed Internal Audit Strategy and Operational Plan for the 2026/27 financial year.

Supporting documents: