Agenda item

Report of the Director of Finance and Resources

The Audit and Procurement Committee considered a report of the Director of Finance and Resources, the purpose of which was to provide the Audit Committee with an update on the internal audit activity for the period April to December 2023, against the Internal Audit Plan for 2023-24.

The report was the second monitoring report for 2023-24, presented to the Committee to discharge its responsibility “to consider summaries of specific internal audit reports as requested” and “to consider reports dealing with the management and performance of internal audit”.

The Internal Audit Plan for 2023-24 was presented to the Audit and Procurement Committee at its meeting on 24^th July 2023.  As the Plan was agreed at the start of the financial year, it was always likely to be subject to some amendments due to changes in the risk environment, requests from service areas to reschedule work, and any exceptions.  It was important that the Internal Audit Service retains a flexible approach in order to ensure it could respond to issues on a timely basis and add value.  In the half year progress report which was presented to the Audit and Procurement Committee at its meeting on 27^th November 2023, it was explained that the Plan would need to be adjusted as a result of long-term unplanned absence within the Service.  Consequently, the Plan has been amended to 400 days (a reduction of 80 days.).  This had been accommodated through:

·  Re-programming a small number of audit reviews into the 2024-25 Audit Plan.

·  Changes in the risk environment impacting the requirement for audit involvement. 

The key target facing the Internal Audit Service was to complete 90% of its work plan by 31^st March 2024.

As at the end of December 2023, the Service had completed 59% of the Audit Plan against a benchmark of 75% (delivery of 100% of the plan). The main reason for the variation in performance related to a small number of audits which had taken longer to complete than the original time estimated.  Achieving 90% of the Plan by 31^st March 2024 would be challenging however, based on the work completed in quarter four to date, it was expected that performance would exceed 80%. 

In addition to the delivery of the Audit Plan, the Internal Audit Service had a number of other KPI’s which underpinned its delivery. One target was noticeably below expectations (audits delivered within budget days) and whilst there were a number of reasons for this, for example, the audit area was more complex than originally envisaged; ongoing monitoring of internal audit work and identifying opportunities for improvement remained a key focus for management, in line with the Public Sector Internal Audit Standards.

The Public Sector Internal Audit Standards were based on the Global Internal Audit Standards. Following a review of the Global Standards by the Institute of Internal Auditors, a new set of standards would come into force in January 2025.  As a result, the Internal Audit Service would be looking to develop a revised set of performance indicators for 2024-25 which were aligned to the new standards. Work was currently ongoing to assess what performance measures would be required and further updates on this would be provided to the Audit and Procurement Committee in due course.  It was the view of the Chief Internal Auditor that these changes would not, in any significant respects, impact on the ability to deliver the annual internal audit opinion.

As at 30^th December 2023, the following audits were in progress:

·  Audits at Draft Report Stage – Limbrick Wood Primary School Formal Follow-Up, Pothole Pro Health Check Stage Two. 

·  Audits On-going – Off-contract Agency Spend, End User Computing, Implementation of new IT systems / upgrades, IR35, Risk Management, IR35 in Schools, CareDirector Post Upgrade Assurance.

Details of a selection of key reviews completed in this period had been provided and in all cases, the relevant managers had agreed to address the issues raised in line with the timescales stated. These reviews would be followed up in due course and the outcomes reported to the Audit and Procurement Committee.

In terms of risk management, there were two focuses:

·  Internal Audit perspective - The main risks facing the Service are that the planned programme of audits were not completed, and that the quality of audit reviews failed to meet customer expectations. Both these risks were managed through defined processes (i.e. planning and quality assurance) within the Service, with the outcomes included in reports to the Audit and Procurement Committee. Delays in the delivery of individual audits could occur at the request of the customer, which could impact on the delivery of the plan. This risk was managed through on-going communication with customers to agree timing and identify issues at any early stage to allow for remedial action to be taken.

·  Wider Council perspective - The key risk was that actions agreed in audit reports to improve the control environment and assist the Council in achieving its objectives were not implemented. To mitigate this risk, a defined process existed within the Service to gain assurance that all actions agreed had been implemented on a timely basis. Such assurance was reflected in reports to the Audit and Procurement Committee. Where progress had not been made, further action was agreed and overseen by the Audit and Procurement Committee to ensure action was taken.

RESOLVED that the Audit and Procurement Committee:

1. Notes the performance as at Quarter 3 against the Internal Audit Plan for 2023-24.
2. Notes the summary findings of the key audit reviews.