Agenda item

To consider a report on the Internal Audit Opinion 2021/22.

Ian Evenett presented a report on the Chief Audit Executive (CAE) opinion on the Internal Controls of the Council for the financial year 2021-22. The opinion was based on the work undertaken by Internal Audit both during 2021-22 and that related to that year. It provided reasonable but not complete assurance concerning the Council’s internal control system and took account of actions that had been agreed with managers to address weaknesses identified, and the impact of the pandemic on the Internal Audit Service.

Recruitment of suitably qualified and experienced Internal Auditors remained a challenge but a new member of staff had been recruited very recently and a temporary part-time member of staff had been recruited to cover a period of leave. A revised Internal Audit Plan 2022-23 would be presented at a future meeting to reflect the slight decrease in capacity in the service.

The service was due to undergo an external review in accordance with the requirements of the Public Sector Internal Audit Standards (PSIAS) and the Chair or Vice-chair would be interviewed as part of the process.

Ian Evenett invited questions and observations from members of the committee:

-        Why were [target] dates not included in the ‘Key Actions Agreed’ such as, for example, for the recovery of payments made against fraudulent applications in Appendix 1 – Summary of Audit Reports Issued? – Recovery was difficult and, although the Council could seek to prosecute, the level of evidence and effort required could be excessive. Sometimes it was not possible to recover due to the nature of the fraud as some were very sophisticated and linked to organised crime.

-        The Assurance Score against the Covid Business Grant Fraud audits was shown as N/A but, nationally, the value of such fraud was estimated in the billions of pounds. Were systemic issues reviewed as part of the audits? – This Council had been required to distribute £6million in grant funding and responsibility lay with central government departments. However, the Council had a number of options including passing on the details to the police or to the Department for Business, Energy and Industrial Strategy which initiated national investigations of organised crime. The Business Grant Fraud audits had started early on and had given Mr Evenett a good deal of confidence in the process. If any systemic issues were identified in the course of an audit, changes could be made to the system.

-        What would it take to provide a ‘complete’ assurance regarding the Council’s internal control system? – Mr Evenett assured members that it was a ‘clean report’ as far as Internal Audit was concerned. Internal Auditors were not identifying failures of control within the testing and would issue lower levels of control if they found anything significant. They outlined what key actions they had agreed in particular audits and would follow up any failures to implement said actions with Heads of Service to ensure that they were implemented. Non implementation of management actions would only be deemed to be acceptable if there had been system changes in the meantime that rendered them unnecessary.

-        According to Appendix 2 several of the audits had not been finished at the time the report was prepared (including Payroll and Payment of Creditors). Had they been finished now? – The Payment of Creditors audit had now started but there had been some reasonable requests to delay some audits and these would be included in the Audit Plan for 2022-23.

-        Would the committee have an opportunity to see the terms of reference of the external review of the Internal Audit service before it commenced? – There was a Memorandum of Understanding (MoU) which set out the broad basis and methodology upon which the constituent authorities agreed to participate in the scheme and how the activity would be carried out.

-        It would be helpful for members to see this as they may want the review to look at certain things that they felt would be of benefit to the committee.

-        If officers were happy with the MoU, and unless there was anything in it that members totally disagreed with, members would likely be supportive of it.

-        Lukman Patel suggested that the MoU be circulated to members and that any changes to the terms of reference of the peer review should be delegated to the Chair and Vice-chair to consider in consultation with co-opted Independent Member David Swift. It was not considered likely that the committee would need to hold a special meeting on the matter.

IT WAS AGREED

1)    That the Chief Audit Executive opinion on the Internal Controls of the Council for the financial year 2021-22 be noted, and

2)    The MoU for the Lancashire Chief Auditors Group Peer Review be circulated to the committee, and

3)    Any requests for amendments to the terms of reference for the peer review be delegated to the Chair and Vice-chair to consider in consultation with co-opted Independent Member David Swift.