Annual Report on Internal Audit Activity 2009-10 (Agenda item 8)
Report of the Head of Internal Audit.
The Head of Internal Audit presented the report, which was required to be made under the Accounts and Audit Regulations 2003, the Accounts and Audit Regulations (Amendment) 2006 and the Head of Internal Audit’s annual reporting requirements as set out in the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006.
The report was required to:
1) Include an opinion on the overall adequacy and effectiveness of the organisation’s control environment.
2) Disclose any qualifications to that opinion, together with the reasons for the qualification.
3) Present a summary of the audit work from which the opinion was derived, including reliance placed on work by other assurance bodies.
4) Draw attention to any issues the Head of Internal Audit judges particularly relevant to the preparation of the Annual Governance Statement.
5) Compare the actual work undertaken with the planned work and summarise the performance of the internal audit function against its performance measures and targets.
6) Comment on compliance with the Standards of the Code.
7) Communicate the results of the internal audit quality assurance programme.
The report gave opinions in three key areas – systems of internal control and risk management, and arrangements in relation to corporate governance. Added to this, Internal Audit cost information had been documented and cumulative performance data had been provided which analysed the quality of service provision operating throughout the year.
In response to a question, Members were informed that the cost of the Internal Audit Service for the previous year had been higher. This year, even though the costs had been lower, more audit assignments had been delivered (20 reviews in 2009/10 compared with 17 reviews in 2008/09). Both the Head of Finance and the Head of Internal Audit indicated, however, that it was not strictly appropriate to compare costs year-on-year, because the number of planned audit days varied considerably each year e.g. Annual Audit Plans encompassed 250 days in 2008/09, 237 days in 2009/10 and 256 days in 2010/11. The Head of Internal Audit did confirm that the actual audit costs for 2009/10 had been marginally lower than originally estimated.
Opinion of the Head of Internal Audit on the Overall Adequacy of the Internal Control Environment at Breckland Council
On the basis of internal audit work undertaken in 2009/10, the Head of Internal Audit’s opinion was that the overall standards of internal control for the year ended 31 March 2010 were adequate and hence accorded with proper practice. This opinion was derived from separate opinions applying to financial systems and non financial / operational systems as recorded in Appendix 4. Referring to the last column of the table at Appendix 4, Members were pleased to note that in terms of the consortium (Breckland, Broadland & South Norfolk District Councils), Breckland Council had been the only authority to gain two good assurances for the year. In the course of the year, the majority of audits had culminated in an adequate assurance level being applied to the systems of internal control under evaluation, whilst Treasury Management arrangements had stood out in best practice terms and merited receipt of a ‘good’ audit opinion. The Management Summary contained the key findings and conclusions arising from this particular review and had been attached at Appendix 2(6) of the report for Members’ information.
However, it must also be noted, as highlighted at Appendix 2 (2) of the report that a limited assurance had been given in year to Environmental Health. A limited assurance had been identified, based on a substantial number of internal control issues needing to be addressed, one of which warranted the raising of a high priority recommendation to correct a significant weakness found. Upon finalising audit work in the area of Environmental Health, a total of 12 recommendations had been proposed and subsequently agreed with management, comprising 1 high, 10 medium and 1 low priority. At year-end, 8 of those 12 agreed actions had been completed, which included the high priority recommendation, whilst the remaining 4 (all carrying medium priority ratings) had yet to reach their due implementation dates.
This year, for the first time, the Annual Report also contained an analysis of assurance levels given in respect of individual audit assignments, looking back over the last 3 financial years. In the course of comparing year-on-year, how the internal control environment had been developing, audit findings for 2009/10 indicated a much improved situation at the authority in the last 12 months, based on the number of positive assurances arising from audits conducted on-site.
The basis of assurance was set out in paragraph 3.3 of the report.
The report also contained some cross referencing to a separate report on the annual review of the Effectiveness of Internal Audit and issues relevant to the Annual Governance Statement. The outcomes of key control testing were also noted with two medium priority recommendations arising in relation to Council Tax and National Non-Domestic Rates. The Head of Finance pointed out that audit findings here applied to Anglia Revenues Partnership’s work undertaken on behalf of Breckland Council whilst Forest Heath and East Cambridgeshire Councils were responsible for their own auditing arrangements in relation to Revenues and Benefits caseloads processed for their organisations.
Opinion of the Head of Internal Audit on the Overall Adequacy of Corporate Governance Arrangements and Systems of Risk Management at Breckland Council
The Head of Internal Audit gave a good assurance in regard to this area. This opinion had been based on the outcomes of an audit assignment conducted in Quarter 4 of 2009/10 (see Appendix 2 (9) of the report).
The planned audit work for 2009/10 was now 100% complete.
Members were asked to note the report but also to take into account the opinions when discussing the Annual Governance Statement.
The percentage of recommendations accepted by management was 96.4%, which was pleasing to note.
Of 39 High Priority recommendations made during the year, 37 had actually been implemented and delivered. This was a considerable improvement on last year’s position. The remaining two applying to the financial year 2009/10 related to recommendations that were in the process of being actioned and were essentially partially complete.
The Chairman had found the report difficult to follow particularly with regard to having to flick backwards and forwards to the relevant appendices.
The questions/comments from Councillor Hewett were answered as follows:
- Has this conclusion been passed over to the external auditors?
- Page.35, paragraph 3.8.4 - There are a few notes about this point. I cannot understand what is happening, and why it is so important.
Answer: The query related to average time elapsing between the issue of audit briefs and commencement of audit fieldwork. A target of 10 days operated but during 2009/10, the contractor achieved a longer lead-in time of 20-35 days. This was good practice in terms of the auditee being properly advised in advance of the audit work commencing on site.
- Page 35, paragraph 3.9.1 - Any reason why two high priority recommendations have not yet been implemented?
Answer: A full explanation was provided in an accompanying report – The Status of Agreed Actions arising from Final Audit Reports at 31 March 2010.
- Page 38, Appendix 1: Broadly, how do we get from “adequate” to “good” overall?
Answer: Comprehensive systems of internal control requiring no further enhancements in all areas audited within a given financial year.
1) the Annual Report of the Head of Internal Audit be received and noted;
2) it be noted that the overall standards of internal control were adequate during 2009/10;
3) it be noted that a good assurance has been given in respect of Corporate Governance and Risk Management arrangements for the year ended 31 March 2010; and
4) it be noted that the opinions provided in respect of the overall standards of internal control and arrangements concerning corporate governance and risk management, are reflected in the Council’s Annual Governance Statement for 2009/10, to be subsequently presented to the Audit Committee.
- A08_BRK Annual Audit Report on Internal Audit Activity for 2009-10 (17 05 10), item 31. PDF 136 KB
- A08AnnualReport200910Appendix1OverviewofPlan, item 31. PDF 14 KB
- A08_Annual Report 2009-10 Appendix 2 - Mngt Summaries, item 31. PDF 209 KB
- A08_Annual Report 2009-10 Appendix 3 - Assurance Definitions, item 31. PDF 37 KB
- A08_Annual Report 2009-10 Appendix 4 - Mapping of Assurance Levels, item 31. PDF 40 KB