To update members on the progress of internal audit work and to bring to their attention any key internal control issues arising from work recently completed.  To enable the committee to monitor performance of the internal audit team against the approved plan.  To assure the committee that action is being taken on risk related issues identified by internal audit.

Update, 21 January 2022:

Please note that elements of Appendix A – Report of Internal Audit Activity, pages 47-72 of the agenda reports pack, do not display as expected.  Version 2 (attached) includes updated page numbering, charts and graphics but the text remains the same, as originally published.

The committee received a report on the progress of internal audit work; an updated ‘Report of Internal Audit Activity’ document had been issued in supplement 1 to the agenda which included updated charts and graphics.

The assistant director of South West Audit Partnership (SWAP) introduced the report, the principal points included:

i.             Since the previous update (27 October 2021, minute 42 refers), twelve audits had been finalised, with a total of eighteen audits completed for 2021/22.

ii.            Eleven audits were at draft report stage and there were fifteen audits in progress.

iii.          There was a noted delay completing the green homes grant testing, as the council had requested an extension to the scheme to 31 January 2022.

iv.          Community testing funding grant work had been completed for January to September, with an under claim of just under £30k identified and notified.

v.           For the twelve audits completed, one returned a substantial assurance, one returned a reasonable assurance, three were limited assurance, and seven were reasonable – grant certification.

vi.          For the three audits with limited assurance (Education Health Care (EHC) Plans, payroll and contract management), five priority 2 actions had been agreed.

vii.         Following a request from the committee, the section ‘Outturn to Date – 2021/22’ (supplement 1, page 27/28) now included the audit objective for each audit.

viii.       The section ‘the Headlines for audits completed to date’ highlighted the thematic findings as ‘the need to update strategy and protocol documents’ and in relation to ‘quality of data from systems’; the findings had been discussed at the chief executive’s management board.

ix.          Planned work continued to be impacted by Covid, including additional audits in relation to grant determinations.

x.           Both community testing funding grant and Test and Trace support payment audits would continue into quarter 4.

Responses were provided to questions from committee members, the key points included:

1.           Payroll (supplement 1, page 23):  The head of corporate finance advised that, in terms of ‘acceptable tolerance’, differences of less than £100 were monitored on a monthly basis, with differences exceeding £100 investigated.  The chairperson requested that details of the quantum of differences that had been written off be circulated to committee members.  The head of corporate finance confirmed that enhanced reconciliation checking had commenced from the target date of 31 December 2021.

In response to further questions about payroll, the head of corporate finance provided an overview of the live integrated payroll system, the complications associated with leavers and employees on sick leave or maternity leave, the reconciliation process, and the purpose of the holding code. 

The vice-chairperson questioned the ‘longstanding issues with the reconciliation of the holding accounts’ and how this had been reflected in previous internal update progress reports.  The assistant director of SWAP said that clarification would be provided about the timeline involved.

2.           Education Health Care (EHC) Plans – Preparation for Adulthood (supplement 1, page 23): The assistant director of SWAP said that clarification would be sought on the treatment of priority 2 findings in terms of the risk register and improvement plan activities.

3.           Action Plan to the OFSTED and Care Quality Commission Report (supplement 1, page 24): The assistant director of SWAP said that an update would be sought on the completion of the action by the target date of 30 November 2021.

4.           Conclusion (supplement 1, page 33): A typographical error was noted where reference to ‘2021/11’ should be to ‘2021/22’.  In response to a request for clarification, the assistant director of SWAP confirmed that the report provided an update on internal audit plan progress for 2021/22 and on the finalisation of audits from 2020/21.  The impacts of Covid and additional work in relation to grant determinations were reiterated.  It was reported that the quarter 4 plan would pick up audits that were deferred from earlier 2021/22 quarters, although it might not be possible to finalise all within the current financial year.

5.           SWAP Performance – Summary of Audit Opinions (supplement 1, page 30): The vice-chairperson expressed concerns about the balance of grant certification and other audit work in recent quarters and, excluding grant certifications, the relatively high percentage of limited assurance findings.  It was also questioned whether, as discussed at a previous meeting (minute 42 of 27 October 2021 refers), additional resource had been secured to deliver some of the planned work.  The assistant director of SWAP outlined the work being undertaken on grant certification and anticipated that there could be a return to normality with the audit plan in 2023/24 but SWAP did not have the additional capacity at present to bring forward any other audits beyond those included in the current plan.  The director of resources and assurance commented that the activity of the council over the last two years had been dominated by the Covid response and, given the related grant funding, the work of internal audit work was appropriate and helpful.  It was commented that some additional capacity had been obtained from SWAP but the ability to service work was finite, particularly given the increased demands from other clients.

6.           Counter Fraud Update (supplement 1, page 45): A committee member commented that the counter fraud activity was to be applauded and could be brought to the wider attention of the public; this was explored further under the anti-fraud and corruption annual report (minute 69 below).

7.           Internal Audit Work Plan Qrt 2 2021-22 (supplement 1, page 39): The assistant director of SWAP advised that the work on the ‘Hereford City Centre Transport Package – Investigation’ was nearly concluded and the final report was to be issued to the director of resources and assurance imminently, with a decision to be taken subsequently about the level of detail to be provided to committee members.

Resolved:      That

a)           performance against the approved plan has been reviewed and areas for improvement identified;

b)          the assurances provided and the recommendations which the report makes have been considered and commented upon;

c)           the proposed 4th quarter internal audit plan 2021-22, on page 22-23 of appendix A to the report, has been reviewed and the committee has considered the level and range of activity proposed in order that the work carried out may give a satisfactory level of assurance over the council’s corporate governance arrangements; and

d)          The corporate fraud update be noted.

Action(s):

Action 136      Information to be circulated on the quantum of write offs in relation to payroll.

Action 137      Confirmation to be provided of treatment of priority 2 findings in terms of the risk register and the current status with meeting the target dates for the identified actions.

Action 138      An update be provided on the ‘longstanding issues with the reconciliation of the holding accounts’, particularly in the context of previous internal update progress reports.