Agenda item

To receive a report from Gemma Young, Head of Internal Audit and Risk Management. The report is not attached to this agenda and will be circulated to follow.

                                                                                                            To follow

This was introduced by Gemma Young, Head of Internal Audit and Risk Management

NOTED

1.    The Public Sector Internal Audit standards require the Head of Internal Audit to give an annual audit opinion of the council’s governance, risk management and internal control. This year’s opinion is limited assurance.

2.    There are four categories of assurance that can be given; substantial, reasonable, limited and no assurance.

3.    The reasons behind this rating are as follows. This year there were 44 pieces of work undertaken by the internal audit team which gave an assurance rating. There were 32 audits were targeted at key Corporate Services and 12 of these received a negative audit opinion (limited or no assurance). There were 12 schools’ audits and of these 8 received a negative assurance opinion. It is clear that as a Council it is the schools that are pushing us into that limited range.

4.    In terms of actions, there were 161 actions recommended in audit reports across the year for corporate audits and 183 actions recommended for schools. The reason why schools’ audits have disproportionally more actions is that the audit looks at a broader scope area for schools so it is natural that there would be more actions recommended. Overall there were 344 more actions recommended by internal audit.

5.    Part of the opinion is based on the timely implementation of agreed audit actions.

6.    As at year end 31 March, 73% of corporate high-risk actions have been implemented and 44% of corporate medium risks implemented rising to 100% for high risk and 85% for medium risk by the 15th of July. For schools, at year end, 59% high risk actions and 75% medium risk actions had been implemented, rising to 82% for high risk and 78%for medium risk by the 15 July.

7.    In terms of why the council has received a negative overall assurance opinion for this year, it should be noted that this year audit has targeted the extremely high-risk areas. Although the plan is for the Head of internal Audit and Risk Management alone to decide, there is close working with the Assurance Board and Executive Directors are asked to identify their high-risk areas.

8.    Another reason for the limited assurance category is that the style of audit has changed from continuous monitoring for key financial systems which is essentially the same tests repeated again and again. This has now changed to proper deep reviews of the key financial systems and this has uncovered some issues that need to be resolved.

9.    There have been some areas where assurances can be obtained externally such as the good overall rating for the Ofsted report, positive LGA review of the Early Years’ service, the Grant Thornton financial resilience review, the adoption of the 10 year capital programme, the treasury management strategy, the introduction of a new risk management framework and improved transparency in financial reporting.

Questions, comments and queries:

·         In response to a query on why there is no assurance for homelessness and one of our primary schools. Officers advised that for homelessness it found that they were not always recording reasons for decisions. It is imperative to be able to demonstrate why a decision has been made and this was not always the case. Audit also found that the submission of data for statutory returns was not always accurate. These were the high-level findings from the audit. For Oakthorpe primary school the full detail can be found in Appendix 4 on page 40-41 of the agenda papers. Appendix 4 also provides details on all the No and Limited assurance audits

·         Members queried whether it is a common issue across schools and whether something could be done to assist the schools through the Director of Education to support them. Officers advised that in the next report on the agenda the 2019/20 Schools Audit Annual Report, the themes are grouped together. This report goes out annually to schools so that they can see what has been found. Procurement is a common issue and audit tries to provide a how to guide every year. Part of the reason why schools have not come out well is that audit will deliberately target certain schools where there may be suspected issues. Since this item was discussed at the Executive Management team, discussions have taken place with the Director of Education and school improvement team. There is a plan to improve things in schools. The communications with schools will be improved, schools will be given longer lead in times for the audits. The Council is also going to tailor the audit programme slightly to match with the school’s financial value standard.  The audit reports are already distributed to the Headteachers, governors and school business managers.

·         A follow up and escalation process has been agreed with the Executive Director of People and the Director of Education so that they will be more aware of where schools are not implemented the actions that have been agreed with them.

·         Members queried why audit findings on the Meridian Water project are identifying as medium or high risk and not critical particularly where the clear identification of roles was identified on p 33. Officers advised that critical will be for a life and death situation only. An example was given of the only critical finding in the last couple of years which was for a telephone line that was going into a care home and was part of an alert system (safe and connected) was going to a single phone line so if this was engaged and the fire alarm went off then the fire alarm would not be able to dial out and call the fire brigade.

·         ?In response to a query on how the going up and down for school roles is captured and when this is identified as a risk. Members were advised that for schools’ financial management there is an overarching audit in this year’s audit plan. This will look at; why this is going wrong, how this can be improved, which schools are good and how can we share best practice and stamp out poor practice. This issue should be captured in this as it is a funding issue for schools. In terms of the impact that the ups and downs of school roles have, this is one of the big risks around the individual school’s financial resilience. This does have a big impact on the individual school’s financial planning. As part of the work of the Council’s finance team every year we require schools to complete budget returns which includes forecasts on their pupil numbers on role so that they understand what their future budget position is. We do have a number of schools where their roles have gone up and down and this does seriously impact schools’ budget and individual schools must respond to this challenge and come back into budget. The local authority has a supportive role encouraging schools to identify those problems early and taking early action.

·         The Committee asked why is Brexit and climate change are not on the risk register? Officers advised that Brexit has its own separate risk register which comes to the committee. Climate Change can be covered under item 14 on the agenda.

AGREED to note the Internal Audit Annual Report.