Annex to Appendix 3 - Interim Audit Report

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Annex to Appendix 3 - Interim Audit Report

Erda - Rose.Carter

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APPENDIX A NORTH YORKSHIRE AUDIT PARTNERSHIP Ryedale District Council Interim Internal Audit Report Q3 2005/2006 Members Overview & Scrutiny Committee REPORT ISSUED TO Chief Executive : - H.Mosley Chief Financial Officer: T.V.Teasdale CPFA DATE OF ISSUE: Feb 2006 CONFIDENTIAL Ryedale District Council Interim Internal Audit Report Q3 2005/2006 Audit Manager: James Ingham CPFA Tel 01723/232364 Introduction Internal audit providers in Local Government have an obligation to produce regular Internal Audit Reports to the Chief Financial Officer and to members. This includes an annual audit report which is reported to Overview & Scrutiny in Summer 2006, however this stis an Interim report summarising work done to 31 December 2005. As an Interim report it contains :- ¤ A statement of assurance regarding the adequacy and effectiveness of the internal control stsystem based on audits completed and reviewed to 31 December 2005. ¤ Any key issues and themes arising out of the internal audit activity that has been undertaken during 2005/2006. ¤ A summary of our performance during the first half year, including details of: Audits completed; ¤ Current issues material to the Internal Audit function Under the Accounts and Audit Regulations 2003 there is a requirement for the Council to undertake a review at least annually of the effectiveness of ...

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Publié par	Erda
Nombre de lectures	21
Langue	English

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Ryedale District Council Interim Internal Audit Report Q3 2005/2006

NORTH YORKSHIRE AUDIT PARTNERSHIP

CONFIDENTIAL

REPORT ISSUED TO

APPENDIX A

DATE OF ISSUE: Feb 2006

Members Overview & Scrutiny Committee Chief Executive : - H.Mosley Chief Financial Officer: T.V.Teasdale CPFA

Ryedale District Council Interim Internal Audit Report Q3 2005/2006 Audit Manager: James Ingham CPFA Tel 01723/232364 Introduction Internal audit providers in Local Government have an obligation to produce regular Internal Audit Reports to the Chief Financial Officer and to members. This includes an annual audit report which is reported to Overview & Scrutiny in Summer 2006, however this st is an Interim report summarising work done to 31 December 2005. As an Interim report it contains :-♦A statement of assurance regarding the adequacy and effectiveness of the internal control st system based on audits completed and reviewed to 31 December 2005. ♦Any key issues and themes arising out of the internal audit activity that has been undertaken during 2005/2006. ♦A summary of our performance during the first half year, including details of:  Audits completed; ♦Current issues material to the Internal Audit function Under the Accounts and Audit Regulations 2003 there is a requirement for the Council to undertake a review at least annually of the effectiveness of its system of internal control and to publish a Statement of Internal Control (SIC) which confirms the adequacy of those systems. To support this, Internal Audit need to provide the Chief Financial Officer with an opinion as to the effectiveness of the system of internal control. This opinion statement is provided in support of the Councils SIC which must be included in the Annual Financial Statements of the Council. The main thrust of the opinion statement is reiterated within this Interim Internal Audit Report.

Respective responsibilities of Management and Internal Audit Responsibility for the Councils systems of internal control rests with line management. Internal Audit is not a substitute for a sound system of internal control nor an extension of management responsibility for internal control. The responsibility for the prevention and detection of irregularities rests with the Council and its line management. It also has a specific Housing Benefit Fraud Investigation Team. The North Yorkshire Audit Partnership will endeavour to plan audit work so that there is a reasonable expectation of identifying where potential for material fraud exists. It is the responsibility of the Chief Financial Officer, in conjunction with the Councils external auditors, and the Audit Manager (NYAP) to determine the scope of Internal Audit.

Basis of Assurance We have conducted our audits both in accordance with mandatory standards and good practice contained within the Cipfa Code of Practice for Internal Audit in Local Government.

The Cipfa Code defines Internal Audit as an assurance function providing an independent opinion on the Internal Control Environment, comprising Risk Management, Control and Governance. Accordingly we have structured our opinion around these themes.

The Assurance: Risk Management

Internal Control [financial systems, etc.]

Corporate Governance

The Councils Risk Management arrangements have made great strides, and is now fairly well embedded within the organisation. However, additional work will continue in 2005/2006 to consolidate the existing arrangements, and to ensure full assurance can be given.

Our overall opinion is that the internal controls within the financial systems in operation are fundamentally sound. This is based upon our examination of the key financial systems as part of the managed audit approach, and the other financial systems that were actually audited. On that basis and our previous experience and knowledge there is no reason to believe that the systems are other than sound.Overall there arrangements are satisfactory, including the local Code of Corporate Governance.

Audits in progress, & Forward audit plan 2005/2006 Our target is that we will achieve at least 95% of the audit plan, which exceeds the level [90%] that is good practice and recognised as such in the CPA assessment process. The audits in progress and planned for the remaining quarters of the year are shown in the table: -Audit Status Housing Benefit In progress Payroll In progress Rural Transport In progress Warden Controlled services In progress Council Tax Planned Q4 Creditors Planned Q4 NDR Planned Q4 Asset Mgt Planned Q4 Depot & Stores Planned Q4 Members Allowances Planned Q4 Tax Management Planned Q4 Local Plan Defer to 2006/07 (unless resources allow) Dog enforcement Defer to 2006/07 (unless resources allow) Insurance Defer to 2006/07 (unless resources allow)

Key Issues/Themes in 2005/2006 We have undertaken a wide cross section of audits during the first half of the year as shown in the chart below.

From our audit work in the year 2005/2006 to date, we have issued audit reports covering specific audits included in the agreed audit plan for the Council; follow up audits and a small number of special audits.

Managed audit

Cyclical audit

Value Added audit

Follow ups

Audit coverage

17%

11%

22%

Special audit/investigations 44% As we have undertaken 3 special audits to date this year, their percentage shows as 17%, though the amount of time for these varies enormously. This should not be taken as a significant concern in the overall control environment. A summary of the key issues arising from our audit work in 2005/2006 is attached as Appendix 1.

Achievement of the Audit plan Operational plans are prepared and agreed with the Chief Financial Officer, and the Head of Financial Services during February and March. These are presented to the overview & Scrutiny committee in its Audit Committee role for approval. The proposed internal audit coverage is agreed with the Councils external auditors, with whom we enjoy a continuous dialogue to ensure that we are working in sympathy with each other throughout the year. This ensures that the overall audit investment is optimised.

We report to the Overview and Scrutiny Committee three times a year with information on audits completed, including follow-ups and the key issues from each audit. The Audit Manager, and Group Auditor as required, will attend the Committee when these Interim reports and Annual Internal Audit Report are presented. Performing your audit Planned work is conducted on a phased basis to ensure even coverage throughout the year, Draft reports are issued within 15 working days of the completion of the audit. At the calendar year-end, of the total of 18 reports issued (including 2 follow up audit report), 90% reports were issued within the 15 day target.

Final Audit reports, including agreed management Action Plans are issued promptly, and within 10 days of the draft being agreed. It should be noted though that there have been some occasions when there has been a significant delays in securing time from managers to discuss and agree draft reports, but once discussed we have issued reports within our prescribed target time.

Report Issue Rate

100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 0-15 0-10 Draft Final No of days [targets: draft <15; Final <10 days] Current Issues Adequacy of the internal audit time allocations within the agreed plan At Ryedale there is occasionally an issue over the amount of time that is provided for individual audits, and we are finding that to provide the proper degree of audit and secure sufficient assurance that the times can be stretching and occasionally border on inadequate. As members may recall the Partnership operates on a quasi-commercial basis, and it is paid for completed audits at the agreed day allocation for the work. This, we have no disagreement with, as it keeps us sharp, as over-runs are a loss to the Partnership and the council can be more certain of its internal audit costs. However where audits exceed their planned time and that is through good reason, additional work, complexity, problems identified etc then the cost of that additional time needs to be agreed between the client manager and the audit manager to come to an acceptable arrangement. If this cannot be achieved and if we cannot agree sensible, realistic times for the audits then we will have no option but to report that to this committee. An example is the recent audit of Personnel and Training where we were asked by line management to review the efficacy of the recently introduced Sickness Management Policy, PIs and Benchmarking the service with other Councils. This we did, and as a consequence the audit extended beyond the plan time by a number of days, which are now the subject of discussion with the client officer.

It could also mean that we may not feel sufficiently confident about the system of internal control to be able to provide an clear statement of assurance to the Chief Financial Officer for the SIC. This is an area that can properly be brought to the Audit Committee of any organisation, as a concern of the Head of Internal Audit. There is from time to time a lack of clarity as to whom we should be responsible, the S151 Officer (the Chief Financial Officer) or the client officer, (the Head of Financial Services) or the relevant accountant where the internal audit budget resides. Also current thinking is that the Internal Audit function must be

seen to be independent, (which we largely achieve through the partnership arrangements) and can be responsible to the audit committee. Reporting Format For 2006/07 we are planning to review and revise the Internal Audit report format. The aim is to make it more straightforward for line management and especially for members so that they can, in their audit committee role, see the management summary from each completed audit exactly as line management see it.

The objective is to make this a 1 page summary which will show the key issues at a glance, and using a traffic light system identify the audit opinion. At this stage we have a 4 colour system in mind, which runs green – yellow – amber – red. What we are suggesting to the Chief Financial Officer is that where the report receives a red opinion that the particular line management will be required to attend the next audit committee (O&S) to discuss the report with the members of the committee.

As now draft reports will be discussed with line management, and an agreed opinion determined. Final reports are then issued to unit managers, the Chief Financial Officer and the client officer, so allowing ample opportunity for discussion and raising in the appropriate forum. We do not expect that we will be using the red opinion with the attendant requirement very often, possibly only once or twice a year, but it is our view that where the audit report gives rise to such an opinion then it is of such importance that the audit committee members need to be appraised and discuss the issue with responsible line management at the earliest possible opportunity. If not we would have the situation where the report may be discussed at committee say 6-9 months after the audit and its currency is lost. At the moment the definitions for each colour have not been finalised, but initial thoughts are: -Green Sound system of internal control, minimal or no recommendations Yellow Good system of internal control, sound management controls, a few recommendations, none significant. Amber Some weakness in the system of internal control, several recommendations may be important or significant. Red fundamental breakdown of the internal control system, major weakness identified requiring prompt remedial action. Numerous recommendations classed as significant. These opinion definitions are exactly that, opinions, and we shall find that within the audit there will be good areas, and poor areas. Our task is to review the overall position and derive a defendable opinion which we report to management and the committee. This process may be refined by allocating an opinion and the relevant colour to separate parts of the audit and therefore being able to see the overall picture. The great beauty of the proposed system for audit reports and reporting is that it lends a clear line of thought from the individual audits to the annual report and opinion statement from the audit manager into the SIC.

Appendix 1

Summary of Key Issues arising from Audits completed in the third quarter 2005/06. Audit & Key Issues Recommendations Action Opinion Debtors Strengths 2/0130Service delivery is satisfactory. Weaknesses Recommendations Follow Up Good No particular weakness.Minor points only 2006/07 General Ledger Strengths 2/0140Service delivery continues to be satisfactory. Recommendations Follow up Weaknesses2006/2007Minor points only Good No particular weakness Income System Strengths 2/0170Service delivery continues to be satisfactory. Recommendations Follow up GoodWeaknesses2006/2007Minor points only No particular weakness Personnel & Strengths TrainingService delivery continues to be 2/1650 satisfactory. Weaknesses Recommendations Follow up Good Minor points only 2008/2009 No particular weaknessFollow up Audits Audit Area Key Issues 2/0145 (04/05) Grant Funding No key issues, subject to final confirmation with line management

Summary of Key Issues arising from completed Audits previously reported. Audit & Key Issues Recommendations Opinion Treasury Mgt Strengths 2/0200Service delivery continues to be satisfactory. Satisfactory Health & Safety Strengths 2/1050Service continues to be satisfactory. Weaknesses Recommendations - agreed. Satisfactory Need to assess risk of corporate manslaughter charge. Persistent non-attendance at training course by manual staff. Performance Strengths Mgt/IndicatorsService delivery has improved. 2/1085 Weaknesses Only minor recommendations. BVPI 199 calculated incorrectly SatisfactoryCommunity Strengths LeisureService delivery is satisfactory. 2/1400 Weaknesses The council needs to ensure that Satisfactory the Conditions of Grant are complied with. Car Parking Strengths 2/2050Service delivery continues to be satisfactory. Weaknesses Recommendations Satisfactory Poor routines for back up ofImproved ar rangements. system data Development Strengths ControlService delivery continues to be Minor recommendations 2/2140 satisfactory. only. SatisfactoryAdmin Bldgs Strengths 2/2530Service delivery continues to be Minor recommendations satisfactory. only. Satisfactory

Action

Managed Audit

Audit due 2006/2007

Follow Up March 2006

Follow up 2006/2007

Follow up 2008/2009

Audit & Key Issues Recommendations Action Opinion Tourism & TICs Strengths 2/3640Minor recommendationsService delivery continues to be satisfactory. only. Follow up 2008/2009 Satisfactory Follow up Audits Audit Area Key Issues 2/0145 (04/05) HB Fraud No key issues. Concerns around personal safety and training to achieve appropriate standards. Opinion Description GoodMinimal risk identified; a few minor recommendations. SatisfactorySome risk identified; some changes should be made. (The default option) MarginalSome risk identified; some changes should be made. [bordering on unsatisfactory] UnsatisfactoryUnacceptable risk identified; changes must be made. UnsoundMajor risk exists; fundamental improvements are required.