APPENDIX E WAVERLEY BOROUGH COUNCIL AUDIT COMMITTEE 10 MARCH 2009 - - PDF document

APPENDIX E

WAVERLEY BOROUGH COUNCIL AUDIT COMMITTEE – 10 MARCH 2009 Title: PREPARATION FOR AND PRESENTATION OF THE DRAFT INTERNAL AUDIT PLAN 2009/10 [Wards Affected: All] Summary and purpose: The Committee’s Terms of Reference include provision for the Committee to comment on the Head of Internal Audit’s proposed Internal Audit Plan. This report presents the draft Plan, and the Committee is invited to comment before the Plan is finalised. How this report relates to the Council’s Corporate Priorities: The work of the Internal Audit service can have an impact upon all the Council’s priorities as its work involves the review of the work of all services. Equality and Diversity Implications: There are no equality and diversity implications. Resource/Value for Money implications: Internal audit work includes consideration of value for money issues and, allied to this, the potential for waste, loss, theft and inefficiency. Legal Implications: The Council must have a Plan that must cover a period of no more than a year in

• rder to fully comply with the requirements of the Code of Practice issued by CIPFA,

which is given mandatory status by the Accounts and Audit Regulations. Introduction 1. The draft Internal Audit Plan, attached at Annexe 1, has been prepared after extensive consultation with the Chief Executive, all strategic directors and service heads. Many issues were raised in those consultations, and it has been necessary to consider carefully on which of the many current developments and pressures the Internal Audit Service is best able to assist or have a meaningful input.

2. It has also been prepared after allowing for a reduction in the service’s budget

• f £21,000, which equates to around 80 days’ work. There have been some

necessary reductions in coverage as a result, and these are explained in the report. 3. The draft Plan as presented should be adequate to cover the current issues facing Waverley. Despite a reduction in resources, it covers all the key risks and obligations, as well as allowing for some special items of work. Resources 4. At the Council’s “star chamber” meetings, an overall target saving of 8% was sought from all service heads. For Internal Audit this equated to around £21,000. As has been mentioned on previous occasions, the Internal Audit Section currently carries two vacancies, one post of Senior Auditor (IT) and one post of Auditor:

• a. The former Senior Auditor (IT) was seconded to the Chief Executive’s

Department in 2003, and a cash sum equivalent to around 50% of the cost

• f this post was allocated. That sum has been increased in line with the

annual pay awards and has been used to buy resources from IT audit specialists.

• b. A post of auditor was held vacant, after the post-holder resigned in 2004,

pending the outcome of the housing transfer ballot. The budget was again used to buy resources from a specialist audit firm, and this worked well and the post has not been filled and resources continue to be bought-in. 5. It is expedient to absorb such a budget reduction by reducing the number of days bought from the general systems audit contractor. IT audit has been maintained at 45 days, as it is considered necessary to maintain a reasonable level of coverage. With this reduction, the Section is now operating at almost 80% of its previous full establishment of 5 posts. Despite this, a sound Plan is possible. 6. Time will have to be made from the management and contingency allocations to enable a re-tendering exercise to be undertaken. Both the IT audit and general systems audit contracts have been extended to the maximum possible under Contract Procedure Rules (CPRs) and new contracts for 2010/11 will be sought. Changes to historic Plan content 7. To meet the star chamber reduction, a number of non-audit activities and contingencies have been deleted from the Plan: Monitoring of cash discrepancies Reconciliation of credit card charges Scrutiny of debts submitted for write-off Maintenance of the contracts register.

8. These items will be transferred to another part of the Resources Department. It had been anticipated that the financial assessment of contractors and other parties/partners would also be transferred. It is a demand-led activity, and demand in 2008/09 has been high; however it has been possible to include 22 days for this valued work in the draft Plan. The matter will be kept under review, and a transfer may still be necessary if this would enable high priority audits to be undertaken. Projects and contingencies 9. The Head of Internal Audit wishes to maintain a pro-active stance and to help

• fficers to develop new systems or implement projects when invited, and in

giving support and advice. It is better to give advice as early as possible in

• rder to avoid future complications and rectification costs. This helps to ensure

appropriate controls are built into new systems at the outset, and the

• pportunity is also provided to help in identification of risks, development of

solutions and the giving of advice on such matters as compliance with CPRs.

• 10. It is an element of the Section’s work that has always been highly valued by

directors and service heads. It would not be prudent to delete all allowance for such work from the Plan. However, reductions in the time allowed have been

• made. Should events arise that would cause these allowances to be exceeded,

either adjustments will have to be made elsewhere in the Plan or a request for a supplementary estimate will have to be made. 2008/09 Plan

• 11. An assessment of the resources available is attached as Annexe 2. This also

shows how the resources will be allocated.

• 12. A key lesson gained from this year’s work has been incorporated into the

2009/10 Plan. This concerns data quality; this was an item raised by several people during the planning consultations and the work of Internal Audit in the summer of 2008 was greatly appreciated. It required considerably more time than had been envisaged, so a similar allowance has been made for next year to allow detailed examination of grant claim and performance indicator data and

• evidence. The new national indicators will also be considered as part of the

work.

• 13. Allowance has been made in the draft 2009/10 Plan to complete 2008/09

reviews that are underway as at the end of March 2009. Only a very small allowance has been made for follow-up of reviews (to verify implementation of recommendations); reliance is again to be placed upon heads of service updating the Covalent system with progress details, which in turn is used as the evidence for reports to the Committee. Planned reviews

• 14. The Internal Audit Strategy states that all high priority audits will be undertaken

in the year of the Plan, medium priority audits within two years and the situation regarding the low priority audits will be kept under review. The draft 2009/10

Plan has been prepared with reference to this, however, resources do not allow this to be fulfilled.

• 15. The method of risk assessment remains unchanged from previous years, and

the weightings given to the assessment factors have not been amended from 2008/09. The purpose of this technique is to help in allocating time. Proportionality is key to this approach, and therefore the three categories are allocated so that the top one third of audits have been categorised “high”, one third “medium” and one third “low”.

• 16. Resources do not allow for all high priority audits to be included in the 2009/10
• Plan. Analysis shows that audits have been undertaken in most cases within

the last three years, and there have been no significant changes in IT systems, procedures or risks since. There are two audits that have been categorised as high priority that have not been audited recently, or will be audited in the 2009/10. These are as follows:

• IT strategy – there is no fully-developed strategy at present, and thus an

audit of the supporting management arrangements and IT controls cannot be undertaken with any focus

• Legal service – the high priority is assigned on the basis that the work is

highly technical/professional in nature, and Council actions are dependent

• n the advice given. The fact that it has not been audited for many years

also increases the risk score underpinning the categorisation. However, it is not considered that Internal Audit could perform a meaningful or useful audit.

• 17. All key financial systems will be audited taking account of Audit Commission
• requirements. These have yet to be agreed for 2009/10.

Anti-fraud and corruption

• 18. Members will recall that heads of service were asked to undertake self-

assessments of current arrangements to counter fraud and corruption. In addition to specific work that will be undertaken as part of the planned audit reviews, allowance has been made to assist in the development of these assessments and to assist in development of action plans. In future years the Section will review progress against those action plans.

• 19. The Audit Commission is currently conducting its bi-annual National Fraud

Initiative (NFI) – a data-matching exercise designed to identify instances where fraud may be taking place e.g. the same person receiving housing benefits from two authorities. This has grown in scope and will require time to oversee the Council’s response. The reports coming out of NFI will initially be checked and then investigated as necessary by the relevant service staff, and Internal Audit will maintain on overview of the process.

• 20. Suggestions made by the Committee’s chairman and vice-chairman regarding
• ther potential areas of fraud have been taken into account when determining

the planned audit reviews that will be undertaken. There will be appropriate testing included in those audits concerned.

• 21. An allowance has also been made from the days allocated to IT audit for the IT

audit provider to assist in the development of reports using computer-assisted audit techniques. These reports would supplement other planned audits such as payroll and creditor, producing reports that can be used to identify anomalies. Corporate Governance

• 22. Members will be aware that the Audit Commission will commence its revised

method of evaluating performance this coming year. Known as Comprehensive Area Assessment (CAA), it replaces the Comprehensive Performance Assessment methodology. It will require fresh input from both members and

• fficers alike, and whilst the precise programme of work is not yet known, an

allowance of 15 days has been included in the Plan. The Head of Internal Audit is responsible for overseeing corporate governance arrangements and, specifically, the Code of Corporate Governance. It is anticipated that the move to CAA will involve him in a considerable amount of work this year.

• 23. Allowance has also been made for Monitoring Officer work. Another demand-

led service, 55 days has been allowed. This is more than was originally anticipated for 2008/09 and is based upon experience. This will be kept under review. Conclusions

• 24. The draft Internal Audit Plan for 2009/10 gives good coverage to the key issues

facing Waverley, and it has been possible to achieve this with a budget

• reduction. The Corporate Management Team has considered it, and their

comments have been included.

• 25. Preparation of the Plan has shown that the Audit Strategy may have to be

amended, as resource levels do not always allow strict adherence to the commitments regarding timings of audits. The Strategy as written also needs to reflect the fact that, whilst an audit may receive a high priority categorisation, it may not be necessary to repeat an audit if the subject was audited recently. Recommendation The Committee is invited to comment on the draft Internal Audit Plan for 2009/10 as attached at Annexe 1, prior to its adoption by the Head of Internal Audit. Background Papers (DCEx) There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report. CONTACT OFFICER: Name: Mr Mark Hill Telephone: 01483 523240 E-mail: mark.hill@waverley.gov.uk Comms/audit/2008-09/039