The Committee considered the report of the Head of Audit Partnership setting out details of the work of the Internal Audit team over the six month period April-September 2011.  It was noted that:-

·  A total of 17 audit projects had been completed during the six month period (one of which was a consultancy review of the use of a time recording system by legal staff).

·  Each audit review included an assurance assessment in terms of the adequacy of controls.  Of the seventeen projects completed during the six month period, one project identified that a high level of control assurance was in place at the time of the audit, seven projects identified substantial assurance and six identified limited assurance.  There were no areas where minimal assurance was in place.  Four further audit projects did not receive an assurance assessment as it was not considered to be appropriate to the scope of the project.

·  A follow-up to each report was completed, usually three to six months after the date of issue of the original report.  The follow-up allowed the adequacy of controls to be reassessed, and Management was expected to have taken the necessary action to address the control weaknesses before the follow-up was undertaken.  All of the follow-ups confirmed that control assurance had been maintained at substantial or had increased from limited to substantial following the implementation of the agreed recommendations. 

·  The follow-up review of Licensing undertaken in June 2011 found that, due to a lack of effective management action, the limited control assurance identified in the original report issued in January 2011 had not changed.  A second follow-up carried out on 3 November 2011 confirmed that virtually all of the recommendations had been fully implemented and substantial progress had been made.  If this had not been the case, a separate report would have been submitted to the Committee and the Head of Service would have been asked to attend the meeting to explain the reasons why.  Follow-up reviews of the Cemetery and Crematorium, security of artefacts at the Museum and the controls in place over three of the Council’s community halls had confirmed that the level of assurance in each case had increased from limited to substantial.

In response to questions by Members, the Head of Audit Partnership explained that:-

·  Processes were in place to make sure that control weaknesses identified by Internal Audit, but not addressed effectively by Management, were escalated and, if necessary, reported to the Audit Committee.  In the case of the review of Licensing, implementation of the agreed Action Plan was accelerated after the issue was raised at Management Team.  The Council had not been disadvantaged financially by the delay in implementing the recommended actions which related primarily to the partnership arrangements, the migration of licensing data to the computer hub based at Sevenoaks and the timetable for the transfer of licences, including Hackney Carriage and Private Hire taxi licences.

·  He was surprised at the number of audit reviews which had identified that a limited level of control assurance was in place at the time of the audit, but he did not think that there was an underlying theme.  Where the audit work identified areas where controls were in need of improvement, this was taken seriously by the responsible managers.  The Internal Audit team tried to apply a consistent approach to their work which not only placed a strong emphasis on reviewing the adequacy of financial controls, but also addressed all aspects of internal control, including the controls in place to manage risks.  Details of the costs and income associated with each service area examined could be included in summary reports in future to assist Members in their assessment of the relative significance of audit findings.

·  Details of the dates when follow-ups were actually carried out and the reasons for any delays could be included in the Internal Audit Annual Report.

·  In relation to the Interreg Mosaic Project, Internal Audit acted as the “First Level Controller” responsible for agreeing and signing off each claim for European funding.  This was purely an audit role.

Arising from these responses, the representative of the Audit Commission advised the Committee that generally there had been an increase nationally in the number of limited levels of control assurance.  This was an indication of the economic downturn, financial pressures and the possible relaxation in internal controls.

RESOLVED:

1.  That the results of the work of the Internal Audit team over the period April-September 2011 as set out in Appendix A to the report of the Head of Audit Partnership be noted.

2.  That it be noted that during the period April-September 2011, seven areas were audited where substantial or high control assurance was in place at the time of the audit and four projects did not have a control assessment.

3.  That it be noted that six areas were audited where only limited control assurance was in place at the time of the audit.

4.  That the improvement in the internal control environment, identified during the audit follow up process and detailed in Appendix D to the report, be noted

5.  That it be noted that there are no important control issues arising from internal audit work which are outstanding and need to be brought to the attention of Members.