The Committee considered the report of the Head of Audit Partnership setting out details of the work of the Internal Audit Team over the financial year 2011/12 and the opinion of the Head of Audit Partnership on the overall adequacy and effectiveness of the Council’s control environment, in the context of the Annual Governance Statement.

The Head of Audit Partnership advised the Committee that he wished to correct the third column of the table set out in paragraph 1.3.40 of the report relating to assurance levels as follows:-

It was noted that:-

·  The statutory Code of Practice for Internal Audit in Local Government in the United Kingdom required the Head of Audit Partnership to provide a written report to those charged with governance, timed to support the Annual Governance Statement.

·  The Accounts and Audit Regulations 2011 also required that the Council “must, at least once a year, conduct a review of the effectiveness of its internal audit”.  It was considered that the Internal Audit Annual Report provided evidence of the effectiveness of internal audit and the Committee was asked to treat consideration of the report as “the review”.

·  It was the opinion of the Head of Audit Partnership that substantial reliance could be placed on the Council’s control environment in terms of the overall adequacy and effectiveness of the controls and processes that were in place to achieve the objectives of the Council.  There were no qualifications to that opinion.

·  The opinion on the control environment was principally formed through the results of the work of the Internal Audit Team during the financial year, but other factors had also been considered such as the results of external audit work during the year and any concerns expressed by the External Auditor; the effectiveness of the Council’s risk management arrangements; significant control breakdowns during the financial year, whether they were found by Internal Audit or not; the results of any other form of external inspection or assessment; and the effectiveness of senior management in resolving control weaknesses.

·  Thirty five audit projects were completed between April 2011 and March 2012 which represented 97% of the original audit plan.

·  The work of the Internal Audit Team had established that for the majority (76%) of the areas examined, substantial controls were in place at the time of the original audit.  Where weaknesses had been identified, the appropriate Head of Service had agreed the action to be taken to rectify those weaknesses.

·  As a result of the follow-up process, 97% of the areas reviewed were assessed to have a satisfactory level of control assurance, with one audit relating to emergency planning awaiting a follow-up assessment at the end of the financial year.  In the context of the preparation of the Annual Governance Statement, this would need to be shown as an “outstanding control weakness” as at 31 March 2012.

The Committee asked a number of questions of the Officers relating to, inter alia, the action taken on issues which the Audit Commission had asked the Council to consider arising from external audit work during 2011/12; the adequacy of the actions being taken in response to the findings of the review of the Council’s emergency planning arrangements; the logistical issues associated with the Mid-Kent Internal Audit Partnership; the adequacy of the resources available to facilitate the risk management process; the reasons why some audit projects did not include a control assurance assessment (for example, the work carried out to validate the accuracy of the Interreg Claim); the action taken following the investigation into the theft of a fuel card at the Depot; the arrangements for allocating work to members of the Internal Audit Team and for recording the actual time spent on individual audit projects; and the role of Members in the internal audit process.

The Head of Audit Partnership indicated that he would report back to the September meeting of the Committee on the outcome of his discussions with the Chief Executive regarding the adequacy of the resources available to take forward the Council’s risk management arrangements.

Some Members expressed concern that being new to the Audit Committee, it was difficult to understand the terminology used and how some of the key findings of audit projects related to the level of assurance issued.  The Head of Audit Partnership undertook to improve the way in which the reports were worded and presented and to arrange training to assist Members in their understanding of the issues and their role in the process.

RESOLVED:  That having considered the replies to its questions and received assurances from the Officers that their concerns will be addressed through training and improved reporting, the Committee:-

1.  Notes the Head of Audit Partnership’s opinion that substantial reliance can be placed on the Council’s control environment in terms of the overall adequacy and effectiveness of the controls and processes which are in place to achieve the objectives of the Council;

2.  Notes that there are no qualifications to that opinion;

3.  Notes the work of the Internal Audit Team over the period April 2011 to March 2012, as shown in Appendix A to the report of the Head of Audit Partnership, and that this is the prime evidence source for the opinion;

4.  Agrees that the outcomes of the internal audit work and the other matters referred to in the report of the Head of Audit Partnership provide evidence of a substantial level of internal control within the Council, which supports the findings and conclusions shown in the Annual Governance Statement for 2011/12;

5.  Notes the improvements in control that occur as a result of the audit process; and

6.  Agrees that it is satisfied that the Council’s Internal Audit service is effective.