Agenda item

Annual Internal Audit Report & Opinion


The Head of Audit Partnership presented the Internal Audit Annual Report and Opinion 2016/17.  Under the Public Sector Internal Audit Standards, the report included:


·  The annual opinion of the Head of Audit Partnership on the overall adequacy and effectiveness of the Council’s internal control, governance and risk management;

·  A summary of the work undertaken by Mid-Kent Audit that supported the opinion; and

·  A statement on conformance with the Public Sector Internal Audit Standards.


It was noted that the Head of Audit Partnership was satisfied from the audit work completed during 2016/17 that the Council could place assurance on its internal control.  The audit work provided assurance that the Council’s corporate governance complied in all significant respects with the guidance issued by CIPFA/SOLACE and that risk management was effective.  The Head of Audit Partnership had decided independently and without any undue pressure from Officers or Members.


During his presentation, the Head of Audit Partnership advised the Committee that:


·  In his previous report presented to the Committee in November 2016, he had raised some concerns on the strength and resilience of some internal controls.  The common thread in these controls was the “second line of defence” – controls designed to identify and correct any failures in the Council’s direct management before such failures could expose the Council to risk or harm.  He had shared these concerns with senior management who had acted in response.


·  As the year continued Internal Audit had found some examples of these controls working effectively and some examples of weakness.  Whilst, overall, the controls offered ‘sound’ assurance, he had continued to raise these matters with senior management separately (besides recommendations arising from individual reviews).  He had noted that senior management recognised the need to improve, as recorded in the Annual Governance Statement.


·  The Audit Service had delivered above the planned number of audit days.


·  The audit project review findings 2016/17 included four weak assurance reports covering Health and Safety, Park and Ride, Performance Management and the Hazlitt Theatre.  The Officers had accepted and were acting to address recommendations arising from reviews.  This included action on reviews previously assessed as ‘weak’.  Sometimes, as in the case of Business Continuity, progress had allowed the Audit Service to reassess the assurance rating to ‘sound’.  The report also referenced the few audit projects that had incurred delays to actions needed to address agreed recommendations.


·  The report also provided an update on counter fraud, including whistleblowing, risk management and the Mid-Kent Audit Service. 


The Head of Audit Partnership confirmed conformance with Public Sector Internal Audit Standards and highlighted continued improvement in performance results.  He added that the Audit Service had achieved this continuing improvement in performance and productivity whilst keeping high levels of satisfaction.


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


·  When considering an NFI match, the question of whether the matter was a fraud or mistake turned on the evidence.  To continue a prosecution as fraud, an investigation must pass Evidential and Public Interest Tests.  The Evidential Test considered whether the weight of evidence suggested a conviction was likely. This included (for a fraud offence) whether there was evidence to prove dishonesty to a criminal standard; a high bar to clear.  On satisfying the Evidential Test, the Council would then need to consider whether a prosecution was in the Public Interest.  This test included, among other considerations, weighing up the cost of prosecution against likely penalties and the deterrence effect.  Without a conviction, the report described positive matches as ‘errors’.


·  With regard to following up audit recommendations, none remained outstanding from 2015/16.  The report also included details on recommendation ratings. Unless there were exceptional circumstances, the Audit Service would not agree to implementation dates more than a year ahead.


The Committee thanked the Head of Audit Partnership for a clear and well-presented report.




1.  That the Head of Audit Partnership’s opinion that the Council’s system of internal control, corporate governance and risk management arrangements have operated effectively during 2016/17 be noted.


2.  That the work underlying the opinion and the Head of Audit Partnership’s assurance that it was completed with sufficient independence and conformance with Public Sector Internal Audit Standards be noted.


Note:  Councillor Daley left the meeting after consideration of this item.


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