BOROUGH OF POOLE
SERVICE PROVISION SCRUTINY AND AUDIT COMMITTEE
1 NOVEMBER 2007
INTERNAL AUDIT - PERFORMANCE AND ACTIVITY REPORT FOR
JULY - SEPTEMBER 2007
PART OF PUBLISHED FORWARD PLAN: NO
STATUS – GENERAL
1. PURPOSE AND POLICY CONTEXT
1.1 This Report gives a summary of the performance of the Internal Audit Section for the second quarter of 2007/2008. In addition, it summarises the audit work undertaken during the period, highlighting any key findings and recommendations. Current progress on implementation of recommendations (as at October 2007) is also detailed.
2. DECISION REQUIRED
2.1 Members are asked to note:
a) the report on the performance of the Internal Audit Section for the second quarter of 2007/08;
b) the summary of audit work undertaken during the period; and
c) current progress on the implementation of recommendations.
2.2 Members are asked to refer any relevant items of concern to the other relevant scrutiny
committees for their attention.
3. Audit Performance Indicators
Period / % Audit Plan Completed / % Time Spent vs Planned on Audit(-under +over) (cumulative) / % Recommendations Accepted / % Previous Agreed Recommendations Implemented / Auditee Satisfaction Score (cumulative) *
Actual
Jul – Sep 2007 / 25 / +3 / 100 / 81 / 3.8
TARGET for Quarter 2 / 26 / 0 / 100 / 100 / 3
Actual
Apr 07 – Sep 07 (Year to date) / 51 / +3 / 100 / 79 / 3.8
TARGET for Year to Date / 50 / 0 / 100 / 100 / 3
TARGET for 2007/08 / 100 / 0 / 100 / 100 / 3
3.1 Performance Indicators Table
* Satisfaction Score Key: 4=Very Satisfied, 3= Satisfied, 2= Dissatisfied, 1=Very Dissatisfied
3.2 The key audit performance indicator target is (theoretically only) to complete 100% of the plan
in the year. Best practice requires that we complete at least 90% of the audit plan. The percentage of the audit plan completed (26%) was on target for Quarter 2 and slightly exceeding the target (51%) for the first half of the year.
3.3 The percentage of recommendations implemented is below target and is reviewed as part of the recommendations followed up/not implemented in section 6 of this report.
3.4 Internal Audit ask auditees to score their satisfaction at the end of each audit (4 = very satisfied, 1 = very dissatisfied). These scores are averaged to give an overall auditee satisfaction score. The auditee satisfaction score of 3.8 is exceeding the target of 3.
4. Time Analysis
4.1 The following summarises the target and actual time spent on Internal Audit activities based on the 2007/08 audit plan.
SECOND QUARTER (JULY – SEPTEMBER 2007)
ACTIVITY / Planned (Days) / Actual (Days) / Variance (Days)+ more than /
- less than planned
PLANNED WORK (Audits, Projects & Consultancy) / 250 / 254 / +4
ANTI-FRAUD/INVESTIGATIONS / 51 / 40 / -11
MEMBER REPORTING / 15 / 14 / -1
OTHER: inc. CORPORATE MANAGEMENT & UNOFFICAL FUNDS / 13 / 21 / +8
RISK MANAGEMENT / 0 / 4 / +4
STATEMENT ON THE SYSTEM OF INTERNAL CONTROL (SIC) / 6 / 2 / -4
EQUAL PAY (Job Evaluation) / 0 / 3 / +3
INDIRECT TIME – Administration/Leave/Training/Sick / 157 / 156 / -1
TOTAL / 492 / 494 / +2
YEAR TO DATE (APRIL – SEPTEMBER 2007)
ACTIVITY / Planned (Days) / Actual (Days) / Variance (Days)+ more than /
- less than planned
PLANNED WORK (Audits, Projects & Consultancy) / 500 / 508 / +8
ANTI-FRAUD/INVESTIGATIONS / 102 / 44 / -58
MEMBER REPORTING / 30 / 34 / +4
OTHER: inc. CORPORATE MANAGEMENT & UNOFFICAL FUNDS / 26 / 28 / +2
RISK MANAGEMENT / 0 / 7 / +7
STATEMENT ON THE SYSTEM OF INTERNAL CONTROL (SIC) / 12 / 10 / -2
EQUAL PAY (Job Evaluation) / 0 / 31 / +31
INDIRECT TIME – Administration/Leave/Training/Sick / 315 / 302 / -13
TOTAL / 985 / 964 / -21
4.2 The amount of time spent on Planned Work was again on target in the quarter and has enabled the key performance indicator to be achieved as detailed in 3.2.
4.3 Investigations time was slightly below planned for the quarter due to the unpredictable nature of this work.
4.4 Time spent on Corporate Management was over target for the quarter due to assistance given on preparing the Council’s self assessment for the ‘Use of Resources’ section of the Corporate Performance Assessment.
4.5 The amount of Total time spent is slightly below target for the year to date which is being addressed with temporary contractors to ensure adequate completion of the Audit Plan.
5 . PLANNED AUDITS
This includes audits completed to draft report stage during the quarter.
Note 1 ‘Recommendations outstanding’ refers to those outstanding ‘at the time of the audit’, not necessarily at the current time.
Note 2 Please note the following terminology – Recommendations are graded ‘High/Medium/Low’ impact. An audit report may contain several High impact recommendations, however this will not necessarily produce a ‘qualified’ audit report. A ‘qualified’ Audit report will be issued in rare circumstances due to the fact that the system/area reviewed overall inadequately safeguards the Authority against identified risks.
5.1 KEY FINANCIAL SYSTEMS AUDITS – The Audit Commission recommended that Internal Audit give Audit Committee Members more detail on the key financial systems audits.
5.1.1 VAT (Financial Services)
Introduction
The audit of the VAT system has been carried out as part of the Annual Audit Plan 2007/08. In 2006/07 the Authority reclaimed VAT to the value of £12.9 million.
The VAT system administration, procedures and practices were ascertained, tested and evaluated to ensure that the following key risk areas are adequately managed: VAT returns prepared correctly/ submitted on a timely basis; Suppliers eligible for VAT recovery identified on a timely and accurate basis; The Authority accounts for VAT on all taxable activity at the correct rate/correct time; VAT is accounted for/reclaimed within regulations issued by Revenue and Customs; Adequate documentation on VAT exists and staff are properly trained; VAT incurred on exempt activities is not reclaimed where it exceeds the 5% ‘de minimis’ limit; Members and Senior Management kept informed of VAT related issues; VAT Issues from the establishment of Poole Housing Partnership have been identified and addressed.
Audit Opinion
The audit concluded that the system had been designed to meet the requirements of the service and adequately safeguards the Authority against identified risks.
Findings & Recommendations
The Council’s VAT system is subject to rigorous external assessment from HM Revenue & Customs reviews. HM Revenue & Customs undertook 2 reviews of the system in 2006/07, during which no system weaknesses or major concerns were identified. All minor errors identified by them have been addressed by the Borough’s Corporate VAT Officer.
No recommendations were made in the 2006/07 previous audit.
One low impact recommendation was made during this review regarding the need to provide VAT awareness training to staff across the Council.
5.2 OTHER AUDITS
Building Consultancy Services
5.2.1 Building Control
The audit concluded that the systems in operation had been designed to meet the requirements of the service and adequately safeguard the Authority against identified risks
Three recommendations from the previous audit had been implemented. One low impact recommendation was not implemented was therefore re-iterated.
Nine low impact recommendations were made covering benchmarking performance, procedure notes, computer system training & access, scaffold licence monitoring, staff training, invoicing and income reconciliation & banking.
Children & Young People’s Integrated Services
5.2.2 Pre Schools
Reviews of allocation of nursery education funding to the following pre-schools were carried out: Topcats Playgroup, Little People Kindergarten and St John’s Church.
The areas reviewed appeared to be operating satisfactorily and in line with the nursery education funding conditions for the Little People Kindergarten and St John’s pre-schools. Two low impact recommendations were made for the TopCats pre-school covering accuracy of the providers claim and their accounts provision.
Children & Young People’s Services – Strategy, Quality & Improvement
5.2.3 FMSiS External Assessments
Internal Audit have spent time preparing for the primary school external assessment reviews due later this year. Assistance is also being given to those primary schools due for assessment next year as part of the planned audits being carried out this year.
Transportation Services
5.2.3 Parking Services
The audit concluded that the systems in operation had been designed to meet the requirements of the service and adequately safeguard the Authority against identified risks.
All seven recommendations from the previous audit had been implemented.
One medium impact recommendation regarding resident parking permits and two low impact recommendations covering parking permit applications & parking charge notice (PCN) recovery were also made.
6. AGREED RECOMMENDATIONS FOLLOWED UP / NOT IMPLEMENTED
6.1 Follow up reviews were carried out to ascertain whether agreed audit recommendations had been implemented and therefore the risks identified had been appropriately addressed. The tables below summarise the findings of the follow up audits.
6.2 Percentage of Agreed Recommendations Followed Up Not Implemented during
July – September 2007
Number of Recommendations Followed UpJul 2007 – Sep 2007 / Number of Recommendations Not Implemented During
Jul 2007 – Sep 2007 / % Recommendations Not Implemented
106 / 20
(2 High, 15 Medium, 3 Low Impact) / 19%
6.3 As shown in Tables 3.1 and 6.2, the percentage of recommendations implemented is below the target of 100%. It is the responsibility of the Service Unit Heads to ensure that recommendations are implemented and service unit risks adequately managed.
6.4 A comparison with the previous three quarters is shown below.
Quarterly Trend Analysis of Percentage of Recommendations Not Implemented
As shown in the graph above, there has been a slight decrease in the number of recommendations not implemented during this quarter compared to the previous quarter.
6.5 The table below shows only those recommendations which are outstanding beyond the latest
agreed recommendation date reported to Members. This includes:
· Any outstanding recommendations not previously reported to this Committee; and
· Outstanding recommendations previously reported to this Committee where the revised target date has again been exceeded.
It is considered that these recommendations need to be brought to the attention of Members. The details of these recommendations are reported in table 6.6 below.
(For further details of the recommendations included on the table below, please refer to Table at 6.6.)
ImpactTime lapse beyond LATEST
Agreed Implementation Date / High / Medium / Low / Total
> 1 year / 2 / 2 / 4
6 – 12 months / 7 / 5 / 12
3 – 6 months / 6 / 1 / 7
< 3 months
Total / 15 / 8 / 23
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6.6 Current Progress (as at 19th October 2007) on Non-Implemented Agreed Recommendations and Reasons for Non-Implementation
This provides further details of the recommendations summarised in 6.5 above.
KEY
Bold = Previously reported to Audit Committee as non-implemented recommendations. SHADED = High and Medium recommendations outstanding for >1year
Audit(Service Unit) / No. Original Recs / Recs
Not Implemented by Latest Date Reported to Members / No./Impact of Recs Not Implemented / Time Outstanding Since Original Date / Recommendations Not Implemented / Service Unit Reasons for Non-Implementation / Further Action Taken /
St Edwards School
(C&YPS-SQI) / 14 / 4 / 4 x medium / 4 x 3 months / · scheme of delegation is finalised and approved by Governors
· complete an assessment/evaluation/pre certification check list before producing the CAS.
· introduce some financial targets in the appraisal process
· the best value statement is enhanced to include more comprehensive procurement guidelines / The remaining documentation requires governor approval. As governors meetings are only held termly, approval has become protracted. Finance Officer has confirmed that approval arrangements are in hand / Revised date 31/12/07 agreed
Hamworthy First School
(C&YPS-SQI) / 9 / 3 / 3 x medium / 2 x 6 months
1 x 3 months / · produce an agreed document defining the Head teacher’s role & responsibilities and delegations
· the Unofficial funds are audited and presented to the Governing Body
· Disaster recovery plan for the Admin. section is produced / · Seeking advise from Personnel
· Chasing unofficial funds Auditor
· Seeking advise from other schools / Revised date 20/10/07 agreed.
Personnel
(Personnel) / 14 / 2 / 2 x medium / 2 x 6 months / · Details of units who have not undertaken Self audit are reported to Management Team.
· Written protocol the production of compromise agreements / · Delayed because self audit process is under review. Once finalised, reports to Management Team will be produced.
· Delayed due to pressure of work and other priorities / Revised date 30/04/08 agreed.
Revised date 31/12/07 agreed.
Other Services
(ASSC) / 14 / 2 / 2 x medium / 1 x 6 months
1 x 3 months / · complete a risk assessment the failure of a major dementia service provider and produce a contingency plan.
· A risk assessment of dementia services is undertaken. / Delayed due to more pressing issues. Confirmation received that assessments are now in progress. / Revised date 31/12/07 agreed.
Education Capital Programme
(C&YPS-SQI) / 20 / 3 / 1 x medium
2 x low / 3 x >1 year / · Effective method of verification of achievement is established (Medium)
· Written guidance / procedures are produced (low)
· A risk assessment is produced of the key priorities. (low) / · Delays in producing the plan
· Difficult to release officer to produce procedures.
· Can not be completed until AMP in produced. / Further revised date 31/12/07 agreed.
Review of all recommendations planned for November 2007
Talbot Combined
(C&YPS-SQI) / 20 / 2 / 1 x medium
1 x low / 2 x 6 months / · Use the benchmarking tools available to review costs (medium)
· produce a financial procedure manual (low). / · Pressure of work and hospitalisation of Head Teacher.
· Delayed as School were waiting for central initiative from Education Finance Team. This option is not now being taken forward. / Revised target date of 31/12/2007
Revised target date of 31/03/2008
Management of Housing Revenue Account
(PHP) / 9 / 1 / 1 x medium / 1 x 6 months / · consider what process should be put in place to cover the necessary adjustments as defined in the sixth schedule. / It has taken longer than expected to agree the process of calculating/making the adjustments to be finalised. It is anticipated that the proposal will be put to Cabinet in December 2007 / Revised date 30/11/07 agreed.
Waste Collection & Disposal
(E&CPS) / 13 / 1 / 1 x medium / 1 x >1 Year / · Review the Service Level Agreement in the light of the new requirements. / Awaiting interface between Academy & Tranman systems to be developed. / Further revised date 31/12/07 agreed.
Old Town First School
(C&YPS-SQI) / 16 / 1 / 1 x medium / 1 x 3 months / · roles & responsibilities of all parties including the project team are clearly defined within the PDR / Delayed as input required from Head of ICT responsible for corporate review of project management. Now received. / Further revised target date 31/12/2007
Data Management
(Corporate) / 11 / 1 / 1 x low / 1 x 6 months / · Lead officer is designated to manage this project. / New Freedom of Information Officer appointed to replace previous officer. / Revised date 31/03/08.
Unbanked Cheques
(Culture & Community Learning) / 4 / 1 / 1 x low / 1 x 6 months / · Review the policy and process of making refunds. / Awaiting release of CAPITA software. / Revised date 31/10/07 agreed.
Ground Maintenance
(Leisure) / 10 / 2 / 2 x low / 2 x 6 months / · Training in Financial Regulations and Contract Standing Orders
· Written procedures are produced. / New Grounds Supervisor recently appointed. / Revised date 05/01/08 agreed.
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