Annual Report
2010 - 2011
Issued: / 31 March 2011
/ / Local Government Act 1972
Accounts and Audit Regulations 2006
Resources Strategic Finance - Internal Audit
LIST OF CONTENTS
1. Introduction
2. Audit methodology
3. Quality and Quantity issues
4. Audit opinion statement
Appendices:
Appendix A: Key performance indicators
Appendix B: Operational performance
Appendix C: Details of audits by department
Appendix D: Analysis of recommendations into priorities and categories by department.
Appendix E: Summary of final quarter work undertaken
Appendix F: Results of sample testing on the implementation of
Internal Audit recommendations
1. INTRODUCTION
Events in 2010/11 brought about the need to amend the annual audit plan to a considerable extent. The change of Government quickly identified the need for the strategic rethinking on a number of key partnerships. This was, therefore, not the time to be undertaking much work in this area. However, as these partnerships are a significant part of the Council’s overall control environment, assurances on the adequate monitoring of them have been obtained from Service Directors.
In December THL became an independent housing association. As the transition was being monitored internally and externally there was little or no benefit in Internal Audit undertaken the previously agreed audit programme on the Housing Revenue Account, contract management, etc. This will also be the last year of supplying an internal audit service to THL. These and other issues, e.g. 5 associated with THL becoming a housing association, the scrapping of the Financial Management Standard in Schools, resulted in 13 audits being cancelled and a number of others being reduced in size and scale.
As these changes were discussed and agreed with management, it was also a contributing factor in one member of staff not being replaced on leaving in November. This was quickly followed by a service review which will lead to the section coming under the Chief Financial Planner on the forthcoming retirement of the current Chief Internal Auditor.
Key performance indicator results for the year are as follows.
· 90.6% of the original planned work achieved (annual target - 93%). This was due to 13 audits being cancelled as stated above. An additional 22 ad-hoc audits were undertaken that were either additional work asked for or investigations.
· 100% acceptance of audit recommendations.
· Satisfactory management satisfaction survey ratings (89%);
· Satisfactory annual report from the External Auditor;
· ISO9001 (2008 standard) accreditation retained;
The remainder of this report will detail how the Internal Audit service has 'added value' to the Council’s activities and provides an opinion statement.
2. AUDIT METHODOLOGY
The expected standard of service provision is as set out in the ‘Code of Practice for Internal Audit in Local Government in the UK, 2006’. The on-going annual reviews of the service by internal and external assessments have given continued assurances that the service complies with the code of practice framework and to a satisfactory standard. These standards also apply in the reporting to Darlington Borough Council’s (DBC) Audit Committee on appropriate Xentrall work.
The underlying principles of the audit process are based on the identification and management of risks within the services the Council provides. Consequently methods have been developed to analyse risks in each audit over a number of headings, e.g. Information, financial, asset and performance management and Governance arrangements. This is as a result of maximising technology capabilities that will give more information to support the audit and Corporate Governance opinion statements.
Significant activities during the year were;
· All significant services of the Authority were reviewed to the point of providing evidence to support the Audit Opinion Statement in section 4 of this report.
· The ISO 9001: 2008 control environment standard was successfully retained.
· Planning for next year has had to recognise there are a considerable number of service reorganisations across the Council that will take some time to undertake. This applies particularly to some key partnerships. Altogether this means next years’ audit plan will have to be flexible with the quarterly reports giving details of changes as they become necessary.
· The scrapping of the schools’ Financial Management standard (FMSiS) part way through the year meant the audit programme had to be revised. However, the basic principle of FMSiS that ensured sufficient information was given to Governors to enable the effective carrying out of their role was retained within the revised testing undertaken.
· Preparation for the next National Fraud Initiative data matching exercise.
3. QUALITY AND QUANTITY ISSUES
The attached appendices show details of the Section’s performance in the following areas.
Appendix A - Key Performance Indicators
Appendix B - Operational Performance
Appendix C - Details of Audits by Department
Appendix D - Analysis of recommendations into priorities and categories by Department
Appendix E - The performance during the final quarter of the year.
Appendix F - Results of sample testing on the implementation of internal audit recommendations
Significant monetary value savings are difficult to identify but the following examples again show how the section continues to add value to the Council’s activities.
1. Data matching undertaken to provide evidence in DWP grant dispute with the Housing Benefits service that resulted in securing an additional £1.1m of funding.
2. Took a major part in the quality review of CESC client documentation prior to external inspection.
3. Periodic testing introduced to identify any duplicate payments to creditors.
4. Undertook a significant re-write of the Council’s Partnership Guidance toolkit and an update to the Council’s Anti Fraud procedures.
5. Anti- fraud and staff records (Single Central Record) training given to Governors, HT’s and admin staff in schools.
6. Guide produced for schools on the checks needed on private school funds.
7. Although usually not significant, the standard audit process still identifies areas where savings can be made, e.g. timesheets at odds with the hours paid; the streamlining of management processes to save staff time, etc.
No issues arose from either the external auditors, the ISO 9001 assessor or the peer reviews on the quality or reliability of the audit service provided.
4. AUDIT OPINION STATEMENT
The Council has a responsibility for maintaining sound systems of internal control that support the achieving of its objectives and for reviewing their effectiveness. From the evidence of work undertaken, Internal Audit is required to provide an opinion on whether these systems are adequately and properly applied.
The system of internal control is based on a risk assessment and management process designed to identify the principal risks to the achieving of Council objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. It is designed to manage rather than eliminate the risk of failure in achieving the Council’s objectives. It can therefore only provide reasonable and not absolute assurance of effectiveness in its ability to deliver its objectives or detect fraud or other malpractice within a reasonable period of time.
The process is underpinned by complying with the core assurance standards of:
· Corporate Governance,
· Financial management,
· Risk management, and
· Openness and transparency.
In our opinion, from the audit work undertaken, the Council has an adequate and, overall, an effective internal control environment upon which it can place reasonable reliance to deliver the systems' objectives, or detect fraud or other malpractice within a reasonable period of time. This platform of controls should be of great service to the Council in helping it through the current period of significant change.
Appendix A
KEY PERFORMANCE INDICATORS
Audits completed:
2008/09 / 2009/10 / 2010/11Total number planned / 142 / 134* / 139*
Adhoc audits added / 24 / 31 / 22
Targets: - numbers
as % of total planned / 132
(93%) / 125
(93%) / 129
(93%)
Total planned audits completed / 136
(88.8 %) / 130
(97%) / 126
(91%)
Adhoc audits completed / 24 / 31 / 22
Total audits completed / 160 / 161 / 148
Total audits ongoing / - / - / -
* Does not include 8 additional THL audits
Productive days per auditor:
2008/09 / 2009/10 / 2010/11Target days / 178.1 / 178.4 / 187.1
Actual achieved / 179.2 / 179.2 / 177.2
Percentage of audit recommendations accepted:
2008/09 / 2009/10 / 2010/11No. of Recs / % Agreed / No. of Recs / %
Agreed / No. of Recs / % Agreed
Target / N/A / 97% / N/A / 97% / N/A / 97%
Actual achieved / 1214 / 1214
100% / 828 / 827
99.8% / 739* / 739*
100%
* Includes 234 restated previous audit recommendations
Customer satisfaction survey results:
Satisfaction surveys are based on 10 questions with a scoring of 1 to 5, with 5 being “Excellent”, 3 “Met Demand” and 1 being “Poor”.
2008/09 / 2009/10 / 2010/11% less than 2.5 / 0 / 0 / 0
Average / 88.9% / 90% / 89%
* New recording methodology
External Assessment:
2008/09 / 2009/10 / 2010/11Audit Commission / Satisfactory / Satisfactory / Satisfactory
ISO9001 (2008) / Retained / Upgraded / Retained
Appendix B
OPERATIONAL PERFORMANCE
CUMULATIVEACTIVITY / Plan
Days / Actual
Days / Variance
Days
Systems / 673 / 768.51 / -95.51
Corporate / 505 / 433.15 / 71.85
Computer / 195 / 137.59 / 57.41
Contract / 107 / 0.41 / 106.59
Adhoc / 125 / 109.16 / 15.84
Management, SLA's & Other / 115 / 110.52 / 4.48
Partnership / 35 / 30.00 / 5.00
Advice and Guidance / 64 / 30.82 / 33.18
Committee Reporting / 22 / 13.74 / 8.26
Completion of Old Year Audits / 30 / 73.33 / -43.33
Chargeable Work / 1871 / 1707.23 / 163.77
Annual & Statutory Leave / 390 / 355.50 / 34.50
Day Release / 0 / 0.00 / 0.00
Other Leave (incl Maternity) / 10 / 7.40 / 2.60
Sickness / 50 / 94.00 / -44.00
Training and Development / 50 / 40.60 / 9.40
Management & Admin / 229 / 300.27 / -71.27
Vacancies / Other / 0 / 95.00 / -95.00
Non Chargeable Work / 729 / 892.77 / -163.77
Total / 2600 / 2600.00 / 0.00
Appendix C
DETAILS OF AUDITS BY DEPARTMENT
NB - Total does not include 234 restated Previous Audit Recommendations
Appendix D
ANALYSIS OF RECOMMENDATIONS
PRIORITIES AND CATEGORIES BY DEPARTMENT
Recommendations to clients are prioritised and categorised as follows:
Priority: 4 - of fundamental importance
3 - of substantial importance
2 - of significant importance
1 - considered prudent
Categories: Segregation of duties
Physical control / Recording of assets
Authorisation and approval
Management controls
Supervision
Organisation
Arithmetical and accounting
Personnel
Information Management
Technology
Combined Summary 2010/11
Combined Summary - 2009/10:
Children, Education & Social Care – 2010/11:
Children, Education & Social Care (Schools) – 2010/11
Development & Neighbourhood Services – 2010/11:
Corporate – 2010/11:
Resources – 2010/11:
Law & Democracy – 2010/11:
Policy, Performance & Communications – 2010/11:
Xentrall Shared Services – 2010/11:
Appendix E
Completed Audits (Q4) 2010/11
SERVICE GROUP / AUDIT TITLE / ASSURANCE LEVEL / RECS MADE / RECS AGREEDCESC / Adhoc – Competition Manager Grant / Not Applicable / 0 / 0
Adhoc – Grangefield YCC Follow Up 2 / Substantial / 0 / 0
Adhoc – Frederick Nattrass / No Assurance / 3 / 3
Adhoc – SICTU / Not Applicable / 0 / 0
Attendance Service (Previous Recommendation Follow Up) / Full / 0 / 0
CareFirst / Substantial / 0 / 0
Communications Equipment & Charges / Limited / 9 / 9
Customer Care and Complaints / Substantial / 4 / 4
Early Years Provision / Substantial / 3 / 3
Education Grant Claims / Substantial / 0 / 0
Educational Psychology Service / Full / 2 / 2
Harrow Gate Primary School / Substantial / 11 / 11
Integrated Commissioning – Nursing and Residential Care (Previous Recommendations Follow Up) / Limited / 4* / 4*
Layfield Primary School / Substantial / 7 / 7
Leaving Care / Substantial / 7 / 7
Personalisation / Substantial / 6 / 6
School Improvement – Virtual School / Full / 3 / 3
DANS / Adhoc – Concessions Procurement / Substantial / 1 / 1
Adhoc – Housing Market Renewal Fund Grant / Not Applicable / 0 / 0
Adhoc – HV&E / Not Applicable / 0 / 0
Adhoc – HV&E Full Review / Not Applicable / 0 / 0
Adhoc – Preston Park Cafe / Not Applicable / 0 / 0
Environmental Health Unit / Full / 3 / 3
Grants / Substantial / 0 / 0
Housing Options – Homelessness Prevention Loans / Substantial / 8 / 8
Housing Regeneration – Equity Loans Scheme / Substantial / 4 / 4
Licensing & Transportation / Substantial / 3 / 3
Sports Development / Grants / Substantial / 0 / 0
Waste Reduction and Recycling / Substantial / 2 / 2
CORP / Committee Reporting / Not Applicable / 0 / 0
Data Matching – NFI and HMRC / Not Applicable / 0 / 0
Ethical Management of Information / Substantial / 9 / 9
Financial Management / Full / 0 / 0
Information Management / Substantial / 0 / 0
Intranet (with PPC - Communications Unit) / - / - / -
ICT System Reviews:
· AXIS Income Management System / Substantial / 2 / 2
· CIPFA Property Asset Management System / Full / 1 / 1
· eXpress Elections Management System / Full / 1 / 1
· FastTest Pro Electrical Test & Inspection System / Substantial / 2 / 2
· MKInsight Audit & Risk Management System / Full / 1 / 1
· MODES Collections Management System / Full / 1 / 1
· QES Youth Services MIS / Substantial / 4 / 4
· Tribal Enterprise Property Management System / Full / 2 / 2
Members Payments and Allowances / Travel and Subsistence / Full / 1 / 1
Officer Payments/Travel & Subsistence/Car Loans / Substantial / 7 / 7
Partnership Management – Renaissance / Not Applicable / 0 / 0
Performance Indicators NI 59 and NI 60 / Not Applicable / 0 / 0
Performance Management Systems / Full / 0 / 0
Treasury Management / Full / 4 / 4
* Previous recommendations ‘Not Implemented’