AGENDA NO.

REPORT TO

AUDIT COMMITTEE

23February 2015

REPORT OF CORPORATE DIRECTOR OF RESOURCES

INTERNAL AUDIT PROGRESS REPORT

SUMMARY

This report provides members with an update of the work carried out by the Internal Audit Section and the progress made against the Audit Plan 2014/2015.

RECOMMENDATIONS

It is recommended that:-

  1. The current position as identified in the attached update report is noted.

DETAIL

Background

  1. Internal Audit is an independent appraisal function established by the Council to objectively examine, evaluate and report on the adequacy of internal controls. This role ensures that there is proper economic, efficient and effective use of resources. It also ensures that the Council has adequate accounting records and control systems.
  1. Committee Members are reminded that the list of audit assignments undertaken in the current year to date has been circulated to all Councillors prior to the meeting. The intention is to give Councillors the opportunity to raise questions on issues that affect their ward or other areas of responsibility and for answers to be provided at the meeting.

Current Position

  1. The attached update report shows the current position in respect of the progress against the 2014/2015 audit plan and the results of the work that has been undertaken.

FINANCIAL AND LEGAL IMPLICATIONS

None

RISK ASSESSMENT

The results of the work undertaken by Internal Audit can be used by managers to assess their risk exposure, recommendations are made where there is perceived to be unacceptable risk.

COMMUNITY STRATEGY IMPLICATIONS

None

CONSULTATION

This report has been submitted to the Corporate Governance Group

Name of Contact Officer:Andrew Barber, Audit & Risk Manager

Telephone No:01642 526176

Email Address:

Background Papers: / Internal Audit Charter
Audit Plan 2014/2015
Counter Fraud Strategy
Ward(s) and Ward Councillors: / None
Property Implications: / None

INTERNAL AUDIT

AUDIT COMMITTEE UPDATE REPORT

2014/15

Internal Audit – Audit Committee Update

Report 2014/15

1AUDIT PROGRESS

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2

3

1.1The plan,approved on 24 February 2014,was based on an audit assessment of risk drawn from a wide variety of sources including:-

  • Findings from previous audit reports and knowledge of Council systems
  • Input from Corporate Management Team and Heads of Service
  • Corporate Risk Register
  • Any areas highlighted by special investigations
  • Susceptibility to Fraud
  • Complexity of systems
  • Service Provider
  • Political/Media Sensitivity
  • Levels of Finance/Budgets

Audit Progress by Service Group

Audit
Area / Planned
Audits / Cancelled
Audits / Unplanned
Audits / Completed / In
Progress / Drafts
Issued / Not
Started
CESC - Non Schools / 11 / 3 / 2 / 5 / 5 / 0 / 3
CESC - Schools / 26 / 1 / 0 / 21 / 2 / 1 / 2
Corporate / 37 / 0 / 0 / 5 / 19 / 2 / 11
DANS / 15 / 4 / 1 / 7 / 5 / 0 / 4
Public Health / 1 / 0 / 0 / 1 / 0 / 0 / 0
Law and Democracy / 2 / 2 / 0 / 0 / 0 / 0 / 0
ICT / 22 / 1 / 0 / 9 / 4 / 1 / 8
Tees Valley Unlimited / 1 / 0 / 0 / 0 / 0 / 0 / 1
Totals / 115 / 11 / 3 / 48 / 35 / 4 / 29

Actual Days Compared to Planned Days

1.2The tables below show an alternative view of the number of planned days v actual days.

Governance Processes

Audit work concentrated on developing frameworks due to the need to make savings in the plan.

Key Financial Systems

All key financial systems are reviewed during the year. This work is usually undertaken in the second half of the year.

Council Wide Systems

This section covers, amongst other things, procurement, grant certification, HR processes, and customer services.

Service Reviews

This category includes work done for CESC (non-schools), D&NS, Law & Democracy and Tees Valley Unlimited. Unplanned Audits have been allocated mainly to this category.

School Reviews

We redesigned the audit programme for schools this year which included some new areas of testing; this change in emphasis has led to some initial overruns.

ICT Individual System Controls

Seven audits have been completed thus far. They have been undertaken by auditors unfamiliar with the testing schedule and as such this has led to some overruns.

Unplanned Audits

One unplanned audit has been completed to date and this is included in the Service Review category above.

1.3The Audit Plan is constantly revised during the year to take account of changing requirements. Amendments to the Plan agreed on 24 February 2014 can be summarised as follows:

2014/15 Planned Audits Amalgamated/Cancelled/Deferred

Service
Group / Audit Title / Comments
CESC / The Links Primary School / Deferred until 2015/16 at the request of CESC Management
Governor Support / Requirements to save audit time, no immediate concerns raised during school audit work.
Pupil Referral Management / Audited in previous 12 months and follow-up undertaken during year.
School Improvement / Requirements to save audit time, no immediate concerns raised during school audit work.
DANS / Development Services / Audited in previous 12 months current risk assessment shows every 24 months.
Registration & Bereavement Services / Requirements to save audit time.
Stores and Stock / This work undertaken during all audit reviews rather than a separate audit
Waste Reduction & Recycling / Work covered by CFYA - Refuse Collection audit.
ICT / Core + IYSS Integrated Youth Support System / Requirements to save audit time, small system and service reviewed during the year.
LAD / Elections / Originally planned to review the European election process but it has been agreed with management to review the main election work in 2015.
Democratic and Development Services / There will be a significant push in terms of member development following the elections in 2015 so it has been agreed with management to move the audit to cover this process.
TOTAL / 11

2014/15 Unplanned Audits Added to the Plan

Service
Group / Audit Title / Comments
CESC / Adhoc – Leaving Care Investigation / Investigation as a result of audit work still on-going.
Adhoc – Cash Handling Review / Work On-going
CORP
DANS / Tees Achieve – SFA Sub-Contracting Arrangements / Some concerns were raised about the sub-contracting arrangements in place, including following contract procedure rules and declarations of interest.
Other
TOTAL / 2

1.4Counter Fraud

The annual fraud survey was completed and submitted to the Audit Commission on the 16 May 2014.We were only able to identify two types of fraud during 2013/2014, Housing Benefits and Council Tax Support Scheme. The National Fraud Initiative has undertaken data matching to support the detection of Council Tax Discount fraud, at the time of submitting the survey the work to verify these matches had not been undertaken due to council tax staff being involved in the annual billing process, this work has now started.

Results from the National Fraud Initiative have now been received and the matches are currently being reviewed.

Included in the service review is the creation of a Risk & Special Projects Officer post within the Internal Audit Team to undertake additional counter fraud work including the actions identified in the Counter Fraud Strategy.

1.5Customer satisfaction survey results:

2012/13 / 2013/14 / 2014/15
Target / 90% / 90% / 90%
Overall Average / 98% / 93% / 95%

* We intend to review our approach to customer satisfaction surveys during the year.

1.6External Assessment:

2012/13 / 2013/14 / 2014/15
ISO9001:(2008) / Retained / Retained / Pending

2AUDIT OUTPUT

Engagement Opinions

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2

2.1For each audit carried out Internal Audit provides an overall conclusion as to whether a sound system of internal control is being maintained. Each opinion is either “Full”, “Substantial”, “Moderate”, “Limited”, or “No” assurance depending on the conclusions reached and the evidence to support those conclusions. “Full” and “substantial” assurance normally indicates that the area under review has a reliable system of internal control.

2.2These individual opinions are summarised below:-

Opinion / Definition / No of Opinions / %
Full Assurance / A sound system of internal controls is being applied consistently, although there may be scope for these controls to be improved in some areas. / 17 / 35
Substantial Assurance / Overall, there is a reasonably sound system of internal controls; however, there are areas where internal controls need to be improved. / 25 / 52
Moderate Assurance / A system of internal controls is being applied, however there are weaknesses which may put some of the system objectives at risk. / 3 / 6
Limited Assurance / There is either a limited system of internal controls being applied, or there are significant weaknesses in the controls in place, which are posing a substantial risk to the achievement of system objectives. / 1 / 2
No Assurance / The system of controls is failing and in need of urgent management attention. / 0 / 0
N/A / This classification covers audit work within a small part of a system. Providing an opinion on this work would misrepresent the system as a whole. / 2 / 4
Total / 48 / 100

2.3An analysis of the recommendations supporting these opinions by priority is shown below:-

Priority / Definition / Number / %
4 - Urgent / Actions that must be taken immediately to manage significant risks that are likely to prevent the Authority achieving one or more of its corporate objectives. / 0 / 0%
3 - Substantial / Actions that should be taken as a matter of priority due to the issues identified posing a substantial risk to the achievement of service/system objectives. / 4 / 2%
2 - Significant / Required actions to reduce the risk of systems failing to achieve their objectives. / 148 / 65%
1 - Prudent / Beneficial to the improvement of internal controls, which will support the achievement of objectives. / 75 / 33%
Total / 227 / 100%

2.4The following table shows the breakdown of recommendations by audit area. This shows that all audit recommendations have been agreed and will be implemented.

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Internal Audit – Audit Committee Update

Report 2014/15

DetailsofAuditsby Service Group

2014/15

Current Year / Previous Audits*
Audit Area / Number of Audits Issued / Number of Recs Made / Recs Agreed to Implement / Recs Not Agreed to Implement / No of Previous Recs Tested* / Passed* / Failed* / N/A*
CESC - Non Schools / 5 / 15 / 15 / 0 / 16 / 6 / 6 / 4
CESC - Schools / 21 / 119 / 119 / 0 / 257 / 198 / 44 / 15
Corporate / 5 / 4 / 4 / 0 / 6 / 5 / 1 / 0
DANS / 7 / 30 / 30 / 0 / 5 / 4 / 1 / 0
Public Health / 1 / 5 / 5 / 0 / 5 / 5 / 0 / 0
Law and Democracy / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
ICT / 9 / 1 / 1 / 0 / 5 / 5 / 1 / 0
Tees Valley Unlimited / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0
Totals / 48 / 174 / 174 / 0 / 294 / 223 / 53 / 19

*Denotes previous recommendations tested as part of the current audit

2013/14

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Internal Audit – Audit Committee Update

Report 2014/15

2.5A further analysis of new recommendations by category is shown below.

Ref / Category / Priority
1 / Priority
2 / Priority
3 / Priority
4 / Total
Current / 2013-14
1 / Financial Management / 6 / 18 / 0 / 0 / 24 / 128
2 / Information Communication Technology / 0 / 0 / 0 / 0 / 0 / 6
3 / Information Governance / Assurance / 5 / 6 / 0 / 0 / 11 / 69
4 / Procurement / 1 / 5 / 1 / 0 / 7 / 35
5 / Health and Safety / 3 / 8 / 1 / 0 / 12 / 6
6 / Risk Management / 1 / 19 / 0 / 0 / 20 / 23
7 / Asset Management / 6 / 8 / 0 / 0 / 14 / 28
8 / Business Continuity / Disaster Recovery / 6 / 8 / 0 / 0 / 14 / 11
9 / Competencies / Workforce Planning / 1 / 6 / 0 / 0 / 7 / 19
10 / Fraud Management / 6 / 4 / 0 / 0 / 10 / 10
11 / Legislative / Constitutional Compliance / 4 / 6 / 1 / 0 / 11 / 45
12 / Ethical Governance / 1 / 5 / 1 / 0 / 7 / 4
13 / Performance Management / Service Improvement / 3 / 4 / 0 / 0 / 7 / 17
14 / Partnership / Relationship Governance / 0 / 2 / 0 / 0 / 2 / 3
15 / Authorisation / 3 / 2 / 0 / 0 / 5 / 6
16 / Segregation / 1 / 1 / 0 / 0 / 2 / 0
17 / VAT / 2 / 3 / 0 / 0 / 5 / 3
18 / Safeguarding / 2 / 14 / 0 / 0 / 16 / 16
TOTAL / 51 / 119 / 4 / 0 / 174 / 429

2.6Shown below is a list of all the audit engagements undertaken during the year together with their assurance opinion. An explanation of any “substantial” recommendations is provided.

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Internal Audit – Audit Committee Update

Report 2014/15

2014/15 Audit Plan Current Position as at 01 November 2018

Recommendations - Including Previous Recs Restated
Current Status / Dept. / Audit Title / Audit Assurance / Final Issued / 1* / 2* / 3* / 4* / Comments
Not Started / CESC - Non Schools / Attendance and Exclusions / - / - / - / -
Not Started / CESC - Non Schools / Child Placement - Adoption and Fostering / - / - / - / -
On-going / CESC - Non Schools / Child Protection Systems and Procedures & Specialist Team Duties / - / - / - / -
Complete / CESC - Non Schools / Children's Centres / Early Years / N/A / - / - / - / - / Follow-up of Previous Recommendations
Complete / CESC - Non Schools / Complaints Review - Adults / Substantial / 20/11/2014 / 3 / 3 / - / -
Complete / CESC - Non Schools / Complaints Review - Children / Substantial / 11/12/2014 / 1 / 4 / - / -
Complete / CESC - Non Schools / Emergency Duty Team / Substantial / 09/10/2014 / 2 / 4 / - / -
Cancelled / CESC - Non Schools / Governor Support / - / - / - / -
Complete / CESC - Non Schools / Youth Direction / Substantial / 27/10/2014 / 1 / 3 / - / -
On-going / CESC - Non Schools / Learning Disabilities / - / - / - / -
On-going / CESC - Non Schools / Leaving Care / - / - / - / -
Not Started / CESC - Non Schools / Out of Borough Placements / - / - / - / -
Cancelled / CESC - Non Schools / Pupil Referral Management / - / - / - / -
Cancelled / CESC - Non Schools / School Improvement / - / - / - / -
On-going / CESC - Schools / Barley Fields Primary School / - / - / - / -
Complete / CESC - Schools / Bewley Primary School / Moderate / 24/10/2014 / 4 / 17 / - / -
Complete / CESC - Schools / Bowesfield Primary School / Substantial / 12/11/2014 / 3 / 5 / - / -
Complete / CESC - Schools / Christ the King RC Primary School / Substantial / 20/10/2014 / 3 / 3 / - / -
Complete / CESC - Schools / Egglescliffe CE Primary School / Full / 24/06/2014 / 2 / 2 / - / -
Complete / CESC - Schools / High Clarence Primary School / Full / 18/06/2014 / 1 / 1 / - / -
Complete / CESC - Schools / Junction Farm Primary School / Substantial / 04/06/2014 / 1 / 2 / - / -
On-going / CESC - Schools / Kirklevington Primary School / - / - / - / -
Complete / CESC - Schools / Levendale Primary School / Substantial / 30/01/2015 / 1 / 4 / - / -
Complete / CESC - Schools / Mandale Mill Primary School / Substantial / 21/07/2014 / - / 7 / - / -
Complete / CESC - Schools / Mill Lane Primary School / Substantial / 20/10/2014 / 5 / 10 / - / -
Complete / CESC - Schools / Myton Park Primary School / Substantial / 01/12/2014 / 2 / 5 / - / -
Complete / CESC - Schools / Oakdene Primary School / Substantial / 02/09/2014 / 2 / 5 / - / -
Complete / CESC - Schools / Pentland Primary School / Substantial / 11/12/2014 / 7 / 5 / - / -
Complete / CESC - Schools / Priors Mill Primary School / Substantial / 24/11/2014 / 6 / 6 / - / -
Complete / CESC - Schools / Roseberry Primary School / Substantial / 29/01/2015 / 3 / 5 / - / -
Complete / CESC - Schools / St John the Baptist CE Primary School / Full / 05/11/2014 / - / - / - / -
On-going / CESC - Schools / St Joseph's RC Primary School (Billingham) / - / - / - / -
Draft / CESC - Schools / St Joseph's RC Primary School (Norton) / - / - / - / -
On-going / CESC - Schools / St Mark's Elm Tree CE Primary School / - / - / - / -
Complete / CESC - Schools / St Mary's CE Primary School / Substantial / 02/09/2014 / 6 / 8 / - / -
Not Started / CESC - Schools / St Patrick's RC Primary School (Fairfield) / Full / 17/12/2014 / 1 / 2 / - / -
Complete / CESC - Schools / St Paul's RC Primary School / - / - / - / -
Complete / CESC - Schools / The Glebe Primary School / Substantial / 30/01/2015 / 3 / 6 / - / -
Cancelled / CESC - Schools / The Links Primary School / - / - / - / -
Complete / CESC - Schools / The Village Primary School / Substantial / 01/12/2014 / 2 / 12 / - / -
Complete / CESC - Schools / William Cassidi CE Primary School / Full / 03/07/2014 / 2 / 1 / - / -
On-going / CORPORATE / Anti-Fraud Management / - / - / - / -
Not Started / CORPORATE / Asset Register / Asset Management / - / - / - / -
Not Started / CORPORATE / Bank Reconciliation / - / - / - / -
Not Started / CORPORATE / Bribery Act / - / - / - / -
On-going / CORPORATE / Building and Construction / - / - / - / -
Not Started / CORPORATE / Business Continuity and Disaster Recovery / - / - / - / -
Draft / CORPORATE / Cash Offices / - / - / - / -
Complete / CORPORATE / Corporate Governance Statement Evidence / N/A / 14/08/2014 / - / - / - / -
On-going / CORPORATE / Council Plans / - / - / - / -
On-going / CORPORATE / Creditors / - / - / - / -
On-going / CORPORATE / Data Matching - NFI/Revenue and Customs / - / - / - / -
On-going / CORPORATE / Data Protection / - / - / - / -
Draft / CORPORATE / Debtors / - / - / - / -
Complete / CORPORATE / Declaration of Interests/Gifts and Hospitality / Substantial / 23/07/2014 / - / 2 / - / -
On-going / CORPORATE / Employee Therapy Services / - / - / - / -
Complete / CORPORATE / Facilities Management / Moderate / 22/09/2014 / 1 / 2 / - / -
On-going / CORPORATE / Financial Management / - / - / - / -
On-going / CORPORATE / Freedom of Information / - / - / - / -
On-going / CORPORATE / Grants / - / - / - / -
Not Started / CORPORATE / Housing Benefits / - / - / - / -
Not Started / CORPORATE / ICT Backup and Recovery / Disaster Recovery / - / - / - / -
Complete / CORPORATE / Income (DBC) / Full / 12/12/2014 / - / - / - / -
On-going / CORPORATE / Information Management / - / - / - / -
On-going / CORPORATE / Officer Payments Mileage / - / - / - / -
On-going / CORPORATE / Partnership Management / - / - / - / -
On-going / CORPORATE / Payroll & Absence Recording / - / - / - / -
Not Started / CORPORATE / Pension Payments/Early Retirement / - / - / - / -
On-going / CORPORATE / Performance Management Framework / - / - / - / -
Not Started / CORPORATE / Public Health / - / - / - / -
Complete / CORPORATE / Recruitment Services / Substantial / 17/10/2014 / - / 1 / - / -
On-going / CORPORATE / Risk Management / - / - / - / -
On-going / CORPORATE / Social Care - Adults / - / - / - / -
Not Started / CORPORATE / Social Care - Children / - / - / - / -
Not Started / CORPORATE / Taxation (CTAX and NDR) / - / - / - / -
On-going / CORPORATE / Transport & Fleet / - / - / - / -
Not Started / CORPORATE / Treasury Management / - / - / - / -
On-going / CORPORATE / Xentrall Governance / - / - / - / -
Complete / D&NS / Adhoc - Tees Achieve SFA Sub Contracting Arrangements / Limited / 18/04/2014 / - / 1 / 3 / - / Issues around compliance with funding arrangements. Compliance with procurement rules. Inclusion of all relevant clauses (specifically bribery/corruption) in contracts.
Complete / D&NS / Affordable Homes Framework / Full / 24/10/2014 / 1 / - / - / -
Complete / D&NS / Asbestos Management & Advice / Substantial / 28/10/2014 / 3 / 5 / - / -
On-going / D&NS / Car Parks / - / - / - / -
Not Started / D&NS / Catering / - / - / - / -
Complete / D&NS / CFYA - Refuse Collection / Substantial / 02/06/2014 / 3 / 4 / 1 / - / There is a need to ensure route risk assessments are made available in the cabs of vehicles.
Not Started / D&NS / Concessionary Fares / - / - / - / -
Complete / D&NS / Conservation / Carbon Reduction / Moderate / 19/11/2014 / 2 / 3 / - / -
Cancelled / D&NS / Development Services / - / - / - / -
On-going / D&NS / Fleet Management / - / - / - / -
On-going / D&NS / Fuel Poverty Reduction / - / - / - / -
On-going / D&NS / Highways and Transport / - / - / - / -
Not Started / D&NS / Housing Options / - / - / - / -
On-going / D&NS / Housing Regeneration / - / - / - / -
Ongoing / D&NS / Libraries / - / - / - / -
Complete / D&NS / Private Sector Housing – Housing Improvements / Full / 09/09/2014 / - / 3 / - / -
Cancelled / D&NS / Registration and Bereavement Services / - / - / - / -
Cancelled / D&NS / Stores and Stock / - / - / - / -
Complete / D&NS / Troubled Families Initiative / Full / 03/06/2014 / 1 / 1 / - / -
Cancelled / D&NS / Waste Reduction and Recycling / - / - / - / -
Complete / ICT / Agresso / Full / 10/12/2014 / - / - / - / -
Complete / ICT / Capita One Children's Management Information System / Substantial / 15/12/2014 / 1 / - / - / -
Draft / ICT / CareWorks CareDirector Adult Social Care Case Management System / - / - / - / -
On-going / ICT / CareWorks RAISE Integrated Children's System / - / - / - / -
Complete / ICT / Civica Icon Income Management System / Full / 19/09/2014 / - / - / - / -
Cancelled / ICT / Core+ IYSS Integrated Youth Support System / - / - / - / -
Not Started / ICT / Dial-a-Ride Online Transport Management System / - / - / - / -
Not Started / ICT / Ebase Electronic Forms Development System / - / - / - / -
Complete / ICT / Environmental Controls / Full / 18/09/2014 / - / - / - / -
Complete / ICT / eStart (Children's Centres System) / Full / 02/12/2014 / - / - / - / -
Not Started / ICT / Exor Highways Management System / - / - / - / -
On-going / ICT / Hardware Controls / - / - / - / -
Not Started / ICT / ICT New Systems Implementation / - / - / - / -
On-going / ICT / ICT Project Management / - / - / - / -
Complete / ICT / MKInsight Audit and Risk Management System / Full / 28/07/2014 / - / - / - / -
Not Started / ICT / Parking Gateway Parking Management System / - / - / - / -
Complete / ICT / PS Enterprise Human Resource Management System / Full / 30/01/2015 / - / - / - / -
Complete / ICT / Remote Access / Full / 05/12/2004 / - / 1 / - / -
Not Started / ICT / Saffron Catering Nutritional Analysis System / - / - / - / -
Not Started / ICT / TALIS Library Management System / - / - / - / -
Complete / ICT / Trojan Childcare Payments System / Substantial / 07/08/2014 / - / - / - / -
On-going / ICT / Virtualisation / - / - / - / -
Not Started / ICT / Website / Intranet / - / - / - / -
Cancelled / L & D / Democratic and Development Services / - / - / - / -
Cancelled / L & D / Elections / - / - / - / -
Complete / PUBLIC HEALTH / Environmental Health / Substantial / 18/09/2014 / 1 / 4 / - / -
Not Started / TVU / Tees Valley Unlimited / - / - / - / -

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