Agenda item

To receive a report from the Deputy Head of the Devon Audit Partnership monitoring the progress and performance on Internal Audit.

The Committee had before it, and NOTED, a report * from the Head of the Audit Partnership reviewing the progress and performance of Internal Audit.

It was the overall opinion of the internal auditor that, based on work performed during 2019/20 and their experience form the current year progress and previous years’ audit, their opinion was one of ‘Substantial Assurance’ on the adequacy and effectiveness of the authority’s internal framework. 

The contents of the report were outlined with discussions taking place regarding the following:

·         There were no material concerns within the core audits and no issues of fraud.

·         The audit of Housing Benefits had identified that there were good controls in place. Internal auditors had assisted the external auditors with the subsidy claim for the first time this year. The final outcome report was awaited.

·         The audit of the debtors area had identified it as of a ‘Good Standard’. There had been some minor VAT issues but staff were working on that. The review of the debtors master file had identified areas of improvement.

·         The audit of the ‘Main Accounting’ system had identified it as being of a ‘High Standard’.

·         Within the audit of the ‘Property Development Company – Governance Review Follow Up’ they were pleased to recognise the significant steps that had been taken to improve the control framework around the highest risk areas previously identified. However, improvements were still needed around the reporting and monitoring mechanisms, particularly with regard to how these were reported to the Cabinet and ultimately Council. Key performance indicators were not sufficiently clear at the present time to recognise the returns that projects might provide. The now quarterly shareholder meeting was recognised as a positive step forward for monitoring purposes.

·         The meaning of ‘impairment’ was explained by the Group Manager for Financial Services and the external auditor as essentially being a mechanism to recognise a provision to cover the council should the loan not be repaid in full. This did not mean that the loan was being written off. The need for the impairment would be reviewed over the life of the project. The 3 Rivers accounts would show the loan at the full repayable amount whereas the outstanding loan on the council’s balance sheet would reflect the possibility that a proportion would not be repaid. The requirement to consider an impairment over the life of loans had been brought in as a result on international accounting standards, IFRS 9, which has been updated in 2019/20. This could be reversed within the accounts when repaid.

·         It was confirmed that formal reporting from 3 Rivers occurred every 6 months and the shareholders meeting occurred every quarter whilst the company itself performed their own monitoring on a monthly basis. This was now in place as a result of a previous audit. It was confirmed that there was continued effort to control risk and improve the management information leading up to any decision points where risk to the council could potentially be impacted or mitigated.

·         The Chairman reminded everybody present that they were welcome at any time to knock on the door of the Development Company office to ask questions (whilst understanding the commercial sensitivities involved) and also to speak to the Cabinet Member for Housing.

·         The shareholders would be meeting next week to discuss the details of the internal audit report.

·         Audit work had been completed on the new on-line job evaluation system. Initial findings were that the system controls and evaluation methodology were sound and should ensure consistency through what is a nationally accepted standard of assessment.

·         It was noted there was still an outstanding audit recommendation in relation to the Procurement area from 2018, this was in relation to the need for a Corporate Procurement Strategy. Discussions were ongoing with regard to the usefulness of such a strategy.

Note: * Report previously circulated; copy attached to the signed minutes.