Agenda item

Draft Internal Audit Annual Report 2021-22

In accordance with the terms of reference of the Committee one of the key areas for the Committee is to monitor the audit activity on behalf of the Council.  This includes receiving the annual report and opinion from the Head of Internal Audit.


The Head of Finance & ICT presented the report that outlined the Draft Internal Audit Annual Report and annual opinion. A summary of audits was provided by assurance levels between 2020/21 and 2021/22 to evidence that significant improvements had been made. As of 2021/22, it was reported that there were no minimal assurance reports, a reduction in the number of partial assurance reports and an increase in the number of substantial assurance reports.


It was further confirmed that all audit actions identified were actively monitored by use of hosted software (4action). The system allows the responsible Officers to manage implementation plans alongside agreed time scales and enabled the Council to ensure all actions were monitored.


RSM then presented their Draft Internal Audit Annual Report. The Auditors highlighted key elements included within the report:


·       Weaknesses had been identified within the framework of governance risk and internal control.

·       The Overall framework could become inadequate and ineffective.

·       Internal Audit work was undertaken during 2021/22, therefore was affected by the disruptions of the pandemic.

·       The Auditors opinion was not only informed by the work undertaken during the year, but also interactions with management and attendance at Committee meetings.

·       During 2021/22, 73 management actions were raised. Compared to 112 actions that were raised and agreed with management during 2020/21.

·       Improvement had been seen in the overall control framework based on the areas reviewed in the year.

·       In terms of previous implementation of internal audit management actions, management had made reasonable progress in three of the reviews but little progress in one of the follow-up reviews.

·       No work or activity had been undertaken during 2021/22 that would require declaration on conflicts of interests from RSM.

·       RSM’s latest external quality assurance review had been undertaken and completed in December 2021 which concluded that RSM generally conformed (highest rating) to the requirements of the IIA Standards, other professional standards and code of ethics.

·       The report would remain in draft until the end of the financial year at which point a final would be issued subject to further amendments.


Clarification was sought on the overall opinion received, due to weaknesses in the framework and governance (third category out of four, with no improvement since the last draft).


The Auditor confirmed that several discussions had taken place internally. The annual conclusions would go through a second partner review process to ensure they agreed with the assertions in the annual reports. It was noted that the annual opinion was borderline to the next bracket. On reflection, RSM had issued two partial assurance conclusions and a number of internal audit actions had not been implemented. Therefore, the overall framework still required work undertaken to remain effective.


It was advised that RSM would review and reconsider the annual report if there were any significant changes in terms of the overall framework up until the end of the financial year.


One Member queried whether RSM would be attending any future meetings.


RSM confirmed that this would be their last meeting, however if management requested their attendance in the future, they would be happy to attend.


Members thanked RSM for their work undertaken over the years. 


Members discussed the actions rated red. It was highlighted that the Council had been taken into special measures for Housing. Further problems were raised around Voids Policy and income and banking surrounding high-risk areas related to the absence of controls of cash reconciliation.


The Chairman highlighted that significant progress had been made from last year. It was noted that Officers had provided assurance of good progress.


The Chief Finance Officer expressed disappointment over the annual opinion and felt that the report had not reflected the work that the Committee and the Council had been undertaking to ensure the control framework continued to be improved. 


One Member raised concern over the high-risk area relating to the absence of controls around reconciling cash collections – markets and toilets. It was noted that this mechanism could have been put into place immediately and the Member questioned why this particular action had not been met.


A further concern was reported on the time-scales around the time taken to move from minimal assurance to partial assurance being too long.


The Head of Finance & ICT raised a previous point in respect of cash reconciliation. It was confirmed that it had been trivial amounts of cash that were not being reconciled and that this related to income collected from toilets. Furthermore, reconciliation was now being undertaken when the cash was being collected from the machines.


A query was raised on the handover to the new internal auditors and how this would be completed to ensure no work was missed.


RSM advised that all outstanding actions agreed with management would not be missed and the new internal auditors would have access to the 4action system to track actions and continue to follow them up. RSM would assist the new auditor to ensure a smooth transition.




That the Governance and Audit Committee:


1.    Accept the Internal Audit Annual Report for 2021/22.

2.    Note the position of direction of the improvement assurance levels given by RSM between 2021 and 2021/22.



(Councillor Ashley Baxter wished that his vote against be recorded in the minutes).


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