The Council was required to ensure that it had reliable and effective internal control systems in place. The adequacy of these systems was tested by both Internal and External Audit.

In the year up to 31 March 2021, Internal Audit had operated in accordance with the Public Sector Internal Audit Standards (hereafter referred to as ‘the Standards’). It was a requirement of the Standards that Internal Audit reported to the Audit and Standards Committee on audit matters and any emerging issues, not only in relation to audit but risk management and corporate governance. In line with the Standards, the Audit Manager was expected to present an annual report on the performance of the Internal Audit Service and to provide an overall opinion on the Council’s control environment.

Ordinarily, a risk-based plan was established and agreed prior to the start of the financial year. However, the audit planning process in 2020/21 was disrupted by the coronavirus outbreak and the work plan originally proposed had to be abandoned.  A new approach was approved by the Committee in June 2020 which included replacing the 2020/21 Audit Plan with quarterly work plans and the implementation of a number of shorter, more focused reviews concentrating on the business-critical issues.

Six audit reviews were completed in the final quarter of 2020/21. All provided good or substantial assurance on the overall governance arrangements and an overview of the findings arising from these audits was given in Appendix A to the report.  Appendix B  to the report provided a summary of all audit reports completed in 2020/21, the level of compliance and assurance rating for each review, and the overall performance of the Internal Audit Team against the plan.

The summary showed 90% of the 2020/21 Audit Plan was completed and only two planned audits (Payroll and CIL Income COVID Risks) were still outstanding at the end of the financial year. Both of these were completed in April 2021.

On face value, both Internal Audit’s performance and level of assurance obtained from its work would appear to show an improvement on the previous year. However, no audit reports were issued in the first quarter of 2020/21 due to the impact of the pandemic, and Internal Audit’s approach had to be modified in order for it to be able to continue to function. This meant that fewer controls were examined than would normally be the case, and the results could not readily be compared with the performance in previous years.

Appendix C to the report showed a summary of the current position with the progress made on implementing the audit recommendations reported at previous meetings.  The situation regarding the old year recommendations was starting to improve and progress continued to be made in respect of most of the remaining cases although the number of long outstanding (i.e. pre-April 2019) recommendations (5) was unchanged since the last quarter. The Chief Executive was being kept informed about the progress on all old year recommendations and was working with the relevant Heads of Service to ensure that they were resolved as soon as possible. All nine recommendations made in the current financial year had been implemented.

The Audit Manager also coordinated the annual National Fraud Initiative (NFI) data matching exercises which had not resulted in any financial savings in 2020/21 because there had been no capacity to analyse and follow up cases due to the pandemic.

In other counter fraud duties, on the council tax side a number of unbanded dwellings had been identified and discounts/disregards that were no longer applicable removed.  On the business rates side, small business rate relief had been wrongly applied and unrated holiday lets identified.  All cases were followed up with the help of colleagues in the Revenues and Benefits Team and an additional £37,878 of revenue income was being collected as a result.

The Audit Manager’s latest self-assessment of his team’s compliance with the Standards (Review of Internal Audit 2020/21) was approved by Members on 22 March 2021.  The review did not identify any significant issues and concluded that there was a high level of effectiveness overall. Quality assurance questionnaires would ordinarily have been used to capture client feedback both from operational management and Heads of Service. However, no questionnaires were issued in 2020/21 due to the limited scope of many of the audits carried out during the COVID-19 pandemic. No data was therefore available to measure customer satisfaction on this occasion, but client feedback would be reintroduced in 2021/22 following a return to more traditional audit coverage.

Performance Measures set for the Audit Team demonstrated that two of the targets for 2020/21 were met or exceeded.  The governance audit target was not met on this occasion because the Payroll audit was still in progress at year end. However, the work was almost complete, and the audit report was issued on 15 April 2021.  No “high” risk recommendations were made during the year.

The work carried out by Internal Audit in 2020/21 did not highlight any significant concerns regarding the internal control environment. 

Taking all of the factors highlighted in this and the quarterly reports into account, the Audit Manager’s overall opinion on the Council’s framework of governance, risk management and control in 2020/21 was therefore that it was adequate and effective.

An update on the Whistleblowing Policy activity in 2020/21 was provided in Appendix D to the report.  In summary, a total of 34 whistleblowing cases were reported to the Audit Manager in 2020/21. This represented a 61% increase in the number of cases received in the previous financial year, but much of the growth could be attributed to COVID-19-related activity. The latest cases included a range of allegations, the majority of which focused on either Benefit/Council Tax Fraud or Housing Issue/Tenancy Fraud. A recent exercise had also resulted in the reporting of Unregistered Food Businesses. All cases were initially reviewed by the Audit Manager and then either referred to the relevant Council officer for further investigation or reported to the appropriate authority.

RESOLVED: That:

1)         Internal Audit’s activity and performance in 2020/21 be noted; and

2)         the Audit Manager’s opinion on the control environment  (paragraph 37) be approved.