Agenda item

The Chief Internal Auditor presented the Quarter 3 Progress Report (to 31^st December 2016) with a purpose of providing assurance to Audit Committee and senior managers on the adequacy of the control environment, and the performance of the Internal Audit Team.  The following points were noted:

·         There have been 30 audit jobs; not all opinion related and 10 draft reports have opinions allocated (as defined in the report).

·         Regarding team performance, 98% of recommendations have been accepted by office managers and work is being undertaken to assure implementation.  Timeliness of reports is identified as an issue and is attributed to the workload of the Audit Manager who is responsible for quality control, consistency and reactive issues.  It was explained that 42% of the plan has been covered which is below the target of 50% but a small improvement on last year.  The team is on track to achieve 75% of the plan by year end.

·         A question was asked if there are any major concerns including workload and areas of greatest sensitivity.  It was responded that priorities have to be drawn because of the limited number of auditors to consider matters that include corporate and service areas, and will be reported to Audit Committee in March 2017.

            A question was asked about the Limited assurance opinions on school meals        and community led delivery and more details were requested.  It was     explained that audits and opinions are defined based on strengths and weaknesses measured against key control objectives.  If it is found that     control objectives are not in place, a financial risk is identified.  A Limited        opinion is awarded where weaknesses outweigh strengths.  An overview was   provided as follows:

                      i.        School meals: There was a lack of official documentation outlining responsibilities for schools and Property Services (which manages the service).  Income data was not monitored appropriately and there were differences not reconciled between school and Property Services systems.  Additionally, significant outstanding debts were not being followed up.

                     ii.        Events: A number of aspects required some improvement:

a)    Some contracts were not always signed although in place;

b)    Income reconciliation in terms of allocation and stock control of tickets;

c)    Record keeping of staff working at events;

d)    Issues concerning the contract tender; and

e)    Reconciliation of financial aspects of an event which were not received as promptly as expected.

A Member requested assurance regarding unsigned contracts.  It was confirmed that these were not always in place for some events and commitment to improvement has been given for future events.  The Chief Officer Innovation and Enterprise provided assurances and context, that the recommendations are wholly or partially addressed.  It was explained that these types of events are at the heart of the council’s commercial strategies and is necessary to balance income generation and risk.  The council acts as the event promoter and receives 100% of the income generated.  This is a high risk position but also potentially high reward and it is necessary to clearly set this position out. The Committee was invited to reflect that the timing of the audit was during the National Eisteddfod and the Status Quo concert and it was accepted that there were some shortcomings due to the many tasks and responsibilities necessary at that time.  The Chief Officer expressed her confidence in the Events Team referring to the forthcoming Little Mix concert at Caldicot Castle.  It was explained that safeguards are in place, but as the focus is profit generation, the council must be prepared for higher risk thresholds.   

It was confirmed that, as the opinion is Limited the matter will be revisited in 6 to 12 months to monitor if the recommendations have been followed up and reported back to Audit Committee in due course.

Reference was made to the Qualifiedopinion on Adult Services (Supporting people with Grants) and it was confirmed that this was one of the council’s claims.  It is responsible for submitting a return to WG and whilst the financial element was acceptable, the conditions were changed during the year determining that outcomes should also be audited and an internal audit certificate awarded.  It was not possible to fully demonstrate the terms and conditions of the grant had been met.

A Member queried the appropriateness of a high risk/high reward approach and encouraged Audit Committee to monitor the situation as councils should take a cautious approach when dealing with public money.  The Chief Officer explained that in times of austerity, an entrepreneurial approach is needed and this adds value to the county.  It was clarified that the audit was of the collective work of several teams, reflecting how the authority works together. In response to a comment, it was confirmed that CMC² was a community interest company not a high risk/high reward enterprise.  The Head of Resources added further context that the events team works with finance officers adding that downside risk is managed with sensitivity and market analyses undertaken.  It was added that events present a measured risk that should be viewed in a wider context.

The Committee were reminded that treasury transactions are much larger and of a completely different magnitude to events.

In response to a suggestion, it was confirmed that this topic has been regularly scrutinised by the Economy and Development Select Committee and it is part of its ongoing work programme.  It was agreed that the follow up audit report in September should include aspects of risk to the authority, including audit of the procedures for the two major events this year.

The Quarter 3 Progress Report was formally noted.