Agenda item

The Audit Manager (Audit West) presented the report.

He said that staff resources had been severely stretched because of sickness, staff leaving and unplanned work. . The Head of Audit West said that the staffing situation could impact on the work being done for the Council for the rest of the year and on Audit West’s external contracts. He had secured additional staff resources through the arrangement with Devon Audit Partnership; these were being deployed on audit work for the Avon Pension Fund. Attempts were also being made to recruit agency staff. However, it was unlikely that any new staff would be in place before the end of this financial year.

Members noted the reasons for current performance against plan but were concerned. One Member said that the magnitude of the risk to the Council of inadequate audit should be taken into account in decisions about the resourcing of the function; the consequences to the Council of making mistakes with Universal Credit, for example, could be severe. The Head of Audit West responded that the situation could be managed to a degree in the short term. He had informed the Committee about the steps he was taking to secure additional staff resource and he drew attention to the information in paragraph 4.2.4 of the report about reviewing the scope of scheduled audits. The focus would be on the highest risks. The current state of the employment market for auditors was such that it would be very difficult to recruit suitably qualified people in any case. The main cause for failure to deliver the plan had been sickness, and both the affected individuals were now back at work. The Member, however, felt that every reduction in staff resource in the Audit Team increased the risk for the Council, and that there should be a minimum complement of auditors which should not be reduced. Another Member agreed with this, and proposed that the resolution should be amended to express the Committee’s concern about the impact of the recruitment freeze on the performance of Internal Audit. The proposed amendment was accepted by the Committee.

[Councillor Ball left the meeting.]

The Audit Manager (Audit West) reported on the follow-up and implementation of audit recommendations. A Member said he was extremely unhappy that recommendations made had not been implemented, and suggested that this should be brought to the attention of the relevant Cabinet Member. Another Member suggested that the Committee take a hard line if the recommendations were not implemented. The Head of Audit West responded that the when follow-up reviews took place, there were often legitimate reasons why recommendations had not been implemented. There was total transparency in reporting non-implementation to the Committee, but he felt that mitigating circumstances had to be taken into account, and that a judgement had to be made, based on the relative value of the risk, about when it was appropriate to report non-implementation to a higher level. If the recommendations about the use of council vehicles had not been implemented by the end of the current financial year, it would be appropriate to escalate the matter.

A Member commented that the results of audits suggested that there had been a deterioration in the overall control environment. He wondered if information about mitigating factors that justified not implementing audit recommendations could be provided to the Committee, as this would enable the Committee to have a better understanding of the impact that the work of Internal Audit was having. The principal focus of audit might be on finance, but it could also have an important influence on organisational culture. He requested that consideration be given to providing the Committee with some commentary that would enable it to have a wider view of governance standards within the Council. The Head of Audit West replied that he aim was always to be open and transparent in the information provided to the Committee. When recommendations were made or risks assessed as high, medium or low, not only financial factors were taken into consideration, but also the risk to the achievement of objectives or the level of performance. Each report contained a table like the one on agenda page 73, showing assurance level and the number of recommendations made and the number agreed by the service. Things can change significantly by the time of the follow-up. Change in the Council was now continuous, and that had to be taken into account in the follow-up. However if there was concern because recommendations were being repeatedly ignored, there were escalation procedures available to bring issues to the attention of the relevant Strategic Director, the Chief Executive or the Strategic Management Team. He had made it clear in his annual report that the level of risk in the Council was rising; the environment had changed from risk-averse/low risk to rising risk as a result of reductions in grant funding to the Council, changes to service delivery and the differing control frameworks of organisations with which the Council has digital interfaces. So a certain increase in risk level had to be accepted. Managers had to learn what level of management was required and what level of risk was acceptable. There were no systemic issues and  what was reported to the Committee were the exceptions. A Member welcomed that reassurance, but did have concerns that the general control environment was under stress and that audit recommendations were not always treated seriously.

Mr Morris said that Members had made excellent points about the importance of the overall corporate culture and how it might be assessed and reported.

RESOLVED to note progress made against the Internal Audit Plan for 2017/18 and to express concern about the impact of the Council’s recruitment freeze on the performance of Internal Audit.