Agenda item

To consider a report by the Chief Officer Financial Services which provides a summary of the Internal Audit activity for the period March to May 2018 and highlight the incidence of any significant control failings or weaknesses.

(Report attached)

The Chief Finance Officer submitted a report which provided a summary of the Internal Audit activity for the period March to May 2018 and highlighted incidence of any significant control failings or weaknesses.

The report also provided information from the Head of Service (Legal) about the recent use of the council’s surveillance powers under Regulation of Investigatory Powers Act (RIPA).

The Committee questioned the high number of areas receiving low assurance opinions from Management referrals  and the extent to which this was a reflection of management not having the necessary skills or assurance to put things right themselves.

The Head of Internal Audit suggested that the management referrals had identified issues necessitating action and it was the independence and methodology of Internal Audit that assists management in structuring an action plan to deal with those issues.

Members also queried how many people providing services to the Council had established personal service companies through which, their services are provided to the Council. 

Members were informed that the IR35 legislation relating to Personal Services Companies placed a responsibility on the council to ensure that, where an individual would have been classed as an employee if they were providing services directly, then they are paid by payroll with appropriate tax and national insurance deductions. The Head of Finance (Financial Management) assured members that developments within the creditor payment system will help to ensure that the relevant employment status checks have been carried out to ensure that the appropriate level of tax and national insurance is deducted. The Head of Audit advised that the follow up audit would review the effectiveness of this process.

The Head of Internal Audit suggested that the issue highlighted by Internal Audit was that the employment status check required by IRF 35 may not routinely be undertaken in a consistent and robust way, however the Head of Finance (Financial Management) confirmed that it was not the council’s policy to engage individuals as personal service companies. Where it was apparent that an individual was operating as a personal service company payments to that individual would be made via the payroll system.

Confirmation was sought as to whether there were any indications from the Accounts (where Employers National Insurance Contributions had not been paid) of Senior staff being engaged as a Personal Service Company.

Members were advised that this was not the reasoning for this, rather the individuals identified had reached the maximum for making contributions and so no further contributions were being made.

The Head of Internal Audit reported on a recent review of external advertising income. The review found that income was being received and monitored, and that there were recognised lines of accountability for the staff managing the external contracts. The audit resulted in a limited assurance opinion overall as the control arrangements were not configured in a manner that ensured that all income due to the council was being identified and collected.

Members sought reassurance in respect of external advertising income, specifically, whether the Council receives Value for Money from the advertising function whether income due was fully collected and whether the Council maximised the opportunities to secure sponsorship.

The Head of Internal Audit confirmed that collection of money due to the authority was within the scope of the audit work undertaken and would be further followed up later in the year.  It was suggested that other aspects fell outside of the scope of the Audit undertaken to date but that an emphasis was being placed on these areas as part of the budget setting strategy for the forthcoming financial year and more generally in the Medium Term Financial Strategy due to be considered by the Executive Board in July. 

Members requested that the Head of Internal Audit brings the Committee’s views on maximising income to relevant Directors attention.

The Committee expressed the wish to look further at this issue when Internal Audit concluded their follow up work and bring their update to the Committee.

In conclusion the Head of Internal Audit said there were no issues identified by Internal Audit in the March to May 2018 Internal Audit Update Report that would necessitate direct intervention by the Corporate Governance and Audit Committee.

RESOLVED –

(i)  To receive the Internal Audit Update Report covering the period from March to May 2018 and note the work undertaken by Internal Audit during the period covered by the report.

(ii)  To note that there had been no limitations in scope and nothing had arisen to compromise the independence of Internal Audit during the reporting period.

(iii)  Members requested that the Head of Internal Audit brings the Committee’s views on maximising external advertising income to relevant Directors attention.

(iv)  That following Internal Audit’s further review of external advertising income an update report be prepared and brought back to a future meeting of this Committee