PAPER D

AUDIT PANEL - 16 FEBRUARY 2005

INTERNAL AUDIT PROGRESS REPORT

REPORT OF THE CHIEF INTERNAL AUDITOR

PURPOSE

1. This report is to provide the Panel with a summary of Internal Audit activity completed since the last report of 21st October 2004. The Panel is invited to note the contents of the report and to seek clarification of any issues arising from audits undertaken.

BACKGROUND

2. In keeping with good corporate governance practice, a Panel of elected members should have oversight of the activities of the Internal Audit Service for the following purposes:

v The Panel should monitor Internal Audit’s performance, both in terms of the quality and quantity of its work;

v The Panel should satisfy itself that Internal Audit has devoted its attention to the appropriate issues;

v The Panel should consider the results of Internal Audit reviews to ensure that any significant findings are addressed, including control weaknesses and to ascertain whether, in the opinion of the Chief Internal Auditor, adequate and satisfactory responses have been given by the Authority’s management;

v The Panel should recommend, if necessary, that further attention should be given to some of the issues raised;

3. To facilitate this process, attached as appendix A are synopses and summaries of significant audit work completed since 21^st October 2004 this year.

4. At the last Audit Panel, members asked for draft performance indicators for Internal Audit Services to be produced for the next meeting of the Audit Panel. Accordingly, attached at Appendix B are suggested indicators for members’ consideration.

5. Members are asked to approve the attached indicators, measurement methods and targets.

FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS

There are no significant financial or legal implications of this report, given that it is a progress report on the Internal Audit function. The Panel is reminded that the Council is required by statute (the Accounts and Audit Regulations) to have an adequate and effective Internal Audit function.

APPENDIX A

1. Audit of Best Value Performance Indicators

The audit was carried out as part of the 2004-05 Audit Plan. The overall objective of the audit was to identify for management where future BVPI reporting could be improved.

Only partial assurance can be given that there will be a significant improvement in 2004-05 BVPIs.

Significant Findings were that

(a) There is some evidence to suggest that the BVPI performance indicator co-ordinators have not been sufficiently proactive in disseminating guidance to data collection staff, and reviewing the quality of data submitted.

(b) There is a lack of awareness amongst staff of the importance of producing accurate BVPI statistics.

(c) The Policy Unit have also reported to us that in their opinion the accuracy of BVPI production has not been given adequate priority by Heads of service and Directors.

(d) There was a lack of understanding by staff of what is required by the BVPI regime.

(e) Staff deviating from the guidance issued

(f) The non-completion of Policy Unit Quality Assurance Guidance for performance indicators checklists, instructed to be completed by the Policy Unit.

(g) There was a lack of adequate management information systems and effective reporting structure to record BVPI data

(h) Unforced errors

We have made thirty three recommendations to improve the control system all of which have been accepted by management.

2. Youth and Community Service

The audit was carried out as part of the 2004-05 Audit Plan agreed by the Audit Committee on 29th July 2004.

Assurance can be given to management that

· overall the objectives of the service are being met and that current risk mitigation strategies are operating satisfactorily and,

· that the planned actions once implemented will improve the management of risk and increase the likelihood of the achievement of objectives.

The key risks identified at the workshop held with Youth & Community officers were: - lack of resources and a failure to prioritise service demands. Recommendations have been made to improve the dissemination of information from the management team to assist the understanding of individual officers of the priorities of the service. The perception of the officers represented at the workshop was that low morale affected the service and it has been recommended that a staff survey is carried out to identify the causes of low morale and that the management team implements an action plan to address the cause and effect of morale issues.

Relative to other authorities the service receives a fairly generous allocation of funds, however more work should be carried out to identify and attract external funding.

3. Customer Accounts (Sundry Debtors System)

This audit was carried out as part of the 2004-05 Audit Plan agreed by the Audit Committee on 29^th July 2004. The audit was carried out by interviewing officers and carrying out testing on selected areas to determine the level of compliance with Council policies and procedures.

Assurance can be given that the control system is being complied with and is operating in an adequate and effective manner. We found this to be a well managed section that provides a good level of service for the Authority. No recommendations have been made.

4. Main Accounting System

This audit was carried out as part of the 2004-05 Audit Plan agreed by the Audit Committee on 29^th. July 2004. The overall objective was to provide assurance to management that the Council’s Main Accounting System is operating in accordance with existing controls and that they are adequate and effective in ensuring the integrity of the Authority’s Financial Management System. The audit was carried out by interviewing relevant officers and carrying out testing on selected areas to determine the level of compliance with Council policies and procedures.

In general assurance can be given to management that systems in place are operating satisfactorily.

5. Creditor Payments System

The audit was carried out as part of the 2004-05 Audit Plan agreed by the Audit Committee on 29 July 2004. The overall objective was to provide assurance to management that the Council’s Creditor Payment System is operating in accordance with management control arrangements and that they are adequate to ensure the integrity of the Authority’s Financial Management System. The audit was carried out by interviewing relevant officers and carrying out testing on selected areas to determine the level of compliance with Council policies and procedures.

Significant findings were that:

1. Inadequacies were identified in the procedures surrounding the maintenance and implementation of signatory authorisations.

2. There is a requirement for an improvement in the reporting of the purchase of items that need to be included in the P11D (personal taxation) returns.

Twenty four recommendations were made, twenty one of which have been accepted by management.

6. National Non Domestic Rates Systems Review

This audit was carried out by interviewing relevant officers and carrying out testing on selected areas to determine the level of compliance with Council policy and procedures.

Overall the systems in place within NNDR are sound with effective controls and procedures in place. There were no major areas of concern however four recommendations have been made, which are of a minor nature and refer to the administration of the service.

Assurance can therefore be given to management that the systems in place are operating satisfactorily.

7. ICT Audit DS4 – Ensure Continuous Service

Our initial body of work and the additional work on the associated ICT project will be handed over to the new Information Security Manager who starts on 14^th March 2005.

PARTNERSHIPS:

8. EXTENDED SCHOOLS

We are working with the Extended Schools Co-ordinator in an advisory and assurance capacity, assisting in the development of the risk profile for the Extended Schools Strategy.

9. SAFER COMMUNITIES

We are currently working with the Head of Democratic & Legal Services to draft a governance structure for the merged Drug Action Team and Crime & Disorder Partnership (“Safer Communities Partnership”).

10. LIBRARIES

We are currently working with the Library Service to develop the appropriate form of partnership agreement (including governance structure) between the Service and the Isle of Wight College.

APPENDIX B

DRAFT PERFORMANCE INDICATORS FOR INTERNAL AUDIT

Current best practice regarding performance indicators is that they should be focused on outputs, outcomes and quality rather than measuring inputs. Accordingly, I put forward the following performance indicators for members consideration:

INDICATOR	MEASURED BY:	TARGET 2005/06	TARGET 2006/07
Proportion of Annual Audit Plan completed	Value of planned tasks completed as a proportion of total planned time.	70%	85%
Proportion of recommendations accepted by management	The number of recommendations accepted by management as a proportion of all recommendations made during the course of the financial year.	80%	90%
Results from customer satisfaction questionnaires.	The average scores from customer satisfaction questionnaires accumulated during the financial year. Scoring on a scale of 0 to 4, 4 being excellent.	3	3.2