1. SUMMARY/PURPOSE

1.1 The purpose of this report is to inform the Audit Panel of the proposed internal audit activity for the coming financial year (and to show how all Council activities will be covered over a six year period).

2. BACKGROUND

2.1 The Council is the largest organisation on the Island, spending and receiving around £300 million per annum and employing around 5,000 staff. In addition it manages its own pension fund valued at £150 million. The Council seeks to achieve probity and regularity in the way it manages such large sums through maintaining a comprehensive system of internal control. Internal Audit is part of the regime of control, and being a finite resource, needs to plan and allocate resources in a rational and systematic way in order to ensure that all the Council’s activities receive an appropriate amount of attention.

2.2 The Strategic Audit Plan which is attached to this report at Appendix A is the result of a rigorous planning exercise which has involved :

· long experience of the Council’s range of activities and its systems

· a risk assessment process using a computerised planning system (the results of which are also summarised as Appendix B)

· extensive consultation with all of the Council’s Service Heads.

2.3 The Plan sets out the specific activities to be audited and the time needed to audit them. Clearly there are some activities and systems which need to be audited more frequently than others. This can be illustrated by the approach to the Council’s main, or fundamental systems such as the main accounting system where we need to check that it is operating satisfactorily and on a frequent basis. This is determined by its sheer size and because it underpins all the Council’s financial affairs. At the other end of the spectrum, small, single size functions where risk is minimal, will receive attention only once in the term of a six year strategic plan. The idea therefore is to match risk with internal audit resource.

2.4 Internal Audit resources are finite and that in itself requires that their use is planned. Currently, by reference to benchmarking comparisons, the Council’s audit team is under-resourced – employing 6.5 full-time equivalents compared to an average of 11 for other (unitary) Councils. As a consequence, resources are only adequate to deliver the most basic coverage, barely satisfying statutory obligations. In order to help narrow this gap, and to begin the development of audit towards ‘operational’ audit and value for money audit, a bid has been made in the current budget round for 1 extra full-time auditor.

2.5 Existing audit resources, after making allowances for training and other ‘indirect’ activity are included in summary in the Plan. The number of available days totals 1,040, and is close to the amount of audit required (subject to the comments made above at paragraph 2.4).

3. OPTIONS

3.1 The Audit Panel is requested to :

(i) endorse the methodology used to construct the Audit Plan;

(ii) consider the relative priorities, frequencies and amounts of time devoted to areas of Council activity;

(iii) note the reservations made in this report about audit resources; and

(iv) make recommendations about the priorities of the Audit Team’s work.

Contact Point : R J Streets, Compliance and Risk Manager, F 3622

R J STREETS

Compliance and Risk Manager

G B RICHARDSON

Chief Internal Auditor