Annual Audit Report - Final 2025-26
Argyll and Bute Council · 16 June 2026
Back to Argyll and Bute HSCP Audit and Risk Committee — 16 June 2026 and its agenda
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Argyll and Bute Integration Joint Board Internal Audit Annual Report 2025/26
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Contents Introduction ............................................................................................................................................ 1 Conformance with Global Internal Audit Standards ............................................................................. 2 Overall internal audit opinion................................................................................................................ 3 National Reports and Associated Points of Interest ............................................................................. 5 Areas of Concern, Observation and Risk to the HSCP ........................................................................... 7 Appendix 1 – Summary of Findings 2025/26 Internal Audit Plan ........................................................ 9 Appendix 2 – Planned v Actual Audit Days 2025/26 ........................................................................... 10 Appendix 3 – Recommendations Actioned and Outstanding ............................................................. 11 Contact Details Chief Internal Auditor: Paul Macaskill Telephone: 01436 604108 E-mail: paul.macaskill@argyll-bute.gov.uk
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 1 Introduction 1. The Global Internal Audit Standards (GIAS) state that: “The Chief Audit Executive must create an internal audit plan that supports the achievement of the organisation’s objectives” and deliver an annual internal audit opinion and report that can be used by the organisation to inform its governance statement. The annual internal audit opinion must conclude on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control. 2. The purpose of this report is to advise the Audit and Risk Committee (the Committee) of the work undertaken by Internal Audit in respect of the Annual Audit Plan 2025/26 and advise the Committee of the contents of the Chief Internal Auditor’s (CIA) independent annual opinion on the effectiveness of the Integrated Joint Board’s (IJB) risk management, internal control and corporate governance processes. 3. Corporate governance is the system by which the IJB directs and controls their functions and relate to their communities. The three fundamental principles of corporate governance are openness, integrity and accountability. A sound system of internal control must be maintained to support the IJB in operating effective corporate governance arrangements. 4. Good governance practice and internal control suggests that: • IJB Members should set appropriate policies on internal control and seek regular assurance that the system of internal control is functioning effectively • management should implement the IJB policies on internal control and design, and implement and monitor suitable systems • a well-established and effective Audit and Scrutiny function should be in place within the IJB • Internal Audit should provide an independent assessment of the adequacy of the system of internal control. 5. The production of the Governance Statement is being led by the IJB’s Chief Officer. To support the governance statement the IJB will need to carry out a review of the effectiveness of internal control, deriving evidence from a variety of sources including Internal Audit, Senior Managers within the IJB with responsibility for developing and maintaining internal control and cognisance of external/internal audit recommendations along with recommendations of other regulatory bodies. 6. This report provides internal audit information in support of the assurance statements and covers the period from 1 April 2025 to 31 March 2026. The risk based audits contained within the 2025/26 Internal Audit Plan are shown in the table included at Appendix 1. This shows the overall audit opinion for each audit and the number and significance of agreed actions. 7. Our annual internal audit plan is designed to provide the Committee with assurance that Argyll & Bute IJB internal control system is effective in managing the key risks. The plans are therefore informed by Argyll & Bute IJB risk management system and linked to the risk register. 8. Internal Audit reports its outputs regularly throughout the year to management and to the Committee. The Committee also approves Internal Audit’s annual plan and monitors the performance of the function. The Internal Audit Plan was approved by the Committee in February 2025.
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 2 9. In addition, the Internal Audit team present audit reports to the Committee which have been delivered as part of Argyll and Bute Council’s Internal Audit plan which the CIA, in agreement with the Chief Finance Officer, feel are pertinent to the remit of the Committee. Primarily these will focus on audits relating to the delivery of social work services. Similarly, IJB audit reports are presented to Argyll & Bute Council’s Audit and Scrutiny Committee for information. 10. The 2025/26 Internal Audit Plan comprised 50 days of planned audit work, including management and administration time. We were able to fulfil the agreed plan and report our findings to the Audit & Risk Committee. 11. Our planned and approved work for 2025/26 has been completed in full and a comparison of actual coverage against the 2025/26 plan is attached at Appendix 2. In addition, we have undertaken a further two reviews at the request of Senior Management within the HSCP. Conformance with Global Internal Audit Standards 12. Internal auditing strengthens the organisation’s ability to create, protect, and sustain value by providing the board and management with independent, risk-based, and objective assurance, advice, insight, and foresight. Internal auditing enhances the organization’s: • Successful achievement of its objectives. • Governance, risk management, and control processes. • Decision-making and oversight. • Reputation and credibility with its stakeholders. • Ability to serve the public interest. Internal auditing is most effective when: • It is performed by competent professionals in conformance with the Global Internal Audit Standards, which are set in the public interest. • The internal audit function is independently positioned with direct accountability to the board. • Internal auditors are free from undue influence and committed to making objective assessments. 13. CIPFA has issued a statement that sets out the role of the Head of Internal Audit in the public sector. A further revised document has been issued in April 2019. The purpose of this statement is to outline the core activities and behaviours that belong to the role of Head of Internal Audit and how these should influence and champion good governance, risk management and internal control. 14. CIPFA and the Institute of Internal Auditors (IIA) have reviewed the guidance and made amendments in order to have a common set of standards across the whole public sector. These changes are primarily based on the International Professional Practices Framework (IPPF). The new standards termed Global Internal Audit Standards (GIAS) which became effective in April 2025 and instil a number of additional requirements on Internal Audit functions and management within the public sector and those Boards or Committees charged with governance. 15. A key requirement of the GIAS is that Internal Audit sections are required to state whether or not they conform to these standards as part of their annual reporting. In addition, they should
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 3 outline the results of the quality assurance and improvement programme together with progress against any improvements identified during this assessment. 16. The Council’s Internal Audit Section operates in accordance with the GIAS which have been agreed to be adopted from 1 April 2025 by the relevant public sector Internal Audit Standard setters. 17. GIAS requires that a Quality Assurance and Improvement Programme (QAIP) is developed in order to provide assurance that internal audit activity: • is conducted in accordance with an Internal Audit Charter • operates in an efficient and effective manner • is perceived to be adding value and improving operations • GIAS also requires, as outlined in the “QAIP”, that: “External assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organisation. External assessments can be in the form of a full external assessment or a self-assessment with independent external validation” 18. To meet this requirement, a reciprocal arrangement to complete a programme of inspections has been developed by the Scottish Local Authorities Chief Internal Auditors Group (SLACIAG). This process identified East Dunbartonshire Council as the body to undertake the independent review of the Council’s Internal Audit function’s level of compliance with the then Public Sector Internal Audit Standards (PSIAS). This output of this review was presented to the Audit and Scrutiny Committee in March 2023. It concluded that the internal audit service demonstrates full compliance with PSIAS and identified many areas of strong practice including sound governance, robust self-assessment, good engagement and clear reporting lines and clear evidence of supervision and audit follow up. Further annual self-assessments are undertaken and reported to Argyll & Bute Council Audit and Scrutiny Committee each September which provides further assurance of Internal Audit’s compliance with the new GIAS. Overall internal audit opinion 19. As the Internal Auditor of Argyll & Bute IJB, we are required to provide the Committee with assurance on the system of internal control. In giving our opinion, it should be noted that assurance can never be absolute. The most that the internal audit service can provide is reasonable assurance that there are no major weaknesses in the whole system of internal control. 20. In assessing the level of assurance to be given, we have based our opinion primarily on the three planned and two additional internal audit reviews undertaken and not the wider financial management and governance arrangements in place during the year. We considered: • the reviews undertaken as part of the 2025/26 internal audit plan • the two additional reviews undertaken at the request of senior management • the internal audit coverage achieved to date • any scope limitations imposed by management • matters arising from previous reviews and the extent of follow-up action taken including in year audits
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 4 • expectations of senior management, the Audit & Risk Committee and other stakeholders • the extent to which internal controls address the client’s risk management /control framework. 21. Internal audit activity is planned to enable an independent annual opinion to be given by the CIA on the adequacy and effectiveness of internal controls within the IJB, including the systems that achieve the corporate objectives of the IJB and those that manage the material risks faced by the IJB. It should be noted, however, that the presence of an effective internal audit function contributes toward, but is not a substitute for, effective control and it is primarily the responsibility of line management to establish internal controls so that the IJB's activities are conducted in an efficient manner, to ensure that management policies and directives are adhered to and that assets and records are safeguarded. 22. We are able to provide a reasonable level of assurance on the adequacy of internal controls risk management and governance arrangements within the IJB arising only from the results of internal audit reviews we have completed during the period in accordance with the programme of Internal Audit work approved by the Committee and additional reviews requested by senior management. In this context, it is important to note that: • it is management’s responsibility to maintain internal control and good governance arrangements on an ongoing basis • the Internal Audit function forms part of the overall internal control and governance structure of the organisation • while we have planned our work so that we have a reasonable expectation of detecting significant control and governance weakness, internal audit procedures alone do not prevent the possibility of poor judgement in decision making, human error, control processes being deliberately circumvented by employees and others, management overriding controls and the occurrence of unforeseeable circumstances • a sound system of corporate governance and internal control provides reasonable but not absolute assurance that the IJB will not be hindered in achieving its objectives or in the orderly and legitimate conduct of its business by circumstances which may reasonably be foreseen. However, a system of corporate governance and internal control cannot provide protection with certainty against any organisation failing to meet its objectives or all material errors, losses, fraud or breaches of laws or regulations • it is the responsibility of Internal Audit to assess the adequacy of the internal control and governance processes as far as it is reasonably possible by reviewing arrangements put in place by management and to perform testing to confirm whether those controls were operating for the period under review • reasonable expectations of Senior Management, the Committee and other stakeholders have been taken into account in terms of our duty to report all matters which come to our attention for the period under review • it is the responsibility of each of the parent bodies Internal Audit Service to assess, identify and report findings as they arise to the relevant officers and committees. 23. During work undertaken in 2025/26 we received appropriate responses to the recommendations made in our reports and, if actioned, should provide management with
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 5 additional comfort that the system of control operates as intended. This opinion is based on our limited coverage and information available to us at the time of preparing this report and should be considered alongside any other information that may be available to the IJB. 24. Summaries of the issues arising in relation to each system or activity covered by the internal audit work in 2025/26 have been reported to management and the Committee throughout the year. We do not, therefore, propose to repeat the matters in this report. There have been no significant issues which have come to our attention that have not been reported to management. 25. Audit reports will include an action plan with a management response establishing the agreed action, timescale and responsible officer. Internal Audit record these in a database and, on a quarterly basis, follow them up to ensure they are being progressed. This progress is reported to the Committee including reasons for any delays implementing agreed actions. 26. Follow up internal audit work has been and will continue to be undertaken to establish if the more significant recommendations made in those reports have been implemented as agreed. Management have continued to make good progress in implementing agreed actions from internal audit reports. Appendix 3 provides a summary of agreed audit actions and their implementation progress to date. 27. Internal Audit operated without any restriction and had unfettered access to all staff and documents both electronic and paper to allow full and effective assessment of the work during 2025-26. We are therefore pleased to note and in accordance with the GIAS, that there are no matters which require to be drawn to the Audit and Scrutiny Committee’s attention or wider senior management contained within this report regarding the independence of the Internal Audit service during 2025- 26, either in terms of restriction, attempts to restrict or inhibit in any way our independence. National Reports and Associated Points of Interest 28. The Accounts Commission issued a report in February 2026 relating to financial bulletin for 2024/25 on IJBs in Scotland. This report highlighted a number of key messages which provides an independent situational position and ‘spotlight’ of IJBs and which, in our opinion, remain currently topical, relevant and applicable and which included: • Despite a real-terms increase in funding, Scotland’s Integration Joint Boards (IJBs) are in a critical financial position. With increasing cost pressures and the total level of reserves now lower than the budget gap forecast, IJBs need to take decisive action and make difficult decisions about services. Despite a real-terms increase in funding between 2023/24 and 2024/25 of 2.3 per cent, the financial position of IJBs has become increasingly concerning. Financial pressures and demands on services continue to grow, outstripping increased funding and savings made, raising concerns around IJBs’ financial sustainability. IJBs must make difficult decisions about how services are delivered, determine the appropriate level of services, and decide where to redesign, reduce or discontinue services. They must be transparent with service users and the public about the potential impact of these changes on service performance and outcomes. • Total reserve levels continue to fall across IJBs. Almost half of IJBs no longer hold any contingency reserves. The total level of reserves held by IJBs is now lower than the budget gap forecast for the year ahead.
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 6 • The majority of IJBs reported operational overspends in-year, continuing the trend from previous years. While unplanned use of reserves decreased in 2024/25, as expected given the significant reduction in reserve levels in recent years, this was offset by a large increase in additional contributions from partners. The partners, NHS boards and councils, also face significant financial challenges and will find it increasingly difficult to allocate further funding to IJBs during the year. • The funding gap in 2025/26 remains significant at £449 million, a slight decrease from £457 million in 2024/25. IJBs must work closely with partners to ensure budgets and savings plans are realistic and to identify solutions that will ensure services remain financially sustainable over the medium to long term. • Although the majority of planned savings were achieved in 2024/25, it is unclear what proportion of these savings are recurring. There continues to be a lack of transparency and detail in public reporting on savings performance. The bulletin made a number of recommendations in which it stated that “Over the next year, IJBs and their partner council and NHS boards need to work more collaboratively to: • set realistic budgets before the start of the financial year that minimise the need for additional in-year contributions. • consult and communicate with service users, carers and the wider public on plans for changes to services and ensure appropriate impact assessments are undertaken. • set out in strategic plans how services will be made financially sustainable and how future demand can be managed through investment in prevention in the medium and long term, including consideration, for example, what services are delivered, how and to whom those services are delivered, and charges for services. • Over the next year, IJBs should: improve the clarity and comprehensiveness of their public reporting on savings performance, including comparisons to targets agreed during budget-setting, and whether savings made were recurring or non-recurring. A full copy of the report and findings can be found using the following link: Integration Joint Boards: Financial bulletin 2024/25 Financial bulletin 2024/25 29. The Auditor General in the report ‘NHS Scotland 2025’ published in December 2025 which covers the financial and operational performance of Scotland’s NHS and again, in our opinion, remain currently topical, relevant and applicable and we believe that this is noted in the following key messages: • Every day the NHS provides vital services to thousands of people across Scotland. Health spending in 2024/25 totalled £20.6 billion, equivalent to 37.5 per cent of the overall Scottish budget. Even with increased funding, the NHS in Scotland is not in a financially sustainable position. NHS boards did achieve unprecedented levels of savings. But boards are still struggling to break even, with seven territorial boards requiring Scottish Government loans. Health spending is projected to continue to grow over the medium term but this will put pressure on other vital public services. The delivery of efficiencies and reform within the health and care system will play an important role in both the NHS’s and Scotland’s overall medium-term financial sustainability. • In 2024/25, the NHS in Scotland employed over 160,000 whole-time equivalent staff and performed 1.3 million hospital procedures. But, despite more money (+£3 billion since 2019) and more staff (+20,000 since 2019), NHS Scotland’s performance has not
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 7 improved in line with commitments made by the Scottish Government. There is demand pressure across the system. Activity in secondary care has increased in the last year but it remains below pre-pandemic levels. Waiting lists and waiting times are starting to fall but it remains to be seen if this progress can be sustained. Improvements in productivity and reform of the health and care system are essential if health outcomes are to get better, health inequalities are to be reduced and service delivery to improve. • The publication of the Operational Improvement Plan, Health and Social Care Service Renewal Framework and the Population Health Framework are welcome steps forward in setting out the key principles for delivering reform. But some of the ambitions within these documents are long-standing and have yet to be delivered, for example, shifting the balance of care to the community. This persistent implementation gap, between policy ambitions and delivery on the ground needs to be addressed. Scottish Government and health and care leaders need to take the opportunity to drive forward the necessary change in direction for health and social care this time round. And with it, the long-term health of Scotland’s citizens. A full copy of the report and findings can be found using the following link: NHS in Scotland 2025: Finance and performance Areas of Concern, Observation and Risk to the HSCP 30. At the time of producing this report the anticipated financial outturn for 2025/26 is a small underspend in the region of £2.9M or 0.7% of annual spend. This situation improved towards the end of the year as actions taken by the HSCP to reduce spend started to have an impact and some additional NHS funding allocations were confirmed. Given that in previous years the need to use reserves has occurred, the improved position is welcome as it provides some degree of additional financial resilience going forward. General reserves do however remain below the target set by the IJB of 2% of annual spend. While the short term position has improved, the longer term outlook remains a significant risk. 31. In terms of ongoing financial risk and viability, the IJB has advised us that it was able to set a balanced budget for 2026/27, however, this relies upon the delivery of £8M in savings and use of £5M of reserves. There is an anticipated funding gap in the region of £3.2M for social care services and £8m for NHS Services. In addition, the gap is expected to widen in subsequent financial years and current projections suggest £22M for 2028/29 and £35M for 2029/30. Demand for services, in part due to demographic change and inflation are expected to exceed funding increases. 32. In addition, we are aware of the proposed changes to the Service level Agreement (SLA) with NHS Greater Glasgow and Clyde, this would represent a potential additional risk of circa £16M which at the time of writing this report remains unresolved. In the event of such an increase to materialise, this would have a significant financial impact on the HSCP. It is important that this outstanding matter is resolved and where applicable determine any residual financial impact which will need to be outlined to the HSCP and also a financial plan to address any funding gap should additional monies or support not materialise centrally. 33. The ongoing use of reserves to meet financial pressures and deficits is well documented but leaves the HSCP with limited usable reserves. This creates significant concerns over the financial sustainability of the HSCP should it not deliver savings arising from any restructuring, service
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 8 redesign and service withdrawal to align funding and financial gaps. It is therefore imperative that a financial recovery plan and where linked to savings and service redesign must be kept on track, risk assessed and robustly monitored in order that any deviation is escalated and alternative savings are identified to meet financial targets. 34. The financial and service delivery challenges affecting the HSCP are complex, not least in part because of the vast geographical dispersion but also from the aging population which tend to have more diverse health and care needs. This is further augmented with a difficulty in recruiting staff needed to deliver such services which is resulting in unmet care need, and mitigating arrangements to deal with such staffing gaps can be both costly and inconsistent in terms of ongoing availability, for example the use of agency staff. It should be noted that other IJB’s with similar complexities are also trying to manage the same challenges. 35. It is important now for the HSCP to consider these challenges and determine a way forward which will undoubtedly require the need for sizable savings to be identified and delivery of services to be redesigned taking cognisance of associated risks. The implications of such levels of cuts may require services being withdrawn and/or down-scaled, services redesigned and alternative approaches having to be considered which may come with higher operational risk. We understand that appropriate impact assessments will need to be undertaken in the event of such changes and considered by the IJB Board. This challenge needs to be a key focus of senior management to ensure that such savings are delivered and managed appropriately to maintain financial sustainability and minimise the risk of financial support from both parent bodies, which are also trying to contain their own financial challenges. 36. Management capacity within the HSCP can be stretched and this may be in part due to the clear challenges between urgent operational matters and staffing gaps. Furthermore, this becomes more acute when there are senior staff vacancies and/or turnover of key staff. Notwithstanding, this can reduce the time resources available to deal with the planning and implementation of strategic change which is now required to meet the challenges placed before the HSCP. 37. There is concern regarding the challenges and risks associated with the backlog in capital works that are required to the estate portfolio within the remit of the HSCP. It has been identified that this could be in the region of £15m which may well be a conservative estimate. It is important that the risks associated with an aging estate and capital works required to maintain these are appropriately monitored and a plan to address these on a risk needs basis should be at the centre of any capital plan. 38. It should be noted that there is now a significant risk of financial implications for both parent bodies should these savings not be delivered or materialised in full from within the IJB which may result in the need for financial assistance. The extent of any assistance, should that be required, will also have pressures within each of the parent bodies as they try and balance their own financial challenges and pressures. Indeed, Audit Scotland in its Annual Audit report of NHS Highland has outlined significant concerns about financial sustainability. 39. Finally, we would like to highlight our appreciation to the HSCP Audit & Risk Committee for their strong support and the co-operation of Officers within the HSCP.
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Appendix 1 – Summary of Findings 2025/26 Internal Audit Plan Summary of 2025/26 Internal Audit Plan & Additional Audits No. of Recommendations made in 2025/26 Report Title Overall Opinion High Medium Low VFM Governance Arrangements High 0 0 2 0 Partnership Working High 0 0 3 0 Workforce Planning Reasonable 0 7 0 0 Payroll Procedures for HSCP Care at Home Reasonable 0 1 1 0 Care Assessment and Resources Allocation – Adult Care Limited 3 0 0 0
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 10 Appendix 2 – Planned v Actual Audit Days 2025/26 Audit Planned Days Actual Days Governance Arrangements 12 12.1 Partnership Governance 17 16.4 Workforce Planning 16 17.3 Management and Admin Time (plus Annual Report and Audit Opinion) 5 5 Total 50 50.8* *The HSCP is not charged for any time which exceeds the 50 days service level agreement. Audit Planned Days Actual Days Payroll Procedures for HSCP Care at Home 15 15 Care Assessment and Resources Allocation – Adult Care 15 15 *These additional reviews were charged in addition to the service level agreement.
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Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 11 Appendix 3 – Recommendations Actioned and Outstanding Report Name Date No. of recommendations No. implemented No. Outstanding Care Programme Approach 31 October 2021 4 4 0 Complaints Handling 30 April 2022 4 4 0 Performance Management 30 September 2022 1 1 0 Directions 30 November 2022 3 3 0 Commissioning 05 December 2022 0 0 0 Risk Management 31 July 2023 4 3 1 Financial Management 31 August 2023 1 1 0 Adult Support and Protection 2 April 2024 1 1 0 Joint Strategic Plan 30 June 2024 3 2 1 Information Governance 31 August 2024 3 3 0 Culture 31 October 2024 5 5 0 Governance Arrangements 30 September 2025 2 0 2 Partnership Arrangements 31 August 2025 3 0 3 Workforce Planning 28 November 2025 7 3 4 Payroll Procedures for HSCP Care at Home 30 June 2025 2 2 0 Care Assessment and Resources Allocation – Adult Care 30 April 2026 3 0 3