Internal Audit and Counter Fraud Summary of Activities
Argyll and Bute Council · 16 December 2025
Back to Audit and Scrutiny Committee — 16 December 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
ARGYLL AND BUTE COUNCIL AUDIT & SCRUTINY COMMITTEE FINANCIAL SERVICES 16 DECEMBER 2025 INTERNAL AUDIT AND COUNTER FRAUD SUMMARY OF ACTIVITIES 1. SUMMARY 1.1 The objective of the report is to provide the Audit and Scrutiny Committee (the Committee) with a summary of Internal Audit activity and progress during quarter 3 of 2025/26. 1.2 Core activities together with a progress update statement are shown below: • 2025/26 Individual Audits undertaken: Eight audits have been completed during the period, 4 have been assessed as providing high assurance, one substantial assurance, 2 reasonable assurance and one limited assurance. (Where HSCP and LiveArgyll Audits are included, these are provided for information only). • 2025/26 Audit Plan progress: The plan is currently on track. In the event that this position was to change, we will flag it to the Committee as part of the quarterly updates. • Scrutiny: Planned work for 2025/26 has been agreed by the Committee along with those who will serve on the Panel, and work on this will commence in January 2026. • Counter Fraud: The Counter Fraud Team (CFT) is continuing to rebill council tax accounts and recovery of funds is underway. All other aspects and referrals are being considered, investigated and evaluated and the Counter Fraud Team remain vigilant to protect our public purse. All CFT team members have completed the accredited CIPFA Fraud Specialist Course. The team lead is currently progressing toward the completion of year 4 of a Master in Accountancy course. • Continuous Monitoring Programme Testing: A number of auditable units are subject to continuous testing. There has been one new issue identified this quarter. • Performance indicators: Current status is green / on track. 2. RECOMMENDATIONS 2.1 To review and endorse the Summary of Activities report.
Page 2
3. DETAIL 3.1 Eight audits have been completed since the previous Committee in September 2025. Audits Completed • Oban Airport • ICT Disaster Recovery • School Residential Trips • Self-Directed Support • Building Cleaning • HSCP Governance Arrangements -for information only • HSCP Partnership Working – for information only • HSCP Workforce Planning – for information only Verification Audit Work Completed • N/A Audits in Planning / in Progress reported to a future meeting of the Committee. • Capital Programme – Management and Monitoring (awaiting management response to draft report) • Payroll – iTrent • Performance Management Arrangements and Reporting • Project Management • Street Lighting 3.2 In addition to those already in progress, indicative audits planned for 2025/26 are: • Eclipse • Rural Growth Deal • Whistleblowing • LiveArgyll Building/Property Maintenance 2025/26 Audit Plan 3.3 Work is ongoing and is currently on track at this point in time. Only one amendment to the plan should be noted and that relates to the strategic Procurement review which has been postponed to another audit plan when the work will be more appropriate to be undertaken. Scrutiny 3.4 It was agreed by the Committee that the chosen subject area for the 2025/26 scrutiny review would be on the Council’s preparedness for the Bio-Municipal
Page 3
Waste (BMW) Landfill Ban. A background and scoping document will be prepared and issued to the Panel members for agreement in due course. We anticipate that this will commence early in January 2026. Counter Fraud 3.5 The CFT is progressing well with both team members fully CIPFA accredited fraud investigators. The team now consists of 2 full time staff after completing secondments. Both team members are fully trained under the accredited CIPFA fraud course. 3.6 Routine work continues and is progressing to track the full income due and to be recovered as part of this ongoing work. Based on the amount of additional billing, even accounting for a degree of non-recovery, the indications are that the team are anticipating exceeding their annual target. In addition, the team are raising awareness of the Council’s zero tolerance to fraud and this will help act as a deterrent to fraud being perpetrated in the first place. 3.7 Visits continue to play a vital role in the CFTs proactive and reactive work. Recent visits have taken place in Mull, Campbeltown and Tarbert. Work is still underway for Helensburgh. Further efforts toward Coll had to be delayed due to Storm Amy. Travel to the outer islands will commence spring 2026. Both officers continue to be proactive and make visits when information is received via the online portal and other islands will soon be visited. 3.8 The CFT continue to link in with Internal Audit and Debt Recovery, and where necessary to assist, trace persons and open communication to long term debts for recovery. Several cases have resulted in large scale rebilling. 3.9 Second homes and Non-Domestic Rates are playing larger roles in the CFT’s investigations with several claims already adjusted. These will remain proactive areas. 3.10 The CFT continue to work closely with the empty homes team to support each other in our remits. Work and communication between each department is key in identifying and finding appropriate solutions to enable empty homes to return to residency or open market. 3.11 The NFI exercise continues to be a routine work area for the CFT. The 2024/2025 exercise had extra data uploaded this September and work on this element will commence when this has been matched and results released. The initial part of the matching exercise is coming to a close. Any remedial or conclusive work will be completed when and where appropriate. The system is reviewed periodically for any updates. 3.12 Since the inception of the CFT a total of £1,553,043,262 has been rebilled and £1,048,213 has been recovered. A recovery percentage of 68% has been achieved at the last review of the figures. Recent large rebilling has been passed to other agencies, and this takes time to process and progress payment plans. Additional Updates from Quarter Three 3.13 The Council has entered a ten-year programme to deliver the Rural Growth Deal (RGD) for Argyll and Bute. The Council, as the accountable body for this
Page 4
programme is required to allocate and account for distribution of the funding to partners, third parties and other bodies in accordance with the approved governance arrangements. The Council’s Chief Internal Auditor has been appointed to coordinate audit activity throughout the programme, this will include liaison with partner auditors to obtain annual confirmation of regular and planned reviews of grant funded activities and a specific review of RGD within the Council’s Annual Audit Plan at least every two years. Discussions regarding the audit input required have taken place and the first review will be included within the 2025/26 Internal Audit Plan. We will closely monitor the additional work associated with this appointment going forward and determine whether additional resources may be required. 3.14 Our work as the contracted Internal Auditors for the HSCP has been progressing well and priority has been given in this area due to staff availability, therefore, we have been able to complete our work for 2025/26. We will continue to monitor and report progress to the HSCP’s Audit and Risk Committee in relation to the implementation of recommendations made in previous reports. 3.15 Internal Audit staff continue to increase their skills and ultimately aim to complete appropriate professional qualifications at the end of their training programmes. Internal Audit have two staff members who are undertaking formal professional training; training is at differing stages but is progressing as expected at this time. The aim is to develop and retain professional staff on the completion of the qualifications and increase resilience within the service. Continuous Monitoring 3.16 Our continuous monitoring programme is generally focused on transactional type activity. Standard audit tests are applied which are relevant to each auditable unit. Control design tests look at whether the controls in place adequately address the potential risk event. There has been one new finding within the quarter that requires to be reported. Table 1: Continuous Monitoring Findings Auditable Area Areas Tested Issues Identified Management comment / action Payroll Expenses Five out of 37 expense claims tested were found to have been authorised by managers/appropriate persons but receipts were either missing or did not align with the claim period, additionally, there was no evidence of Executive Director approval for claims over 6 months old. The respective Managers/authorisers were notified of the findings via email and advised that the guidance on the HUB must be adhered to and the importance of this. Four responses were received assuring that the guidance would be followed in future and despite sending 3 emails, no response was received for the 5th claim tested. 3.17 A process is in place whereby management are advised of continuous monitoring findings and, where appropriate, requested to take remedial action. Due to the
Page 5
volume of continuous monitoring tests carried out the decision was made to report by exception only. National Reports 3.18 A follow up process for national reports is in place whereby management are advised of national reports published and asked to confirm what, if any, action is planned as a result of the report. Table 2 details the national reports issued during quarter two of 2025/26 due to be reported in quarter three. Table 2: National Reports National Report Issued To Detail Management response/ Action taken Delivering for the future: Responding to the workforce challenge Executive Director Kirsty Flanagan Scotland’s councils urgently need to make progress with workforce plans if they are to protect services and financial sustainability. ‘Following publication of the Workforce Challenges report in August 2025, the Council has been assessing our current People Strategy and Strategic Workforce Plan against the Commission’s recommendations. This self- assessment will be reported in the first instance to the Executive Leadership Team in Spring 2026 and any improvements identified for inclusion in future iterations of the Strategic workforce documents.’ Flooding in Communities: Moving towards flood resilience Executive Director Kirsty Flanagan Flooding is getting worse because of changes to our climate. It’s likely flooding will happen more often. A request has been made to schedule this report for discussion at the next Scottish Collaboration of Transportation Specialists (SCOTS) meeting on 12 December, thereafter, a report will be prepared for the Council’s Environment, Development and Infrastructure (EDI) Committee. The 2023/24 audit of Glasgow City Council Chief Executive The processes, decisions and actions that enabled five senior Glasgow city Council officers to take significant early retirement and redundancy payouts fell short of the behaviour and standards expected of public servants. A stand-alone report to be submitted to a future meeting of the Audit and Scrutiny Committee.
Page 6
Cyber-attack affecting operations and services: The 2023/24 audit of Comhairle nan Eilan Siar Executive Director Kirsty Flanagan All Scottish councils must learn from the immediate and ongoing impacts of a significant cyber- attack on Comhairle nan Eilean Siar. Argyll and Bute Council actively manages cyber security risk through its Strategic Risk Register, regular reviews, and robust IT protocols using specialized software, while acknowledging that absolute prevention cannot be guaranteed. The Council collaborates with other authorities, including Comhairle nan Eilean Siar, for mutual learning and recovery support, and participates in the Scottish Local Authority Information Security Group (SLAISG) for information sharing and best practices. Cyber risk remains a key focus, with efforts centred on minimizing threats and ensuring readiness and preparation for potential attacks. National Fraud Initiative (NFI) 3.19 NFI data matching involves comparing computer records held by one body against other computer records held by the same or another body to identify potentially fraudulent claims and payments to be identified. Note though that the inclusion of personal data within a data matching exercise does not mean that any specific individual is under suspicion. Where a match is found it indicates that there may be an inconsistency which requires further investigation. No assumption can be made as to whether there is fraud, error or other explanation until an investigation is carried out. A reminder process is in place to ensure that matches are reviewed on a timely basis. 3.20 The previous NFI exercise has been completed and results published by Audit Scotland. This exercise was conducted by officers and matches checked and closed accordingly. NFI provided additional data releases over the course of the exercise and matches were addressed when these became available. 3.21 Existing users have been reviewed and new users added where requested, all users have been and will continue to be informed that matches are available for review. Progress in investigating matches will be monitored monthly by the Counter Fraud team and reported quarterly to the Audit and Scrutiny Committee. 3.22 New HMRC data has been uploaded and released back to us, the respective teams have been contacted to start matching this data. 3.23 The NFI exercise for 2024/25 has commenced with the data uploads so far submitted to the Cabinet office for review and therefore data matching when released. The new NFI matches will appear in the table below as and when they have been released and checked. More uploads have been given to Cabinet office during November 2025 and will be matched once released.
Page 7
Table 4: National Fraud Initiative Progress at 16/11/2025 Operational Area Total Matches Recommended/Very High / High/ Medium Risk Matches Matches Complete * WIP Match Description CT to Elect Register 2422 0 2422 0 CT records to Electoral Register/ other data sets to ensure discount awarded to only those living alone aged over 18, taking into account disregarded occupants. (CT to other Datasets will not be progressed further due to poor quality data) CT rising 18s 85 0 85 0 CT to HMRC Household Composition 1106 0 1106 0 Housing Benefits 13 9 11 0 HB records to records in other authorities / other datasets including student loans, payroll and pensions to identify undeclared income and capital. Payroll 300 107 61 0 Payroll records to other datasets including other payrolls and pensions to ensure employee is not receiving additional income. Blue Badges 200 200 200 0 Blue badge records to DWP data to identify deceased claimant with valid badge. Housing Waiting list 262 258 227 0 Housing waiting list records to other organisations HBCTR and tenant data to identify undisclosed changes in circs or false info. Council Tax Reduction 638 174 206 3 CTR records with records in other authorities / other datasets including; student loans, payroll and pensions to identify undeclared income and capital Creditors 2340 0 1126 0 Analyses Creditors data to identify possible duplicate vendors and payments, VAT errors or fraud and multiple vendors sharing a bank account. Procurement 67 0 14 0 Payroll records to Companies House and creditors’ data to identify employees who appear to have a personal interest in a company that the authority has traded with. Business Rates 154 0 154 0 Business rates records within and between authorities to identify those fraudulently claiming small business bonus scheme and grants
Page 8
* Work in Progress Overall Summary of Matches Matches Complete Work In Progress Cleared Frauds Errors Total Value £ Recovering Recovering Value £ 5612 3 5532 0 80 62,726 0 0 Internal Audit Development 3.24 The table below details progress against the action points in our Internal Audit development plan. Table 5: Internal Audit Development Key Actions: updated 18/11/25. Area For Improvement Agreed Action Progress Update Timescale Review Continuous Monitoring Programme The Continuous Monitoring Programme will be reviewed to assess value of existing tests carried out and establish where these can be enhanced with greater use of data analytics. In progress March2026 Follow-up Performance Reporting Develop performance reporting dashboard on Power BI In progress March 2026 3.25 Internal Audit scorecard data provided below are aligned to those for internal audit in the Financial Services service plan. All indicators are shown as currently being on track. Table 6: Internal Audit Team Scorecard Internal Audit Team Scorecard 2025– 26 – FQ2 25/26 (as at September 2025) BO115 We Are Efficient and Cost Effective Internal Audit Level of Satisfaction Actual 100% G Target 80% Review of Strategic Risk register Status On Track G Target On Track Percentage of audit plan completed Status 100% G Target 80% Percentage of audit recommendations accepted by management Actual 100% G Target 100%
Page 9
4 CONCLUSION 4.1 The 2025/26 audit plan is progressing as anticipated at this stage in the year, together with the Counter Fraud Team continuing with visits and pro-active work throughout Argyll and Bute. 5 IMPLICATIONS 5.1 Policy – Internal Audit continues to adopt a risk-based approach to activity 5.2 Financial – None 5.3 Legal – None 5.4 HR – None 5.5 Customer Service – None 5.6 Risk – None 5.7 Climate Change – None 5.8 Fairer Scotland Duty – None 5.9 Equalities – protected characteristics – None 5.10 Consumer Duty – None 5.11 Island Communities – None 5.12 Children’s Rights and Wellbeing – None For further information please contact Internal Audit (01546 604108) Paul Macaskill Chief Internal Auditor 16 December 2025