Internal Audit and Counter Fraud Summary of Activities
Argyll and Bute Council · 4 September 2025
Back to Audit and Scrutiny Committee — 4 September 2025 and its agenda
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ARGYLL AND BUTE COUNCIL AUDIT & SCRUTINY COMMITTEE FINANCIAL SERVICES 04 SEPTEMBER 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 one of 2025/26. 1.2 Core activities together with a progress update statement are shown below: • 2024/25 Audit Plan progress: The plan is complete and all items reported to the Committee. • 2025/26 Individual Audits undertaken: Two audits have been completed during the period, one has been assessed as providing high assurance and one substantial assurance. In addition, two pieces of audit verification work were undertaken relating to the SPT claim and Local Government Benchmarking Framework (LGBF). (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 later in the calendar year. • 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. The established CFT team member is on secondment to Housing for career and personal development for a two year period. The CFT have obtained a member of staff, again on secondment for the same time period who has recently completed the CIPFA Fraud Specialist Course. The team lead is currently progressing toward the completion of year 3 of a Master in Accountancy course. • Continuous Monitoring Programme Testing: A number of auditable units are subject to continuous testing. There have been two new issues which we have identified this quarter. • Performance indicators: Current status is green / on track.
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2. RECOMMENDATIONS 2.1 To review and endorse the Summary of Activities report. 3. DETAIL 3.1 Two audits have been completed since the previous Committee in June 2025. Audits Completed • Education Maintenance Allowance (EMA) • Music Services Verification Audit Work Completed • SPT Annual Claim – See section 3.6 for further details • Local Government Benchmarking Framework – See section 3.7 for further details Audits in Planning / in Progress reported to a future meeting of the Committee. • Self-Directed Support (Draft Report – awaiting management response) • Payroll – iTrent • ICT Disaster Recovery • School Residential Trips • Capital Programme – Management and Monitoring • Building Cleaning • Oban Airport • HSCP Audits 3.2 In addition to those already in progress, indicative audits planned for Q3 2025/26 are: • Street Lighting • Performance Management Arrangements and Reporting 2025/26 Audit Plan 3.3 Work is ongoing and is currently on track at this point in time. 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 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 towards the end of the calendar year.
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Counter Fraud 3.5 The CFT is progressing well with both team members fully CIPFA accredited fraud investigators. The current investigator has taken on a 2 year secondment to empty homes for further skills development and this is due to come to an end in September 2025 with discussions ongoing regarding transitional arrangements. The backfill of the investigator post was again on a secondment basis which is also coming to an end. The seconded member of staff has completed and passed the CIPFA Fraud Specialist course. Efforts are underway to maintain service delivery for the terminations of both secondments. 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. Visits continue to play a vital role in the CFTs proactive and reactive work. Recent visits have taken place in Islay, Dunoon, Tarbet and surrounding villages. Investigations and visits will take place in the outer islands toward the autumn. Both officers continue to be proactive and make visits when information is received via the online portal and other islands will soon be visited. 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. 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. The CFT now have an established referral system in place from council tax teams and have already liaised with this team going forward into 2025 for the review of the second and holiday home tax changes. The aim is to assist with the single person discount review within 2025. 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. The NFI exercise continues to be a routine work area for the CFT. The 2024/2025 exercise has extra data to be uploaded this September and work on this element will commence when this has been matched and 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 Since the inception of the CFT a total of £1,514,262 has been rebilled and £950,168 has been recovered. A recovery percentage of 62% has been achieved
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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 Two 3.6 The Strathclyde Concessionary Travel Scheme (SCTS) is founded on the provision of the Transport Act 1985, which allows authorities to make concessionary travel schemes in certain circumstances. The SCTS is administered by Strathclyde Partnership for Transport (SPT) on behalf of the SCTS Joint Committee consisting of 12 local authorities to issue travel cards which entitles the holder to discounted travel by reason of age or disability, and provide reimbursement of fare reductions on rail, subway and ferry services. Argyll and Bute Council operates two ferry routes that qualify for concessionary fares within the SCTS. Internal Audit are required to provide a certificate of accuracy on an annual basis to confirm that the details pertaining to the number of concessionary passengers carried and the equivalent standard fares are consistent with the quarterly claims for reimbursement of the difference between the concessionary fare charged and the standard fare. The data and supporting information for quarter 4 2024/25 claim was provided to Internal Audit for review and found to provide an accurate representation of the number of passengers and value of fares charged, and the reimbursement value was found to have been calculated in accordance with the SCTS requirements. The certificate of accuracy was therefore issued on 11 June 2025. 3.7 A sample of data in respect of the Statutory Performance Indicators (SPI’s) that are required to be returned by councils as part of the Local Government Benchmarking Framework (LGBF) must be reviewed by Internal Audit for submission to the Improvement Service by 31 August each year. Internal audit carry out this work in collaboration with colleagues in performance management. Internal Audit was provided with data from which to select indicators for review on 25 June and as large variances were reported in ‘Other Local Government Employees – Sickness Absence – including Covid, ‘Sport and Leisure Management’, and ‘Museum Services’ these indicators were selected for review. ‘Teachers – Sickness Absence – including Covid’ was also reviewed alongside Teachers data due to large numbers involved. ‘Council Tax Collection’ was selected as this has risen in both the past two years and ‘Council Tax Income’, as this has slightly dipped this year and both indicators use similar data sources. Some minor errors were identified in the Sport and Leisure Management, and Museum Services, these were immaterial and did not require to be amended prior to submission to the Improvement Service. The supporting data were found to contain a known issue and an incorrect calculation. The relevant officers are progressing with plans to ensure this is not repeated in future. Therefore, Internal Audit are offering a substantial level of assurance for all 6 of the indicators reviewed. 3.8 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 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
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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. 3.9 Our work as the contracted Internal Auditors for the HSCP has been progressing well and priority has been given in this area due to the availability of staff, work has completed for 2024/25 and commenced 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. 3.10 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 3.11 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 two new findings within the quarter that require to be reported. Table 2: Continuous Monitoring Findings Auditable Area Areas Tested Issues Identified Management comment / action Budgeting Engagement logs for cost centres Engagement records not maintained Staff will ensure that an appropriate record is maintained going forward. This is a minor issue but will be rectified. Payroll Overtime High levels of overtime Management have advised that an error had been made in the overtime payment and details have now been passed to Payroll who will make arrangements to recover the overpayment element in full. 3.12 A follow up process is in place whereby management are advised of continuous monitoring findings and, where appropriate, requested to take remedial action. There are currently no outstanding follow-up points arising from previous testing. Due to the volume of continuous monitoring tests carried out the decision was made to report by exception only. National Reports 3.13 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
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planned as a result of the report. Table 2 details the national reports issued during quarter four of 2024/25 due to be reported in quarter one of 2025/26. Table 3: National Reports National Report Issued To Detail Management response/ Action taken Sustainable Transport: Reducing car use Executive Director Kirsty Flanagan A lack of leadership has meant the Scottish Government has made minimal progress towards its challenging climate change goal of reducing car use. All councils in Scotland have seen an increase in car kilometres driven. The Council works closely with Hi Trans and a new Regional Transport Strategy has been approved that promotes the use of public transport and active travel. The council is about to consult on a new active travel strategy to inform how new active travel routes will be delivered in future years. At the moment the majority of funding to deliver active travel improvements comes through competitive bids and we have been successful in relation to projects in Kintyre, Roseneath and Islay. Further bids have been made. The council has also approved a further consultation on transport issues that will inform a new local transport strategy. The issue of reducing car usage will be examined through this however given we are a predominately rural authority with limited public transport options reducing car usage will be a challenging task going forward. National Fraud Initiative (NFI) 3.14 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. 3.15 The previous NFI exercise has been completed and results are being compiled by Audit Scotland. Any follow up matches will be addressed if necessary. This exercise was conducted throughout the year by officers and matches checked and closed accordingly. NFI provided additional data releases over the course of the exercise and matches are addressed when these become available.
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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 and progress will be monitored monthly by the Counter Fraud team and reported quarterly to the Audit and Scrutiny Committee. New HMRC data has been uploaded and released back to us, and teams have been contacted to start matching this data. 3.16 The new 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. Table 4: National Fraud Initiative Progress at 03/08/2025 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 3 0 CT to HMRC Household Composition 1106 0 0 0 Housing Benefits 13 9 9 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 51 0 Payroll records to other datasets including other payrolls and pensions to ensure employee is not receiving additional income. Blue Badges 200 200 183 0 Blue badge records to DWP data to identify deceased claimant with valid badge. Housing Waiting list 262 259 199 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 87 2 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
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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 * Work in Progress Overall Summary of Matches Matches Complete Work In Progress Cleared Frauds Errors Total Value £ Recovering Recovering Value £ 4248 2 4173 0 75 58,756 0 0 Internal Audit Development 3.17 The table below details progress against the action points in our Internal Audit development plan. Table 5: Internal Audit Development Key Actions: updated 31/3/25. 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 December 2025 3.18 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.
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Table 6: Internal Audit Team Scorecard Internal Audit Team Scorecard 2025– 26 – FQ1 25/26 (as at June 2025) BO115 We Are Efficient and Cost Effective Internal Audit Level of Satisfaction Actual 100% G Target 80% Review of Strategic Risk register Status Complete G Target Complete Percentage of audit plan completed Status 100% G Target 80% Percentage of audit recommendations accepted by management Actual 100% G Target 100% 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 4 September 2025