Internal Audit and Counter Fraud Summary of Activities
Argyll and Bute Council · 12 June 2025
Back to Audit and Scrutiny Committee — 12 June 2025 and its agenda
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ARGYLL AND BUTE COUNCIL AUDIT & SCRUTINY COMMITTEE FINANCIAL SERVICES 12 JUNE 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. • 2024/25 Individual Audits undertaken: Seven audits have been completed during the period, one has been assessed as providing high assurance, three substantial assurance and three reasonable assurance. There is one report concerning LiveArgyll issued since the last Committee. (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 through 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 no 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 Seven audits have been completed since the previous Committee in March 2025. In addition, visits were undertaken to Coulcil depots in Lochgilphead, Helensburgh, Dunoon and Rothesay which are detailed in section 5 of the report, together with our work undertaken for the HSCP. Audits Completed • Short Term Lets • Bridges Asset Management Plan • Asbestos Management • External Placements • Trading Standards • Leasing - IFRS16 • Disclosure Checks - Protecting Vulnerable Groups (PVG) Audits in Planning / in Progress reported to a future meeting of the Committee. • LGBF • SPT Annual Claim • Education Maintenance Allowance • Payroll – iTrent 3.2 In addition to those already in progress, indicative audits planned for Q2 2025/26 are: • School Residential Trips • Music Service • Reporting Concerns at Work – Whistleblowing Policy • HSCP - Audits 2025/26 Audit Plan 3.3 Work is ongoing and is currently on track at this point in time.
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Scrutiny 3.4 It was agreed by the Committee that the chosen subject area for the 2024/25 scrutiny review would be on the Council’s complaints process. This review has now concluded and is reported as a separate agenda item at this committee. 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 report is submitted to this Committee outlining the suggested approach and appointment of the Panel to undertake this work. A background and scoping document will be prepared and issued to the Panel members for agreement in due course. 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. The investigator post was filled again on a secondment basis. The new member of staff has completed and passed the CIPFA Fraud Specialist course. Both team members will revert to substantive post circa September 2025. Continued routine work is still progressing to track the full income recovered from the team’s work, however, based on the amount of additional billing, even accounting for a degree of non-recovery, the indications are that the team are still exceeding their 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, Rothesay, Helensburgh, and Luss, the review for Oban has been completed with both non-domestic rates and Council tax being reviewed and rebilled. Both officers continue to be proactive and make visits when information is recieved via the online portal and outher 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
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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 commenced with matches already being progressed, with additional matches having recently been released. Review and matches are completed periodically. Since the inception of the CFT a total of £1,411,068 has been rebilled and £924,810 has been recovered. A recovery percentage of 65% has been achieved at the last review of the figures. Due to other commitments the rebilling has yet to be checked and updated. Additional Updates from Quarter Four 3.6 A series of visits to Council depots and HSCP Integrated Equipment Stores was undertaken to verify quantities and values of stock items submitted for year-end accounting purposes. Stock items were found to be stored safely and securely with robust systems an processes in place to provide accurate counts and reasonable measurements, and whilst small differences were identified, the overall value was found to be immaterial. 3.7 We have been working closely with the Council’s HR and Payroll Teams to obtain a suite of reports from the new system to inform our Continuous Monitoring Programme. These reports had not been provided since this system was implemented in August 2024 due to development issues, however, a significant amount of work has taken place by the development team and reports have now been delivered. Work has commenced to progress testing with the information provided for the period August 2024 – March 2025, thereafter regular monthly and quarterly reporting in addition to self-service functionality has been arranged for future testing requirements. 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 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.
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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 have been no new findings within the quarter that require to be reported. Table 2: Continuous Monitoring Findings Auditable Area Areas Tested Issues Identified Management comment / action No issues identified. 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 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 Local government in Scotland: Financial Bulletin 2023/24 Executive Director Kirsty Flanagan Scotland’s councils continue to face severe financial pressures. The need to consult with communities, clearly communicate the impact on local services, whilst working together to shape and deliver The Interim Head of Financial Services presented a report to the Executive Leadership Team on 11 March and is included as a separate agenda item at this committee.
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urgently needed transformation , is more important than ever. A review of Housing Benefit overpayments 2018/19 to 2021/22 Executive Director Kirsty Flanagan Audit Scotland’s Housing Benefit overpayment study. The Council’s performance in Housing Benefit overpayment recovery is very strong, consistently exceeding the national average. The only action required is to review and update the existing management checking protocol. This will ensure it remains fit for purpose, aligns with the responsibilities of the newly formed Revenues and Benefits Business Support Team, and that all management checks are up-to-date, targeted, and proportionate to the current caseload and operational challenges. Additional Support for Learning Executive Director Douglas Hendry The Scottish Government and Councils must fundamentally rethink how they plan, fund and staff additional support for learning as part of core school education in Scotland. Following consideration of the report and in terms of the recommendations, if the Scottish Government determines these are being taken forward, they will take the lead on these matters at a national level and we will engage with them as appropriate. Integration Joint Boards Finance bulletin 2023/24 Chief Officer HSCP Community health and social care finances are increasingly precarious. Integration Joint Boards must urgently work with their partners in the NHS and Councils to reform how they deliver services to achieve financial sustainability. A summary of this report was included in the HSCP Finance & Policy Committee agenda on 19 May and will be considered at the Audit and Risk Committee on June 20. The HSCP is in the process of seeking approval for its financial recovery plan and is developing savings proposals to address the issues raised by Audit Scotland in respect of financial sustainability in the Health and Social Care Sector.
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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. 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 18/05/2025 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 0 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 10 3 Payroll records to other datasets including other payrolls and pensions to ensure employee is not receiving additional income.
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Blue Badges 200 200 149 0 Blue badge records to DWP data to identify deceased claimant with valid badge. Housing Waiting list 262 262 159 2 Housing waiting list records to other organisations HBCTR and tenant data to identify undisclosed changes in circs or false info. Council Tax Reduction 245 174 46 1 CTR records with records in other authorities / other datasets including; student loans, payroll and pensions to identify undeclared income and capital Creditors 2340 0 573 1 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 0 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 £ 3382 7 3312 0 70 54,786 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 September 2025
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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. Table 6: Internal Audit Team Scorecard Internal Audit Team Scorecard 2024– 25 – FQ4 24/25 (as at March 2025) BO115 We Are Efficient and Cost Effective Internal Audit Level of Satisfaction Actual 97% 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% 4 CONCLUSION 4.1 The 2024/25 plan is complete and 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: 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 12 June 2025