Internal Audit and Counter Fraud Summary of Activities
Argyll and Bute Council · 17 December 2024
Back to Audit and Scrutiny Committee — 17 December 2024 and its agenda
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ARGYLL AND BUTE COUNCIL AUDIT & SCRUTINY COMMITTEE FINANCIAL SERVICES 17 DECEMBER 2024 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 three of 2024/25. 1.2 Core activities together with a progress update statement are shown below: • 2024/25 Audit Plan progress: One member of the team had been on sick leave for eight weeks and this has had an impact but we are currently working to try and mitigate this as much as possible in order that the plan is delivered. At this stage of the year we anticipate that the plan can be completed subject to no further unplanned absences or changes to resources. 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. • 2024/25 Individual Audits undertaken: Four audits have been completed during the period, two have been assessed as providing high assurance, one substantial assurance and one reasonable assurance. In addition, three reports concerning the HSCP have been issued and considered by the Audit and Risk Committee. (Where HSCP and LiveArgyll Audits are included, these are provided for information only). • Scrutiny: Planned work for 2024/25 has commenced in relation to the Council’s Complaints processes. The first meeting of the Panel took place on 29th November 2024. • 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. 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 Four audits have been completed since the previous Committee in September 2024. In addition, visits were undertaken to Islay and Mull which are detailed in section 5 of the report, together with our work undertaken for the HSCP. Audits Completed • Non Domestic Rates (NDR) • IR35 Off-Payroll Working and Compliance • IT Risk Register and Mitigation Processes • Community Education • Culture (HSCP) • Joint Strategic Planning (HSCP) • Information Governance (HSCP) Audits in Planning / in Progress reported to a future meeting of the Committee. • Asbestos Management • Bridges Asset Management Plan and Inspection Regime • Oban Airport • Trading Standards • Disclosure Checks - protecting vulnerable groups • Roads and Flood Prevention • Data Security & Information Security 3.2 In addition to those already in progress, indicative audits planned for Q4 2024/25 are: • Short-Term Lets • External Placements • Leasing – Estates • Stores 2024/25 Audit Plan 3.3 • Work is ongoing and is currently on track at this point in time. • A request has been made by senior management to cancel the planned review of ‘New Roads and Street Works Coordination’ as a recent exercise, as we understand, has been undertaken in this area. This will be noted as an amendment to the approved plan for 2024/25. • A request has been received from senior management to postpone the review of Eclipse post implementation review to the 2025-26 audit year and we have
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scheduled this into the draft 2025/26 audit plan. This will be noted as an amendment to the approved plan for 2024/25. 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. A report was submitted to the September 2024 Committee outlining the suggested approach and appointment of the Panel to undertake this work. The former Chairperson, Martin Caldwell has delivered a brief training session which was particularly useful for those new to the Committee but also increasing the resilience of the Committee to have suitably experienced Panel members. A Background and scoping document has been prepared and issued to the Panel members and a meeting arranged for 29 November to progress the review. Officer input will be provided as required and consistent with previous scrutiny reviews undertaken. 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 will undertake the above CIPFA accreditation and has commenced this course at the beginning of October 2024 Both team members will revert to substantive post circa sept 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 were made to local areas including Helensburgh, Rhu, Garelochead and Tarbert in line with referrals and proactive work. Other areas visited have been some of the more rural islands of the authority which has taken a prolonged period of investigative time. A larger scale visit to Oban is planned for November/December. Several enquiries have led to rebilling’s and other necessary information sharing to the Department for Work and Pensions. Both officers continue to be proactive and make visits when necessary. The CFT continue to link in with 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 rebilling. Second homes and Non-Domestic Rates are playing a larger role in the CFT team’s work with several claims already adjusted. This will remain a proactive area. The team now have an established referral system in place from council tax teams and the CFT have already liaised with this team going forward into 2024 for the review of the second and holiday home tax changes. The information already
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shared in the short space of time has resulted in rebilling and adjustments of accounts. Together we aim to keep accurate records and update accounts where error or missing information is held. This approach will continue as the method of collaborative and interdepartmental working has been helpful. 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 2022/23 exercise is now closed and the results are located within this report. The next exercise has commenced and the uploads have been successful to NFI within Cabinet Office deadlines. Since the inception of the CFT a total of £1,262,086 has been rebilled and £877,577 has been recovered. A recovery percentage of 69% has been achieved at the last review of the figures. Due to other commitments this quarter’s recovery has still to be checked and updated. Additional Updates from Quarter Two 3.6 Staff continue to work from home or on a hybrid approach and this has proved to be successful, where on-site visits have been required due to the specific nature of the audit work, these have been undertaken. 3.7 A series of visits to Customer Service Points, Schools and Roads and Amenity services was undertaken across Islay and Mull. The premises visited were assessed against our standard work programmes for facility responsibility, school funds and general service provisions, both good practice and issues were identified during these visits and discussed with the officers whilst on location. A number of issues were escalated to management as a result of these visits and further details will be provided at a future meeting of this Committee following receipt of management responses. 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. 3.09 Our work as the contracted Internal Auditors for the HSCP has been progressing well and priority has been given in this area given the availability of staff and work has now completed. We will continue to monitor progress to the HSCP’s Audit and Risk Committee in relation to the implementation of recommendations made in previous reports.
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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 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 quarters two and three of 2024/25 due to be reported in quarter three 2024/25. Table 3: National Reports National Report Issued To Detail Management response/ Action taken The National Fraud Initiative in Scotland 2024 Executive Director – Kirsty Flanagan A data matching exercise detected £21.5 million worth of fraud and payment errors across the Scottish public sector. The Council continue to participate in the NFI exercise and follows up all high risk matches in accordance with our embedded processes. Any suspected or potential fraud is followed up in all cases in order to determine the facts and where appropriate investigated.
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Tackling digital exclusion Executive Director – Kirsty Flanagan Clearer leadership and focus needed to tackle digital exclusion “Audit Scotland are keen to speak to the report as widely as possible, so if it is helpful to ASC to continue to have the session in December, I am sure they would be fine with that. We could also arrange for a couple of officers involved in some of the actions to come along too if helpful. It will be pretty brief to Council and ASC may want to look at it in more depth” Audit Scotland will deliver a presentation at the December Audit and Scrutiny Committee and Officers involved in progressing actions will attend and provide an update. Transformation in Councils Chief Executive Reform is increasingly urgent – Councils have never faced such acute challenges, putting budgets and workforce under severe stretch and strain. Councils and key partners must significantly increase the pace and scale of major changes if they are to protect vital public services. The Chief Executive is part of the Working Group overseeing the SOLACE/IS sector led Transformation Programme, leading on Leadership and Development, chairing the Leadership Practitioner Forum. The Council is exploring a Single Authority Model which could be a vehicle for effective cross sectoral working, taking a place-based systems approach to transformation. To take a longer-term approach, there needs to be multiyear budgeting and planning from government. New initiatives and requirements that effectively ring-fence funding limits the Council's ability to focus on transformational activity. There has been significant transformation over the last decade, and this now needs to take place beyond individual Council levels. Our previous budget simulator consultation did show an increased awareness in our communities of the funding pressures facing the Council. We need to continue to build on
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this and increase the understanding of the level of change required and the limits this will place on what the Council will do. There is still a high level of expectation on what the council should deliver that does not always recognise the limited funding available. SOLACE/IS work is being progressed largely by volunteers from participating Councils who are contributing to this national work using existing resources. There is no specific funding allocated to this work. This shows the commitment from Councils to try and progress transformation despite the significant fiscal challenges and the pressures this puts on local delivery. The Council continues to innovate wherever possible which can be evidenced by our use of technology/AI and data, amongst other things. Our Connect for Success principles are designed to support innovation and transformation, targeted at the priorities agreed recently by Council. There is a willingness to transform and to take proportionate and informed risks. Our geography and demography do pose additional challenges for our area. Transformation alone will not be sufficient to close the forecast funding gaps. Reductions in service will also be needed if the outturns continue as forecast. Alcohol and Drug Services HSCP Chief Officer The Scottish Government has made progress in increasing residential rehabilitation capacity and implementing treatment standards. However, it has been slow to progress key The Audit Scotland report has been shared with the ADP and will be tabled at the next ADP Committee meeting. This document, together with other direction from the Scottish Government will help inform our priorities; and, it is particularly
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national strategies, such as a workforce plan and alcohol marketing reform. People in need still face many barriers to getting support. The workforce is under immense strain and the increased focus on drug harm is shifting attention from tackling alcohol issues. Alcohol and drug services are coordinated at local level by partnerships but have limited powers to influence change and direct funding which is heavily focused on those at crisis point rather than prevention. timely, as we develop our new local strategy. More focus on alcohol is welcomed as MAT Standards and National Mission has led us to concentrate on drugs in recent years. This is very relevant to Argyll and Bute, as we have more deaths from alcohol. In 2023, we had 22 alcohol specific deaths and 16 drug deaths; there has been an upward trend in both these areas, in the last twenty years. At the national ADP Co- ordinators meeting, there was a general sense that the issues highlighted in the Report are ongoing challenges and we would welcome sustainability of National Mission, beyond 2026 and longer-term funding. Prevention and stigma both feature highly and this mirrors our strategy development work locally. However, more detail on the tiers of prevention would be welcomed, from the Report. Accountability of Drug and Alcohol Services and a Whole Systems Change are two areas; again, this is generally welcomed, but it sounds like this direction will need to come nationally. This Report is timely, as we develop our strategy for the next two years and consider changing one of our "pillars" to focus on partnership working - and again, this mirrors the recommendations of the Report. 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
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carried out. A reminder process is in place to ensure that matches are reviewed on a timely basis. 3.15 The current 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. The NFI matches are detailed below for the now completed 2022/23 exercise. 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 17/11/2024 Operational Area Total Matches Recommended/Very High / High/ Medium Risk Matches Matches Complete * WIP Match Description CT to Elect Register 2155 0 2155 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 402 0 402 0 CT to HMRC Household Composition 935 0 38 0 Housing Benefits 21 15 20 0 HB records to records in other authorities / other datasets including student loans, payroll and pensions to identify undeclared income and capital. Payroll 143 2 140 0 Payroll records to other datasets including other payrolls and pensions to ensure employee is not receiving additional income. Blue Badges 238 205 238 0 Blue badge records to DWP data to identify deceased claimant with valid badge. Housing Waiting list 233 214 233 0 Housing waiting list records to other organisations HBCTR and tenant data to identify
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undisclosed changes in circs or false info. Council Tax Reduction 307 233 278 0 CTR records with records in other authorities / other datasets including; student loans, payroll and pensions to identify undeclared income and capital Creditors 589 0 33 0 Analyses Creditors data to identify possible duplicate vendors and payments, VAT errors or fraud and multiple vendors sharing a bank account. Procurement 38 0 38 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 214 0 187 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 £ 3762 0 3669 0 93 60,450 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 31/10/24. Area For Improvement Agreed Action Progress Update Timescale Review Continuous Monitoring Programme Continuous monitoring tests will be reviewed following audit of Debt recovery to assess value of existing tests carried out. Consider adding test to review date taken to process invoices from date of receipt within the Council (not at Creditors) In progress March 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 – FQ2 24/25 (as at September 2024) 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 2024/25 audit plan is progressing despite some sickness within the section 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. Resource has been focused on the HSCP contract in this last quarter. 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 Fairer Scotland Duty – None 5.5.1 Equalities – protected characteristics – None 5.5.2 Socio-Economic Duty – None 5.5.3 Islands – None 5.6 Climate Change – None 5.7 Risk – None 5.8 Customer Service – None 5.9 The Rights of the Child (UNCRC) – None For further information please contact Internal Audit (01546 604108) Paul Macaskill Chief Internal Auditor 17 December 2024