Audit and Scrutiny Committee Annual Report 2022/23
Argyll and Bute Council · 14 September 2023
Back to Audit and Scrutiny Committee — 14 September 2023 and its agenda
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ARGYLL AND BUTE COUNCIL AUDIT & SCRUTINY COMMITTEE FINANCIAL SERVICES 14 SEPTEMBER 2023 AUDIT AND SCRUTINY COMMITTEE ANNUAL REPORT 2022/23 1. SUMMARY 1.1 The purpose of this report is to provide the Chair of the Audit and Scrutiny Committee’s (the Committee) annual overview of the Committee’s activity during the financial year 2022/23 and a summary of key developments since the commencement of 2023/24. It sets out how the Committee has fulfilled its remit and provides assurances to the Council. 2. RECOMMENDATIONS 2.1 Review and endorse the Chair’s Annual Report. 2.2 Agree that the Chair presents the report to a future meeting of the Council at a date to be confirmed. 3. DETAILS 3.1 It is important that the Committee fully complies with best practice guidance on Audit Committees to ensure it can demonstrate its effectiveness as a scrutiny body as a foundation for sound corporate governance for the Council. The Chartered Institute of Public Finance and Accountancy (CIPFA) issued an updated guidance note Audit Committees Practical Guidance for Local Authorities and Police 2022 Edition which incorporates CIPFA’s Position Statement: Audit Committees in Local Authorities and Police. This sets out CIPFA’s view of the role and functions of an Audit Committee. The CIPFA Audit Committees Guidance includes the production of an annual report on the performance of the Audit Committee against its remit for submission to the Council. 4. CONCLUSION 4.1 The Audit and Scrutiny Committee Annual Report 2022/23, which is appended to this report as Appendix 1, provides assurance to full Council over the activity of the Committee. 5. IMPLICATIONS 5.1 Policy: None 5.2 Financial: None 5.3 Legal: None 5.4 HR: None 5.5 Fairer Scotland Duty: None 5.5.1 Equalities: None 5.5.2 Socio-Economic Duty: None
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5.5.3 Islands Duty: None 5.6 Climate Change: None 5.7 Risk: None 5.8 Customer Service: None For further information please contact Internal Audit (01546 604108) Paul Macaskill Chief Internal Auditor 14 September 2023 Appendices: 1. Audit and Scrutiny Committee Chair Annual Report 2022/23
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1 Appendix 1 - Audit and Scrutiny Committee Chair Annual Report 2022/23 Introduction by the Chair of Audit and Scrutiny Committee This report provides an overview of the Audit and Scrutiny Committee’s (the Committee) activity during the financial year 2022/23 and a summary of key developments since the commencement of 2023/24. In 2022/23 the Committee met quarterly on a hybrid approach with the following as appointed members: Martin Caldwell (Chair) Daniel Hampsey Reeni Kennedy-Boyle Graham Hardie Andrew Vennard Jim Lynch (Vice Chair) Mark Irvine Committee meetings were also attended by appropriate representatives of the Council including the Chief Internal Auditor (CIA). Audit Scotland until November 2022, our newly appointed External Auditors, Mazars, as do other Council Officers as and when appropriate including the Chief Executive and the Head of Customer Support Services who attends regularly to advise the Committee on issues relating to performance management. Newer Members of the Audit and Scrutiny Committee, following their induction and formal training on the Committee’s operations, functions and powers, together with risk management, continue to develop in both their understanding of their role and are gaining experience required to discharge the role as ‘those charged with governance’. Further training to support this continuing development and knowledge theme has been augmented with training in treasury management. It is important that the Committee develop and build on their knowledge and experience to fulfil the role. In 2022/23 the Council’s Internal Audit section were subject to an independent External Quality Assurance Assessment which is mandatory under the Public Sector Internal Audit standards (PSIAS) every five years. I was pleased to note that the service was deemed compliant in all 14 areas of assessment, this was a first for the Council and reflects well not just on the service but also that of the wider governance operating within the Council. I continued to work closely with the CIA and have built up a good and productive relationship as he continues to build up his knowledge of the Council and its operations. In looking forward to 2023/24 and beyond, significant pressures continue as a result of financial settlements and this has been particularly compounded as a result of inflationary pressures and rising costs of fuel, gas and electricity, together with the risk of unfunded or partly funded pay settlements. These pressures are likely to remain and will continue to add an element of uncertainty in relation to the overall financial picture affecting the Council. The Council continues to undertake appropriate medium to long term financial planning using a scenario modelling approach which helps to provide Members with a thorough overview of the implications of funding and cost pressures. I am however satisfied that the Council continues to embrace these challenges in a strategic, capable and productive manner. Martin Caldwell – Chairperson
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2 1. Audit and Scrutiny Committee’s Effectiveness and Impact 1.1 The Committee’s role is to ensure that the Council’s internal control framework and governance arrangements are operating effectively. In order to fulfil this role a range of reports are provided to the Committee during the year. I am satisfied that the frequency, content and detail of reports provided to the Committee allow myself and fellow members to adequately fulfil this role. 1.2 In March 2022 Internal Audit presented their annual audit plan setting out their approach to the 2022/23 audit of the Council and in June 2023, Mazars outlined their planned approach to their work reflecting their statutory duties and risk based approach. The respective audit plan and approach were considered by the Committee and accepted. 1.3 During 2022/23 the CIA has continued to develop our approach to audit and scrutiny. Particular developments which have furthered the effectiveness of both Internal Audit and the Committee are: The continued and successful work of the Counter Fraud Team. The approach to Scrutiny continues to develop and a significant piece of work on ‘Consultations’ was undertaken in 2022/23 and arrangements are underway to complete work on the ‘Fly Tipping’ review in 2023/24. The CIA engaged with members of the Committee as part of the planning process for the 2023/24 audit plan. An external assessment has been undertaken during 2022/23 in terms of compliance with the Public Sector Internal Audit Standards (PSIAS) after a portfolio of evidence has been prepared and submitted. This independent assessment identified that the Internal Audit service was in full compliance with all 14 areas of criteria. 2. Assurances Internal Audit Assurance 2.1 Internal Audit is a key source of assurance for both members and management on the effectiveness of the control environment. The Committee has a responsibility for ensuring that Internal Audit is effective in the provision of this assurance. I am content that the minor amendments made to the 2022/23 audit plan as a result of operational changes and approaches within the Council have been appropriately addressed internally or as part of the 2023/24 audit plan. I am content with the assurance provided by the CIA that sufficient work has been undertaken to allow him to provide an opinion on the Council’s systems of governance and internal control. Throughout the year, in my opinion, clear assurance judgements are provided, underpinned by an appropriate evidence base and, where appropriate, include sound management advice and guidance. 2.2 The Committee has received regular reports and information from the CIA including: risk based internal audit annual plan regular progress reports annual report, in line with PSIAS, which provided the CIA’s independent annual opinion on the effectiveness of the Council’s risk management, internal control and governance processes.
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3 2.3 Exhibit 1 shows an analysis of assurance opinions provided by internal audit in the three year period 2020/21 – 2022/23. Whilst there have been minor fluctuations year to year, the important trend identified is a fall in audits issued that have been providing limited assurance. In addition, there has been an increase in the number of audits classified as providing a high level of assurance in 2022/23. There was only one classified as being limited. For these, and all other audit reports, management have accepted 100% of audit recommendations and action plans have been agreed with a robust follow-up system in place with progress presented to the SMT on a quarterly basis and to the Committee as a standard agenda item. Exhibit 1 – Audit Assurances (2020/21-2022/23) 2.4 The Committee has a clear role in relation to oversight of the internal audit function; specifically in relation to overseeing its independence, objectivity, performance and professionalism. I am pleased to advise, as Chair of the Committee, that I am satisfied that internal audit is effective and activity is undertaken in accordance with relevant standards. External Audit Assurance 2.5 External Audit is an essential part of the process of accountability and assurance for public funds, providing an independent opinion on the financial statements, and reviewing aspects of governance and financial management. Working closely with Internal Audit, the external audit programme ensures that statutory responsibilities are delivered, without the duplication of audit work. The Council’s recently appointed external auditors are Mazars. 2.6 The audit of the Council’s financial statements is still ongoing at the time I wrote this report and the Council is still to receive its 2022/23 annual audit report. Consequently this reduces the assurance we can take at the current time from external audit’s work however the Council were subject to a Best Value review in 2019/20 which highlighted good progress made by the Council since the last inspection in 2015, specifically the significantly improved relationships amongst elected members and between members and officers and the Council’s sound approach to financial planning. It also identified areas for the Council to focus its continued improvement upon, such
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4 as community engagement, performance management, more significant transformation and redesign of services and better engagement of staff in planning and implementing change. I am pleased that the Council has responded positively to these messages and have agreed an action plan to help address the issues highlighted. It is also worth highlighting that Audit Scotland and more recently Mazars attend all meetings of the Committee and provide written and verbal updates on progress against their audit and any emerging audit issues. This helps provide the Committee with ongoing assurance. 3. Risk Management 3.1 The CIA performs an annual strategic risk register assurance mapping exercise which enables the Committee to assess the levels of assurance it can take over the activity undertaken by the Council to manage its strategic risks. This is complemented by the Chief Executive presenting the Strategic Risk Register to the Committee on an annual basis to allow the Committee to further scrutinise the approaches being taken to manage risk. 4. Independence 4.1 To assist in preserving the Committee’s independence, measures are in place including: the appointment of an independent chair observation of the Internal Audit Charter which specifies the independence of the CIA and the wider audit team the non-political approach of the committee the active involvement of the external auditors clear terms of reference aligned to CIPFA’s Role of the Audit Committee Guidance 5. Scrutiny 5.1 During 2022/23 the Committee undertook a significant piece of work in relation to ‘Consultations’ as part of our scrutiny plan. This report was presented to the Audit and Scrutiny Committee in June 2023. These and previous reports were well received by the Committee and widened the understanding of the complexities and challenges faced by both staff and the community in specific areas and where these reports will help allow continuous improvement as a Council. 5.2 The benefits of scrutiny are twofold; helping to understand what can often be multifaceted and procedurally complex issues due to legislation but also to help consider ways to improve and develop to make any processes more understandable and/or streamlined where that is at all possible. 5.3 Scrutiny work will continue in 2023/24; it is anticipated that work in 2023/24 will focus on the completion of the Fly-Tipping scrutiny review in which further data was required to allow a more holistic view of the current arrangements in place and to inform any further improvement required in this area. 6. Counter Fraud Team (CFT) 6.1 The Council has an effective CFT having been made permanent after a trial period with both officers having completed the CIPFA (Chartered Institute of
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5 Public Finance and Accountancy) Accredited Counter Fraud Specialist Course meaning they are fully accredited counter fraud investigators. This further strengthens the Council’s commitment to protecting the public purse. 6.2 Since the inception of the CFT, regular reporting to the Audit and Scrutiny Committee takes place and latterly in June 2023 the CFT reported that proactive and targeted work in this area has resulted in a cumulated £876,573 (ending April 2023) being rebilled and that to date £683,897 (ending April 2023) has been recovered. The ongoing work of the CFT in both recovery but also in its deterrent effect sends a strong message that the Council will take all reasonable steps it can to identify error and fraud but also take appropriate action to recover monies that are due. Regular reports are presented to Committee each quarter in relation to the work of both Internal Audit and the Counter Fraud function. 6.3 Local visits throughout Argyll and Bute were undertaken in the year and this will form part of a rolling programme of visits going forward, focusing on maximising the income due to the Council. In addition the CFT 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. I expect further visits to be equally successful and so far in 2023/24 this has proved to be the case. It is pleasing to note that the ongoing work in relation to counter fraud clearly demonstrates the Council both in its commitment to recovering sums of revenue due through error or fraud but also in the wider context of good governance. 7. External Quality Assurance Assessment – Internal Audit 7.1 The mandatory Public Sector Internal Audit Standards (PSIAS), published in April 2013 and updated in March 2017, apply to all internal audit service providers in the UK public sector. To supplement the PSIAS, and provide specific guidance surrounding its application within a local government setting, the Chartered Institute of Public Finance and Accountancy (CIPFA) compiled a Local Government Application Note, (LGAN) which was updated in 2019. This requires all internal audit providers to have an independent external assessment of these standards in application within that service. 7.2 An independent report on the Council’s Internal Audit Service was prepared and presented to the Audit and Scrutiny Committee in March 2023. It is pleasing and reassuring to note that the assessor found that in all 14 areas of assessment the Council’s Internal Audit Service fully conform to the standards. The assessor also identified that the team are highly qualified with a training plan in place to address any skills gaps and that they deliver a high quality service for the Council which is evident by the questionnaires returned after the completion of each review. 7.3 This was the first time the Council’s Internal Audit Service obtained a fully conforms opinion in all 14 areas of assessment and the independent report demonstrates the importance of having a fully resourced and functioning service which provides assurance to senior management and to those charged with governance responsibilities, specifically, the Audit and Scrutiny Committee. This position should provide substantial assurance to the Council and Members of the Audit and Scrutiny Committee.
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6 8. Looking Forward 8.1 In 2022/23 as a result of local elections a new Committee was formed, our new Committee Members are settling into the role and I am sure they will continue to contribute to the effectiveness of the Committee. It is of course a pleasure to continue to work with our Vice Chair, Councillor Jim Lynch and acknowledge the support he has provided to me in this role. In 2022/23 I intimated my intention to stand down as Chair after having held this independent position for over a decade, I have, however, agreed to provide interim cover until a suitable replacement is found in order to provide direction and continuity for the Committee. 8.2 In 2023/24 and onwards the Committee will consider potential options/topics for scrutiny reviews and as a Committee we will continue to implement and further develop our scrutiny approach. 8.3 This focus on continuous improvement is equally applicable to the audit element of the Committee and we will continue to work with the CIA and, where appropriate, our newly appointed External Auditors Mazars, to identify opportunities to further develop the skillset and expertise of both the Committee and the internal audit department to facilitate effective challenge and scrutiny. 8.4 The Counter Fraud Team will continue to focus their resources on specific concerns across the local authority area seeking to recover monies owed and due to the Council in accordance with its policies. 8.5 The Council continue to provide the audit services to the HSCP and were awarded the contract for a period of three years commencing 1 April 2021. A formal service level agreement was signed on 28 January 2021 to reflect the new contract. In 2022/23, a plan of audit coverage was agreed and presented to their Audit and Risk Committee. 8.6 The Internal Audit team are focused, professional and work continues to promote better resilience within the team through the opportunities of professional training schemes and other forms of staff development. This approach fits in well with the Council’s programme of ‘Growing our Own’ in order that the Council has skilled workforce for the future and these are retained locally where possible. 8.7 We will continue to provide updates on progress of the CFT and reports will be presented to the Committee as part of the quarterly and annual reporting of the Internal Audit service. 9. Conclusion 9.1 Based on the reports received and reviewed by the Committee, I am in in agreement with the CIA’s annual audit report which confirms that reasonable assurance can be placed upon the adequacy and effectiveness of the Council’s internal control system in 2022/23. I am satisfied that active monitoring and follow up of recommendations are in place in respect of agreed management actions. This follow up process is further enhanced by the continuous monitoring programme carried out by internal audit which provides ongoing assurance over the Council’s core transactional based systems.