IA Annual Report 2025-26 (AEJC)
North Ayrshire Council · 29 September 2026
Back to Ayrshire Economic Joint Committee — 29 September 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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AYRSHIRE ECONOMIC JOINT COMMITTEE MEETING – 29 SEPTEMBER 2026 REPORT BY INTERIM CHIEF AUDITOR, EAST AYRSHIRE COUNCIL SUBJECT: AGD INTERNAL AUDIT ANNUAL REPORT 2025/26 PURPOSE OF REPORT 1. The purpose of this report is to provide for noting an annual report on internal audit activity in line with obligations laid out in the Ayrshire Growth Deal (AGD) Governance Document (Appendix 1). Specifically this report provides: • a summary of AGD internal audit work both prior to and since inception; and • an annual internal audit opinion for the AGD. RECOMMENDATIONS 2. The Joint Committee is asked to: (i) Consider and endorse the Internal Audit Annual Report 2025/26; and (ii) Note that this report will be submitted to both UK and Scottish Governments upon completion (i.e. after AEJC consideration) in line with section 2.20 of the Governance Document. BACKGROUND CONSIDERATION BY THE PARTNERSHIP BOARD 3. This report was considered by the Ayrshire Economic Partnership Board on 29 September 2026. REQUIREMENT TO HAVE AN INTERNAL AUDIT FUNCTION 4. The Local Authority Accounts (Scotland) Regulations 2014 require local authorities to operate a professional and objective internal auditing service; in practice this means that the internal audit function is operationally independent; free from limitations on the scope of its work and that the Chief Auditor reports independently with no undue influence. The internal audit service must be provided in accordance with recognised standards and practices which from 1 April 2025 are those set out in the Global Internal Audit Standards in the UK Public Sector (GIAS), which are a combination of the Global Internal Audit Standards (GIAS) (IIA, January 2024), GIAS in the UK Public Sector – Application Note (IASAB, December 2024), and the CIPFA Code of Practice for the Governance of Internal Audit (2025). It is the responsibility of each authority to ensure compliance with the GIAS.
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CONTROL ENVIRONMENT WITHIN COUNCILS 5. It is primarily the responsibility of management to establish an appropriate and sound system of internal controls, and to monitor the continuing effectiveness of that system. 6. Internal Audit reports are presented to senior management and include recommendations that, when implemented, will further improve the control environment. TRUST IN INTERNAL AUDIT – EXTERNAL AUDIT 7. External Audit report their annual conclusions on internal audit within their annual audit report to each Council. The most recent reports are for 2024/25 with no significant issues arising providing assurance for those placing confidence in the work of Internal Audit. All three Annual Audit Reports are available on the Audit Scotland website. MAIN REPORT INTERNAL AUDIT WORK PRIOR TO AND SINCE INCEPTION 8. Eighteen assignments have been carried out across the three Ayrshire Councils for the AGD. The scope and outcomes of these exercises are summarised at Appendix 2. Outcomes reported to date range from one limited assurance outcome (2022/23), through to reasonable assurance and up to sound assurance. 9. Our work continues to be informed by the Audit Scotland publication Scotland’s City Region & Growth Deals (January 2020) and the follow-up published in June 2023, recognising AGD internal audit good practice, which was considered by the AEPB and AEJC on 7 August 2023. That follow-up report also reinforced that the 2023 AEJC agreement to review the AGD risk register quarterly is good practice. AGD ANNUAL INTERNAL AUDIT OPINION 2025/26 10. Work carried out in 2025/26 is sufficient to allow the Interim Chief Auditor to produce an Annual Internal Audit Opinion for the year to 31 March 2026. The most that Internal Audit will provide in the annual opinion is reasonable assurance based on the risk-based plan and a rolling programme of work. This is similar to the scope of external audit work in the context of a Council’s financial statements which aims to give reasonable assurance on the statements. 11. Our overall opinion, based on the work presented in Appendix 2 is that reasonable assurance can continue to be placed upon the adequacy and effectiveness of the AGD’s framework of governance, risk management and control in the year to 31 March 2026. The Interim Chief Auditor continues to be satisfied that a robust approach is taken by the three internal audit teams with recommendations being adopted by management supporting the assurance framework within which the AGD operates.
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12. The Interim Chief Auditor notes the comprehensive AGD entry in the Corporate Risk Register of the Accountable Body (East Ayrshire Council) including reference to the Annual Conversation with both Governments which took place on 16 March 2026 and projects across the three councils were strategically reviewed and discussed with a focus on meeting the challenges to ensure and expedite future delivery and aims of the Deal. The Interim Chief Auditor supports appropriate and proportionate governance arrangements to ensure successful delivery on the ground. AUTHORITY WIDE ANNUAL INTERNAL AUDIT OPINIONS 2025/26 13. AGD operations are managed through the control environments of the three Ayrshire Councils. The Chief Auditors in all three Councils have issued annual authority wide opinions of reasonable assurance providing wider assurance to the AGD stakeholders. IMPLICATIONS 14. Eight implications have been considered in the preparation of this report. Implications Yes No Paragraph number in report 1. Policy/Strategic Planning No 2.Governance No 3. Human Resources No 4. Equality and Fairer Scotland Duty No 5. Financial No 6. Risk Yes Para 15 7. Community Wealth Building No 8. Net Zero No RISK IMPLICATIONS (INTERNAL AUDIT RESOURCES) 15. Each year there is the ongoing risk of significant unplanned work emerging in each Council, planned resources for AGD work not being available and work not being carried out to an acceptable standard which would compromise the ability to complete sufficient work to produce an Annual Internal Audit Opinion for the AGD; local mitigations should offset the potential impact of these risks. APPENDICES 16. The annual report is supported by two appendices: • Appendix 1: AGD Governance Document V16 (Internal Audit Extract) • Appendix 2: AGD Internal Audit Assignments Paul Davies Interim Chief Auditor, East Ayrshire Council 15 September 2026
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BACKGROUND PAPERS 1. Chartered Institute of Public Finance and Accountancy (CIPFA) Local Government Application Note for the United Kingdom Public Sector Internal Audit Standards (2nd edition February 2019) 2. Chartered Institute of Public Finance & Accountancy (CIPFA), CIPFA Statement on the Role of the Head of Internal Audit in Public Service Organisations (2nd edition April 2019) 3. Audit Scotland, Scotland’s City Region & Growth Deals (January 2020) 4. Audit Scotland, Scotland’s City Region & Growth Deals Follow-Up (August 2023) 5. Ayrshire Economic Joint Committee, 23 June 2025, AGD Governance Document V16 Deal Documents - All Documents (south-ayrshire.gov.uk) Person to Contact: Paul Davies, Interim Chief Auditor, East Ayrshire Council Email: paul.davies@east-ayrshire.gov.uk Implementation Officers: Paul Davies, Interim Chief Auditor, East Ayrshire Council Email: paul.davies@east-ayrshire.gov.uk Paul Brown, Senior Manager (Audit, Fraud, Safety, Risk & Insurance), North Ayrshire Council Email: paulbrown1@north-ayrshire.gov.uk Cecilia McGhee, Chief Internal Auditor, South Ayrshire Council Email: Cecilia.McGhee2@south-ayrshire.gov.uk
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Appendix 1 AGD GOVERNANCE DOCUMENT V16 (INTERNAL AUDIT EXTRACT) 2.16 The Accountable Body’s Chief Auditor will be appointed as Chief Auditor for the AGD to coordinate Internal Audit activity. 2.17 Each partner will be responsible for allocating Internal Audit resources as required for local AGD activities. The Accountable Body’s Internal Audit section will reserve the right to review programme and project activities as required and request information from all partners regarding these activities. 2.18 Each year a consolidated Internal Audit Plan will be presented to the AEJC and AREP having been prepared following: • consultation with relevant senior officers of the AGD PMO; • consideration of the risks affecting the AGD at programme and project level; • consideration of both internal and external factors affecting the AGD; • consideration of previous internal and external audit findings; • consideration of all of these elements which will inform Public Sector Internal Audit Standards (PSIAS) / Global Internal Audit Standards (GIAS) in the UK Public Sector based risk assessments carried out locally by the Accountable Body and Partner Authorities; and • any relevant items subsequently included in local Internal Audit plans approved by each partner’s audit committee in line with PSIAS/GIAS obligations will be reflected in the consolidated AGD Internal Audit Plan. 2.19 All AGD Internal Audit work will be carried out in line with the PSIAS until 31 March 2025 and GIAS from 1 April 2025 with individual Internal Audit assignment reports presented to the AEJC and AREP for noting. 2.20 The relevant annual Internal Audit Report will be submitted to both UK and Scottish Governments upon completion. The AEJC and AREP will be advised of the overall outcomes from Internal Audit work in an annual Internal Audit Report the timing of which is anticipated to align with the annual accounts timetable and will be reported to the AEJC and AREP for noting in line with PSIAS/GIAS requirements. The Annual Internal Audit Report will include a summary of AGD internal audit work in year by all partners, an annual opinion for the AGD and for further assurance will also include the authority–wide Annual Internal Audit opinions prepared by each partner. 2.21 Actions arising from Internal Audits will be followed up by the relevant Internal Audit team in line with established arrangements in that authority and these follow-up reports will be presented to the AEJC and AREP for noting. 2.22 Further audit, advisory consultancy or investigative work may be requested by the PMO, AEJC and AREP. In most cases the PMO and its placement in the Accountable Body will play a leading role in managing requirements for additional support. 2.23 The Accountable Body’s Chief Auditor will liaise with partner Chief Auditors through established arrangements.
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Appendix 2 AGD INTERNAL AUDIT ASSIGNMENTS PRIOR TO AND SINCE INCEPTION Year Council Type of Audit Work Scope Outcome Link to “Audit Room” on AGD Portal (members only) Up to and including 2020/21 East Ayrshire Council Advisory Both prior to the AGD being signed off on 20 November 2020 and since advice has been provided on governance arrangements. Advisory Not applicable 2021/22 East Ayrshire Council Advisory & Assurance The aims and objectives were to inform the lead client, the Chief Financial Officer and Head of Finance & ICT, on how well systems and processes within the Programme Management Office (PMO) which are designed to keep the Ayrshire Growth Deal (AGD) on track, are working in practice; and to advise on any scope for improvement in systems and compliance verification processes which are identified by our assurance work. This included advising on the update of the AGD Governance Document V15. Our overall assessment of controls concluded that there was sound assurance in most areas - key controls exist and are applied consistently and effectively in most areas. Non- compliance has only been identified in low risk or medium risk areas. 21-22 EAC Internal Audit Report - Advisory & Assurance.pdf
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2021/22 North Ayrshire Council Governance The scope of this audit was limited to North Ayrshire Council’s role in the projects. It focused on the governance structures across the Council’s participation in the deal rather than individual projects. The main objectives of the audit were to ensure that: · governance structures and roles and responsibilities of officers and elected members within North Ayrshire Council, in relation to the Ayrshire Growth Deal are clearly defined and communicated in order to enable good governance and strong accountability · North Ayrshire Council has adequate risk management arrangements in place in relation to the Ayrshire Growth Deal · suitable arrangements are in place to monitor the progress of the Ayrshire Growth Deal programmes within North Ayrshire, including appropriate reporting and scrutiny arrangements · there are adequate arrangements in place to ensure that North Ayrshire Council is fulfilling the requirements of the Project Management Office and external funding providers. Overall, reasonable assurance was obtained with regard to the governance arrangements for the Ayrshire Growth Deal within North Ayrshire Council. Overall good governance arrangements are in place, but some of the projects are still at an early stage of development and therefore it has not been appropriate to fully develop the governance arrangements yet. 21-22 NAC Internal Audit Report - AGD Governance.pdf 2021/22 South Ayrshire Council Governance The aim of the assignment was to obtain assurance that there are adequate governance arrangements in place for Reasonable assurance was obtained that 21-22 SAC Internal Audit Report - AGD Governance.pdf
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South Ayrshire Council Ayrshire Growth Deal (AGD) portfolio of projects. there are adequate internal governance arrangements in place for South Ayrshire Council’s portfolio of AGD projects. 2022/23 East Ayrshire Council Assurance Testing of AGD Grant Claims. The aim of this assignment was to provide assurance to the EAC Chief Financial Officer and Head of Finance & ICT that the AGD Quarter 4 2021/22 Grant Claim Forms had been completed accurately and in line with the requirements of the UK and Scottish Governments and AGD procedures, prior to the deadline for their sign-off on 22 April 2022. Our work was carried out in “real-time” and the Chief Financial Officer was immediately advised of the assurance which could be placed on processes prior to the sign-off and submission of the claim. The value of the Grant Claim was £0.335m (Community Wealth Building - £154,408, Working for a Healthy Economy - £180,748).Assurance was also sought for the residual element of the Quarter 4 2021/22 Grant Claim, which was claimed for in July 2022 along with the Quarter 1 2022/23 Grant Claim. This review was retrospective due to the low value of the claim (£0.010m). Sound assurance. We found that both elements of the Quarter 4 Grant Claim had been completed accurately, were fully signed by appropriate officers and were in line with the requirements of the UK and Scottish Governments and AGD procedures. We also identified areas for consideration for continuous improvement. 22-23 – EAC AGD Grant Claims
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Follow-up Advisory Follow-Up of 2021/22 Findings Advisory work included: • Governance Document revision • Risk Register • Benefits Realisation Plan • Support to Audit Scotland follow- up exercise • Attendance at AEPB and AEJC meetings to inform our work All actions fully implemented. 22-23 – EAC AGD Advisory & Assurance – Follow Up 2022/23 North Ayrshire Council Assurance Contingency budget in place and the aim would be to reserve this for any claims audits in year. No work required Not applicable 2022/23 South Ayrshire Council Assurance Follow-up Testing of internal governance arrangements. Follow-Up of 2021/22 Findings. Limited assurance with immediate action taken by senior management. All actions sufficiently implemented. Confidential. 22-23 - SAC - AGD Governance Arrangements - Follow-Up.pdf 2023/24 East Ayrshire Council Advisory Work included support to Audit Scotland national review, advice on Programme Risk Register, Senior Auditor embedded in AGD PMO as critical friend. Advisory Not applicable
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2023/24 North Ayrshire Council Assurance The audit was structured as 3 mini- audits covering each of the revenue projects, reflecting the different stages each project had reached and the different natures of the projects. The main objectives of the audit were to: • Ensure that controls within the management of the Community Wealth Building project are suitable and operating effectively. • Ensure that controls to manage the contract for the delivery of Working for a Healthy Economy are suitable and operating effectively. • Provide audit advice regarding the proposals for the Ayrshire Skills Investment Fund, including an employer grants scheme. Substantial assurance 2024-PA-024 AGD Revenue Projects (Final -amended).pdf 2023/24 South Ayrshire Council Follow-up Follow-Up of 2022/23 Findings. All actions sufficiently implemented Confidential 2024/25 East Ayrshire Council Advisory Review of Governance Document V16 which was agreed at the AEJC on 23 June 2025. Advisory Not applicable 2024/25 North Ayrshire Council Assurance Audit purpose: To obtain assurance that there are robust monitoring arrangements in place for the capital projects that NAC are leading on. Not applicable Not applicable
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Due to resources constraints within the team, this assignment was subject to delay and the primary focus therefore was on the day-to-day delivery of the service and the AGD Programme. Assignment subsequently rolled forward to 2025/26. 2024/25 South Ayrshire Council Assurance 2024-25 Assignment - AGD Outline Business Case Approval Arrangements (changed from planned assignment – follow up of 2023/24 actions (not required) and review of contract management (new contracts not in place). The objective of the completed audit was to review the governance arrangements in place for the creation and approval of Outline Business Cases (OBCs) prepared for the Ayrshire Growth Deal (AGD) to ensure there are sufficient controls to enable projects to be sufficiently appraised and reviewed. It is anticipated that any recommendations for improvement can be applied to future OBC and Full Business Cases (FBC) prepared by South Ayrshire Council (SAC). The audit concluded in reasonable assurance with 5 actions which management have agreed to implement. Reasonable assurance 2025-05 Ayrshire Growth Deal - Outline Business Case Approval Arrangements (SAC).pdf 2025/26 East Ayrshire Council Following the Public Pound Benchmarking to Audit Scotland recommendations for City and Region Growth Deals. The aim of the assignment was to verify the AGD has arrangements in place which Our overall assessment of controls concluded that there was sound AGD - Benchmarking to Audit Scotland recommendations for City and Region Growth Deals.pdf
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address the findings of Audit Scotland in their follow-up reporting of June 2023, “Scotland’s City Region and Growth Deals: Progress of the 2020 audit report recommendations”. This exercise was carried out as part of Internal Audit’s work on Following the Public Pound. The report raised two recommendations. assurance in most areas - key controls exist and are applied consistently and effectively in most areas. Non- compliance has only been identified in low risk or medium risk areas. We reinforced that “The Chief Auditor supports appropriate and proportionate governance arrangements to ensure successful delivery on the ground”. 2025/26 North Ayrshire Council Assurance Audit purpose: To obtain assurance that there are robust monitoring arrangements in place for the capital projects that NAC is responsible for. TBC Report being finalised 2025/26 South Ayrshire Council Follow-up The 2025-26 assignment was a follow up of the five actions raised in the 2024-25 report ‘AGD – South Ayrshire Council 100% Implementation 2026-07 Follow Up AGD - SAC OBC Approval
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Outline Business Case Approval Arrangements’ and concluded that all actions had been sufficiently implemented. Arrangements.pdf END