Agenda item

To consider a report by the Head of Internal Audit Services (copy enclosed) which presents the Head of Internal Audit’s Annual Report for 2011/12.

11.30 a.m. – 11.45 a.m.

A report by the Head of Internal Audit Services, which presented the Head of Internal Audit’s Annual Report for 2011/12, had been circulated with the papers for the meeting.

The report presented the Head of Internal Audit’s Annual Report for 2011/12 (Appendix 1).  The previous Corporate Governance Committee had approved a draft version before the end of 2011/12, with final version requiring the approval of the Corporate Governance Committee.

It was explained that in accordance with the ‘Code of Practice for Internal Audit in Local Government in the United Kingdom’ (2006), issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), the annual report should:-

·        provide an opinion on the overall adequacy and effectiveness of the organisation’s internal control environment;

·        disclose any qualifications to that opinion, together with the reasons for the qualification;

·        present a summary of the audit work undertaken to formulate the opinion, including reliance placed on work by other assurance bodies;

·        draw attention to any issues we judge particularly relevant to the preparation of the annual governance statement; and

·        comment on compliance with the standards contained in the Code of Practice and communicate the results of the internal audit quality assurance programme.

The Committee were informed that the Code required an Annual Report to the Audit Committee or its equivalent.

Appendix 1 – Annual Internal Audit Report 2011/12 included the           Audit Opinion.

The overall adequacy and effectiveness of the organisation’s internal control environment had been defined as the policies, procedures and operations in place and these had been identified in the report.

The Head of Internal Audit Services had based his audit opinion on the Internal Audit work carried out during 2011/12, the opinions formed in each area of review and the issues raised during our work, as shown in Appendix 1.  Using the new assurance ratings from Internal Audit Reports, as shown in the table included in the report, the opinion of the Head of Internal Audit had been that, Denbighshire could have ‘medium’ assurance in the overall adequacy and effectiveness of its internal control environment, including its arrangements for governance and risk management.

There had been no issues relevant to the Annual Governance Statement and Management’s response to issues raised by Internal Audit had been included in the report, together with, details of the Internal Audit Performance Measures.  With regard to compliance with the Code of Practice Standards, the Wales Audit Office (WAO) reviewed the service annually, but did not produce a formal report.  However, the WAO had raised no issues of concern with the service.

The Head of Internal Audit Services provided a brief update in respect of the one audit report issued which had a red status, which related to St Bridgets School, Denbigh.  He explained that work was ongoing and a report was currently being      which outlined progress in respect of the Action Plan, he also confirmed this was not a corporate issue and there were no implications for other schools in the Authority. 

A breakdown of the delivery of the Internal Audit Strategy 2011/12 had been included in the report, along with assurance scores and number of issues raised for the completed reviews, definitions used to form our audit assurance and the ratings used to assess the risk-levels for issues raised. 

In response to a question from the Chair, the Head of Internal Audit Services confirmed that the number of originals planned days would differ from the actual days, as the strategy was flexible and reviewed as risks and priorities change.  

The Head of Internal Audit Services responded to a question from Councillor M.L. Holland regarding school budgets and the school funding formula review.  He explained that work undertaken in Secondary Schools included a review of the financial management of the school generally in order to provide assurances to the Welsh Government.  Due to the size of Primary Schools, the financial management of the schools would be looked at as a subject and a sample of the schools would be looked at to examine the practices adopted. 

It was explained by the Head of Internal Audit Services that a report on financial balances would be submitted to the Performance Scrutiny Committee in September, 2012.  Councillor J. Thompson-Hill outlined the budget provisions for schools and highlighted that there could be disparity between large High Schools and small Primary Schools.  He also explained that Denbighshire did not have a formal cap in terms of percentages of school balances.

Following a brief discussion, it was:-

RESOLVED – that the Corporate Governance Committee approves the Internal Audit Annual Report 2011/12, including the overall Audit Opinion included within it.