Audit Committee
7 June 2011
Agenda Item No_____8________
Internal Audit’s Annual Report and Opinion 2010-11
Summary:
The purpose of this report is to satisfy the requirements of the
Accounts and Audit Regulations 2011, and the Head of Internal
Audit’s annual reporting requirements set out in the CIPFA
Code of Practice for Internal Audit in Local Government in the
United Kingdom 2006 (“the Code”). The code specifies that the
following information should be reported:
•
An opinion on the overall adequacy and effectiveness of the
organisation’s control environment
•
Any qualifications to that opinion, together with the reasons
for the qualification.
•
A summary of the audit work from which the opinion was
derived
•
Any issues the Head of Internal Audit judges particularly
relevant to the preparation of the Annual Governance
Statement
•
Comparison of the actual work undertaken with the planned
work, summarising the performance of the internal audit
function against its measures and targets
•
Commentary on the compliance with the standards of the
Code
•
Communication of the results of the internal audit quality
assurance programme.
Conclusions:
Based on the audit work carried out during 2010/11, it is our
opinion that the overall adequacy and effectiveness of the
Council’s control environment is adequate in accordance with
the definitions given at Appendix E
Recommendations:
The Audit Committee is recommended to:
•
Receive and note Internal Audit’s Annual Report and Opinion
Audit Committee
7 June 2011
for 2010/11, particularly the overall opinion on the Council’s
control environment.
Cabinet member(s):
Ward(s) affected:
All
All
Leah Mickleborough, Deputy Audit Manager
01508 533954, lmickleborough@s-norfolk.gov.uk
Contact Officer, telephone
number, and e-mail:
1.
The Internal Audit Service at North Norfolk District Council
1.1.
The Internal Audit Service arrangements at the Council remain unchanged during
the year. The service is managed by South Norfolk Council and delivered by
Deloitte Public Sector Internal Audit Ltd.
1.2.
The cost of the service is shown in the table below:
Nature of the work
2009/10
2010/11
£
£
Cost of the planned work (Deloitte)
84,663
89,021
Cost of managing the service, supporting the Audit
Committee and officers (South Norfolk Council)
37,438
32,919
1,988
5,702
Cost of additional work (Deloitte)
TOTAL COST
124,089 127,642
2.
Overall opinion on the adequacy and effectiveness of the Council’s Internal
Control Environment
2.1.
One of the main responsibilities placed upon the officer responsible for the
internal audit service is to give an opinion on the overall adequacy and
effectiveness of the Council’s control environment.
2.2.
On the basis of audit work undertaken in 2010/11, it is my overall opinion that
the Council’s overall control environment is adequate in accordance the
definitions at Appendix E.
3.
Qualifications to that Opinion
3.1.
The internal control systems are designed to manage risk to a reasonable level.
As such, the opinion can only provide a reasonable – and not absolute – level of
assurance as to the adequacy and effectiveness of those systems.
4.
The audit work from which the Opinion has been derived
4.1.
This Committee has received periodic reports on the progress in delivering the
Annual Audit Plan, including summaries of completed audit assignments. The
current report includes the following appendices:
Audit Committee
•
•
•
7 June 2011
Appendix B - an overview of the work delivered within the 2010/11 Annual
Audit Plan;
Appendix C - management summaries of the completed audit assignments
not previously presented to the Committee
Appendix D - the audit opinions that have been given since 2008/09, under
the present audit arrangements
Systems of Internal Control
4.2.
We have issued positive opinions for all audits of the Council’s fundamental
financial systems. In addition to the “good” opinion given in respect of Payroll
and Human Resources, we have noticed ongoing improvement in other financial
systems, reflected by fewer audit recommendations being raised.
4.3.
We also undertook a review of the key controls operating in those fundamental
financial systems not subject to audit during the year. This review raised one low
priority recommendation, as highlighted in Appendix C(5)
4.4.
In respect of non-financial systems, there has again been a general
improvement in the assurances we have been able to give. Only one “limited”
assurance was given, in respect of the Network Infrastructure; the outcomes
were reported to this Committee in March 2011. A “good” level of assurance was
given in respect of data quality / performance management, and an improved
level of assurance was awarded in respect of waste management arrangements.
4.5.
With regards to the implementation of audit recommendations, a separate
report is provided to the Committee outlining the progress made to resolve
outstanding issues. Of the 4 high priority recommendations brought forward from
2009/10, all have now been resolved by management. For audits completed as
part of the 2010/11 Plan, no high priority recommendations have been raised.
Corporate Governance arrangements
4.6.
Two pieces of work were undertaken, namely the review of Corporate
Governance and Risk Management arrangements, a summary of which is
attached at Appendix C(4), and the audit of Ethical Governance, the results of
which were communicated to members in September 2010.
4.7.
The assurance level given in both cases was “adequate”. One medium priority
recommendation was raised in respect of corporate governance, whilst 3 of the 4
recommendations identified in our review of Ethical Governance remain
outstanding, awaiting the implications of the outcome of the local election and
review of government guidance which has recently been issued.
Risk Management arrangements
4.8.
Two of the recommendations raised in the course of our work as above related to
risk management. In particular, further work is required to ensure all services
have identified risk within their planning processes.
Audit Committee
7 June 2011
5.
Issues considered relevant to the Annual Governance Statement
5.1.
In preparing the Annual Governance Statement, we would usually expect
management to be mindful of any high priority recommendations that remain
outstanding. As identified in paragraph 4.5 above, all such recommendations
have now been implemented; as such, we do not consider there are any specific
issues which should be reflected in the Annual Governance Statement.
6.
Comparison of audit work undertaken
6.1.
As identified in Appendix B, all planned audit work has been completed. No
amendments were made to the Annual Audit Plan approved by the Audit
Committee in March 2010.
6.2.
At the request of management, Deloitte have undertaken an additional
assignment, reviewing procurement processes within property services. The
outcomes of the work were communicated to this Committee in March 2011.
7.
Effectiveness of Internal Audit
7.1.
Elsewhere on your agenda is a report on the Effectiveness of Internal Audit. It
includes:
•
The performance of the service;
•
The degree of compliance with the Code;
•
The compliance with the quality assurance measures for the service.
Appendices attached to this report:
Appendix B: Review of work performed in accordance with the Annual Audit Plan
2010/11
Appendix C: Summaries of Completed Audit Assignments
Appendix D: Assurance opinions provided on individual audit assignments
Appendix E: Definitions of assurance opinions relating to individual audit assignments