Agenda and minutes

There were no apologies for absence submitted.

There were no Declarations of Interest or Dispensations notified.

To approve the Minutes of the last meeting of the Committee held on 7^th March 2022.

The minutes of the last meeting of the Audit Committee held on the 7^th March 2022 were submitted for approval as a correct record.

Resolved                                    -    That the minutes be received and approved as a correct record.

Report attached.

Mark Beard, Head of Audit & Investigations provided a report to inform and update the Committee on the Annual Internal Audit Report and Audit Opinion for 2021/22 and to give details on the performance of the Internal Audit Team and final outturn position for 2021/22.

The production of an Annual Internal Audit Report & Audit Opinion was a requirement of the Public Sector Internal Audit Standards (PSIAS) which were jointly published by the Chartered Institute of Internal Auditors (CIIA) and the Chartered Institute of Public Finance and Accountancy (CIPFA).  The Annual Internal Audit Report & Audit Opinion was also an aid to those charged with governance in their consideration of the Annual Governance Statement in support of the Council’s Financial Statements.  The report also enabled those charged with governance to gain an independent viewpoint on the Council’s Control Environment.

The Annual Internal Audit Report & Audit Opinion was a supporting piece of evidence and did not replace or prevent the Council’s requirement to produce the Annual Governance Statement.

A copy of the Annual Internal Audit Report & Audit Opinion 2021/22 was provided as an appendix to the report and included the following sections:

• Executive Summary;
• Audit Opinion;
• Purpose and Boundaries;
• Review of Internal Control;
• Significant Issues Arising;
• Audit Performance; and
• Analysis of Audit Time – 2021/22.

The key information arising from the report was as follows:

• The Head of Audit & Investigations was able to issue a positive opinion on the systems of Internal Control based on the work carried out in 2021/22.  The opinion score had very slightly dropped from 1.36 in 2020/21 to 1.40 in 2021/22.  The number of recommendations had increased from 8 in 2020/21 to 13 in 2021/22.

• Internal Audit had not identified any issues in 2021/22 during the course of their audit work that would have had a material effect on the Council’s Financial Statements.

• Internal Audit had achieved audit plan coverage of 97.21% in 2021/22.  This was 0.79% below the annual target of 98%.

• Production and publication of the report was a requirement of the Public Sector Internal Audit Standards.  The report satisfied the requirements for those charged with governance and formed a supplementary piece of evidence to the Annual Governance Statement.

Mr Beard highlighted trends from the information contained within the Tables set out in the report.

The Chair asked about Project Management in Table 6 (Block 2 on p.20) and whether this was expected to overrun further.  Mr Beard indicated that the work had been paused because key individuals were not available.  Some areas had had to be covered again with new staff and in some areas the remit had been extended.

The Chair asked about the 8 audit engagements that had not been completed mentioned at a Paragraph 4.4 and when these would be ready.  Mr Beard reported that detail should start to come through at the next meeting and that Project Management was, in fact, already mentioned in the Appendix 1 of the report at Agenda Item 5.  There were  ...  view the full minutes text for item 70.

Report attached.

Mark Beard, Head of Audit & Investigations presented a routine report to inform Members of the Audit Reports issued during the period February 2022 – July 2022 and to bring to the attention of the Committee what the key issues were.

The report included a list of the audits carried out and any key issues, a summary of which is provided below:

Members were reminded that the number of audit reports that were issued between each Committee meeting was subject to variation dependent on the size of the audit and any non-routine audit work, such as investigations, that the Team might become involved in.  Therefore, for the purpose of reporting, only the audit reports fully completed, issued and agreed would be included.

Any investigations that might be carried out would not be included as a matter of routine in the report, particularly if they related to a specific individual or individuals.

There was a target of 98% of the audit plan to be completed by the end of the 2021/22 financial year in terms of audit days completed.

Position as at end of March 2022       =          97.21% of the plan completed

The position at the end of March 2022 could be broken down as follows:-

Completion rates fluctuated from month to month as staff leave was factored in.  Despite the impacts caused by the pandemic, the Internal Audit Team was 0.79% from achieving the planned target for the year.

With regards to 2022/23 there was a target of 98% of the Audit Plan to be completed by the end of the current financial year in terms of audit days completed.  As the Audit Team completed timesheets which then fed into the audit plan, it was possible  ...  view the full minutes text for item 71.

Report attached.

Mark Beard, Head of Audit & Investigations presented a report to inform Members of the outcome of routine follow-ups following the previously agreed action plans for completed Audit Reports.

The report covered the period March 2022 – June 2022.  Details of the follow-ups carried out and actions implemented were provided as Appendix 1 and, at the meeting, Mr Beard outlined the actions carried out.  A list of the topics/service areas covered is as shown below:-

• Creditors; and
• Facilities.

Following the agreement of the recommendations between Management and Internal Audit following the completion of the audit assignment, the area was revisited by Internal Audit and the recommendations were reviewed to ensure they had been implemented as agreed.  This process was known as the ‘Follow-Up’.

Internal Audit assessed the current position against what had been agreed at the end of the audit.  Where no action had been taken by the Service Area, then Internal Audit would question why and issue a revised Action Plan.  Part of the control within this process was consideration by Audit Committee of any issues that arose.  The Committee had the ability to ask questions of Management in the relative service areas why they had not acted upon the agreed Action Plan.  The Committee could also express what its expectations would be with regard to such a problem occurring.

Internal Audit aimed to carry out a Follow Up for each completed audit area within 6 months of completion.  However there were a number of exceptions to that aim:-

i.)    Follow-Up in 6 months would be pointless if the recommendations were a low enough priority to allow a longer time frame.

ii.)   Work of the Audit Team did not allow the Follow-Up to be carried out.  Although Follow Ups were an important part of the process the Head of Audit & Investigations would always have to weigh this against the need for achieving the Audit Plan and auditing the risks the Council faced.

iii.)   There were no recommendations arising from the original audit.

The Chair asked whether partially completed items would continue to be reported.  Mr Beard responded that the partial implementation would be noted and picked up again at the next audit.  Councillor Dawson asked about the Facilities Service Desk role.  Mr Beard responded that it logged the calls for repairs for the Council’s estate, which could include anything from a leaky tap, to broken windows, fire safety or structural issues.  Health and safety issues would be given priority.  Some repairs could be carried out by the Council’s handyman, but others required external contractors.

Resolved                                    -    That the Committee notes the content of this report for informational purposes.

Report attached.

Mark Beard, Head of Audit & Investigations presented a report on the revised Internal Audit Charter which had been updated to reflect both good working practices and also to ensure it remained aligned with the Public Sector Internal Audit Standards (PSIAS).

Mr Beard outlined that the Charter set out the rules and ethos within which Internal Audit operated and how it interacted with the Corporate Management Team and the Audit Committee.  It had originally been planned to update this Charter around 18 months ago, but the work had been put on hold due to other priorities.  The PSIAS were based on international standards which could be applied equally to the private sector.  The ‘governing board’ in the context of a local authority was generally the Audit Committee.  The Charter would be taken into consideration when the Internal Audit function was externally inspected.

The report indicated that the PSIAS were the standards within which Internal Audit worked and had to comply with and stated that an Internal Audit function must have in Internal Audit Charter.

The Internal Audit Charter established the framework within which Hyndburn Borough Council’s Internal Audit Service operated to best serve the Council and to meet its professional obligations under the PSIAS.

The previous version of the Internal Audit Charter had been adopted in 2017.  The 2022 Charter replaced the earlier version and had been updated to reflect current working practices by the Internal Audit Service and also ensured that it remained aligned to the requirements of the PSIAS.

The Internal Audit Charter covered:-

• Relevant Regulations and Interpretation;
• Definitions;
• Mission & Core Principles;
• Responsibilities;
• Independence, Objectivity and Integrity;
• Reporting Lines and Relationships;
• Access to Information;
• Internal Audit Resources;
• Competency;
• Quality Assurance and Improvement;
• Investigations and Counter-Fraud;
• Engagement Planning;
• Performing the Engagement;
• Communicating Results;
• Monitoring Progress of Actions Agreed; and
• Responsibilities in relation to the Internal Audit Service.

The areas contained within the Internal Audit Charter linked back into the PSIAS requirements.

Councillor Carole Haythornthwaite enquired if there was a requirement to submit the Hyndburn Charter to the overseeing body for the PSIAS.  Mr Beard indicated that each authority would produce its own bespoke Charter and there was no requirement to submit the document to any other body.  However, it would be subject to scrutiny during the external review of Internal Audit and would be mentioned if there were any issues.  Hyndburn’s Charter included all of the mandatory elements and some other standards which were considered to be important locally.

Resolved                                    -    That the Committee notes the content of the report for informational purposes.

Report attached.

Mark Beard, Head of Audit & Investigations presented a report to inform members of the updated self-assessment of the Public Sector Internal Audit Standards (PSIAS) which he had carried out and also the Quality Assurance and Improvement Programme (QAIP) which set out how the Council managed any standards that were not compliant, thus ensuring conformance with the PSIAs overall.

Mr Beard highlighted that a report was provided on this matter to the Committee each year, which might be a short report or a longer format, depending on the circumstances.  Because of the new Members on the Committee in 2022/23, the longer format report had been produced this year.  The authority needed to explain where it did not comply with standards, otherwise it would need to state that it did not comply on every piece of audit work carried out.  For Hyndburn, there were only a small number of ‘partiality conforms’ and ‘this has not occurred’/‘not applicable’ entries on the pro forma.  The self-assessment then led to the Quality Assurance & Improvement Programme, which was an Action Plan and living document, which explained how any issues were being addressed.  That document provided that evidence of conformity required by the external inspectors of Internal Audit.  The inspections were due to take place every 5 years and the next one was due to commence in November 2022.

The report informed Members that the PSIAS was the framework that Internal Audit had to work within and comply with.

In addition to the PSIAS, Internal Audit had to have a Quality Assurance & Improvement Programme (QAIP).  The QAIP detailed any standards which were not met or were partially in conformance together with any other key issues linked to the PSIAS.  The QAIP included what steps were being taken to progress such issues and should be viewed as an ongoing improvement programme.

The Head of Audit reviewed the PSIAS annually to ensure that the Internal Audit Service conformed to the PSIAS, highlighting if there had been any changes and ensuring that any such changes were reflected in the QAIP.

The 2022 self-assessment of the PSIAS and the 2022 updated QAIP were provided as appendices to the report.

The Chair enquired whether partial conformity with the PSIAS was a major concern and whether the Council should conform.  Mr Beard said that not all standards needed to conform, because most of the standards had a high degree of conformity.  The Internal Audit Team maintained good, inclusive relationships with Corporate Management Team and individual Heads of Service.  He provided an example of partial conformity in connection with Standard 2050 (Coordination) and explained the reason for this assessment.

Resolved                                    -    That the Committee notes the updated PSIAS Self-Assessment and the updated QAIP.

Report attached.

Mark Beard, Head of Audit & Investigations presented a report to inform and update the Committee about the Public Sector Internal Audit Standards (PSIAS) external peer review process, which would ensure that Hyndburn Borough Council met the requirement under PSIAS that the Internal Audit Service was externally assessed once every 5 years.

The PSIAS stated that a local authority internal audit function must be subject to an external inspection against the PSIAS once every 5 years.  The last external inspection of Hyndburn’s Internal Audit Service had taken place in February 2018.  The next external inspection of Hyndburn’s Internal Audit Service against the PSIAS was provisionally timetabled for November 2022.

There were 8 Lancashire Councils including Hyndburn taking part in a Lancashire Peer Review process.  Of the remaining Lancashire Councils which were not part of this scheme, two Councils had chosen to buy-in their external review from an outside provider.  Four Councils had internal audit provided by Mersey Internal Audit Agency.  One Council was part of the Northwest Chief Audit Executives Group and they also supplied internal audit to another Council.

There was a sub-group of the Lancashire District Councils’ Audit Group consisting of the Heads of Audit from Burnley, Blackpool, Chorley / South Ribble (one head of Audit covered both Councils), Hyndburn and Wyre.  This sub-group had reviewed and updated the methodology for the Lancashire Peer Review process that was based on the one developed previously by the North West Chief Audit Executives Group.

A Memorandum of Understanding (MofU) had been produced that set out the key aspects of the process including:

• The participating Councils;
• Duration of the MofU;
• Confidentiality;
• Governance;
• Moderation and Quality Control;
• Cost; and
• Methodology.

A copy of the MofU was included as an appendix to the report.

The peer reviews had been split into grouped areas to perform the inspections.  These groupings were as follows:

• Burnley, Blackburn with Darwen, Chorley / South Ribble;
• Blackpool, Hyndburn, Wyre; and
• Preston

Preston was originally in a triad with 2 other authorities both of whom had now outsourced their internal audit provision to an external provider.  As a result, the external review of Preston City Council’s internal audit service had been carried out using a shared approach by a number of the other Heads of Audit participating in this process.  Mr Beard indicated that it was possible that Ribble Valley might join the Lancashire Peer Review group in the future.

The timetable for carrying out all 8 external reviews was between June 2021 and March 2023.  The external reviews of the internal audit service for Blackburn, Blackpool and Preston had already taken place with the rest still being outstanding.

Hyndburn Borough Council’s external inspection of Internal Audit was scheduled to take place during November 2022 with the exact dates still to be set.  As part of this process the external assessors would interview key personnel as defined within the PSIAS.  This would include:

• Chief Executive;
• Director of Finance s151;
• Monitoring Officer;
• Chair of Audit Committee;  ...  view the full minutes text for item 75.

To note proposals for Member development in relation to the role and responsibilities of Audit Committee Members.

Martin Dyson, Head of Accountancy outlined proposals for Member development in relation to the role and responsibilities of Audit Committee members.

It was acknowledged that for 2022/23 the Committee included several Members who had not served on this body before.  Therefore, it would be useful for training to be provided on roles and responsibilities and the processes undertaken or overseen by the Committee.  It would be useful for the Committee to participate in an evaluation of its own effectiveness.  This could be achieved by undertaking a self-assessment.  A self-assessment had not taken place in Hyndburn for a number of years.

Members were asked to consider whether they wanted refresher style training, or training on the basics, which could be delivered in house by officers.  It was suggested that the Chair should undertake additional training.  The self-assessment should be timed to take place before the Review of Internal Audit.

Mr Beard highlighted the Chartered Institute of Public Finance and Accountancy (CIPFA) document Audit Committees: Practical Guidance for Local Authorities and Police (2018 Edition), which could be used for learning and development and contained a self-assessment tool at Appendix D.  Mr Beard undertook to circulate the document after the meeting.  It was suggested that a phased approach to the self-assessment be carried out as follows:

• STAGE 1 – each councillor to read the guidance document.

• STAGE 2 – each councillor to complete the self-assessment questionnaire to be achieved in time for the November 2022 Audit Committee meeting (further guidance would be provided on this process).

• STAGE 3 – Mr Beard to collate the self-assessment questionnaires and produce a report to the November Audit Committee.  This would highlight any knowledge / skills gaps too.

Mr Dyson also reported that an additional meeting of the committee would be required before November to provide the updated position on the Annual Statement of Accounts 2020/21.  The signing off process had been delayed by approximately 1 year.  The authority was working closely with the new auditors, Mazars, to finalise the accounts.  Mazars representatives had been unable to attend the Committee today due to other commitments and sickness.

Councillor Noordad Aziz enquired bout he reason for the change of external auditors from Grant Thornton, as he believed that all Lancashire authorities were part of the same cohort audited by this company.  Mr Beard indicated that the change had been undertaken by agreement with Public Sector Audit Appointments (PSAA) and Grant Thornton to enable the auditors to better manage capacity and client relationships.  Councillor Aziz asked if any other Lancashire authorities used Mazars, as it would be useful to share experience.  Mr Beard confirmed that Rossendale Borough Council had engaged Mazars.  Councillor Aziz commented that the disestablishment of the Audit Commission in 2015 had not worked well, given that the change had been intended to drive forward efficiencies.

Mr Dyson indicated that delays to the completion of the Annual Statement of Accounts for 2020/21 were largely outside of the authority’s control.  ...  view the full minutes text for item 76.