Agenda item

This report sets out the findings and recommendations from the 2012/13 review of the effectiveness of the system of internal audit in Surrey County Council.  

Declarations of Interest:

 None.

Officers:

Sue Lewry-Jones, Chief Internal Auditor

Stephen Mungavin, CIPFA

Key Points Raised During the Discussion:

1.    The representative of CIPFA introduced the report, explaining that the effectiveness review for 2012/13 assessed the Council’s readiness for the Public Sector Internal Audit Standards which come into effect from 1 April 2013.  Many aspects of the Internal Audit service were found to be good but there were some areas which could be improved to meet the new Standards.

2.    The Cabinet Member for Change and Efficiency requested an explanation of risk-based planning as opposed to risk priority planning.  The CIPFA representative explained that risk priority planning is a system of prioritising audit work through identifying, scoring and ranking risks.  Resources are then aligned to the highest scored risk areas.  In risk-based planning, there is a clear thread between high level objectives and risks, which feed into the control environment and audit panning on a periodic basis and into audit works itself.

3.    It was suggested that Galileo could be more effectively used to centrally record and evidence continuous professional development.

4.    Members expressed concern about increasing the amount of paperwork necessary for audits.  The CIPFA representative explained formal evidence of audit planning discussions would help steer the auditor and clarify what is being reviewed for the Manager.  However, records could be kept electronically rather than in hard copy.

5.    There was support from both the CIPFA representative and some Members for replacing the current audit opinions with a traffic-light system.

6.    The CIPFA representative clarified that while the guidance suggests that the Chief Internal Auditor should report to the Chief Executive in order to retain independence, it was understood that this may not be practical in an organisation of Surrey’s size.  No weaknesses were identified in the operation of the current arrangements.

7.    CIPFA views the scope of Internal Audit as being beyond a narrow financial accounting role.  If the Council believes that there is risk with regard to the structure of the organisation, CIPFA does not perceive any difficulty in Internal Audit looking at management structures.

8.    In response to a query about how robust the conclusions can be when they are based on only two Internal Audit reports, the CIPFA representative explained that the two reports showed a similar pattern and therefore provided adequate evidence.

9.    In relation to paragraph 53, the Chairman noted that an independent review of governance arrangements had been carried out by the audit commission some two years ago.

10.  The Chief Internal Auditor informed the Committee that she was pleased with the report by CIPFA.  With regard to the Standards where the opinion is that Internal Audit is “partially compliant”, the issues have either already been addressed, are in the Internal Audit Charter to be approved by the Audit and Governance Committee later on the agenda, or are otherwise easily rectified.  The Chief Internal Auditor stated that she did not wish to rush into risk-based planning but would provide training to the audit team and review how this was approached elsewhere.  Also, while some auditors used Galileo consistently, others did not and this report would be used to address this with the team.  The Annual Internal Audit Report to be considered by the Committee in June would provide an update on progress on implementing the review recommendations.

Actions/Further Information to be Provided:

None.

Resolved:

The Committee

a.    Noted the report.

b.    Agreed to receive an update on progress in implementing the recommendations arising from the review as part of the Annual Internal Audit Report to be presented to the Committee in June 2013.

Next Steps:

To receive an update on progress in implementing the recommendations of the External Review of the System of Internal Audit at Surrey County Council (Recommendations tracker ref: A7/13).