Agenda item

The Head of Assurance (HoA) reported that he had reviewed and updated with minor track changed amendments the Internal Audit Charter (Appendix 1), which defined the purpose, activity, and responsibility of Internal Audit activity.

The HoA then discussed the Internal Audit Strategy 2024/25 set out in Appendix 2, which detailed how the Internal Audit Service was delivered, in line with the Charter. The Strategy had been updated to reflect minor changes in working practice as a result of the recent external assessment against the Public Sector Internal Audit Standards. The service was provided by a small inhouse team supported by externally provided resources. It was proposed that the existing arrangements to co-source external support from both Mazars and PwC via appropriate framework contracts be continued into 2024/25.

The scope of the Strategy covered all LBBD activities, including those provided by external providers and legal entities. As such the Internal Audit Plan referred to below included risk-based audit activity in the Council’s companies.

The Internal Audit Plan which was compiled annually prior to the commencement of each financial year and was developed in line with the Charter and Strategy. The Plan also detailed the manner in which Internal Audit resources would be used including draft audit titles and proposed audit objectives. 

As part of the risk-based approach 120 of the 865 audit days within the Plan had been held back in the event that some, as yet unspecified, risk emerged during the year which required an immediate response. The Plan was set out in Appendix 3.

The Committee in recognising the crucial importance of Internal Audit questioned the size and capacity of the team to deliver what amounted to an ambitious Audit Plan, and within that context what the extent and cost of external support was. The HOA recognised that the team was not big enough to deliver the Plan in isolation, and therefore was reliant on external support. However, he made the point that it did not all come down to staff resources, as a number of the audits were of a specialist nature and consequently that specialism was not always available in house. Most London Boroughs did buy in services from Mazars and PwC, and many bought them in a greater number of days than LBBD. That said steps were being taken to build in house resilience. In the past it had proved difficult to fill the more senior posts and so by reducing vacancies to trainee auditor levels, the HOA had recruited two apprentices via the Pan London Apprenticeship Scheme that had proved very successful. Both were doing well, practically and exam wise and with the right structure in place, this would allow for career progression. 

In light of the above response a question was raised as to the ability of the team to provide consultancy services, given the size of the team. The HOA stated that the majority of this work tended to be around control design. For example, when a new IT system was due to come online (a few were included as part of the proposed Plan) it was advantageous for Audit to input at the design stage rather than review it once it was developed and operating. As it was the Council’s Audit Manager was a qualified IT auditor which was very valuable to the organisation.

Turning to particular parts of the proposed Plan mention was made of a number of service areas where there was limited or no assurance from previous years, highlighting in particular housing repairs and maintenance, which was an example of an area with no assurance in previous years. Taking that example the HOA stated that management advice at the time indicated that changes were due to be made to the control environment to improve matters. However rather than taking this at face value the service had been added to the Plan for review. This approach had similarly been taken with other services as listed in the Plan where there were limited or no assurances from previous years.

The aim of the Plan was to enable the HOA to give an opinion at the end of the year of the overall adequacy and effectiveness of the control environment which included prior year coverage and concerns. 

Given the situation with the housing repairs and management service and notwithstanding any mitigation actions taken to improve the assurance status, the Committee placed on record its concerns seeing the significant funding incurred in that area.

Other matters raised by Members and responded to by the HOA concerned the auditing of the Council’s companies, the costs of engaging external audit consultancy, the approach taken in preparing the Plan, specifically aligning it to the Council’s vision and key priorities, the rationale behind the proposed reviews set out in the Plan especially in areas which were already noted as being of substantial assurance, whether the number of days allocated to each review was seen as sufficient, and what was the meaning of TBC in the case of some audits dating back a number of years. 

The Committee agreed to approve the draft Internal Audit Charter, as well as both the Strategy and Plan for 2024/25.