A copy of the report is enclosed.

The Committee considered the report of the Deputy Chief Executive and City Treasurer which set out the process for the annual review of effectiveness of the Council’s system of internal audit as part of its governance assurance processes. The process is designed to provide assurance to the Deputy Chief Executive and City Treasurer and the Audit Committee over the system of internal audit including the role, function and performance of the internal audit service. 

The Chair invited questions from the Committee.

A member referred to the audit outputs issued to date and asked officers to explain why the number of audits for 2018/19 had reduced in comparison to previous years and the reasons for this. Officers were asked to explain changes to the Audit Committee Terms of Reference regarding “impairment to independence or objectivity arising from additional roles outside of internal auditing of the Head of Internal Audit and Risk Management.

The Committee was informed that there had been three time consuming investigations that, although were carried out separately, were counted as a single output. Also, since 2016 there were now fewer standard compliance grant audits taking place that were quicker to complete. The development of the new audit approach had required time with members of the audit team which had been a factor in completing audit work. In addition, the point was made that the outputs from external counter fraud work undertaken is not recorded as an audit output. In view of the number available resource hours (2500 days) and the volume and complexity of the audits, it was anticipated work would increase, with approximately 120 audit outputs per year. The Head of Internal Audit and Risk Management explained that the change to the Terms of Reference was to provide clarity on his role and to enable him to not be involved in areas of audit work he may be responsible for.

A member referred to paragraph 3.8 of the report and asked officers why there was an intention to change the levels of assurance from five to four in 2019/20 as part of the revised audit approach. In reference to paragraph 3.9, officers were requested to send all audit report to Executive Members rather than a summary implementation of recommendations. The point was made that Executive members were part of the assurance reporting framework and must be included.

The Head of Internal Audit and Risk Management reported that the assurance levels had been amended to an even number to avoid setting ‘safe’ middle ground levels of assurance. Officers undertook to forward full audit reports and summary reports to Executive Members and this would be included within the Audit manual.

A member referred to the proposed revision to the Audit Committee Terms of Reference, Internal Audit and requested that the word “Review and” be inserted at the start of the second bullet point relating to the risk-based internal audit plan. Officers were also requested to retain paragraph 4.4 as detailed in the current Audit Committee Terms of Reference.

The Head of Internal Audit and Risk Management undertook to retain the words “Review and” in the proposed Terms of Reference, Internal Audit - second bullet point and to retain paragraph 4.4 of the current Audit Committee Terms of Reference in the proposed version of the Terms of Reference.

The Committee agreed that it was satisfied with the assurance provided by the review of effectiveness and management of improvement actions provided from the QAIP 2018/19 and planned actions for 2019/20, as detailed in Appendix 1 of the report.

Decisions

1.    To note the report submitted and the comments made.

2.    To note the amendments made in respect of the Audit Committee Terms of Reference, as detailed in Appendix 2 of the report submitted.

3.    To approve the Internal Audit Charter, as detailed in Appendix 3 of the report submitted.

4.    To request that a report is submitted to the Audit Committee in six months to provide details on the circulation of audit reports and summary reports to Executive Members.