The report of the Deputy Chief Executive and City Treasurer is enclosed.

The Committee received a report of the Deputy Chief Executive and City Treasurer Head of Internal Audit and Risk Management which discussed the annual review of effectiveness of the Council’s internal audit function as part of ongoing assurance processes. The report highlighted that the review of effectiveness had been scheduled for submission to this Committee in April 2021 but was delayed due to the pandemic.

Key points and themes in the report included:

• The context, structure and scope of the review
• An overview of audit planning and priorities
• A discussion of resources
• The purpose and scope of the Quality Assurance Improvement Plan (QAIP)
• A summary of progress and activity up to September 2021.

A member asked the progress of the longstanding service restructure. The Committee was informed that whilst the progress of implementing a revised structure had been delayed by the impact of the pandemic, matters were in hand and recruitment should take place in December of this year. This would therefore strengthen the core internal audit function as well as counter fraud activity. The Committee resolved to receive a report on the implementation of the Internal Audit Service restructure at its January 2022 meeting.

Discussions moved to the Internal Audit Service should be externally reviewed. The Committee endorsed the proposal that Manchester undertakes a review of Birmingham City council in early 2022 and be reviewed by the team from Sheffield in Spring 2022, noting that a further report on the timing and scope shall be submitted to a future meeting of the Committee.

Noting the reports narrative around priority and pressures, a member asked about the balance of activity between Manchester City Council and Bolton Metropolitan Borough Council. The Deputy Head of internal Audit and Risk management explained that whilst Bolton Metropolitan Borough Council had its own internal audit team, support was provided by the Head and Deputy Head of Internal Risk Management. He estimated that prior to the pandemic this took up approximately 30% of resource, though this reduced significantly during the pandemic as them team was engaged in pandemic recovery fund-related activity. He invited the Committee to note that the reduction in planned audit activity within the Council’s own team had partly been due to a lack of client availability. He also explained that as things return to ‘business as usual’ the plan was to re-establish links with Bolton and determine the level of support required by their in-house team. Noting the comments around the depth and diversity of the skills mix within the team, and using the example of cyber fraud risk, a member asked how well this competence mix matched the balance of risk across the organisation. The Deputy Head of Audit and Risk Management said that whilst there was sector specific competence within the team, retention of ICT auditors within the organisation presented a challenge and as such, support from Salford City Council’s lCT audit was outsourced. He assured the Committee that through this collaborative approach cyber risk is effectively audited in Manchester.

Discussions then moved to the effectiveness of support provided to the Internal Audit service through the function of this Committee. The Deputy Head of Audit and Risk Management explained that the frequency of training for Audit Committee members was determined through specific CIPFA guidance. The Chair then spoke about the complexities of local government finance and governance arrangements and indicated that a private training session for committee members would be scheduled for its December meeting where practices to explore and underpin efficacy may be discussed in greater depth.

There was a discussion about the Committee’s Terms of Reference with a particular focus on impairments to independence or objectivity within the audit function and the periodic review of safeguards to limit such impairments. The Deputy Head of Audit and Risk Management gave assurance that all possible conflicts of interest are explored through existing governance arrangements and agreed to provide a report outlining this area of activity to a future meeting of the committee. The Committee also agreed to add a report on the selection of external service providers and the agreement of the terms of appointment to its future work programme.

The Committee the discussed the focus of audit planning priorities as pandemic related demands lessen. The Deputy Head of Audit and Risk Management indicated that the internal audit service was currently focussing capacity on business-as-usual activities at an approximately of 80% of previous levels.  The report outlined areas of focus which included two examples of the Council’s wholly owned companies. The Deputy Chief Executive and City Treasurer asked the Committee to note that a report that discussed governance arrangements concerning the council’s wholly owned companies had recently been submitted to the Resources and Governance Scrutiny Committee and that this could be shared with Audit Committee members for information.

Decisions

1          Note the level of assurance provided by the review of effectiveness and progress on management improvement actions from the Quality Assurance Improvement Plan (QAIP) and planned actions for 2021/22.

2          To endorse the proposal for an External Audit Assessment of the Internal Audit Service through a Core Cities peer review programme, noting that a further report on timing and scope shall be submitted to a future meeting of the committee.

3          To agree the Audit Committee’s Terms of Reference

4          To endorse the Internal Audit Charter.

5.         To schedule a report which discusses the implementation of the Internal Audit Service restructure at its January 2022 meeting.

5.         To schedule a report on safeguards that limit impairments to independence within the internal audit function to the Committee’s future work programme.

6.         To schedule a report which discusses the selection of external service providers (including the agreement of the terms of appointment) to the Committee’s future work programme.