Agenda Item No 10

The Vale of Glamorgan Council

Audit Committee: 25th April 2016

Report from the Operational Manager - Audit as the Head of Audit

2015/16 Annual Internal Audit Opinion

Purpose of the Report

1. To present to members of the Committee the Operational Manager - Audit (as the Head of Audit) annual opinion report on the overall adequacy of the Council's internal control environment.

Recommendation

THAT the report on the 2015/16 Head of Audit's Annual Internal Audit Opinion be considered and approved.

Reason for the Recommendation

To keep the Audit Committee informed.

Background

2. This report gives a brief description of the role of Internal Audit, the control environment within which internal audit operates and also provides a summary of work carried out during the year to 31st March 2016. A statement of overall opinion on the internal control environment is also given in support of the Annual Governance Statement which the Council is required to include with the Statement of Accounts.
3. Internal Audit is an assurance function that primarily provides an independent and objective opinion to the organisation on the control environment comprising risk management, internal control and governance by evaluating its effectiveness in achieving the organisation's objectives. It objectively examines, evaluates and reports on the adequacy of the control environment as a contribution to the proper, economic and effective use of resources.
4. The control environment comprises the organisation's policies, procedures and operations in place to:

• Establish, and monitor the achievement of, the organisation's objectives;
• Identify, assess and manage the risks to achieving the organisation's objectives;
• Facilitate policy and decision making;
• Ensure the economical, effective and efficient use of resources;
• Ensure compliance with established policies, procedures, laws and regulations;
• Safeguard the organisation's assets and interests from losses of all kinds, including those arising from fraud, irregularity or corruption.

5. One of the main aims of the Section is to provide assurance on the Council's overall system of internal control. This is achieved in part through delivery of the Annual Audit Plan which is designed to address:

• Requirements of the Audit Committee;
• Delivery of a scheduled programme of audits on a risk based needs assessment;
• Support the Managing Director and the Head of Finance in discharging their statutory duties.

Relevant Issues and Options

6. Attached at Appendix A and Appendix B is a detailed report (including the outturn for 2015/16) on the work undertaken by Internal Audit during the financial year 2015/16. The purpose of this report is to satisfy the requirements of the Accounts and Audit (Wales) Regulations 2014 and the Head of Audit's annual reporting requirements set out in the Public Sector Internal Audit Standards. The following information should be forthcoming:

• Include an opinion on the overall adequacy and effectiveness of the organisation's control environment;
• Disclose any qualifications to that opinion, together with the reasons for the qualification;
• Present a summary of the audit work from which the opinion was derived, including reliance placed on work by other assurance bodies.
• Draw attention to any issues the Head of Audit judges particularly relevant to the preparation of the Annual Governance Statement.
• Compare the actual work undertaken with the planned work and summarise the performance of the internal audit function against its performance measures and targets;
• Comment on compliance with the Standards of the Code;
• Communicate the results of the internal audit quality assurance programme.

7. The opinion contained within the report relates to the system of internal control at the Council and the overall control environment in place. The system of internal control is designed to manage risk to a reasonable level rather than to eliminate the risk of failure to achieve corporate/service policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. Included within Appendix B is the supporting evidence which lists all those assignments which have been completed during the year where an audit opinion has been applied.
8. On the basis of internal audit work undertaken in 2015/16 and taking into account all available evidence, it is my opinion that a reasonable assurance level can be applied to standards of internal control at the Vale of Glamorgan Council for the year ended 31st March 2016.
9. One key governance, risk management and internal control issue has been identified during the year and this relates specifically to the procedures and processes in place for the management of the Council's Waste Contracts. In addition, with significant savings required throughout the Council, there is an inherent risk of breakdown in the systems of control particularly where roles, responsibilities and systems are changing.

Resource Implications (Financial and Employment)

10. None as a direct consequence of this report.

Sustainability and Climate Change Implications

11. None directly from this report

Legal Implications (to Include Human Rights Implications)

12. Provision of an adequate and effective Internal Audit function is a legal requirement under the Accounts and Audit (Wales) Regulations 2005 as amended from time to time.

Crime and Disorder Implications

13. Pursuing initiatives to prevent, detect and deter crime is encompassed within the terms of reference under which the audit function operates.

Equal Opportunities Implications (to include Welsh Language issues)

14. None as a direct consequence of this report.

Corporate/Service Objectives

15. The work of audit is intended to assist in the achievement of all corporate and service objectives.

Policy Framework and Budget

16. The proposals in this report are in accordance with the policy framework and budget.

Consultation (including Ward Member Consultation)

17. No further consultation is proposed.

Relevant Scrutiny Committee

18. Corporate Resources.

Background Papers

None

Contact Officer

Helen Smith - Operational Manager - Audit Tel: 01656 754901

Officers Consulted

External Audit - Wales Audit Office

Responsible Officer:

Carys Lord - Head of Finance / Section 151 Officer