The Audit Committee has approved recommendations for improving the Council's internal control systems.

URL: https://rother.moderngov.co.uk/ieDecisionDetails.aspx?ID=1812

Decision Maker: Audit Committee

Outcome: Recommendations Approved

Is Key Decision?: No

Is Callable In?: No

Purpose: To summarise the work undertaken by Internal Audit in 2024/25; to report on the Internal Audit Team’s performance during the year; and to provide an opinion on the Council’s control environment based on the results of the Internal Audit work.

Content: The Council was required to ensure that it had reliable and effective internal control systems in place. The adequacy of these systems was tested by both Internal and External Audit.   In the year up to 31 March 2025, Internal Audit had operated in accordance with the Public Sector Internal Audit Standards (hereafter referred to as ‘the Standards’). It was a requirement of the Standards that Internal Audit reported to the Audit Committee on audit matters and any emerging issues, not only in relation to audit but risk management and corporate governance.  In line with the Standards, the Audit Manager was expected to present an annual report on the performance of the Internal Audit Service and to provide an overall opinion on the Council’s framework of governance, risk management and control.   Four audit reviews were completed in the final quarter of 2024/25.  All audits provided substantial assurance on the overall governance arrangements.  An overview of the findings arising from the audits was detailed in Appendix A to the report.   Appendix B to the report provided a summary of all audit reports completed in 2024/25, the level of compliance and assurance rating for each review, and the overall performance of the Internal Audit Team against the plan.  Details of all audit reports issued in the first three quarters of 2024/25 had already been reported to this Committee at previous meetings.   The summary showed that only 87.1% of the 2024/25 Audit Plan was completed (marginally below the target of 90%).  This was primarily due to some work not going ahead i.e. Waste Contract, U4BW Update Project Consultancy and overruns of the Estates Income and De La Warr Pavilion (DLWP) and Heart of Sidley – Levelling Up Funding (LUF) and Programme Governance audits, and the complexity of the latter and the number of issues found with both.  Two audits (Creditors and Cyber Security) were still in progress at the end of the year.  Members noted that the Creditors audit was now completed and issued.   Appendix C to the report showed a summary of the progress made on implementing the audit recommendations reported at previous meetings. There were currently 13 recommendations in the ‘Old Years’ section that were still outstanding.  Most related to 2023/24, however five older recommendations remained outstanding.  Overall slow progress was being made.  The Audit Manager would continue to work with the Heads of Service to ensure progress was maintained.   Good progress had been made on the current year recommendations, with over two-thirds having now been implemented, and work was underway in most of the remaining cases.   In addition to compliance work, Internal Audit also allocated time each year to undertake counter fraud duties, primarily focused on council tax and business rates and the Community Infrastructure Levy. This work resulted in total savings/additional income of £36,512 in 2024/25.   The Audit Manager also coordinated the annual National Fraud Initiative data matching exercises which had not resulted in any financial savings in 2024/25.   Routine audit work often highlighted financial errors which could result in savings (or increased income) once corrected. Savings totalling £115,865 had been identified in 2024/25, relating to five different audit areas.  An estimated £20,000 VAT overpayment had been identified in the Land Charges audit, which would be recovered over the next few months.   The Audit Manager’s latest self-assessment of his Team’s compliance with the Standards (Review of Internal Audit 2024/25) was approved by Members in March 2024.  This showed that the action plan for 2024/25 had been largely met, but further steps would be required in 2025/26 to achieve general compliance.  The report concluded that there was a high level of effectiveness overall, which Members were pleased to note.   Quality assurance questionnaires were used to capture client feedback and operational staff feedback.  Due to lack of responses a new system of collating feedback would be developed for 2025/26. However, the responses that were received were positive.   Performance measures set for the Audit Team demonstrated that three of the targets for 2024/25 were met or exceeded. The targets for governance audits and overall completion of the audit plan were not met because of the issues already outlined in the report.   The results of the 2023 peer review and the recent self-assessment exercise performed by the Audit Manager, both showed that the Council’s Internal Audit Service generally conformed with the Public Sector Internal Audit Standards.   Under the Accounts and Audit Regulations 2015, ultimate responsibility for maintaining a sound system of internal control rested with the Council, but this had been delegated to the Deputy Chief Executive (as Section 151 Officer) in 2024/25. The assessment of the control environment was made by reviewing the recommendations made in Internal Audit reports and by the production of the Annual Governance Statement.  The Annual Governance Statement would be considered by the Committee at a separate meeting.  The work carried out by Internal Audit in 2024/25 had highlighted concerns in two particular areas (Estates Income, and DLWP and Heart of Sidley – LUF and Programme Governance), which were outlined in the report.  Other issues had been addressed, though some areas of concern remained.   Taking all of the factors highlighted in the annual and the quarterly reports into account, the Audit Manager’s overall opinion on the Council’s framework of governance, risk management and control in 2024/25 was adequate and effective.   An update on the Whistleblowing Policy activity in 2024/25 was provided in Appendix D to the report.  In summary, a total of 20 whistleblowing cases were reported.  Most cases focused on either Benefit / Council Tax / Business Rates Fraud or Housing Issue / Tenancy Fraud.  All cases were initially reviewed and then either referred to the relevant Council officer for further investigation or reported to the appropriate authority, although the outcome of this work was not always known.   Members had the opportunity to ask questions and the following points were noted during the discussions:   •     for the two audits that had been given a minimal assurance rating, DLWP and Heart of Sidley – LUF and Programme Governance, and Estates Income, there was just one recommendation outstanding on the former and improvements made to the latter in terms of resourcing, but concerns remained regarding the backlog of rent reviews and expired leases; •     initial deadlines set by the Government for both the DLWP and Heart of Sidley LUF programmes had been unrealistic,  which mirrored the experience of other LUF projects  nationwide. Timescales had since been extended and the Heart of Sidley, in particular, was now on track for completion on time. Lessons had been learnt on both sides; •     the newly formed Corporate Development Team had oversight of the LUF and Levelling-up Partnership projects and the Corporate Programme Board, which was a Member Board, had oversight of the Capital Programme, both of which had improved the understanding and reporting of projects. There were still further improvements to be made in the area of communications; and •     once the footprint of the new authority was known, the structure of functions such as Internal Audit would require careful consideration. Joint work had already commenced on financial modelling between the authorities across East Sussex.   Members of the Committee were supportive of the Audit Manager’s opinion and noted Internal Audit’s activity and performance in 2024/25. Members thanked the Audit Manager for the work of the Internal Audit team.   RESOLVED: That:   1)   Internal Audit’s activity and performance in 2024/25 be noted; and   2)   the Audit Manager’s opinion that the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control in 2024/25 was adequate and effective be approved.

Date of Decision: June 9, 2025