The report of the Head of Policy and Governance is attached.

Contact: Barry Hanson 07990 086409

The Committee received a report from the Head of Policy and Governance presenting the internal audit performance position for the period April to August 2026 and the revised annual audit plan for 2026/27. The Head of Policy and Governance reported that twenty-nine final audit reports had been issued during the period, with seventeen providing either good or reasonable assurance. This represented 58% of opinions issued, compared with 35% in the equivalent period of the previous year. It was also reported that there had been a corresponding reduction in limited and unsatisfactory assurance opinions to 42%, compared with 65% in the previous equivalent period and 48% in the prior year outturn. The Committee was advised that 222 recommendations had been made across the reports, including two fundamental recommendations, and that revisions to the audit plan had been undertaken in response to resource constraints, slippage in delivery, emerging risks and consultation with Senior Officers.

In response to questions from Members, the Chair sought assurance regarding the significance of the reported improvement in assurance levels and whether there were areas of repeated limited assurance. The Head of Policy and Governance advised that repeated limited assurance findings were a concern, as they indicated that previously agreed management actions had not been implemented, and confirmed that such issues were taken into account when forming his year-end audit opinion.

In response to a query about how assurance was obtained that management had implemented agreed audit recommendations along with the escalation processes that existed where actions were not completed, the Head of Policy and Governance explained that there was a defined escalation framework depending on audit assurance levels, whereby reports with limited or unsatisfactory assurance were escalated to relevant Service Directors and, where necessary, statutory officers including the Section 151 Officer, the Chief Executive and the Monitoring Officer. It was confirmed that implementation of significant and fundamental recommendations was monitored and escalated where required.

Further concern was raised regarding whether the audit plan appropriately reflected the Council’s financial position and whether sufficient audit focus was being placed on high-cost and high-risk areas, particularly Children’s Services and Adult Social Care. It was noted that Children’s Services were experiencing significant financial pressure and that some key transformation-related audits appeared to have been reduced or removed. It was explained that the audit plan was developed through statutory requirements, risk assessment, consultation with Service Directors and statutory officers, and consideration of available audit resources. It was further explained that some audit areas had been adjusted due to resource reductions following staff departures and that certain areas were removed where alternative assurance existed, where management had already acknowledged issues and implemented action plans, or where work was ongoing and audit activity would not add value at that time. The Internal Audit Manager added that audit timing was a key factor, particularly where services were mid-transformation or where assurance work would duplicate existing reviews or management activity.

The Section 151 Officer further advised that internal audit was intended to support management improvement rather than duplicate operational responsibility, and that auditors did not always hold the specialist service expertise required to assess operational delivery models in areas such as social care in detail. It was also explained that audit activity must balance value for money with assurance coverage and capacity constraints.

A query was raised regarding interpretation of the audit trend data, and it was noted that over a five to six-year period the proportion of reasonable and limited assurance opinions had remained broadly stable, while extremes of good and unsatisfactory assurance were reducing. The Head of Policy and Governance responded that no firm conclusions could yet be drawn from the trend data in isolation and that a clearer picture would emerge once further audit work was completed later in the year.

A further question was raised concerning the reduction in audit resources due to the loss of a principal auditor and a senior auditor. The Head of Policy and Governance confirmed that recruitment would initially focus on the principal auditor post, with decisions on the second post to be made following completion of that recruitment process.

Members also queried whether changes in the role of the Head of Policy and Governance, including the addition of risk management responsibilities, would impact audit independence or capacity. It was confirmed that the impact was expected to be minimal and that professional standards and governance arrangements ensured independence of audit opinion would be maintained.

A Member sought clarification regarding audit coverage of payroll systems, noting a high volume of recommendations and ongoing issues. The Head of Policy and Governance confirmed that payroll remained an area of concern due to its system limitations and complexity, and that remediation would require significant system investment and long-term work. The Section 151 Officer supported this position and noted that payroll system replacement would be a major undertaking with operational disruption risks.

RESOLVED:

that the Internal Audit Performance Report and the Revised Annual Audit Plan 2026/27 be endorsed;

that the Committee’s concerns regarding prioritisation of audit activity in relation to key financial and service risks be noted for further consideration by officers.