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ITEM BV7

BEST VALUE COMMITTEE – 11 SEPTEMBER 2002

AUDIT & RISK MANAGEMENT SERVICES – WORK PROGRAMME 2002/03 - PROGRESS STATEMENT AS AT AUGUST 2002

Report by Director for Business Support & County Treasurer

Introduction

  1. Since the beginning of this financial year, Audit & Risk Management Services has been operating with a new strategic plan and the first year of which forms the basis for the 2002/03 work. This progress report sets out the work undertaken so far this year, against the work programme and summarises the main findings and the Director or accountable manager response to those findings. This has been produced in tabular form at Annex A. (download as .rtf file)

    2. Audit Opinion and Recommendation Priorities

  2. Annex A also shows the overall audit opinion and the grouping of recommendations into priorities. On each section of audit work we arrive at a conclusion that assesses the audit assurance in one of our four categories. These arise from our evaluation opinion, where we assess the system of controls, which are in place to achieve the system objectives. Also, our testing opinions, where we check whether the controls said to be in place are being consistently applied.

    3. Full Assurance Evaluation opinion. There is a sound system of control designed to achieve the system objectives, and

    Testing opinion. The controls are being consistently applied.

    Substantial Assurance Evaluation opinion. While there is a basically sound system there are weaknesses which put some of the control objectives at risk, and/or

    Testing opinion. There is evidence that the level of non-compliance with some of the controls may put some of the system objectives at risk.

    Limited Assurance Evaluation opinion. Weakness in the system of controls are such as to put the system objectives at risk, and/or

    Testing opinion. The level of non-compliance put the system objectives at risk.

    No Assurance Evaluation opinion. Control is generally weak leaving the system open to significant error or abuse, and/or

    Testing opinion. Significant non-compliance with basic controls leaves the system open to error or abuse

  3. As the work programme progresses, we will build up a profile of assurances which will lead to an overall opinion of the system of internal control at the end of the year. Both the Section 151 officer and the District Auditor will then use that overall opinion to assess if the level of assurance they require has been met. Also, the opinion on the system of internal control will be one of the indicators for overall governance of the Council.

  4. In all cases, other than full assurance, there will be follow-up work to verify that management action has been taken. Where limited or no assurance has been given, then further immediate work has been programmed as the level of risk remains high.

  5. In order to give managers assistance in their action planning, we have also placed our recommendations in one of three priority categories:

    6. Priority 1: Major issues for the attention of senior management

    Priority 2: Other recommendations for line management action

    Priority 3: Minor issues around tightening of existing system controls

    As part of the follow-up work, towards the end of the year, we will concentrate on ensuring the implementation of priority 1 and 2 recommendations, without which the risks will remain high.

    Accountability and Reporting

  6. ARMS is accountable as part of the Financial Review Division primarily to the Director for Business Support (Section 151), but requires links with all the Directors and senior management teams to be effective. A network of contacts for ARMS work has been built up and quarterly meetings are in place as an important feature of plan management. In respect of each review, time is invested in ensuring managers have the opportunity to comment on initial terms of reference and exit meetings are held to explain the main findings. This ensures that there is an effective outcome to each review in terms of acceptance of recommendations and delivery on time. Annex A summarises the main findings, recommendations and responses received from the relevant Director. Each ARMS report is copied, at publication to the District Auditor.

  7. Contact with the District Auditor continues to be refined with a protocol for setting out duties and responsibilities between District Audit and ARMS being recently agreed. This includes the possibility of joint audit planning using the same risk assessment, publication of internal/external audit review timetables and District Audit review of ARMS files at completion of each review. The review of Social Services pooled budgets is a joint review planned for autumn 2002.

    8. Non-Risk Assessed Activities

  8. Most of the work programme activities are risk-assessed to determine priority, but there is professional work outside the mainstream programme, which is not risk-assessed. This centres mainly around the continuing need to provide advice on financial control and to provide specialist advice in respect of major initiatives, such as the MIS project.

    9. Financial Control Advice

  9. Advice on financial control can take the form of publicity material, the drafting of standards/protocols or informal day-to-day advice. Managers are continuously encouraged to be aware of the importance of financial control, with the expectation that managers will provide assurance on the system controls they are responsible for. The new Audit and Accountability framework for schools, which the DfES is piloting at the moment, is pointing in this direction, with the possibility of schools producing an Annual Controls Assurance Statement from March 1994 onwards. Equally, we will be looking to third parties, who supply services to the County Council to supply control assurance statements for the financial systems supporting their invoicing arrangements. Recently, negotiations have been opened with the main waste management companies to provide a control assurance statement.

    10. Financial Control Advice – Schools

  10. Financial Control Seminars for headteachers and governors are planned and seminars have recently been held in Banbury and for new headteachers. More are planned for Witney, Oxford City schools and Abingdon during the autumn term. A number of secondary schools have also completed the control risk self-assessment questionnaire for which they have received feedback. Also, there is an on-going programme of joint healthcheck visits to schools agreed with Education Finance. The feature of these visits is to review the main financial controls and the arrangement to ensure accurate drafting of delegated budgets and budget monitoring information both for governors and the LEA.

    11. District Audit Review of Audit & Risk Management Services

  11. The District Auditor has recently completed the 2001/02 review of Audit & Risk Management Services. There is a recognition that significant progress has been made since the 2000/01 review. The 2000/01 review made 23 recommendations mainly around stricter compliance with professional standards. 22 of the recommendations have been implemented. The one remaining recommendation related to ensuring the formal separation of audit role in providing advice and undertaking review work in the same service environments. This issue is being addressed as part of the current review of the S.151 Officer (County Treasurer’s) professional responsibilities. The 2001/02 review has 5 recommendations, all of which are now addressed and have been acknowledged by the District Auditor.

    12. Risk Management

  12. The Risk Management Protocol was endorsed by individual directors during May 2002 and has been commended by the Continuous Performance Assessment team. It will also shortly appear on the IDeA website as an example of best practice.

  13. An implementation plan for the risk management protocol is also in place. The main part of the implementation plan will be to run risk management workshops as part of the service planning process and there are also proposals being prepared to hold risk workshops around each of the strategic priorities in order to identify the obstacles, threats and risks to the achievement of the key priorities at an early stage.

  14. A number of workshops have been facilitated, the outcomes of which are to rank risks and to action plan to reduce the most significant risks. The action plans are the most important part of the process, to ensure ownership and accountability for reducing risks.

  15. Risk Management is also a key element of project management and the risk manager will be joining the corporate review of project management to ensure a consistent approach is taken.

    16. Programme of Future Work

  16. The work programme for the rest of the year has now been finalised and the main reviews are listed in Annex B.

    17. The Review Process and ARMS Resources

  17. As part of implementing the new ARMS strategy, the Quality Manual has been completely revised and all review staff now work to the same standard. Reviews are closely defined so that only the controls associated with the highest risks are reviewed, so there is maximum impact within tight time deadlines. Continuing secondment of an experienced Audit Manager from Deloitte and Touche has given access to an up-to-date review methodology and automating of most of the review process. So, efficiency of current resources has been improved significantly. A reassessment of current resources will be necessary in October/November, to plan for delivering the balance of the current year work programmes. The District Auditor is likely to comment on ARMS resources in December 2002, as part of the annual assessment of the Council’s financial control environment.

  18. The Committee is RECOMMENDED to:

          1. note the work programme progress to date (as shown in Annex A);

          2. receive the proposed work schedule for the rest of the year (as set out in Annex B);

          3. identify any specific areas where future reports are required on the implementation of agreed management action(s) arising from any of the reviews reported in Annex A.

CHRIS GRAY
Director for Business Support & County Treasurer

Background Papers: None

Contact Officer: Keith Bellew, Audit Services Manager, Tel: 01865 815265

Email: keith.bellew@oxfordshire.gov.uk

2 August 2002

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