Internal Audit
What Is It?
What is it?
Internal Audit is a small team of finance, control and risk specialists employed by the Council as part of its whole framework for managing risk effectively.
The role of Internal Audit is to:
- give independent assurance that systems operated by the Council are sound and effective
- alert officers to areas of system weakness and make recommendations for improvement
- give unbiased professional advice on current Council initiatives and developments
The role of Internal Audit is not to:
- police the authority
- manage the risks of the authority
- maintain systems of internal control
- determine operational policies and procedures
- ensure the detection of fraud and irregularity
The management of risk and establishment of adequate systems of internal control are the responsibilities of management.
Formal Definitions
The formal definition for the Internal Audit service adopted by Fareham Borough Council is as follows:
"Internal Audit is an independent function established by management to provide objective evaluation, assurance and consultation on the internal control systems governing the operations of the Council.
It assists the Council to achieve its objectives by evaluating and recommending improvements on the adequacy of governance, risk management, controls and use of resources."
There are also a number of professional definitions.
Statutory Status
Internal Audit is a statutory function within every Local Government organisation as established by the Local Government Act 1972.
This act requires Council's to appoint a Section 151 Officer who is responsible for "the proper administration of their financial affairs ". At Fareham this is the Director of Finance and Resources.
These responsibilities are further defined in the Accounts and Audit Regulations Act 1996 as "a relevant body shall maintain an adequate and effective system of internal audit of their accounting records and control systems".
The Institute of Internal Auditors defined the profession in 1999 - "Internal Auditing is an independent, objective assurance and consulting activity designed to add value to an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic approach to evalate and improve the effectiveness of risk management, control and governance."
Internal Audit Services Provided
There are a number of different services provided by the Internal Audit team in order to fulfil their role. These are summarised below.
Managed Audits (MBA)
These audits are carried out on the Council's fundamental financial systems (Creditors, Debtors, Payroll, Council Tax, NNDR, Accounting, Housing Benefits and Asset Register) and are carried out annually in liaison with the External Auditors.
Systems Based Audits (SBA)
These audits involve an assessment of the adequacy of controls in place in the systems used by front line and support services. This forms the majority of our work.
Corporate Audits
These audits are used to examine the control framework at a corporate level, such as performance management.
Departmental Audits
These audits are carried out at departmental level and examine controls and risks across the whole department rather than being service specific.
Computer Audits
This is a specialised area of Internal Audit work involving both consultation and reviews of ICT systems, management and projects. This can cover areas such as compliance with the Data Protection Act or more specialised reviews such as database controls.
Contract Audits
This is the other main specialised area within Internal Audit. This involves advice and analysis of any large area of expenditure which are carried out under a contract. These include all contract work such as capital schemes, consultancy work, supplies or goods, materials and services.
Fraud & Probity
This type of work is carried out either as part of systems audits or short exercises in their own right to check the validity and accuracy of Council transactions. This used to be the main remit for Internal Audit sections, but systems based auditing is now promoted by the professional accounting and auditing bodies. Fraud prevention is also a proactive area of our work and the Council is a member of the National Anti-Fraud Network. We receive regular fraud warning bulletins from the Network which are acted upon.
Special Investigations
The Internal Audit team can be called upon by management to investigate any problems that have been identified. We can also act upon any small irregularities brought to our attention by members of staff or people and businesses external to the organisation.
Value For Money Studies (VFM)
These studies concentrate on the economy, efficiency and effectiveness of a service rather than internal control. An element of this is usually carried out in systems reviews. However, depending on the resources available, specific studies can be requested by Management. An example of this could be mobile phone use and tariffs.
Advice & Consultancy
The Internal Audit team can provide ad-hoc advice on control issues relating to any system problems or changes. This can include giving advice on the production and interpretation of internal policies, financial regulations, publication reviews, or advising as part of a work group.
How do we determine what work we do?
The Internal Audit service is independent of the services it audits. The Audit Manager therefore has the freedom to determine the priorities of the service in conjunction with the Director of Finance and Resources.
This is achieved by carrying out a detailed risk analysis of all the Council's systems and services which are then maintained in a Strategic Audit Plan which is updated on a yearly basis. The key risk areas are then identified for the following year and go to form the Annual Audit Plan for the year.
Copies of plans are available by e-mail ; internalaudit@fareham.gov.uk.
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