Agenda item

Internal Audit Charter

The purpose of this report is to inform Audit Committee of an updated Internal Audit Charter in accordance with the requirements of the Public Sector Internal Audit Standards (April 2017) and the related Local Government Application Note.

Internal Audit Charter

K. McDonald, Head of Internal Audit and Risk Management informed Audit Committee of an updated Internal Audit Charter in accordance with the requirements of the Public Sector Internal Audit Standards (April 2017) and the related Local Government Application Note.  (A copy of the report has been filed with the signed minutes).

Members were advised that the Internal Audit Charter was most recently approved by Audit Committee in July 2020.  The Internal Audit Charter had been reviewed to ensure that the exact requirements of the PSIAS continue to be met and the proposed Internal Audit Charter had been attached to the report as Appendix A. 

Councillor Cessford questioned if the Charter had been effective in light of the recent external review of governance led by Solace and the Section 114 report.  He picked out points 2.3, 5.1, 5.9 and 9.2 of the Charter and questioned why these had not worked the way that was planned.  K. McDonald felt that the Charter had worked well from an Internal Audit perspective.  For example, there had been no restricted access and there were no matters of concern from him.  There was three lines of defence and Internal Audit was only one of them.  An annual Internal Audit Plan was produced with agreement by Audit Committee which sought to give assurance to management and members that certain processes operate in an efficient and effective manner and ensure the integrity of transactions.  However, it was noted that Internal Audit could not possibly look at all areas and therefore had to target resources to specific places. 

Councillor Cessford sought assurance that if an issue was raised it would be investigated and he felt in the past action had not been immediately.

The Chair commented that there were mechanisms in place to pass any issues to the Head of Internal Audit and Risk Management and since he had been Chair the Committee had brought concerns to him which had subsequently been included in the Internal Audit Plan.  

It was confirmed that anyone could raise concerns or areas of interest to Internal Audit.  Internal Audit were duty bound to receive any request and consider them within the wider assessment of risk across the organisation and then form a judgement as to whether there was a sufficient risk there to divert audit resource.  They would need to be alert to potential bias or malice.  Also, it could be that the issue was in the process of being looked into or investigated and Internal Audit would not want to duplicate work.  But it was stressed that Internal Audit were independent, had unrestricted access and remained impartial.

Councillor Dale stated that she did support the Charter and would use it to hold Internal Audit to account.  She hoped that lessons would be learnt from recent governance problems in order to allow the business of the Council to begin to move forward.

Councillor Oliver commented on previous years where he believed there was not the same level of independence and an inherited culture where Internal Audit was included in Executive team meetings.  He questioned what plans were in place to ensure Internal Audit remained independent and not part of the Executive Team.  The Head of Internal Audit and Risk Management stated that he could not comment on anything that had happened previously.  But reassured Members that he would always act independently, honestly and any issues could be raised with him.  He confirmed that he did attend meetings and had unrestricted access but was not part of the Executive Team.  He was able to report unbiased opinions and would continue to challenge in order to evaluate and improve the effectiveness of risk management, control and governance processes.  The importance of demonstrating Internal Audit's independence through the Internal Audit Charter was stressed

Councillor Dale commented that she believed that Internal Audit and External Audit were working but if anyone felt otherwise there was other avenues that could be taken.

RESOLVED that Audit Committee agree to the updated Internal Audit Charter which is attached as Appendix A to this report, and which is a requirement of the Public Sector Internal Audit Standards.