SOUTH NORFOLK DISTRICT COUNCIL Appendix 4 INTERNAL AUDIT PLANNING RISK ASSESSMENT 2012/13

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1 Definition of Risk Factors Factor A - Materiality - Value - the value of annual direct income/expenditure associated with the systems/activities. Factor B - Materiality - Volume - an estimate of the number of transactions processed by the systems/activities per annum. Factor C - Significance - the significance of the systems to the activities of the Council. Factor D - Complexity - the complexity of the systems/activities in terms of their operation and auditability. Factor E - Change - recent changes to the systems or the likelihood of change to the systems in the audit planning period. Factor F - Inherent risk - the likelihood of error or malpractice. Factor G - Profile - the political sensitivity of the systems/activities. Risk Scoring to determine Frequency of Audits Low risk - 0% to 34.9% - Full systems audit one year in five Medium risk - 35% to 59.9% - Full systems audit one year in three High risk - 60% to 84.9% - Full systems audit one year in two, supplemented by annual key controls checks Very High risk - 85% + - Full systems audit annually MANDATORY AUDITS CORPORATE RESOURCES Work to support the preparation of the Annual % Very Annual Core audit necessary to meet External Audit Governance Statement (AGS), includes key control High requirements and provide further insight into overall testing of fundamental financial systems annual opinion on systems of internal control. No change required to scoring from 2011/12 risk assessment. Review of Corporate Governance % High Annual Risk score suggests 2-yearly cycle of cover required but we intend to continue to undertake an annual review of corporate governance arrangements, to afford an annual audit opinion in this area; particularly in the light of reduced Audit Commission scrutiny of governance arrangements, and the requirements being imposed on the Council by the Localism Act. In the course of the 2012/13 audit needs assessment, it was necessary to increase the scoring of Factor E to reflect the changing environment. Page 1 of 8

2 MANDATORY AUDITS CORPORATE RESOURCES Systems of Risk Management % Medium Annual Risk Management is usually subject to annual scrutiny to ensure that a separate opinion can be given in this area to both the Section 151 Officer and the Accounts, Audit and Governance Committee, which can then be used to inform the Annual Governance Statement, and assist the Committee in fulfilling its remit to maintain an oversight of risk management arrangements at the authority. Discussions with senior management in 2011/12 led to an audit of Risk Management being deleted from the Annual Audit Plan, but on the understanding that arrangements must be revisited in 2012/13. As far as ANA for 2012/13 is concerned, the score against Factor E has been reduced. It was scored higher last year to reflect new management and methodology changes rolled out. Accountancy services - treasury management, control accounts, banking, bank reconciliation, asset register, budgetary control, insurances % Very High 1 in 2 Core system - reliance placed on our work by Risk has increased in this area due to range of pressures - recession and cut in RSG, on-going need for further efficiency savings, reserves reducing, poor interest rates impacting on treasury management achievements, etc. Staff changes also within Treasury Management during 2011/12. Risk score for 2011/12 remains applicable in 2012/13. However, we continue to maintain that 2- yearly audits remain sufficient for audit opinion requirements, and will supplement this with key control testing undertaken in alternate years as part of the work to support the AGS. Page 2 of 8

3 MANDATORY AUDITS CORPORATE RESOURCES Sundry debtors % High 1 in 2 Core system - reliance placed on our work by System has transferred to payment control team but issues found in course of 2011/12 audit showing some flaws in system of internal control. Will monitor developments through audit follow up work and alternate year key control testing as part of the AGS work. No change to risk assessment score required in 2012/13. Exchequer services - Electronic ordering and payments % High 1 in 2 Core system - reliance placed on our work by Greater transparency over Council expenditure required with the publishing of transactions of 500 and over. Receipt, handling and banking of remittances % High 1 in 2 Core system - reliance placed on our work by Payroll and human resources, car loans, leased cars, % High 1 in 2 Core system - reliance placed on our work by officers' expenses Council Tax and NNDR % Very High 1 in 2 Core system - reliance placed on our work by National studies indicate that the number of cases where people are fraudulently claiming discounts and exemptions are rising. The Government are currently proposing fundamental changes to the way that Council Tax and NNDR are locally administered. Score increased in 2012/13 against Factor E to acknowledge this. We remain satisfied that the in-depth review on a 2- yearly basis with key control testing in alternate years is adequate for annual audit opinion purposes. Housing benefit/ctb % Very High 1 in 2 Core system - reliance placed on our work by This is a service that has consistently received an adequate assurance from Internal Audit although 2010/11 certification work by External Audit resulted in the raising of three issues. Our existing audit approach is such that we are satisfied that the service is being adequately audited to provide the requisite audit opinions for the authority. We therefore do not propose implementation of in-depth annual systems reviews in line with the risk rating obtained. Page 3 of 8

4 OTHER SYSTEMS AUDIT CHIEF EXECUTIVE Performance Management % Medium 1 in 2 We are required, by the Council's Data Quality Strategy, to give a 2-yearly opinion on performance management arrangements. We also note the adoption of the new CorVu performance management system in 2012/13. Elections and Electoral Registration % Medium 1 in 3 High profile service Business Improvement % Medium 1 in 3 Expanding team responsible for innovative new approaches being adopted by the Council. New to feature on the Risk Assessment. Economic Development % Medium 1 in 3 Recent recruitment of staff. Increased activity planned. New to feature as a separate service on the Risk Assessment. Page 4 of 8

5 OTHER SYSTEMS AUDIT CORPORATE RESOURCES Gifts and hospitality - members & officers % Low 1 in 5 Although an important activity to ensure members and officers are aware of requirements, and follow these, it is a relatively low audit risk area. Democratic services, including Members' Allowances, Licensing, Freedom of Information and Data Protection % Medium 1 in 3 Risk score unchanged from 2011/12 - continue to apply 3-yearly audit scrutiny. Procurement % High 1 in 2 The significance of this system has increased with the ever growing need to find savings through procurement. Previous audit reviews have also indicated some weaknesses in the system of internal control. Risk scoring confirmed the need to maintain 2-yearly review of arrangements. Property valuation and management, office management and security % High 1 in 2 The Council has been expanding its property portfolio in recent years and under the Localism Act, there is the possibility that some Council assets/property will transfer to Parish and/or Town Councils in the future. It has been necessary to increase the score attaching to Factor E to reflect changing circumstances, but this has not altered the overall risk rating. Reprographics % Low 1 in 5 Reprographics has now moved to Property Services within the Corporate Resources Directorate. Some adjustment made to Factors B and E in 2012/13. However, these revisions have no impact on the overall risk assessment rating and frequency of audit requirements. Page 5 of 8

6 OTHER SYSTEMS AUDIT DIRECTOR OF COMMUNITIES Neigbourhoods and Communities, including grants and management, economic development, tourism, heritage and culture Customer Focus, including reception, equalities, marketing % High 1 in 2 The Localism Act will be giving more responsibility to Neighbourhood Boards and the local community, and as a consequence the scores for Factors A, C, D and E have been increased for 2012/13. However, the overall score still produces a high risk rating and a need for 2-yearly rather than annual audit coverage % Medium 1 in 3 Council is placing increasing focus on being customer orientated. The 'My South Norfolk Council' project is indicative of how the authority has been repositioning itself to enhance public access to services. Lean systems reviews are also being undertaken to improve service delivery from the customer's point of view and eliminate 'waste' within systems. Greater website interaction has also been pursued to improve services to the local community. Homelessness, housing strategy % High 1 in 2 A high profile service which has recently been the subject of LEAN systems review. Home options % Medium 1 in 3 Discussed with CMT. Requested this feature in Strategic Audit Plan with audit scrutiny scheduled for 2013/14. Sports facilities at Diss, Long Stratton and Wymondham % High 1 in 3 These audits are undertaken on a cyclical basis, whereby each centre will be audited in turn once every three years. There has been considerable innovation in the last months and as a consequence, Factors C and E have been rescored to reflect this change in circumstances. Overall, the services gain a high risk rating from these adjustments, but based on audit assurances obtained previously and the pattern of review that is currently adopted, no change in audit review is advocated going forward. Partnerships % High 1 in 3 Partnerships have remained a high risk area. As noted below, current government initiatives indicate greater emphasis on working in partnership and a "big society", hence it is high profile. There are several key partnerships we have which help to deliver services for our residents, added to which we are now entering into the nplaw partnership with Norfolk County Council. CMT previously supportive of 3-yearly audit input. Page 6 of 8

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8 OTHER SYSTEMS AUDIT DIRECTOR OF DEVELOPMENT AND ENVIRONMENT Environmental Health Services other than Waste Management - emergency planning, pest control, dog control, food safety, pollution control, etc. Waste management - refuse collection, street cleansing, recycling, clinical waste, abandoned vehicles, etc % Medium 1 in % High 1 in 2 Wast Management services have been the subject of considerable work to reduce expenditure and realise cost savings in 2012/13. Car Parks % Medium 1 in 3 Civil Parking Enforcement through a joint Committee arrangement has now been introduced. Although this is significant for the service, due to the lower significance of this service to overall Council operations we have determined that this will be subject to review in line with the medium priority status in Risk score unchanged for 2012/13. Housing Standards includeing Aids and Adaptation Grants, Safte and Warm Grants and Disable Facilities Grants % High 1 in 2 Risk score unchanged from 2011/12 Development control - fees, enforcement, section 106 agreements, land charges % Medium 1 in 3 Material system warranting cyclical audit coverage. Pronounced service interface with the public. Page 8 of 8