At each inspection we review the coverage of Internal and External Audit. This Appendix details our findings.
The review of coverage by IA considers the control environment within which the Benefits system operates. Particularly relevant to our review is whether a risk assessment has been carried out. This is needed to identify the risks involved in administering benefits and to provide a basis for the planned amount of audit coverage. The quality of the work carried out is also considered.
On EA the inspection focuses on the results of relevant reports, fraud and corruption coverage and grant claim certification work. A key issue is the need to reconcile audit and inspection findings in order to provide the LA with consistent feedback.
IA at EP&NBC is part of the Borough Treasurer’s Department. The section consists of an IA manager and 3 staff.
We held a meeting with the IA manager to:
We found some good practices in the approach and coverage adopted in the audit of HB and CTB at EP&NBC. These are discussed below.
There was a documented risk analysis in place, which had been drawn up as part of the 3 year IA forward plan. The risk analysis was based on the Chartered Institute of Public Finance and Accountancy (CIPFA) guidance.
It showed that benefits is the highest risk system in the LA. We support the approach taken.
IA carried out 136 days’ work on the HB system in 1998/99. This represents 16% of available audit days and is more than the original plan. Although still significantly below the 28% of total revenue expenditure, this is well above the coverage we have found in most of our inspections. EP&NBC is to be commended for giving greater weight to this area of acknowledged high risk than other Las, but still need to increase their IA coverage.
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Fig. G.1: IA ad hoc projects |
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BFI comments |
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Review of members’ interests |
IA has carried out a review to test members’ interests as potential landlords and claimants. This is a high-risk area that should be the subject of regular coverage. |
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Review of rent rebate cases |
IA has responded to external concerns and has carried out some testing of rebate cases and of empty properties. They plan to return to this area in future years. This is an important area at EP&NBC as rent rebate accounts for nearly half of benefits expenditure. |
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Review of fraud |
Following EA work, IA carried out some further work in this area, raising matters of fraud awareness, weaknesses in controls within benefits, reconciling housing and benefits records and highlighting the importance of random residency checks. We support this work. |
Source: EP&NBC
However, we have some concerns about IA work and identify the following areas for improvement.
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Fig. G.2: IA areas for improvement |
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BFI comments |
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Independence |
This is compromised by the involvement of IA in non-audit duties. In particular IA is closely involved in the control, custody and issue of cheques. This situation is unsatisfactory and represents a weakness in internal control. |
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Audit approach |
EA has raised concerns, which we share, that the internal audit of HB/CTB is not fully systems-based. Although IA tests key controls annually, on EA’s behalf, there is still no documentation or evaluation of the system. This is a serious concern and needs to be addressed. IA informs us that it has this in hand. |
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Follow up |
At the time of our inspection IA had not always fully followed up its work. For example, the fraud review has an incomplete action plan. This needs to be addressed. |
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Testing of the systems |
EA recommended that IA carried out more testing on cases of WBS. We support this and consider that there should also be testing of overpayments and the verification and assessment of claims. |
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Other issues |
EA also highlighted a number of other areas for IA to address. These include:
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Source: EA and BFI analysis
We note that IA is allocating additional time in the current year’s plan to take these matters forward.
We met with DA, the external auditor for EP&NBC and reviewed recent relevant audit reports. We also discussed the findings and outcomes of recent work to certify the grant claim to DSS. DA was also updated on the progress of our inspection.
Our discussions with DA showed the key messages and findings from our inspection were largely consistent with BFI. Notably:
The inspection identified that there had been considerable IA and EA coverage at EP&NBC. It identified some areas of good practice and other areas for improvement by IA. Our discussions with EA identified a consistency of messages and findings for the attention of EP&NBC.