Agenda item

Internal Audit Progress Report

(To receive a report by Rachel Abbott (Team Leader – Audit), which invites the Committee to note the outcomes of Internal Audit's work and identify any necessary actions that need to be taken)

Minutes:

Consideration was given to a report by Lucy Pledge (Head of Internal Audit and Risk Management), which provided details of the audit work completed to August 2019; advised on progress of the 2019/20 plan; and raised any other relevant matters.

 

During the period from June to August 2019, eight audits had been completed and a further three were at draft report stage.  There were currently 14 audits in progress, either at scoping or fieldwork stage.  Pages 13 to 17 of the Agenda Pack provided information on the eight completed audits, of which seven had received substantial assurance and one limited assurance.  It was advised that the Committee would receive a further update at its meeting on 18 November 2019. 

 

Vicki Sharpe (HR Services Manager) was in attendance to explain to the Committee why limited assurance had been given to IR35 and to explain the measures which had been put in place to address the issues, which were outlined in the report.

 

The Committee was advised that work had been completed to identify why, when and how much had previously been spent on consultants; officers were liaising with the Finance Team with an aim of implementing improved budget coding; improvements had been made to approval processes and quarterly reporting.  All of the above improvements would be implemented by March 2020. 

 

Members were provided with an opportunity to ask questions relating to the IR35 audit, where the following points were noted: -

 

·       IR35 had originally came into effect in April 2000 designed to tackle tax avoidance from 'disguised employment' – off-payroll working when an individual works for a client through their own intermediary, often a personal service company, as opposed to an employee providing services directly for the client.  When the legislation was reformed in 2017, the public sector had the responsibility to assess and deduct at source the Income Tax and National Insurance contributions that would apply as if the individual working through the intermediary were directly employed by the Council. 

·       It was confirmed that when the reformed legislation was implemented, a programme board consisting of finance, Serco and human resources colleagues had produced guidance notes on IR35, which detailed steps managers must follow when using a consultant.  Although training had not been provided in 2017, managers were issued with guidance and could access their human resources advisor for additional guidance and support.

·       There was a clear need for visibility so that the use of consultants could be monitored effectively.  Improvements to the budget coding would ensure this visibility and provide more accurate quarterly reporting.

·       It was advised that the HR Team had requested an audit on IR35, as they could see improvements were required particularly around visibility and to the approval process.  The Committee congratulated the HR Team for proactively highlighting this as an area for an audit. 

·       The Committee recognised that there were already processes in place for IR35; however these were inconsistently applied and there was a need for a more centralised approach. 

·       It was advised that officers were working alongside the procurement team to ensure the procurement of consultants was not progressed until the necessary steps had been followed.

·       It was suggested that the County Council give consideration whether it should adopt a policy similar to the NHS, where IR35 was applied to all consultants, who were thus paid with deductions as if they were employees.

 

It was advised that Adult Care – Financial Assessments had been provided substantial assurance.  It was queried how this could be the case when there continued to be a backlog in financial assessments.  It was explained that the scope of the audit was limited to the improvement plan.  The question was raised on the impact the backlog would have on market supply strategic risk, Minute 22 refers.

 

It was queried what preparations the County Council was making on the domestic reverse charge, which would introduce a major change to the way VAT was collected in the building and construction industry.  The domestic reverse charge was scheduled to come into effect from 1 October 2020.  It was advised that this query would be directed to the VAT specialist within the Finance Team.

 

RESOLVED

 

That the outcomes of Internal Audit's work be noted.

Supporting documents:

 

 
 
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