Contact: Karen Shaw, 01962 846072, email: [email protected]

1 Introduction

1.1 The purpose of this report is to review delivery of the current audit strategy and highlight changes for approval by members of the Governance Committee.

2 Background

2.1 The Audit Strategy 2004 to 2007 was reviewed, updated and approved by Governance Committee in March 2006.

2.2 We intended to produce a new strategy for the period 2007 to 2010 to reflect the following current change issues:

· the revised Accounts and Audit Regulations 2006

· the revised CIPFA Code of Practice for internal audit 2006

· requirements of the Audit Commission's Use of Resources and Value for Money Assessments.

2.3 Our first priority has remained the delivery of the audit plan and the annual assurance statement and this, together with the implementation of new audit management software and major long-term sickness issues, have impacted on our ability to plan for a major revision for 2007/08. We therefore propose to defer a full refresh of the audit strategy until 2008/09 and we intend to begin preparation for this in the Summer 2007.

2.4 In the meantime, the aim of this report is to review progress in delivery of the current strategy and ensure that it remains up to date. This enables internal audit resources to continue to be used effectively in providing an appropriate level of assurance.

2.5 The revisions to the audit strategy have already been considered by the Treasurer and Senior Officers, together with the summary audit plan for the three year period (copy attached at Appendix A).

2.6 To date the audit strategy, which has been formally documented since April 2004, has been largely successful in achieving the aims of internal audit identified in the Accountancy Practices Board (APB) guidelines, the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom, (the Code) and the CIPFA Local Government Audit Manual.

2.7 The definition of internal audit, as stated in the Code, is `an assurance function that primarily provides an independent and objective opinion to the organisation on the control environment comprising risk management, control and governance by evaluating its effectiveness in achieving the organisation's objectives. It objectively examines, evaluates and reports on the adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources.' The terms of reference for the internal audit service provided to Hampshire Fire and Rescue Service were approved by the Governance Committee in March 2006 and no changes are considered necessary at this time.

3 Review of current Audit Strategy

3.1 We have made good progress in working towards delivering the current Audit Strategy. The areas subject to ongoing development are highlighted below.

Value for money

3.2 During 2006/07 we included a specific statement in all audit reports, detailing whether or not any value for money opportunities were identified. Audit staff have also received training to help them to identify VFM opportunities during the conduct of their audit work.

3.3 Traditionally, purchasing arrangements have been reviewed as part of the individual system and establishment reviews, however, the 2008/09 internal audit plan includes a broader review of procurement arrangements across the Hampshire Fire and Rescue Service to ensure that controls promote the achievement of value for money.

Fraud and irregularity

3.4 A separate fraud and irregularity team has been set up and is receiving appropriate specialist training and development. In accordance with Financial Regulations, management are required to notify the Treasurer of cases of fraud or irregularity so that consideration can be given to internal audit involvement to advise on control issues. The specialist team is also available to investigate allegations at the request of management.

3.5 To date our involvement in this area has focussed on participation in the National Fraud Initiative and National Anti Fraud Network on behalf of the Hampshire Fire and Rescue Service. During 2006/07, we had planned to develop a programme of proactive counter fraud work to test the strength of the anti fraud culture in the Hampshire Fire and Rescue Service, however reprioritisation of resources in the internal audit team prevented this and we will work closely with management and the Professional Standards Department to develop this area of work during 2007/08.

4 Resource implications

Liaison with the Audit Commission

4.1 We have had regular liaison meetings with the Audit Commission throughout 2006/07 to discuss national and local audit issues, ensure that duplication is minimised and also that reporting to the Governance Committee is co-ordinated as far as possible. We propose to continue with this arrangement in 2007/08.

Staff input

4.2 The overall objective of the audit strategy is to distribute internal audit resources to provide an appropriate level of assurance for the Hampshire Fire and Rescue Service. The 2007/08 plan has been prepared on the basis of assessed audit need and there has been no significant change in the resources required to deliver the assurance work in 2007/08.

4.3 Our implementation of new audit management software during 2007/08 is expected to achieve some efficiencies in the audit process over time, enabling us to deliver either a higher level of audit assurance or a reduction in audit days in some areas. The longer term impact of this change will be assessed as part of our major review of the audit strategy in the Summer 2007.

5 Recommendation:

5.1 That the Governance Committee approve the internal audit strategy for 2007/08.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

Published works.

Documents which disclose exempt or confidential information as defined in the Act.

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