Contact: Karen Shaw, tel 01962 846194 or email [email protected]

1 Summary

1.1 The internal audit opinion is that Hampshire Fire and Rescue Authority has an appropriate framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the Authority's objectives. Audit testing has shown controls to be working in practice. Where improvements to controls are required, we are satisfied that appropriate action has been, or, will be agreed by relevant managers and that they will be resolved in an appropriate manner.

1.2 The following paragraphs explain how we arrived at this opinion.

2 Recommendations

2.1 That the Fire Authority accept the internal audit assurance statement for 2008/09 detailed in Appendix A.

2.2 The main risks identified during the year are noted.

3 Background

3.1 In accordance with the Accounts and Audit (England) Regulations 2003, as amended in 2006, the Fire Authority is required to include an annual governance statement within the published accounts.

3.2 To support the process of producing the annual governance statement, the Chief Internal Auditor is required to provide an independent opinion on the adequacy and effectiveness of the system of internal control operating across the Authority.

3.3 This opinion is contained in the assurance statement attached at Appendix A.

3.4 It is a management responsibility to develop and maintain the internal control framework, and to ensure that the Authority's resources are properly applied. Internal audit is an assurance function that provides an independent and objective opinion to the Authority on the control environment by evaluating its effectiveness in achieving the Authority'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. (source: CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006).

4 Objectives

4.1 This report will outline the level of assurance that we are able to provide, based on the internal audit work completed during the year. It will:

· give an opinion on the overall adequacy and effectiveness of the Authority's internal control environment

· disclose any qualification to that opinion, together with the reasons for the qualification

· present a summary of the audit work undertaken to formulate the opinion, including reliance placed on work by other assurance bodies

· draw attention to any issues the Chief Internal Auditor judges particularly relevant to the preparation of the annual governance statement

· compare the work actually undertaken with the work that was planned and summarise the performance of the internal audit function against performance measures and criteria

· comment on compliance with these standards and communicate the results of the internal audit quality assurance programme.

5 Audit approach

5.1 A summary outlining the audit approach and audit delivery during 2008/09 is provided in Appendix B.

5.2 Detailed reports, giving the internal audit opinion on each of the systems examined have been issued to individual managers who have considered each report and provided a management response. This report provides an opinion on the overall control framework using the following terms which are defined in Appendix C:

· comprehensive

· appropriate

· incomplete

· inadequate.

6 Overall assurance

6.1 The internal audit opinion is that Hampshire Fire and Rescue Authority has an appropriate framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the Authority's objectives. Audit testing has shown controls to be working in practice. Where improvements to controls are required, we are satisfied that appropriate action has been, or, will be agreed by relevant managers and that they will be resolved in an appropriate manner.

6.2 There has been no change in the overall level of assurance provided compared to that given in our 2007/08 annual internal audit opinion.

7 Issues raised during 2008/09

Main Findings

7.1 22 reviews were completed in 2008/09 and based on the audit evidence obtained,15 systems /establishments had an appropriate framework of control and four had an incomplete framework of control to ensure that the activities and procedures achieve the Authority's objectives. Two reviews were follow up audits and in each case evidence of progress against recommendations was found. One report was a pro-active fraud report. Overall, audit testing has shown that the controls are operating in practice.

7.2 A summary of the opinions on the reviews carried out in 2008/09 is shown at Appendix D.

Data Quality

7.3 Our review of Data Quality found an incomplete framework of control as there is currently no Data Quality Strategy in place, although a draft strategy is in the process of being written. Roles and responsibilities for Data Quality have not yet been assigned which increases the risk of incomplete or inaccurate data. We will carry out further work in 2009/10 to assess the progress in addressing the risks identified.

Fuel Issues

7.4 We reported in our mid year progress report that we had concerns over inadequate management information for fuel stocks and a lack of procedures for staff. Subsequent work has found that all procedural recommendations have been addressed with new policies and procedures in place and available to staff. We understand that a new fuel management and monitoring system, which will provide the necessary management information, is currently being procured and it is expected that this will be in place by the end of the 2009/10 financial year. This project is currently at the specification stage and will shortly go out to tender.

SAP Access

7.5 In our mid year progress report we reported concerns regarding SAP Access. Our review highlighted that due to incomplete documentation, management are unable to precisely identify what SAP access staff have. A particular concern was raised over the number of users who have access to add positions to the organisational structure, leading to a risk of the setting up of `ghost' employees. We have been assured that controls and segregation of duties have been improved to ensure that only three members of staff have access to set up positions and appoint to them. We also understand that procedures are also in place to independently monitor posts created by staff with this dual role. These controls will be reviewed and tested in the 2009/10 payroll review.

Payroll

7.6 The 2007/08 Internal Audit Annual Opinion report highlighted risks concerning a lack of segregation of duties between the Workforce Planning and Workforce Support functions, and a lack of independent checking of data. In response, management revised arrangements to improve segregation of duties and have added compensating controls including improved checking and monitoring systems. These controls were assessed as part of the 2008/09 review of human resources and were found to be operating in practice.

Fleet Maintenance Centre

7.7 Concerns have been raised over the Fleet Maintenance Centre in previous reports, in particular over the resilience and ability of the stock control system to produce useful and timely management information. No formal audit work on processes within the Fleet Maintenance Centre has been carried out during 2008/09 due to the Centre's relocation and management changes and the need to allow time for previous recommendations to be implemented and embedded. Work is on-going to procure a system to replace the current management system and some audit work has been carried out in this area.

7.8 We have, however, received regular updates from management on progress and are aware that a sub-group of the Performance Review and Scrutiny Committee are also monitoring progress and an external consultant, who has carried out work for similar Fire Authorities, is to be appointed to review processes and systems and make recommendations for improvement.

7.9 Whilst a number of other significant recommendations were made during the year, these were significant to the systems concerned and were not material in the context of the Authority as a whole.

Common findings

7.10 No significant common findings have been identified during the year.

Follow-up work

7.11 Where an assignment concludes that the overall framework of control in an establishment or system is `inadequate', a follow-up review is carried out within one year. Whilst there were no inadequate opinions in 2007/08 requiring follow-up, follow up work was undertaken to assess progress made in implementing recommendations arising from our review of the Use of Mobile Phones, and CFRMIS. We found that appropriate measures had been taken to address the recommendations made in both of the above reviews.

7.12 We will continue to review the implementation of audit recommendations made in 2008/09 as part of our 2009/10 audit plan. In addition, HFRA has a robust process for monitoring the implementation of agreed actions and progress has been reported to each meeting of the Governance Committee during the year.

Pro-active fraud work

7.13 During 2008/09 we met with the Employee Relations Department to further develop our approach to delivering pro-active fraud detection work in accordance with our agreed plan. Detail of this work can be found in Appendix D.

7.14 Data matches reported by the Audit Commission as a result of the 2008 National Fraud Initiative (NFI) have been risk assessed and are in the process of being investigated. No significant issues have been raised so far.

Irregularities

7.15 No potential irregularities have been reported to us during the year.

8 People Impact assessment

8.1 The proposals in this report are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1998 and the Race Relations (Amendment) Act 2000.

9 Resource implications

9.1 The cost of preparing the annual internal audit opinion report are provided for in the Authority's revenue budget.

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.

TITLE FILE

None

Appendix A

Annual assurance statement for the year ended 31 March 2009

Introduction

The Accounts and Audit Regulation 2003, amended in 2006, require the Treasurer to maintain an adequate and effective system of internal audit.

The Regulations also require the Fire Authority to include an annual governance statement within the published accounts.

To support the process of producing the annual governance statement, the Chief Internal Auditor is required to provide an independent opinion on the adequacy and effectiveness of the control environment, comprising risk management, control and governance.

Responsibilities

It is a management responsibility to develop and maintain the internal control framework, and to ensure that resources are properly applied in the manner and on the activities intended. It is the responsibility of Internal Audit to form an independent opinion, based on reviews during the year, on the adequacy and effectiveness of the system of internal control.

Basis of opinion

The strategic and annual internal audit plans were prepared by the Chief Internal Auditor to take account of the characteristics and relative risks of the activities involved and were approved by the Treasurer. The internal audit plan has been delivered in accordance with the Code of Practice for Internal Audit in Local Government in the United Kingdom, issued by CIPFA.

Work has been planned and performed so as to obtain all the information and explanations which were considered necessary in order to provide sufficient evidence to give reasonable assurance that the internal control system is operating effectively. However, this assurance can never be absolute. The most that the internal audit service can do is to provide reasonable assurance that there are no major weaknesses in the system of control.

Opinion

In my opinion Hampshire Fire and Rescue Authority has an appropriate framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the Authority's objectives. Audit testing has shown controls to be working in practice.

Karen Shaw

Chief Internal Auditor

Hampshire Fire and Rescue Authority

24 June 2009

Appendix B

Audit Background

1 Scope of internal audit

1.1 The Chief Internal Auditor is required to provide the Authority with an assurance on the system of internal control. It should be noted, however, that this assurance can never be absolute. The most that the internal audit service can do is to provide reasonable assurance that there are no major weaknesses in the system of control. In assessing the level of assurance to be given the following have been taken into account:

· all audits completed during 2008/09, including those audits carried forward from 2007/08

· any follow up action taken in respect of audits from previous periods

· any significant recommendations not accepted by management and the consequent risks

· the effects of any significant changes to the organisation's objectives or systems

· the quality of internal audit's performance

· the proportion of audit need that has been covered to date

· the extent to which resource constraints may limit the ability to meet the full audit needs of the Authority

· any limitations that may have been placed on the scope of internal audit.

2 Audit service quality

2.1 The service we provide is designed to ensure compliance with the standards for internal audit promulgated by the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006. The standards cover the following areas:

· scope of internal audit

· independence

· ethics for internal auditors

· audit committees

· relationships

· staffing, training and continuing professional development

· audit strategy and planning

· undertaking audit work

· due professional care

· reporting

· performance, quality and effectiveness.

2.2 We have a number of mechanisms in place to ensure that our services are of a consistently high standard. In particular:

· we are registered under British Standard BS EN ISO 9001:2000, the international quality management standard and have developed a comprehensive set of audit and management procedures to underpin this

· we have Investors in People accreditation which ensures that the training and development needs of all our staff are reviewed on an annual basis as part of our individual planning process, with essential needs delivered within the year

· we have a quality assurance programme which includes an annual service improvement planning process; annual benchmarking with other local authority internal audit providers to compare the efficiency, effectiveness and economy of our services; a rolling programme of reviews of a sample of completed audit reviews and management processes to ensure consistency in approach and compliance with professional standards and quality procedures; and a quarterly review by the County Treasurer's management team of our performance indicators.

2.3 Whilst identifying some opportunities for continuous development, the results of the quality assurance programme confirm that we substantially comply with the requirements of the Code of Practice.

2.4 In addition, our work is subject to annual review by the Authority's external auditors who continue to rely on our work to support their audit opinion.

3 Audit Needs

3.1 A risk assessment was undertaken for the 2008/09 audit plan, which involved an analytical review of data relating to the Authority including: size of budgets, content of committee reports or committee decisions, previous audit findings and consultation with the Director of Corporate Services and other finance managers to ensure the audit plan addressed the key risks facing the Authority.

A summary of audit days delivered during 2008/09 is provided in Table 1.

Table 1 - Summary of audit days delivered (2008/09)

Detail	2008/09 Days	Days
Days carried forward from 2007/08		3.5
Audit plan agreed by Treasurer	239
Variations to the plan	+3
Revised plan at the year end		242
Total days		245.5
Total days delivered including delivery of carry forward audits		214.5
Days carried forward to 2008/09		31

3.2 The 2007/08 carry forward days relate to one audit, SAP Access which was in progress at the end of the year. SAP Access was not included in the 2006/07 opinion. This was completed during 2008/09 and is included in this report.

3.3 The audit plan was revised during the year to 242 days. The original and revised audit plans are shown at Appendix E. An additional three day follow up review of Mobile Phones was requested to assess actions taken following the pro-active fraud detection work in this area.

3.4 The carry forward days relate to audits where a draft was issued and awaiting management response or where testing was in progress as at 31 March 2009. Of those audits, Overtime and Stores Procurement are not included in this report, but will be reported in the 2009/10 audit opinion.

3.5 No limitations were placed on the scope of our work during the year.

4 Audit approach

4.1 We examined systems operating to achieve objectives set by management in each of the areas detailed in Appendix E. We are not aware of any significant changes to any of the systems reviewed since our work was conducted.

4.2 Our work has been carried out using a systems based audit approach. This covers the control environment of HFRA which comprises the systems of governance, risk management and internal control. Key elements of the control environment include:

· establishing and monitoring the achievement of HFRA's objectives

· the facilitation of policy and decision-making ensuring compliance with established policies, procedures, laws and regulation - including how risk management is embedded in the activity of HFRA, how leadership is given to the risk management process, and how staff are trained or equipped to manage risk in a way appropriate to their authority and duties

· ensuring the economical, effective and efficient use of resources, and for securing continuous improvement in the way in which functions are exercise, having regard to a combination of economy, efficiency and effectiveness

· the financial management of HFRA and the reporting of financial management

· the performance management of HFRA and the reporting of performance management.

4.3 An implicit part of our systems based audit approach is an evaluation of the controls in place to prevent and detect fraud and we perform sufficient audit testing to confirm that controls are working in practice.

5 Audit Liaison

5.1 Staff within Hampshire Fire and Rescue Service have been co-operative and helpful during audits, and have worked with us to ensure that audits have been timed to suit both parties.

5.2 Management responses to audit reports have been prompt helping to ensure that recommendations to address control weaknesses receive management's early attention. This has been aided by the pro-active role undertaken by the Deputy Performance Review Manager in tracking and following up audit responses and action plans.

5.3 Audit Appraisal Questionnaires (AAQ) have been received from ten of the reviews completed in the year with an average satisfaction score of 93.3% (88.8% 2007/08), which demonstrates a good working relationship. We are grateful for these responses, as feedback enables us to improve our service to the Authority.

5.4 Quarterly meetings have taken place between the Director of Corporate Services, Head of Financial and Office Services, Deputy Performance Review Manager and Internal Audit to discuss progress on the delivery of the internal audit plan and provide an opportunity to share information on audit and operational developments within the service.

Appendix C

Audit opinion definitions:

Appendix D

Hampshire Fire and Rescue Authority

Annual internal audit opinion 2008/09 - Summary of main issues reported during 2008/09.

Note 1 - the definitions for opinions are given in Appendix C.

Appendix E

Hampshire Fire and Rescue Authority

Annual internal audit plan 2008/09

This page summarises our audit plan for 2008/09. More detail of 2008/09 audit assignments are shown on pages 21 and 22.