Internal Audit Annual Report 2002/03

Report: 6
Date: 19 June 2003
By: Treasurer

Summary

The attached draft Annual Report of the Director of Internal Audit on the work of Internal Audit in 2002/2003 gives the Director of Internal Audit’s opinion on the adequacy and effectiveness of internal control within the MPS. The covering report provides a brief overview.

A. Recommendation

The Audit Panel is asked to approve the attached draft Annual Report of the Director of Internal Audit for circulation to all members of the MPA.

B. Supporting information

1. The annual report of the Director of Internal Audit is attached as Appendix 1. The report summarises the work of Internal Audit in 2002/2003 and sets out the Director of Internal Audit’s opinion on the adequacy of internal control.

Programme performance

2. Internal Audit has completed 81% of the planned systems audit programme for 2002/2003 (i.e. audit fieldwork completed and a draft or final report issued). This is a significant improvement over 2001/2002 where Internal Audit were only able to manage 67% coverage. A number of significant reviews and investigations were conducted by Internal Audit during the year and their work overall continues to support the MPA and the MPS in promoting greater accountability and control.

Internal Audit staffing

3. The number of staff employed in Internal Audit grew slightly during 2002/2003. Although, on average Internal Audit remained understaffed by about 20-25% of the identified need. This had an impact on Internal Audit’s ability to complete the planned programme of work. Effort was concentrated on achieving as much of the systems audit programme as possible and in consequence the number of BOCU reviews conducted was reduced.

Internal Audit budget

4. The budget for Internal Audit was set at £1,644,000 for 2002/2003. Taking into account some adjustments that have yet to be made for unspent accruals and cross-charges, Internal Audit underspent by £73,000. This relates to the unexpected loss of some provisionally appointed staff and delays in processing work by a contractor.

Financial savings

5. The work of Internal Audit and in particular their Forensic Audit Branch, continues to make a significant impact. As a result of Forensic Audit activity savings or losses stemmed during the year were approximately £3.8 million and recoveries made approximately £87,000.

Quality assurance

6. During the year the external auditor reviewed the work of internal audit following on for their review in 2001/2002. The District Auditor confirmed his previously reported view that the work of Internal Audit is of sufficient quality for him to be able to rely on its conclusions.

Management response

7. 97% of Internal Audit recommendations were accepted by management in 2002/2003 against a target of 90%. All high risk recommendations were accepted. Information on the implementation of recommendations should be available by the time the Panel meet.

Opinion on internal control

8. The Director of Internal Audit introduced in 2001/2002 a grading system to indicate the relative adequacy of controls in the systems audited. The average of the results across all the year’s audits enables the Director to add a quantitative measure to his opinion on the overall adequacy of internal control. This also provides a benchmark against which future improvement can be assessed.

9. On a five point scale where 1 represents controls performing well, a score of 2 indicates that controls are adequate. An average score of 2 would therefore mean that controls overall were adequate and this should be the target.

10. The average score for those systems reviewed in 2002/2003 was 3.3 a marginal improvement on 3.5 for 2001/2002. High risk systems scored a disappointing 3.9 in comparison to an average score of 3 in 2001/2002. However, follow-up reviews with an average score of 2.6 compared to 2.8 in 2001/2002 offer more encouragement. It also indicates a marked improvement on the average score for the initial audits.

11. On the basis of the average overall score the Director of Internal Audit gives his opinion as follows: “In summary, there is evidence from our follow-up audits of improved control by the MPS and I can offer a 57% assurance (improved from 50% in 2002/2002) on the adequacy of control and the effectiveness of systems within the MPS.

Looking Forward

12. Internal Audit is committed to helping the MPS improve its implementation of accepted recommendations. Following the Director of Internal Audit’s six-monthly presentations to the Commissioner on the role of Internal Audit the MPS has recognised the need to improve awareness of financial controls and risks. Internal Audit will continue to develop its assistance to training programmes to ensure adequate financial awareness for new and existing police management at junior and middle ranks.

13. There have been a number of positive developments in working alongside new and changing management teams in the MPS that should enable an increasingly effective role for Internal Audit in acting not only as the eyes and ears for the MPA but also contributing to improved financial and business management within the MPS. Liaison with the developing role of the MPS Risk Manager will enable Internal Audit to advise and the whole MPS in those areas where specialist audit advice can help reduce risk.

C. Equality and diversity implications

None.

D. Financial implications

1. The risk of loss through fraud, abuse, waste or inefficiency if Internal Audit recommendations are not effectively implemented.

2. Savings and recoveries that where appropriate can be off-set against budgets.

E. Background papers

None.

F. Contact details

Report author: Peter Martin, Treasurer, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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