To consider the Annual Year-End Internal Audit Report and Opinion for 2024/25 (DFP/06/2526)

Director of Finance and Procurement, Mike Rea, introduced the report providing Members with the Annual Year-End Internal Audit Report and Opinion for 2024/25. Members were reminded that the internal audit function was provided by Liverpool City Council. It was noted that Internal auditors had been on site in recent months completing the planned audits.

Jonathan Brookman, the lead Audit Manager, from Liverpool City Council presented the Internal Audit Annual Report. It was noted that the overall opinion, detailed on page 88 confirmed substantial assurance that systems of internal control within the Authority were operating effectively for 2024/25.

Members were drawn to page 90, which highlighted the fundamental system audits, including areas such as payroll and creditors. It was noted that the results of two strategic audits were also detailed within the report.

Jonathan Brookman noted that page 92 displayed five new recommendations, which would be followed up as they became due, and that 21 recommendations from previous audits remained outstanding and would be actively followed up over the next year.

It was highlighted that the Internal Audit Charter had been revised to reflect new global internal auditing standards effective from 1 April 2025, which was outlined on pages 103 of the report.

Councillor Bell discussed the internal audit opinion on page 88, welcoming positive progress in standard reporting, incident management, and resource use. However, Councillor Bell explained that further attention was needed on enforcement powers, embedding values and behaviours across all levels, and improving leadership, values and diversity. Councillor Bell queried how these issues would be addressed and how feedback would be used to support continuous improvement.

The Chief Fire Officer, Nick Searle discussed culture within the sector and emphasised that the Authority had implemented significant changes over the past 12 months. It was noted that these changes were driven by the Authority’s Cultural Action Plan which was informed by HMICFRS’s Misconduct in the Fire Service Report 

Chief Fire Officer, Nick Searle highlighted that the Service was actively addressing room for improvement and that the Authority took the approach to culture seriously. Members’ attention was drawn to notable improvements implemented in recruitment, training, and the review of disciplinary and grievance procedures.

Councillor Bell sought clarification on the Authority’s use of enforcement powers. Monitoring Officer, Ria Groves advised that the Authority were utilising the powers from the Fire Safety Order to review all enforcement of premises. Members were advised that a review of processes had been undertaken, and Members were assured that if efforts failed to ensure fire safety the Authority had processes in place to prosecute those responsible. 

Monitoring Officer, Ria Groves reminded Members that Culture and Enforcement and Prosecution were part of the Scrutiny Forward Work Plan 2025-26 and would be scrutinised effectively. 

Councillor O’Keeffe highlighted the outstanding 21 recommendations on page 92, from past years. She queried what the timeline was for these recommendations and if it was usual to carry 21 over to the next year. Johnathan Brookman clarified that specific recommendations were assigned to individual Officers including, consumable stores orders, change of Officers and a restructure within the Finance department.

Mike Rea mentioned that the Authority had performed well in past audits. However, some recommendations may not be relevant as processes change, for example changes had been made regarding the store’s audit, highlighting that several recommendations were implemented during COVID-19.  It was reported that the Authority had held a surplus of stock for various reasons, which was why an adjustment had been made to this year's audit plan to review it and Members noted that many processes had been put into action as per the recommendations.

Councillor Bell requested clarification of the sanction outlined in section 3.8, stating that it was not easily understood. She requested a simplified explanation, assurance on how the matter was being addressed, and what measures were in place. Mike Rea clarified that section 3.8 related to an expenses audit and noted that the current Service Instruction (SI) for claiming expenses lacked detail on the consequences of noncompliance with procedure.

Members noted that the risk identified was that failure to follow the SI could lead to procedural breaches. The recommendation was to revise the SI to include a clear statement that non-compliance may result in disciplinary action, and that deliberate falsification of claims or supporting evidence would be treated as gross misconduct. Mike Rea advised Members that internal management accepted the recommendation, and that the SI would be updated within the current financial year.

Mike Rea focused on another recommendation regarding instances where scale rate allowances were exceeded without recorded justification. It was suggested that this raised a risk that value for money may not be obtained. It was reported that the recommendation outlined that Officers should be reminded to provide clear justification whenever a claim exceeds the standard scale rate.

It was reported that internal management accepted the recommendation and that where scale rates were exceeded, employees would be required to support their claims with receipts.

RESOLVED that the contents of the Internal Audit report for 2024/25 be noted.