Report of the Local Government Efficiency Review Group

• Examining arrangements for economic, efficient and effective use of
resources.
7.2.2 Local authority resources assigned to internal audit, stood at 99 staff for all
city and county councils at the end of 2008. Most internal audit staff do not
have formal auditing or accountancy qualifications, and three county
councils did not have an internal auditor for 2008. The VFM Unit of the
LGAS has produced a number of publications relating to internal audit.
7.2.3 Recommendations contained in these reports and handbook on internal
audit should be considered and implemented by local authorities where
appropriate. Full systems reviews should be included in the work
programme of the local authority’s internal audit unit and should also be
extended to the associated town councils over time. Local authorities
should ensure that their internal audit function is operating in accordance
with best practice, given their respective size and resources. Liaison with
other authorities and the wider public service through forums and interest
groups would be useful in this regard. The internal audit function should
report directly to the county/ city manager and the local authority audit
committee, rather than through the finance function. A breakdown of the
work carried out by the local authorities internal audit staff at the end of
2008 is illustrated in Table 7.1 below.
Table 7.1 – Activities of Internal Audit Staff in Local Government
Time Allocation
Audit assignments 71%
Checking receipts 13%
Checking Motor Tax 7%
VFM 6%
Other 3%
Source: Local Government Audit Service
7.2.4 Local authority internal audit units have a responsibility in relation to VFM
and it is clear that the proportion of resources allocated to VFM work is low
at 6%. Internal audit should be required to allocate say 10% of their
resources to VFM audit work. In order to coordinate the VFM audit work
being carried out, the local authority internal audit units should liaise more
with the LGAS VFM audit unit. Copies of local authority internal audit VFM
reports should be forwarded to the LGAS so that good practice identified
from this work can be shared with all councils. Local authorities should
have local arrangements in place for the internal checking of receipts,
including motor tax. This work should be separate from the work of internal
auditors, who should not spend 20% of their time checking receipts.
7.2.5 The Group recommends that the internal audit function in local authorities
should be resourced by staff with suitable professional qualifications and
sufficient ICT skills to allow the extraction and analysis of data from the
financial systems. As current posts become vacant, posts should be filled
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