Huntingdonshire District Council risks falling foul of internal audit standards due to low staffing, a senior officer has warned.
A report put to the council's corporate governance committee on September 2 said compliance with the public sector internal audit standards "will be difficult to achieve" in the current circumstances.
Liberal Democrat councillor Sarah Conboy raised her concerns to the committee.
She said: "I think [internal audit] is one of the most important functions that we have at our disposal in terms of quality assurance, and quality for councillors that due process is happening and that we are managing those risks really effectively."
But she added reading the report, "that worries me considerably".
She asked the internal audit manager, David Harwood, if that comment should make people "sit up straight?" To which he replied, "I think you probably should be sitting up straight at this point".
Mr Harwood said part of the challenge is that the same standards apply to multinational corporations as they do to the council, noting the difference in staffing levels.
Speaking after the meeting, he said: "My issue is, with such a small team, it is difficult to deliver those national standards."
He said the team is "smaller than it has been," recalling the council took the decision to reduce the size of the audit team last year.
Asked if it was the first time he had raised the issue of not complying with the regulator, he said "I believe it is".
And he warned it created the potential for "reputational damage" to the council.
Committee chair, Conservative councillor Mac McGuire, told the committee: "I was concerned this [staffing levels within the internal audit team] was not registered as a risk."
He said he shared the concerns raised by Cllr Conboy, and said "we must not leave ourselves vulnerable, both from reputational damage and any other sort".
The report to the committee said: "Delivering an internal audit service with two [full-time] staff is a challenge. Both in respect of ensuring that the audit plan covers sufficient work across the whole of the internal control environment, but also allowing internal audit to contribute to new initiatives and developments, an area where often the greatest benefit and value can be added.
"The internal audit manager is of the opinion that full compliance with public sector internal audit standards will be difficult to achieve.
"An external independent assessment will be commissioned during 2020/21."
The council's head of resources, Clive Mason, responded to concerns raised, telling the committee: "David and I have an active debate about this issue, quite regularly. PSIAS stands there as a standard that we should all achieve, however it isn't statutory, but it is good practice. However, putting that to one side - because that's where David [Harwood] and I have a little bit of an interesting debate - in my humble opinion, the key issue here is can we rely on the internal control processes that we have… I do insist, no matter what, those key financial systems are adhered to and controlled appropriately, and David has complete independence to go off and do as much as, or as little as, he considers necessary."