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Costessey Town CouncilInternal Audit Report 2014-15 (Final update)
Prepared by Adrian Shepherd-Roberts
Stuart J Pollard
Director
Auditing Solutions Ltd
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Background and Scope
The Accounts and Audit Arrangements introduced from 1st April 2001 require all Town and Parish Councils to implement an independent internal audit examination of their Accounts and accounting processes annually. The Council has complied with the requirements in terms of independence from the Council decision making process appointing Auditing Solutions Ltd to provide the function to the Council: this report sets out the areas examined during the course of our visits to the Council for 2014-15, which took place on 10th and 11th November 2014 and 8th June 2015.
Internal Audit Approach
In completing our review for the 2014-15, we have again had regard to the materiality of transactions and their susceptibility to potential misrecording or misrepresentation in the year-end Statement of Accounts, together with considering the potential impact that may arise from any variances in income and expenditure comparing that for 2014-15 with previous years.
Our overall aim is to satisfy ourselves and provide officers, councillors and local electors with assurance that the Council’s systems of internal financial control are robust and are operating in accordance with approved statutory and regulatory framework as set out in central government legislation and the Council’s own governance arrangements and procedures.
Overall Conclusion
We are pleased to confirm that, in the areas examined, the Council continues to operate effective control systems that should help ensure that transactions are free from material misstatement and will be reported accurately in the detailed Statement of Accounts and Annual Return for 2014-15.
We are again pleased to acknowledge that Council members and officers have provided clear and detailed accounting records and continue to operate a sound, approach to risk management and corporate governance issues, together with the development and management of effective internal controls and procedural documentation.
On the basis of the satisfactory conclusions drawn from our work undertaken during the year, we have duly signed off the Internal Audit Report at Section 4 of the Annual Return, assigning positive assurances in each relevant area.
Detailed Report
Maintenance of Accounting Records & Bank Reconciliations
Our objective here is to ensure that the accounting records are being maintained accurately and currently and that no anomalous entries appear in cashbooks or financial ledgers. We have: -
Ø Checked and agreed the opening Omega trial balance detail with the closing balances in the 2013-14 Statement of Accounts and Annual Return;
Ø Ensured that the ledger remains in balance at the present date;
Ø Ensured that the cost centre and nominal ledger coding structure remains appropriate for the Council’s needs;
Ø Checked and agreed detail on the combined Current and Business Saver accounts cashbook in Omega, examining transactions in May and September 2014 and March 2015, agreeing detail to the supporting bank statements, also verifying detail of all inter-account “sweep” transfers” for those months;
Ø Similarly, checked and agreed detail of transactions on the Salaries cashbook, again agreeing detail with the supporting bank statements for the same three months;
Ø Checked and agreed detail on the bank reconciliations at 31st May & 30th September 2014 and 31st March 2015 on all accounts, noting that reconciliations continue to be prepared routinely at the close of each month; and
Ø Verified the accurate disclosure of the combined year-end cash and bank balances in the year’s Annual Return and detailed Statement of Accounts.
Conclusions
We are pleased to report that no significant issues have been identified in this area.
Review of Corporate Governance
Our objective is to ensure that the Council has a robust regulatory framework in place; that Council and Committee meetings are conducted in accordance with the adopted Standing Orders and that, as far as we are able to ascertain, no actions of a potentially unlawful nature have been or are being considered for implementation. We have:-
Ø Noted that members have re-affirmed the Financial Regulations and the Standing Orders in January 2014. These are again to be reviewed in 2015-16 and brought into line with the latest NALC model documents;
Ø Noted that the Council have a defined openness, transparency and media policy in place; and
Ø Completed our review of minutes for the year examining those for full Council and Standing Committee meetings to ensure that no issues affecting the Council’s financial stability either in the short, medium or long-term exist, also that no legal issues appear to be in existence whereby the Council may either be considering or have taken decisions that might result in ultra vires expenditure being incurred.
Conclusions
No issues have been identified in this area of our review. We shall continue to monitor the Council’s approach to governance arrangements at future visits.
Review of Expenditure
Our aim here is to ensure that: -
Ø Council resources are released in accordance with the Council’s approved procedures and budgets;
Ø Payments are supported by appropriate documentation, either in the form of an original trade invoice or other appropriate form of document confirming the payment as due and/or an acknowledgement of receipt, where no other form of invoice is available;
Ø All discounts due on goods and services supplied are identified and appropriate action taken to secure the discount;
Ø The correct expense codes have been applied to invoices when processed;
Ø VAT has been appropriately identified and coded to the control account for periodic recovery; and
We have completed our review of payment transactions for the year for compliance with the above criteria selecting a sample of payments including those individually in excess of £3,000, together with a more random selection of every 35th cashbook transaction irrespective of value, for the financial year. Our test sample comprises 64 payments totalling £1,128,839 and equating to 82% of non-pay related payments processed in the year.
We also note that VAT returns continue to be completed in a timely and accurate manner, with electronic “on-line” submission now in place, in line with HMRC requirements. We have examined the four quarterly reclaims confirming that the detail correlates to that in the Omega VAT control account.
Conclusions
We are pleased to report that no significant issues have been identified in this area of our review with all the above criteria met.
Assessment and Management of Risk
Our aim here is to ensure that the Council has put in place appropriate arrangements to identify all potential areas of risk of both a financial and health and safety nature, whilst also ensuring that appropriate arrangements exist to monitor and manage those risks in order to minimise the opportunity for their coming to fruition. We have: -
Ø Examined the Council’s current year’s insurance policy with Zurich to ensure that appropriate cover is in place to meet the Council’s present needs. Public Liability cover stands at £15 million; Employer’s Liability at £10 million and Fidelity Guarantee at £1 million, all of which we consider appropriate to the needs of the Council;
Ø Noted that the insurer also continues to undertake periodic engineering inspections to supplement the weekly safety checks of play areas undertaken by the grounds staff;
Ø Noted that the Council has continued to engage the services of an external consultant (SJB Solutions) to provide a risk assessment and health and safety management service; and
Ø Noted that detailed financial risk assessment registers were last re-adopted by Council in January 2014. These are in the process of being revised by Full Council in 2015-16 following the Local Elections. The process of the review being delayed in 2014-15 due to some of the councillors standing down six months prior to the elections and the requirement to co-opt new members.
Conclusions
We are pleased to report that no issues arise warranting formal comment or recommendation in this area. We would, however, remind the Council that, in order to comply with the mandatory requirements of the Practitioners’ Guide (1) - which sets out the ‘proper practices’ to be followed by councils in relation to the accounts, governance and internal control - it will be important to ensure that members continue to formally review both the financial and operational risks on at least an annual basis, going forward, and that the results of these reviews are minuted.
1: Governance and Accountability for Local Councils: A Practitioners’ Guide (England) March 2014, issued by the Joint Practitioners’ Group.
Budgetary Control & Reserves
Our objective here is to ensure that the Council has a robust procedure in place for identifying and approving its future budgetary requirements and level of precept to be drawn down from the District Council or Unitary Authority (where applicable): also, that an effective reporting and monitoring process is in place. We also aim to ensure that the Council retains appropriate funds in general and earmarked reserves to finance its ongoing spending plans, whilst retaining appropriate sums to cover any unplanned expenditure that might arise.
The Council has, as evidenced by the supporting documentation and minutes, undertaken an appropriate exercise in determining the budget and precept requirement for 2015-16: we note that the year’s final precept was approved and adopted by full Council at £507,776, plus the Council Tax Support Grant of £50,467 at its meeting on 6th January 2015. We are also pleased to note that members continue to be provided with regular budget monitoring reports / management accounts provided from information produced from the Omega software data.
At this final visit, we note that the closing General Fund balance stood at just over £105,000, which is satisfactory for revenue expenditure at current levels and is considered to be perfectly appropriate to the Council’s needs at present.
Conclusions
There are no matters arising in this area warranting formal comment or recommendation.
Review of Income
In this area of review, we aim to ensure that income due to the Council is identified, invoiced (where applicable) and recovered at the appropriate rate and within a reasonable time scale, also that it is banked promptly in accordance with the Council’s Financial Regulations. Consequently, we have: -
Ø Noted that the Council has revised fees and charges for 2014-15 for the pitch hire with further increases to be considered for 2015-16;
Ø Examined the controls in place over the receipt and documentation of pitch hires, ensuring that signed agreement forms are in place and that appropriate sales invoices have been raised and that fees have been settled within a reasonable time period;
Ø Similarly, we have examined the controls in place over the receipt of applications for interments from undertakers reviewing documentation supporting ten interments that have occurred this year;
Ø Examined the controls in place in relation to the recording of allotment holders, completion of annual rental agreements and recovery of fees due in respect of the year commencing 1st October 2014; and
Ø Examined the Sales Ledger “Aged Debtors Report” noting that, where appropriate, these are being chased on a regular basis with agreement reached with the debtors for settlement by instalment or preparing for legal action.
Conclusions
We are pleased to record that no significant issue have been identified in this area.
Petty Cash Account
The Administration office operates a limited petty cash account on an “imprest basis” with monthly re-imbursements to a maximum holding of £300. We have checked and agreed transactions for October 2014 from the relevant Omega cashbook posting entries to supporting documentation and are pleased to report that sound controls continue to operate in this area, with all sequentially numbered vouchers in place and VAT identified accordingly for periodic recovery. We have also checked the physical cash held with no issues arising.
We note that charge cards have been issued to the Clerk and Head Groundsman to assist with urgent and /or immediate purchases via the internet to ensure best value is obtained. These are operated through separate Omega “cashbooks” to record the transactions on each account. We have checked and agreed three months’ transactions on these cards and are also pleased to report that no issues have been identified with the level or type of expenditure incurred.
Conclusions
No issues have been identified in this area of our review process.
Salaries and Wages
In examining the Council’s payroll function, we aim to confirm that extant legislation is being appropriately observed and the requirements of HM Revenue and Customs (HMRC) as regards the deduction and payment over of income tax and NI contributions, together with meeting the requirements of the local government pension scheme, as most recently significantly amended from 1st April 2014, as regards employee contribution percentages now being based on actual salary including overtime rather than on the Whole Time Equivalent salary. To ensure compliance with the above criteria, we have: -
Ø Checked detail of payroll transactions in October 2014;
Ø Ensured that the Council has approved employees’ gross pay rates for the financial year and that these have been duly and accurately applied;
Ø Noted that Moneysoft payroll software is now used to compute the monthly payroll, which includes the production of independent monthly pay slips;
Ø Checked to ensure that appropriate PAYE tax codes and NIC table deduction rates, depending on whether the employee was a member of the pension scheme or not, have been applied;
Ø Checked to ensure that the appropriate percentage superannuation deductions, based on the LGPS salary bandings as most recently further updated from 1st April 2014, have been applied to those staff in the pension scheme;
Ø Examined a sample of timesheets and travel claims submitted by employees in support of any additional hours worked and claimed as either overtime or TOIL, also ensuring that they are appropriately certified for accuracy and payment, also ensuring that the approved mileage rates are correctly applied and subjected to tax; and
Ø Verified that the net salaries, paid currently by cheque, are in line with the relevant payslips.
Conclusions
No issues have been identified in this area of our review process.
Fixed Asset Register / Inventory