Download Final Update Report - Biggleswade Town Council

Biggleswade Town Council
Internal Audit Report 2014-15 (Final Update)
Prepared by Nigel Archer
Stuart J Pollard
Director
Auditing Solutions Ltd
Background and Scope
The Accounts and Audit Regulations 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 complied with the requirements in terms of
independence from the Council decision making process at the outset of the updated Regulations,
appointing Auditing Solutions Limited to provide the function.
Our programme of cover has been designed to afford appropriate assurance that the Council’s
financial systems are robust and operate in a manner designed to ensure effective probity of
transactions and to afford a reasonable probability of identifying any material errors or possible
abuse of the Council’s own and the national statutory regulatory framework. The programme of
cover is also designed to facilitate our certification of the Annual Return that now, under the
current Accounts and Audit Regulations, acts as the Council’s formal Statement of Accounts
subject to external audit certification.
Internal Audit Approach
We have, as previously, employed a combination of selective sampling techniques (where
appropriate) and 100% detailed checks on a number of key areas in accord with the previously
agreed five year, rolling programme of work in order to gain sufficient assurance that the
Council’s financial and regulatory systems and controls continue to be appropriate and fit for the
purposes intended.
This report sets out those areas examined during the course of our final update visit to the Council,
which took place on 25th March 2015 and supplements the work undertaken over the course of two
days in October 2014 and February 2015. We have agreed with the Town Clerk that any further
work to verify the closing Statements of Accounts and Annual Return disclosures will be
undertaken “remotely” at our offices, without further charge, following their preparation by the
external contractors (DCK Beavers): we do not consider that it will be necessary for a further
detailed report to be issued, although we will advise satisfactory completion of the final review
once completed.
Conclusions
We are pleased to report that no significant matters have been identified from the work completed
to date and it has not been considered necessary to append any form of Action Plan this year.
The Annual Return had not been received at the time of this final visit: consequently, we have also
asked that the Clerk forward the document to us in due course so that we may sign off the IA
Certificate accordingly and return it for the Council’s necessary further action.
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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. To that end, we
have:  Noted that third party contractors (DCK Beavers Ltd) continue to undertake the majority
of the Council’s financial transaction processing on Omega, generally fortnightly;
 Ensured that the financial ledger remains in balance at the present date (28th February
2015);
 Checked that the closing balances, as reported in the Statement of Accounts for 2013-14,
have been correctly rolled forward as the opening balances for 2014-15 in the Omega
software;
 Ensured that a comprehensive, meaningful and appropriate nominal ledger coding
schedule remains in place;
 Checked and agreed transactions in both the Council’s Current and Business Reserve
account cashbooks to the relevant bank account statements for three sample months (April
& September 2014 and February 2015), including all inter-account “sweep” transfers for
the same months;
 Confirmed detail of all transactions to 28th February 2015 (only the quarterly interest
receipts) in full on the Capital Reserve account; and
 Checked detail on the Omega based bank account reconciliations for all three accounts as
at 30th April & September 2014 and 28th February 2015 to ensure that no long-standing,
uncleared cheques or other anomalous entries exist: no such issues were identified.
Conclusions
We are pleased to record that no issues have been identified in this area warranting formal
comment or recommendation. We shall verify the accurate disclosure of the year-end balances
in the Annual Return once relevant documentation is provided for our examination.
Review of Corporate Governance
Our objective here is to ensure that the Council has robust corporate governance documentation
and processes 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:  Examined the minutes of the Full Council and its Standing Committees meetings for the
municipal year to date (10th March 2015) to ensure that no potential issues affecting the
Council’s financial stability either in the short, medium or long term exist. We previously
noted the continued discussions with regard to the Car Park lease arrangements,
provisional conclusions having been agreed at the Full Council meeting in December
2014: we also note that an Extraordinary meeting was due to be held on 31 st March 2015
to further debate car parking issues throughout the town, not only those to be leased by
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the Council. We also previously noted the confidential meetings arising in relation to
certain previous staffing / procedural matters, which would appear to be still ongoing at
the time of this final update visit, but do not consider it necessary nor appropriate to
comment in this respect at present;
 Previously reported that the Council’s Standing Orders (SOs) and Financial Regulations
(FRs) were formally reviewed and re-adopted at the Full Council meeting in August
2012. Subsequently, at the previous interim visit, we noted that SOs were re-adopted in
October 2014, whilst FRs remained under review following the promulgation of a revised
NALC model document: we now note that these deliberations were concluded with
revised FRs being formally adopted by Full Council in January 2015; and
 Also previously reported that the Council had met all the necessary criteria and formally
adopted the General Powers of Competence.
Conclusions
There are no issues arising of which officers and / or members are unaware at present.
Review of Expenditure
Our aim here is to ensure that:  Council resources are released in accordance with the Council’s approved procedures and
budgets;
 Cheques are signed by two elected members of the Council;
 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;
 An official order has been raised for all purchases and service delivery where one would
be expected;
 All discounts due on goods and services supplied are identified and appropriate action
taken to secure the discount;
 The correct expense codes have been applied to invoices when processed; and
 VAT has been appropriately identified and coded to the control account for periodic
recovery.
We have completed our testing in this area, examining all those payments individually in excess of
£2,500, together with a more random selection of every 30th cashbook transaction irrespective of
value, for the year to 28th February 2015. Our sample, including the monthly non-domestic rates
comprised some 120 payments, totalling more than £318,400 and representing 59% of all non-pay
related payments for the year to that date.
We are pleased to note that the three quarterly VAT return submissions to 31st December 2014 had
been completed in a timely manner and that the balances disclosed in the most recent return were
in accord with the underlying Omega control account balance.
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Conclusions
All the above criteria were met in the sample of payments examined and no formal
recommendations arise.
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 identified in order to minimise
the opportunity for their coming to fruition.
 We have previously noted that the Financial Risk Assessment Registers were reviewed
and re-affirmed by Full Council in December 2013: consequently, no further testing work
has been undertaken in this area other than to note from the Clerk’s verbal feedback at
this final update visit that no changes are required for 2014-15 and this will be formally
recorded in the minutes of the next Council meeting;
 Our current examination of minutes for 2014-15 has identified that full safety inspections
and risk assessments had been carried out at all Council play areas with the resultant
reports indicating a high standard of management and repair; and
 We note that, following a review of insurance renewal quotations, the Clerk has
successfully negotiated a transfer from Zurich plc to Aon with savings in annual
premiums in excess of £22,000. We have examined the content of the current year’s
policy schedule (to March 2015) noting that both Employer’s and Public Liability stand
at £10 million, with Fidelity Guarantee cover set at £250,000 and that adequate Business
Interruption / Loss of Revenue cover is in place at £50,000.
Conclusions
There are no issues identified in this area warranting formal comment or recommendation.
Precept Determination and Budget Control
We aim in this area of our work to ensure that the Council has appropriate procedures in place to
determine its future financial requirements leading to the adoption of an appropriate budget and
the formal determination of the amount to be precepted on the District Council or local Unitary
Authority (where applicable), that effective arrangements are in place to monitor budgetary
performance throughout the financial year and that the Council has identified and retains
appropriate reserve funds to meet future spending plans.
The first interim visit took place in advance of any significant or formal consideration of the
Council’s budgetary and precept requirements for 2015-16, although we were pleased to note that
the accountancy contractors continue to prepare appropriate I&E and budget monitoring
statements.
We now note that the Budget and Precept deliberations were duly concluded in January 2015, the
latter being formally agreed and recorded at £702,469, noting also that the Unitary Authority has
determined that it will not pay over any “Support Grant”.
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We also note that the Council’s contractors continue to prepare, for circulation to members,
comprehensive management accounts based on the Omega reporting facilities on a regular basis.
Conclusions
No issues have been identified in this area to warrant formal recommendation: we shall
consider the closing out-turn for the year and the levels of Earmarked Reserves and General
funds as part of the “remote” review of the Statement of Accounts and Annual Return once
prepared.
Review of Income
Our objective in this area is to ensure that all income due to the Council is identified for prompt
recovery and banking. In addition to the precept, the Council receives income from a variety of
other sources including office and playing field rentals, allotments, cemetery activities, bank
interest, weekly “general” and monthly “farmers” markets, grants and donations.
We only undertook limited work in this area at the first interim visit, including noting that the
scales of fees and charges pertaining for 2014-15 had been approved and the sample cashbook
transaction testing noted earlier in this report. Subsequently, we have updated our cashbook
testing to include February 2015 transactions and verified all quarterly interest receipts arising on
the Capital Reserve account to 31st December 2014.
We have also examined income arising from Cemetery activity by reference to the Burial Register
entries for all three sites for the year to 31st December 2014, ensuring that each was supported by
appropriate application forms / certification notices; that the fees charged were in accord with the
Council’s published scales; that all monies due had been received in a timely manner and that the
underlying Omega cashbooks and nominal ledger income codes had been accurately updated.
Finally, at this recent update visit we have visually examined all appropriate nominal ledger
income code transaction reports to 28th February 2015 to ensure that there are no obvious errors or
omissions, particularly where periodic receipts would be expected such as seasonal pitch fees,
farmers’ markets and Court House lettings: no such issues were identified. We also examined a
sample of the sales ledger invoices raised to ensure fees and charges were properly charged in
accord with the published scales.
Conclusions
No significant issues have been identified in this area: we discussed with the contract
accountants, who were in attendance on the day of this final update visit, the current Aged
Debtors report and filing of sales invoices, which appeared to be slightly out of date and were
re-assured this would be tidied up as part of the “pre-closedown” health check in the near
future.
Petty Cash Account
As a result of the previously noted transition from the full “Code” audit to the “limited assurance”
regime, we are now required to express a view on the operation of petty cash accounts as part of
the Internal Audit Certificate at Section 4 of the Annual Return.
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Consequently, at the first interim visit, we examined two sample months’ transactions (July and
August 2014) on the limited petty cash scheme operated at the Town Hall, which has a maximum
holding of £150 and is “topped up” on an Imprest basis monthly. We have ensured that each
payment was supported by an appropriate supplier invoice / till receipt, that VAT was separately
identified and coded for periodic recovery and that each re-imbursement was properly recorded in
the cashbook.
Conclusions
There are no issues arising in this area in the current year.
Salaries and Wages
In examining the Council’s payroll function, we aim to confirm that extant legislation is being
appropriately observed as regards adherence to the Employee Rights Act 1998 and the
requirements of HM Revenue and Customs (HMRC) in relation to the deduction and payment
over of income tax and NI contributions, together with meeting the requirements of the local
government pension scheme, as further revised from 1st April 2014 in relation to employee
contribution percentage bandings, that are now based on actual salary for the year, also including
overtime, rather than WTE scales as previously.
To meet these objectives, we have examined the payroll procedures in place and the physical
payments made to staff in August 2014, noting that the service provision continues to be
outsourced to a local firm (GH On-line) and that all employees continue to be paid on a monthly
basis. Our review has included:  Ensuring that the Council had approved employee pay rates for the financial year and that
these have been duly and accurately applied;
 Checking to ensure that appropriate PAYE tax codes are being applied following the
annual budgetary increases in personal allowances with effect from April 2014;
 Checking to ensure that national insurance deductions were being computed accurately
depending on whether the employee was a member of the pension scheme or not;
 Checking that the correct scales of superannuation deductions, based on the revised LGPS
salary bandings as further updated in April 2014, were being applied where appropriate;
 Ensuring that appropriately approved timesheets are submitted by all employees in support
of any flexible hours worked and / or claimed as overtime; and
 Verifying detail of the net salary payments and third party settlements of PAYE and LGPS
by comparison of payslips, etc with the BACS settlements.
Conclusions
One exceptionally minor observation was raised with officers during the course of the first
interim visit in relation to one employee’s national insurance deduction table and did not
consider it necessary to repeat the detail in this report, as any potential monetary effect was
completely immaterial and suitable checks and revisions were undertaken prior to the next
payroll run.
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Asset Registers
The Council is required by the Accounts and Audit Regulations 1996 (as periodically amended) to
maintain a formal register of the assets owned and managed by the Council and we have
previously commented positively on the comprehensive “terrier” that is in place at Biggleswade.
Additionally, DCK Beavers continue to maintain a register identifying the cost of all principal
assets held / purchased to which annual depreciation is applied as appropriate for the purposes of
the detailed Statement of Accounts prepared by them.
We also noted that all depreciation was subsequently “written back” for the purposes of the
Annual Return to ensure that the total value disclosed at Box 9, Section 1 was in accord with the
reporting requirements of the Governance and Accountability Manual (2014) confirming that to be
the case for 2013-14.
Conclusions
There are no issues arising in this area to warrant formal recommendation at present: we shall
verify the accurate disclosure of the asset value in the Annual Return and detailed Statement of
Accounts once the relevant documentation is available for our review.
Investments and Loans
Our objectives here are to ensure that the Council is “investing” surplus funds, be they held
temporarily or on a longer term basis in appropriate banking and investment institutions, that an
appropriate investment policy is in place and that the Council is obtaining the best rate of return
on any such investments made and that interest earned is brought to account correctly and
appropriately in the accounting records. We have previously noted that the Council no longer
invests “surplus” funds in periodic Term deposits and this has remained the case during 2014-15
to date.
We have also previously noted the existence of outstanding PWLB loan liabilities but, at the first
interim visit, did not verify the instalment payment in September 2014 to their third party
“demand” notice (which was not readily to hand at the time and, subsequently, it has not been
located despite having been posted to the Omega purchase ledger), although cashbook to bank
statement testing for the month confirmed its settlement.
At this final update visit, we have obtained a copy of the PWLB notification of the March 2015
settlement due: as the payment had yet to be taken by direct debit from the bank, we were unable
to formally verify the amount paid.
Conclusions
There are no issues arising in this area at present: we shall verify the disclosure of the residual
loan balances in the Annual Return as part of the “remote” work in due course.
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Statement of Accounts and Annual Return
As indicated above, we shall verify the accuracy of detail in the Annual Statement of Accounts,
together with detail for inclusion at Section 1 of the Annual Return, as produced by the contract
accountants once made available for our examination.
Conclusions
We shall report any further conclusions in this area as an addendum to this report, if
appropriate, once we have received and reviewed the relevant documentation to be provided
following completion of the year-end closedown and Accounts production process by DCK
Beavers.
Biggleswade TC: 2014-15 (Final Update)
30-Jun-17
Auditing Solutions Ltd