ࡱ > 9 @Q bjbj ddF M . . s s s s s D 7 f L " " " e g g g g g g $ L s " " " " " s s 4 % % % " F s s e % " e % % m e" F U P Q 0 ` " s 8 " " % " " " " " _$ f " " " " " " " " " " " " " " " " . 9 : Barling Magna Parish Council Internal Audit Report 2017-18 Stuart J Pollard Director Auditing Solutions Ltd Background Statute requires all town and parish councils to arrange for an independent internal audit examination of their accounting records and system of internal control and for the conclusions to be reported each year as part of the Annual Governance and Accountability Return (AGAR) process. This report sets out the work undertaken in relation to the 2017-18 financial year, which has been undertaken in two tranches during April and May 2018. We are again pleased to acknowledge the quality of record keeping and documentation provided for our examination this year. Internal Audit Approach In undertaking our review, 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 / AGAR. Our programme of cover is, as in previous years, designed to afford appropriate assurance that the Councils financial systems remain robust and operate in a manner to ensure effective probity of transactions and to afford a reasonable probability of identifying any material errors or possible abuse of the Councils own and the national statutory regulatory framework. The programme is based on the ten areas covered by the Internal Audit Report as part of the AGAR process, as detailed in the Governance and Accountability Manual (G&AM). Overall Conclusion We have concluded that, based on the satisfactory conclusion of our programme of work for 2017-18, the Council has maintained appropriate accounting records with further clear indication of improved governance controls. Notwithstanding that, we have again made one or two recommendations where we consider further improvements could be made to the existing controls, detail of which is set out in the body of the report with the resultant recommendations further summarised in the appended action Plan. Based on the satisfactory conclusion of our programme of work for the year, we have duly completed and signed off the Internal Audit Report assigning positive assurances in each relevant area. Detailed Report Review of Accounting Arrangements & Bank Reconciliations The Clerk has again used the Scribe software to maintain the accounting records with funds now held in three bank accounts (two with the Co-op and one with HSBC). We are pleased to note the closure of the previously operated Santander and HSBC accounts and have verified the transfer of closing funds to the Co-op bank account. 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: - Agreed the opening trial balance detail in the Scribe accounting software with that in the 2016-17 Statement of Accounts and certified AGAR, noting that a few transactions on a former HSBC account in 2016-17 that werent identified in that years accounts, as relevant bank statements were not provided by or available from the bank at the financial year-end; Checked and agreed transactions (both receipts and payments) in the Councils Scribe cashbooks for all accounts to the relevant bank statements for the full financial year; Noted that regular bank reconciliations are prepared and presented to members during the year and verified detail on the combined three bank accounts reconciliations as at 4th and 31st March 2018 to ensure that no long-standing uncleared cheques or other anomalous entries exist; and Ensured the accurate disclosure of the combined bank account balances as at 31st March 2018 in the years AGAR. Conclusions We are pleased to acknowledge the quality of recording of the years financial transactions, together with the regular reporting of bank reconciliations during the year: consequently, no issues arise warranting formal comment or recommendation. Review of Corporate Governance Our objective is to ensure that the Council has robust corporate governance documentation and processes in place, that Council and Committee (where appropriate) meetings are conducted in accordance with the adopted Standing Orders (SOs) and that, as far as we may reasonably be expected to ascertain, no actions of a potentially unlawful nature have been or are being considered for implementation. We have: - Examined the Councils minutes for the financial year under review to determine whether any issues exist that may have an adverse effect, through litigation or other causes, on the Councils future financial stability; Noted that the Council approved the 2018-19 precept as 41,756 at the December 2017 meeting; Noted that the SOs and FRs have been reviewed and updated in the year, bringing them into line with the latest NALC model documents. However, we note that they contain conflicting values for seeking formal tender action, with the former showing a value of 1,000 (Para 18 (c) refers, whilst the FRs imply a value of 25,000 (Para 11.1 (h) refers). Conclusions and recommendation As indicated above, the SOs and FRs should be subjected to further review with the limit for formal tender action standardised in both document, with a sliding scale for the acquisition of formal and informal quotations. NALC has just issued a revised set of model SOs and we commend these as a sound basis for the next review of the Councils extant document: we have provided the clerk with an electronic copy of this latest document to further assist the Council. We noted last year that the clerk was working on the development of detailed financial guidance procedure notes, which were to be presented to Council for approval, once finalised. We have requested a copy of the documents and will review their content as part of our 2018-19 review. We shall continue to monitor the Councils approach to governance at future reviews also continuing our examination of minutes. Finally, in this area, we wish to thank the Chairman for the comprehensive responses provided in our governance questionnaire, which afford us further assurance as to the soundness of the Councils operative controls. R1. The values at which formal tender and quotation action is required should be consistent in the Standing Orders and Financial Regulations. Review of Expenditure Our aim here is to ensure that: - Council resources are released in accordance with the Councils approved procedures and approved budgets; 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; All discounts due on goods and services supplied are identified and appropriate action taken to secure the discount; An official order was placed for all goods and services as necessary when not covered by contracts or similar agreements, such as utility bills; The correct expense codes have been applied to invoices when processed; All payments have been reported to Council; and VAT has been appropriately identified and coded to the control account for periodic recovery and that reclaims have been submitted accordingly in the year to date. We have reviewed the procedures in place for the receipt, processing and approval of payments for work undertaken on behalf of the Council and supplies received and have examined all payments in the year for compliance with the above criteria in view of their relatively low volume. We note that VAT reclaims have been prepared and submitted for the financial year at the end of each quarter. In examining the documentation supporting payments in the year, we noticed that on a number of occasions where vatable purchases are made by the clerk with a VAT registration number recorded on the till receipts / invoices, the VAT element of the expenditure has not been identified for recovery: whilst the amounts involved are small, care should be taken to ensure that all recoverable VAT is identified and reclaimed: this applies particularly to car parking fees and purchases from B&Q, although we noted a few other instances where the VAT amount had not been identified. Conclusions and recommendation No significant matters of concern have been identified in this area with appropriate approval and control mechanisms now in place and each payment in our test sample meeting the above criteria. However, as indicated above, care should be taken to ensure that, for all vatable supplies, an appropriate VAT receipt is obtained and the VAT coded accordingly in the accounting software. We also noted that invoices supporting several the regular monthly service invoices paid by Direct Debit were not held on file. R2. The Clerk should ensure that, wherever possible, a VAT receipt or registration number is acquired to assist in the recovery of any VAT expended. R3. Appropriate arrangements should be made with service providers for the Clerk to receive a copy of their monthly accounts or periodic statements. 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 to minimise the opportunity for their coming to fruition. We have considered the Councils approach to risk assessment and management noting that updated LCRS software output was formally adopted at the February 2018 full Council meeting. We have also reviewed the Councils insurance schedule with Aviva noting that Employers and Public Liability cover are both in place at 10 million with Fidelity Guarantee cover set at 150,000, all of which we consider affords the Council appropriate cover. Conclusions No issues arise in this area this year warranting formal comment or recommendation. Precept Determination and Budgetary 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 approved budget and formal determination of the amount to be precepted on the District Council, 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. We have, previously in this report, acknowledged the satisfactory conclusion of the Councils budget deliberations resulting in the formal adoption of the precept for 2018-19. We are also pleased to note that members are provided with regular budget reports generated by the Scribe software during the year. We have reviewed the final outturn detail with no issues identified warranting further investigation or comment by officers or members. The year-end available fund balance stands at 34,900 (46,550 as at 31st March 2017) and equates to approximately 3 months revenue spending at present levels and is considered appropriate for the Councils present needs. We have made previous reference to the apparent absence of any formal earmarking of funds to finance future projects and developments (such as the hall refurbishment), noting that a reserves policy is being developed for presentation to and adoption by the Council. Conclusions No issues arise in this area this year: we shall continue to monitor the Councils budgetary performance as part of next years review also examining the reserves policy and its impact on the overall balances retained by the Council. Review of Income In considering the Councils income streams, we aim to ensure that robust systems are in place to ensure the identification of all income due to the Council from its various sources, to ensure that the income is invoiced in a timely manner and that effective procedures are in place to pursue recovery of any outstanding monies due to the Council. Apart from the annual precept, the Council has only received income by way of grants, donations and small amounts of bank interest, now also receiving income from hire of the recently refurbished and re-opened Village hall. We have examined a sample of the bookings since re-opening with no issues arising currently: we shall examine this area in greater depth at our next review ensuring that appropriate controls and documentation is in place. This should, in line with best practice, and to provide a clear audit trail, include: - A signed hire agreement form for each booking / block of bookings A formal diary record of bookings, identifying the name of the hirer, booking times and cross-reference to the invoice raised Invoices clearly identifying the make-up of the fees charged Register of invoices raise identifying the hirer, date issued, amount invoiced; payment and banking dates Conclusions No issues or concerns have been identified in this area this year: as indicated above, we shall undertake a more in-depth review of hall hire as part of our 2018-19 review. Petty Cash Account No petty cash account is in use at the Council, the clerk reclaiming any out-of-pocket expenses periodically, which are subject to the same approval procedure as trader invoices. Review of Staff Salaries In examining the Councils payroll function, we aim to confirm that extant legislation is being appropriately observed as regards adherence to the requirements of HMRC for the deduction and payment over of income tax and NI contributions. We note that, to facilitate completion of monthly RTI returns to HMRC, the HMRC Basic PAYE Tools software is being used by the clerk to process his and the Hall Managers monthly salary, together with Members allowances, payments and determine any resultant tax and NI deductions due together with the Councils NI contributions. To meet this objective, we have: Ensured that the Council has approved the clerks pay rate and basic working hours; Checked and agreed the computation of existing staff gross pay for March 2018; and Checked to ensure that the appropriate tax codes have been applied for the year and that the correct tax; NI deductions and employers national insurance contributions have been accurately calculated and are being paid over appropriately to HMRC (we note, as previously alluded to, that due to the former clerks failure to submit the necessary returns to HMRC, the Council received an 800 penalty from HMRC. Conclusions We are pleased to record that no issues arise in relation to the processing and payment of salaries to the two staff in post or in relation to the calculation if tax and NI deductions and contributions. Asset Register / Inventory The Governance and Accountability Manual requires all councils to maintain a comprehensive register of all assets owned and leased by the Council. We are pleased to note that an appropriate register is in place, with values recorded at cost or nearest approximation thereto based on the prior year value reported in the AGAR, together with new additions in 2017-18. We have reviewed the content of the record, comparing the content with the insurance schedule where possible, although in most cases, due to the nature of grouping of assets in the insurance schedule, it is not possible to determine whether the asset register detail is complete. Best practice also suggests that the asset register should identify the following detail, where known or acquirable for each asset and note some progress towards identification of this detail: Purchase date Purchase cost, or proxy value thereof Insured value (for budgetary purposes when considering replacements) Serial or registration numbers, where applicable Date of disposal and sale income, again where applicable We are also pleased to note the development of a photographic record of assets as recommended previously. Conclusions No issues have been identified in this area this year warranting formal comment. Investments and Loans As indicated earlier in this report, the Council has no specific investments at this time, funds being held in a variety of bank accounts with limited amounts of interest being earned. We have made previous reference to the loan to the Trustees of the Barling Magna Village Hall to assist with its purchase, detail of which is again included in the asset register and appropriately disclosed as such in the years AGAR as a Fixed Asset. We also note the successful application for a PWLB loan to assist in defraying the redevelopment costs of the hall and have ensured the appropriate recording of transactions in the accounts and AGAR. Conclusions No issues exist in this area at present. Statement of Accounts and AGAR The AGAR forms the Councils statutory Statement of Accounts subject to external audit examination and certification: our objective is to ensure the accuracy of information disclosed in the AGAR at Section 2 and that it is consistent with the detail contained within the Councils financial and other supporting records. We have examined detail of the intended entries at Section 2 of the 2017-18 AGAR ensuring that they are consistent with the years accounting and other records. Conclusions No issues arise in this area warranting formal comment or recommendation this year. We have duly signed off the Internal Audit certificate in the AGAR assigning positive assurances in each relevant area. Rec. No.RecommendationResponseReview of Corporate Governance R1The values at which formal tender and quotation action is required should be consistent in the Standing Orders and Financial Regulations. Review of Payments & VATR2The Clerk should ensure that, wherever possible, a VAT receipt or registration number is acquired to assist in the recovery of any VAT expended. R3Appropriate arrangements should be made with service providers for the Clerk to receive a copy of their monthly accounts or periodic statements. PAGE 1 PAGE 1 Norton Radstock TC: 2005-06 (Final) DATE \@ "dd/MM/yyyy" 18/05/2018Auditing Solutions Ltd PAGE 4 This reporthas been prepared for the sole use of Barling Magna Parish Council.Fully permitted by law, no responsibility or liability is accepted by Auditing Solutions Ltd to any third party who purports to use or rely, for any reason whatsoever, on this report, its contents or conclusions. Barling Magna PC: 2017-18 17-May-18Auditing Solutions Ltd Barling Magna PC: 2017-18 17-May-18Auditing Solutions Ltd ( ) ? F G L M ^ ` b ²}o`RA hs h! 0J" 5B*CJ ph h5 0J" 5B*CJ ph hs h! 5B*CJ ph h! B*OJ QJ ^J ph h! 5B*CJ ph h