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Horningsham Parish CouncilInternal Audit Report 2016-17
Claire Lingard
Consultant Auditor
Stuart J Pollard
Director
Auditing Solutions Ltd
Upper Deverills PC: 2016-17 / 25-Apr-16 / Auditing Solutions Ltd2
Background
All town and parish councils are required by statute to make arrangements for an independent internal audit examination of their accounting records and system of internal control and for the conclusions to be reported each year in the Annual Return. Auditing Solutions Ltd has provided this service the Council since 2012-13.
This report sets out the work undertaken in relation to the 2016-17 financial year, during our visit on 10th May 2017, together with the matters arising and recommendations for action, where appropriate.
Internal Audit Approach
In undertaking our review for the year, we have had regard to the materiality of transactions and their susceptibility to potential mis-recording or misrepresentation in the year-end Statement of Accounts/Annual Return. Due to the low volume of transactions, we have employed 100% detailed checks in a number of key areas in order to gain assurance that the Council’s financial and regulatory systems and controls are appropriate and fit for the purposes intended.
Our programme of cover has been designed to afford appropriate assurance that the Council’s financial systems are 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 Council’s own and the national statutory regulatory framework. The programme is also designed to facilitate our completion of the ‘Annual Internal Audit Report’ in the Council’s Annual Return, which requires independent assurance over a number of internal control objectives.
Overall Conclusion
We have concluded that, on the basis of the programme of work we have undertaken, the Council has maintained adequate and effective internal control arrangements during the year. We are pleased to acknowledge the quality of records maintained by the Clerk and thank her for her assistance which has ensured the smooth progress of our review process.
We have completed and signed the ‘Annual Internal Audit Report’ in the year’s Annual Return, having concluded that, in all significant respects, the control objectives set out in that report were being achieved throughout the financial year to a standard adequate to meet the needs of the Council.
This reporthas been prepared for the sole use of Horningsham Parish Council.To the fullest extent 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.
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Detailed Report
Maintenance of Accounting Records & Bank Reconciliations
The Clerk has maintained the Council’s accounting records using Excel spreadsheets, which we consider adequate given the low volume of annual transactions. The Council maintains a single bank account with Lloyds TSB Bank: we have agreed the cashbook detail to the relevant statements for the full financial year, also checking and agreeing the year-end cashbook / bank statement reconciliation ensuring that no anomalous items exist, such as out-of-date cheques.
Conclusions
We wish to compliment the clerk for again maintaining a high standard of records. No issues arise in this area warranting formal comment or recommendation.
Review of Corporate Governance
We have examined the content of the Standing Orders (SOs) and Financial Regulations (FRs), both of which have been reviewed and were re-adopted formally at the full Council on 21st April 2016: we are pleased to note that they have been amended in line with the latest NALC Model documents in order to reflect the recent changes in procurement arrangements consequent on EU legislation relating to the advertising of all contracts in excess of £25,000 over a three-year period.
We have examined the content of the extant SOs and FRs and consider them appropriate for the Council’s present needs.
We have again reviewed the Council’s minutes for the current year to determine whether any issues exist that may have either a legal or financial impact on the Council and its future financial stability and are pleased to record that no such items appear to exist at present.
Conclusions
We are pleased to record that no issues arise in this area this year.
Review of Payments
We have examined the controls in place over the approval of payments for release and consider them sound.
We have reviewed all payments made during the year to ensure that the following criteria were met: -
Ø Payments were supported by a trade invoice or acknowledgement of receipt.
Ø VAT has been calculated correctly and is recovered at appropriate intervals.
Ø The Council at a Council meeting approved each payment.
Ø Payments have been correctly analysed in preparation of the year-end Statement of Accounts.
Ø Section 137 payments have been identified in the cashbook and are within the Council’s spending limit.
Conclusions
We are pleased to report that no issues have arisen in this area with the above criteria met appropriately for the year.
Assessment and Management of Risk
We are pleased to note that the Council reviewed and formally re-adopted its Risk Assessment documentation for the financial year.
The Council’s insurance cover is provided via Hiscox Insurers. We have examined the insurance schedule for 2016-17 with Public and Employer’s Liability cover both in place at £10 million and Fidelity Guarantee cover at £500,000 all of which we consider appropriate for the Council’s present needs.
Conclusions
No issues arise in this area warranting formal comment or recommendation. We shall continue to monitor the Council’s approach to risk management at next year’s review.
Budgetary Control and Reserves
The Council’s minutes, together with the supporting papers provided to Council indicate that members have considered and agreed the 2017-18 budget and precept, setting the latter at £13,072.00. We are also pleased to note that Councillors continue to receive regular income and expenditure reports along with the bank balance detail at each meeting.
Overall reserves as at 31st March 2017 have increased to £25,501 (£13,064 as at 31st March 2016): we are pleased to note the adoption of a formal reserves policy during the financial year with identified earmarked reserves of £24,100 held at 31st March 2017, including a “Risk and Contingency Reserve” of £3,400. Regarding this last item as part of the General reserve balance, gives an overall General Fund balance of £4,800 which equates approximately five months’ revenue spending at the 2016-17 level and sits comfortably within the generally recognised CiPFA guideline of between three and six months’ revenue spending.
Conclusions
No issues arise in this area of our review, although we urge members to ensure that total funds are retained at an appropriate level: generally recognised CiPFA guidance is that the General Reserve fund balance should equate to between three and six months’ net revenue spending.
Review of Income
The Council receives only limited income, mainly from the annual precept, Council Tax Support Grant and VAT recovered. We have reviewed the year’s bank statements and other available supporting documentation agreeing detail to the cashbooks.
Conclusions
We are pleased to record that no issues arise in this area.
Petty Cash Account
The Council’s policy is not to maintain any form of cash float with any out-of-pocket expenses incurred reclaimed and paid in line with normal trader payment procedures.
Salaries and Wages
We noted previously that the Clerk had established a PAYE scheme for the Council: we have examined her salary payments during the year noting that members approved an incremental increase part way through the year.
The Clerk is now paid by cheque on the 12th day of each month, by receipt of a post-dated cheque. This situation will be resolved when the council’s banking facilities are transferred to electronic banking with the Unity Trust Bank in 2017-18.
We have, consequently, checked and verified the basis of the clerk’s gross salary payments for the year, together with any relevant tax deductions, which are paid over to HMRC accordingly.
Conclusions
We are pleased to record that no issues arise in this area.
Fixed Assets
The Governance and Accountability Manual requires all councils to maintain a record of the assets owned. We are pleased to note compliance with this requirement, the Clerk maintaining an appropriate register recording both the purchase cost and annually uplifted insured value, as assigned by the insurer. We have checked and agreed detail as recorded in the Asset Register to the insurance schedule with no issues arising in that respect.
We are also pleased to note compliance with the Annual Return reporting requirements with the asset value in the 2016-17 Return remaining unchanged from that reported in 2015-16, with no assets acquired or disposed of in the year.
Conclusions
We are pleased to record that no issues have been identified in this area, with asset values appropriately reported in the Annual Return.
Investments and Loans
The Council has no funds in investments and has no third-party loans either payable or receivable.
Statement of Accounts and Annual Return
We have verified the accurate recording of financial detail in Section 2 – Accounting statements 2016-17 of the Annual Return agreeing detail therein to the supporting financial and other relevant documents.
Conclusions
No issues arise in this area and we have duly signed off the Internal Audit Report in the year’s Annual Return assigning positive assurances in each relevant area.
Horningsham PC: 2016-17 / 10 May 2017 / Auditing Solutions Ltd