Introduction

  1. This is the second progress report to the Audit and Governance Committee for financial year 2010 / 2011. The purpose of this progress report is to inform the Audit and Governance Committee of the status of the internal audit work completed with respect to our internal audit plan for 2010 / 2011.

Performance Against the Audit Plan

  1. Performance up to 30th September 2010 against the agreed audit plan is set out in the following table:

Planned days 2010/2011 full year / Planned days 2010/2011 six months ended 30th September 2010 / Actual days six months ended 30th June 2010
Planned Assurance Work / 1882 / 941 / 830
Contingency (Investigations) / 97 / 48 / 112
Total / 1979 / 989 / 942
  1. The actual number of audit days delivered was 95% of the planned total. The shortfall is due to:

sickness (including phased return to work) 60 days

early retirement of principal auditor 47 days

work placement ending 35 days

142 days

This was offset by:

additional days worked by agency staff 52 days

additional days worked by audit staff 43 days 95 days

Summary of internal audit activity during the second quarter 2010/2011

4.The internal audit plan for 2010 / 2011 is attached at Appendix A and records the current status of the internal audit assignments.

  1. Final reports have been issued for the following audits carried over from the 2009 / 2010 audit programme. These relate to:-

Town Hall

Middlesbrough Theatre

Arts Development

  1. Final reports have been issued for the following audits from the 2010 / 2011 audit programme. These relate to:-

Community Councils (19 from 25 audits completed)

Berwick Hills Primary School

Lingfield Primary School

Beverly School

Hall Garth Community Arts College

Stewart Park

Area Care (incl. Horticulture and Highway Verge and Tree Maintenance)

Building Cleaning & Security

Youth & Community Centres (3 from 9 audits completed)

Community Centres (3 from 4 audits completed)

A summary of the findings from the above reports is included at Appendix B.

  1. In addition to planned audits, time has been incurred in the quarter in performing the following ad-hoc work:

HB Count 2010

Review of Expenditure Pupil Referral Unit

Banking Discrepancy Primary School

  1. In the period under review, Internal Audit has undertaken unplanned work on the following capital grant claim: Bio-fuel boilers.
  1. During the quarter, the Internal Audit Service provided a NHS graduate trainee accountant with a flexi-placement opportunity. The flexi-placement was for a period of eight weeks. In this time, under supervision, the trainee carried out an audit of the integrated occupational therapy service.
  1. Going forward from the end of September 2010, the Internal Audit Plan is based on the position of Deputy Audit Manager being filled. The structure for the new shared Internal Audit Service with Redcar and Cleveland does not include an equivalent post, therefore it has not been filled. Taken together with the early retirement / voluntary redundancy of a Principal Auditor and the ending of a work placement in July the Internal Audit Service has fewer resources than originally planned. To reduce the impact of the loss of resource, a decision was taken to extend the contract of one agency staff beyond its expiry date at the end of August 2010.
  1. The HB Count work undertaken on behalf of the external auditor has proved to require a greater amount of resource than originally planned. To the end of September 2010 it has consumed 85 man days which has resulted in the budget for contingencies exceeding the planned allocation for the year. Additional work continues to be undertaken on the HB Count work to meet the deadline for submission of the grant claim. The overspend against the contingency allocation taken together with the reduction in resources means that the original audit plan is no longer achievable. A revised audit plan based on available resources after taking into account the overspend on contingencies will be provided to the Committee for approval.

Appendix A

Overview of Internal Audit Programme 2010 / 2011

Audit Area / Status / Notes
Fundamental Financial Systems
Audits carried over from previous year / Draft reports completed
Other Corporate Financial Systems
Purchase Cards / Completed
World Pay / All Pay / Draft report issued
Travel & Subsistence / Fieldwork in progress
Code of Practice Audits
Annual Governance Statement (AGS) / Complete / Input to AGS financial year 2009 / 2010
National Fraud Initiative / Fieldwork in progress / On going investigation of data matches and preparation work for NFI2010. All data sets submitted for NFI 2010
Children Families & Learning
Bank Reconciliation Cheque Book Schools / Complete
Primary Schools (15) / Audits in progress / Three audits complete and final report issued. Draft audit reports issued on a further six schools
Secondary Schools (2) / Audits in progress / One audit complete and final report issued the second audit commenced in the 2nd quarter
Special Schools / Audits in progress / One audit complete and final report issued. The second audit commenced in quarter two.
Direct Payments / Fieldwork in progress
Leaving Care Service / Fieldwork in progress
Youth Offender Team / Pre-audit work / Head of Service on temporary assignment with an external organisation. Audit deferred to quarter 3 until acting Head of Service has had time to become established. Recommence audit quarter 3.
Environment Services
Area Care (incl Horticulture & Tree Maintenance) / Completed
Building Cleaning & Security / Completed
Play Builder / Pre-audit work
Stewart Park / Completed
Regeneration
Places for Change Grant / Grant certification work complete
Business Support / Draft report issued
Housing Market Renewal Fund / In progress / Audit of final grant claim for financial year 2009 / 2010 completed
1st quarter grant usage statement audited
Community Councils (25) / In progress / Audits completed of 19 Community Councils
Performance & Policy
National Information Statistics / Draft reports issued
Strategic Resources
Dispensation From Contract Standing Orders / In progress / Comments on requests for dispensations from the competition element of Contract Standing Orders:
1st April – 30th June no. received 7
1st July – 230th September no. received 9
Contract Audit
Tender / Quotation Registers / Fieldwork in progress
Code of Practice Audits
Contract Standing Orders / Completed / Revised Contract Standing Orders to be submitted to Council for approval
Children Families & Learning
Youth & Community Centres (9) / In progress / Audits of 3 Youth & Community Centres completed
Contact Point / Completed / Assurance certificate signed
Family Support Service / Fieldwork in progress
Environment Services
Newham Grange Leisure Farm / Completed
Stewart Park / Completed
Regeneration
Community Centres (4) / In progress / Audits of 3 Community Centres completed
Tourist Information Centre / Fieldwork completed
Middlesbrough Historic Quarter Lottery Grant / To commence / Awaiting confirmation final grant claim complete
Social Care
Residential Agency Payments / Fieldwork in progress
Supporting People Grant Claim / To commence / No longer a requirement for Internal Audit certification of grant claim
Information Technology
Voice Transmission / To commence / Scheduled quarter 2
Other Corporate Financial Systems
Gifts & Hospitality / To commence / Scheduled quarter 3
Telephone Allowances / To commence / Scheduled quarter 3
Code of Practice Audits
Corporate Governance / To commence / Scheduled quarter 3
Children Families & Learning
Catering / To commence / Scheduled quarter 3
ICT Units / To commence / Scheduled quarter 3
Sixth Form / Colleges Funding LSC / No longer required following decision not to transfer to LAs
Ethnic Minority Inclusion Team / To commence / Scheduled quarter 3
Children’s Trust / To commence / Scheduled quarter 3
Environment Services
Emergency Planning / To commence / Scheduled quarter 3
Section 278 Agreements / Commuted Sums / To commence / Scheduled quarter 3
Traffic Signals / To commence / Scheduled quarter 3
Trading Standards / To commence / Scheduled quarter 3
Healthy Towns / To commence / Scheduled quarter 3
Safe Middlesbrough Partnership / To commence / Scheduled quarter 3
Regeneration
Stockton / Middlesbrough Initiative / To commence / Scheduled quarter 3
Middlehaven / To commence / Scheduled quarter 3
Local Area Agreement / To commence / Scheduled quarter 3
Housing Advances / To commence / Scheduled quarter 3
Future Jobs Fund / To commence / Scheduled quarter 3
Social Care
Registrars / To commence / Scheduled quarter 3
TCES / To commence / Scheduled quarter 3
Lansdowne Day Centre / To commence / Scheduled quarter 3
User / Carer Support / To commence / Scheduled quarter 3
Information Technology / To commence / Scheduled quarter 3
Legal & Democratic Services
Members Allowances / To commence / Scheduled quarter 3
Performance & Policy
Strategic Risk Management / To commence / Scheduled quarter 3
Health & Safety / To commence / Scheduled quarter 3
Strategic Resources
Insurance / To commence / Scheduled quarter 3
Procurement / To commence / Scheduled quarter 3
Information Technology
Internet Usage & Security / To commence / Scheduled quarter 3
Application Reviews / To commence / Scheduled quarter 3
Installation Review / To commence / Scheduled quarter 3
Contract Audit
Receipt & Custody of quotations & Tenders / In progress
Opening of Quotations & Tenders / In progress
Core Financial Systems
Budgetary Control / To commence / Scheduled quarter 4
Capital Accounting / To commence / Scheduled quarter 4
Cash Receipt & Banking / To commence / Scheduled quarter 4
Council Tax / To commence / Scheduled quarter 4
Creditors / To commence / Scheduled quarter 4
Debtors / To commence / Scheduled quarter 4
Housing & Council Tax Benefit / To commence / Scheduled quarter 4
Main Accounting / To commence / Scheduled quarter 4
Non Domestic Rates / To commence / Scheduled quarter 4
Payroll / To commence / Scheduled quarter 4
Pension Administration / To commence / Scheduled quarter 4
Pension Fund Investments / To commence / Scheduled quarter 4
Treasury Management / To commence / Scheduled quarter 4
Other Corporate Financial Systems
Car allowances / In progress / Scheduled quarter 4
Code of Practice Audits
Money Laundering / To commence / Scheduled quarter 4
Accounting Instructions / To commence / Scheduled quarter 4
Financial Regulations / To commence / Scheduled quarter 4
Environment Services
Clairville Stadium / To commence / Scheduled quarter 4
Rainbow Leisure Centre / To commence / Scheduled quarter 4
Southlands Leisure Centre / To commence / Scheduled quarter 4
Neptune Leisure Centre / To commence / Scheduled quarter 4
Municipal Golf Course / To commence / Scheduled quarter 4
Acklam Sports Centre / To commence / Scheduled quarter 4
Private Sector Housing / To commence / Scheduled quarter 4
Regeneration
Town Hall / To commence / Scheduled quarter 4
Middlesbrough Theatre / To commence / Scheduled quarter 4
Urban Policy & Implementation / To commence / Scheduled quarter 4
Preventing Violent Extremism / To commence / Scheduled quarter 4
Housing Advances / To commence / Scheduled quarter 4
Social Care
Direct Payments / To commence / Scheduled quarter 4
Individual Budgets / To commence / Scheduled quarter 4
Contract Audit
Contractors Final Accounts / To commence / Scheduled quarter 4
Appointment of Consultants / To commence / Scheduled quarter 4
Sourcing Strategy / To commence / Scheduled quarter 4
Non Audit Work
Middlesbrough Golf Club / To commence / Scheduled quarter 4

Appendix B

Summary of Internal Audit Findings

Internal Audit Area / Overall Assurance Level / Priority / Number of Findings / Details
Purchase Cards / Substantial / 1 / - / No recommendation
2 / - / No recommendation
3 / 2 / Replacement cards should be signed for by cardholders when collected from Exchequer Services
A review of purchases card transactions is undertaken to assess the cost effectiveness of implementing alternative solutions to recover the VAT on level one purchases. These are purchases from suppliers who charge VAT but the IT equipment used to process the payment does not provide the level of authentication required to meet HMRC standards for recovery.
Berwick Hills Primary School / Substantial / 1 / - / No recommendation
2 / 4 / The school development plan should include an outline for a further two years in addition to detailed costed plan for the first year. The source of funding should be specified and a projection of future costings included.
The school should draw up an ICT sustainability plan to ensure that its future IT requirements can be identified. A summary of the schools IT plan should be included within the school development plan.
Orders should be raised on SAP within 24 hours of being communicated to the supplier. Emergency telephone orders should be followed by a written order within 24 hours.
Reimbursement of bus fares or other travel and subsistence should be claimed through the payroll using the appropriate claim form available on the intranet.
3 / 9 / The school’s financial procedures should be updated to include the up to date quotation and tender limits. The procedure detailing process to be followed for the breakfast club should be incorporated into the schools main financial procedures.
Once the budget has been loaded into SAP, a printout should be produced and signed by the Headteacher to confirm that the approved budget plan has been correctly loaded into SAP.
The Headteacher should provide the Senior Leadership Team with a copy of the budget monitoring reports produced for the Governing Body to ensure they are all informed of the overall financial position of the school.
Any individuals processed through SAP as one time vendors should be requested to provide evidence of their self employed status prior to payment being made.
The imprest cash should be used for the purchase of emergency breakfast club items. Expenditure should not be from income collected, which should always be banked intact.
The annual review by the Governing Body of breakfast club fees and any future lettings fees should be minuted.
Income notifications should be initialled and dated to confirm that the monies have been received into the school budget share.
Where payment of an invoice is late for reasons which include supplier dispute, or non receipt of invoice, this should be annotated on the face of the invoice.
The annual inventory check undertaken should be confirmed by way of signature of the person who undertook the check. Any discrepancies should be reported and investigated.
Lingfield Primary School / Substantial / 1 / - / No recommendations
2 / 5 / The parameters of the school development plan should be extended to show how planned future initiatives up to three years are costed out, where the funding is coming from and what the expected impact will be. This working document then should be discussed with the Governing Body.
An independent person should sign a SAP printout produced at the time of loading the budget, to confirm they have checked that the budget has been loaded correctly into SAP.
All invoices raised by the school in relation to lettings should be processed through SAP.
When seeking quotations, the potential contractors should be explicitly asked if they have the staff, time and resources to carry out the work.
Orders should be raised on SAP within 24 hours of being communicated to the supplier. Emergency telephone orders should be followed by a written order within 24 hours.
3 / 3 / The school’s whistleblowing policy should be annually reviewed and presented to the Governing Body for consideration even if no amendments have been made.
Cash reimbursements should be signed for by the member of staff receiving them. All travel claim reimbursements should be submitted on the correct travel & subsistence forms present on Lotus Notes
The Governing Body should be informed of any disposals of surplus stocks and equipment.
Beverley School / Full / 1 / 0 / No recommendations
2 / 6 / A lettings agreement should be drawn up and any lettings fees and other charges payable to the school should be agreed by the Governing Body and reviewed annually.
The school should check with the VAT and taxation officer when it receives any income from a new source to ensure that the income is accounted for properly in SAP.
A quotation register should be put into place at the school for all quotations above the LA quotation limit. The register should include the date the quotation was received, the date all the quotes for an individual purchase were opened and the staff members / Governors present during the opening of the quotations.
Orders should be raised on SAP within 24 hours of being communicated to the supplier. Emergency telephone orders should be followed by a written order within 24 hours.
All invoices relating to the purchasing card should be signed by the Headteacher, to confirm that they all relate to legitimate school purchases and that the procurement section have only charged the school for purchases made on the school card.
The Headteacher should sign to evidence the checks undertaken on the bank reconcilliations.
3 / 4 / A vehicle log sheet should be drawn up which should include, confirmation of the visual check undertaken by staff. Any defects should be noted and the start and end mileage of any journeys should be logged.
The letters sent to parents with the Parent Support Advisor should clearly state that pupils will have to be provided with a packed lunch if payment is not received. Letters should be appropriate to the level of the debt.
A paper copy of the SAP report detailing goods not receipted after 3 months should be held on file and annotated with actions taken.
The listing of items removed should be made available to the Governing Body for examination at least annually and the minutes should record Governor approval.
Stewart Park / Substantial / 1 / 0 / No recommendations
2 / 2 / As the risk assessments have passed their review date for both Stewart Park and Prissick Plaza, the Park Manager should ask the Council’s Health & Safety advisor to carry out the appropriate assessments as soon as possible.
The Park Manager should speak to Employer Services and arrange to get appropriate Park employees to attend a General Risk assessment course as soon as possible.
3 / 0 / No recommendations
Area Care including / Substantial / 1 / 0 / No recommendations
Horticulture and Highway Verge and Tree Maintenance / 2 / 6 / The ‘annualised hours’ timesheet should be signed by the employees, Group / Assistant Group Leaders and the Neighbourhood and Area Care Manager or in their absence the Business / Estimator Manager where applicable.
The Neighbourhood and Area Care manager should look into the possibility of purchasing / hiring small vans to replace employees using their own private motor vehicle.
The Council’s vehicle / small plant and zero value asset registers should be physically checked and brought up to date as soon as possible.
The Council’s vehicle / small plant and fleet zero value asset registers should be checked annually by the service to ensure that the correct information is recorded. Any discrepancies should be reported to the Head of Streetscene Services and the appropriate Mouchel Business Services Limited, Environment Finance Officer.
The Neighbourhood and Are Care Manager should instruct that any equipment that cannot be repaired, must be returned to the main Area Care offices in Stewart Park for disposal.