Internal Audit - Rearsby PC · The last claim made covered the period to 01/09/14, which was a...

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EDWOOD PRYOR LTD

Internal Audit

REARSBY Parish Council

Year Ending 31 March

2016

Internal Auditor: Richard Willcocks

Summary Checklist Report

This internal audit report is based upon the Association of Local Councils recommended checklist, introduced in 2016, in conjunction with the Practitioners’ Guide to Governance and Accountability in Local Authorities.

Internal Audit Summary Checklist Report for REARSBY Parish Council

Year Ending: 31 March 2016

19/05/2016 21:34 160519 IAR_ReaPC_2016_SECT1_V.1.3_FINAL Page 1

Name of Council Rearsby Parish Council Name of Clerk to the Council Sue Norledge

No. Of Councillors Name of RFO (if different)

Quorum Precept (for audit year) £18,008 excl. Council Tax Support

Grant (CTSG)

Electorate 900 (approx.) Gross budgeted income £18,008

1. Book-Keeping Comments & Recommendations

1.1 Ledger maintained & up to date? Yes No The accounts are balanced to be up to date for the monthly Council meeting and are up to date to the financial year-end.

1.2 Arithmetic correct? Yes No Checks of the computerised accounting system confirmed that the cashbook and other accounts arithmetic were correct.

1.3 Evidence of internal control? Yes No Internal audit

Risk assessment policy

Statement of internal control

Budgetary control and monitoring

Bank reconciliation review by Council

1.4 VAT evidence, recording and reclaimed? Yes No The Council is able to recover VAT through the Local Authorities and Similar Bodies Scheme. A claim for repayment of VAT is made as and when there is a significant amount to reclaim, which is normally every 2 years. The last claim made covered the period to 01/09/14, which was a higher than normal reclaim because of the play area expenditure. A claim is pending to 31/03/16. Testing indicated that VAT on income and expenditure had been correctly applied. It is not known if there has previously been a VAT inspection.

1.5 Payments in the ledger supported by invoices, authorised & minuted?

Yes No See Detailed schedule in Compliance Testing Report

1.6 Is S137 expenditure separately recorded and within statutory limits?

Yes No A separate S137 account is maintained in the cashbook to record S137 expenditure.

1.7 Is S137 expenditure of direct benefit to the electorate? Yes No All S137 expenditure incurred in the current financial year was in respect of activities relevant to the parish. i.e. a £370 donation to Rearsby Parochial Church Council.




2. Due Process Comments & Recommendations

2.1 Standing Orders adopted since 2010? Yes No The Clerk gave an assurance that Council reviewed the Standing Orders annually and that no changes were required during following the AGM on 04/05/16. NB: Standing Orders and Financial Regulations (SOFR) are combined into one document.

2.2 Standing Orders reviewed at Annual Meeting? Yes No Standing Orders, together with other key Council governance documents, are scheduled to be reviewed and approved at the Annual meeting in May.

2.3 Financial Regulations adopted? Yes No The Clerk gave an assurance that Council reviewed the Financial Regulations annually and that no changes were required during following the AGM on 04/05/16. NB: Standing Orders and Financial Regulations (SOFR) are combined into one document.

2.4 Financial Regulations properly tailored to Council? Yes No The current Financial Regulations are based on the current NALC model Standing Orders and Financial Regulations, adapted to suit the specific needs of the Council.

2.5 Equal Opportunities policy adopted? Yes No An Equal Opportunities policy has not yet been adopted by the Council, but is under consideration.

RECOMMENDATION: That the Council should consider the benefits of introducing an Equal Opportunities policy and implement accordingly.

2.6 RFO appointed? Yes No Sue Norledge was appointed as Clerk to the Council on 05/01/04, which included responsibility as the RFO.

2.7 List of member’s interests held? Yes No The Clerk maintains and updates the list of member’s interest as required. A link is available on the parish council website to the list of member’s interest held at Charnwood Borough Council.

2.8 Agendas signed, informative and displayed with 3 clear days’ notice?

Yes No At least 7 days prior to the Council meeting the clerk prepares and signs the council meeting agenda, which lists matters for discussion and is posted on the Council’s website and on notice boards around the village.

2.9 Purchase orders raised for all expenditure? Yes No Financial Regulations determine how commitment to purchase is made (see 2.10). Most orders for goods and services are made by or confirmed by email.

2.10 Purchasing authority defined in Financial Regulations? Yes No The Financial Regulations stipulate that: • Under £250 can be authorised by the Clerk.

Over £250, two quotes required.

Over £5,000, tenders required.

2.11 Legal powers identified in minutes and/or ledger? Yes No (clarification to be sought from LRALC post audit)

2.12 Committee terms of reference exist and have been reviewed? Yes No N/A. No committees of council.




3. Risk Management Comments & Recommendations

3.1 Does a scan of the minutes identify any unusual financial activity?

Yes No Minutes are prepared for all meetings of the Council, which meets monthly. No unusual financial activity was found in the minutes reviewed. Council minutes are available to view on the Council’s website.

3.2 Is an annual risk assessment carried out? Yes No The Council has a formal risk assessment policy in place covering many of the areas of risk the Council may be faced with. The risk assessment policy is maintained by the Clerk and normally reviewed annually, as part of the review of Standing Orders and Financial Regulations. No changes were required to this specific area following the AGM on 04/05/16.

3.3 Is Insurance cover appropriate and adequate? Yes No The level and range of insurance cover appears to be adequate for the size of the Council.

3.4 Evidence of annual insurance review? Yes No The insurance is renewed annually on 1st

June. Insurance cover is currently placed with brokers Aon, who insure through Allianz for all insurances. The Clerk undertakes a review of insurances prior to renewal to ensure that best value is obtained in respect of service levels and premiums. The level and range of insurance cover appears to be adequate for the size of the Council.

3.5 Internal financial controls documented and evidenced? Yes No An initial Statement of Financial Control was prepared by the Clerk in September 2015 and will be put to the May 2016 Annual Meeting in May 2016 for review and approval. In addition, effective and acceptable financial control procedures are operative as stipulated in the Standing Orders and Financial Regulations.

3.6 Minutes initialled, each page identified and overall signed? Yes No Minutes of all Council meetings are initialled by the chair of the meeting. Each page of the minutes is identified by a unique page number reference and all minutes are signed by the meeting chair and dated.

3.7 Regular reporting and minuting of bank balances? Yes No Bank balances are presented to Council at each meeting as part of the financial reporting and are minuted.

3.8 S137 expenditure minuted? Yes No S137 expenditure incurred is specifically identified as S137 expenditure in the minutes.

4. Budget Comments & Recommendations

4.1 Annual budget prepared to support precept? Yes No A detailed budget is prepared annually by the Clerk.

4.2 Has budget been discussed and adopted by Council? Yes No The budget for the financial year being audited was reviewed and approved by the Council at its January 2015 meeting.

4.3 Any reserves earmarked? Yes No From the total reserves at the end of the financial year of £34,348, a sum of between £15 to £20k has been earmarked for major projects e.g. replacement railings.

4.4 Any unexplained variances from budget? Yes No All explained as per the Annual Return and year-end financial reports.




4. Budget Comments & Recommendations

4.5 Precept demand correctly minuted? Yes No The approved precept demand of £18,008 was forwarded to Charnwood Borough Council by the deadline and was correctly minuted. There was no Council Tax Support Grant (TSG) applied in 2014-15.

5. Payroll - Clerk Comments & Recommendations

5.1 Contract of employment? Yes No The Clerk has a contract with the Council to undertake the duties of Clerk to the Council on a self-employed basis. The contract is for 6 hours per week. The contract with the Clerk is in accordance with JNC pay guidelines and is reviewed annually by the Council. The Clerk is contracted to the Council on a self-employed basis (currently 6 hours/week), the conditions of which satisfy the requirements for self-employment status as outlined in the NALC Employment Briefing of December 2012. It is considered that this NALC guidance note supersedes the general instruction from HMRC that all Parish Council Clerks should be paid through the PAYE system (i.e. via a payroll). It is noted that from 01/04/16, the Council has outsourced the payroll processing to Ladywell Accounting Services and the Clerk will be employed by the Council from this date and paid through the payroll.

5.2 Tax code issued/contracted out? Yes No The Clerk declares the gross payments received for services as Clerk, on a personal self-assessment return, as per contractual arrangements. See 5.1

5.3 PAYE/NI evidence? Yes No N/A. The Clerk is responsible for her own tax affairs. See 5.1

5.4 Has Council approved the salary paid? Yes No The Clerk is paid gross, monthly in arrears, on submission of an expense claim form. Any changes to the clerk’s remuneration and contract are approved by the Council. Council approve salaries for payment as part of the expenditure approval process. The Clerk’s salary is approved within the setting of the annual budget.




5. Payroll - Clerk Comments & Recommendations

5.5 Other payments reasonable and approved by Council? Yes No The contract with Clerk includes a quarterly office allowance, which was increased from £75 to £100 from August 2015. This is to cover incidental expenses of working from home. Other specific business and out of pocket expenses incurred by the Clerk are claimed at the same time as the claim for remuneration by the Clerk. The Council is registered for pensions auto enrolment, However, because of the applicable salary, it is understood that the Clerk would not be eligible for pension’s auto enrolment and the Council therefore does not have set up a default pension scheme.

6. Payroll - Other Comments & Recommendations

6.1 Contracts of employment? Yes No N/A as the Clerk is responsible for all the financial and administrative affairs of the Council.

6.2 Does the Council have employers’ liability cover? Yes No The Council has employer’s liability cover of £10M.

6.3 Tax code(s) issued? Yes No N/A Disc = no

6.4 Minimum Wage paid? Yes No The Clerk’s remuneration exceeds both the applicable Minimum Wage and Living Wage.

6.5 Disciplinary, Grievance & Complaints procedures in place? Yes No These procedures have not yet been adopted by the Council.

RECOMENDATION That because the Clerk has moved from self-employed to employed status, the Clerk’s contract of employment should include reference to Disciplinary, Grievance and Complaints procedures.

7. Asset Control Comments & Recommendations

7.1 Does the Council keep a register of all material assets owned? Yes No The Clerk is responsible for maintaining the manual asset register.

7.2 Is the asset register up to date? Yes No The asset register was up to date as at the financial year-end.

7.3 Value of individual assets included? Yes No Any addition to the asset register is normally based on materiality rather than a fixed minimum value.

7.4 Inspected for risk and health and safety? Yes No A Councillor inspects the village assets e.g. play areas on a regular basis and reports back to the Council. Play equipment checked annually by ROSPA accredited inspectors.




8. Bank Reconciliation Comments & Recommendations

8.1 Is there a bank reconciliation for each account? Yes No The Council holds following bank accounts, all of which were operating at the start of the financial year; Barclays Community (current) Account; bank statements received monthly. The main account for cheque payments. Barclays Business Reserve Account; bank statements received quarterly. An interest bearing savings account. The Clerk is responsible for preparing the bank reconciliations and reports the balance on each account to each meeting of Council. Recommendation: That in accordance with the Statement of Internal Control, the bank reconciliations are reported to Council on a regular e.g. at least quarterly and are checked and approved by a councillor.

8.2 Reconciliation carried out on receipt of statement? Yes No The bank accounts are reconciled on receipt.

8.3 Any unexplained balancing entries in any reconciliation? Yes No All balancing entries fully explained.

8.4 Is the bank mandate up to date? Yes No The Barclays bank mandate allows only 3 authorised signatories, for which the Council have agreed that two of these signatories should be councillors and the other the Clerk. Prior to the May 2015 local council elections, the 2 authorised council signatories were Councillors Chennery and Blankley. Councillor Blankley did not stand for re-election at the May 2015 local council elections and was replaced as an authorised signatory by Councillor Ian Christie-Smith. Following this change, the bank mandate was updated by the Clerk. The Clerk is a nominated cheque signatory and is recognised by the bank for administrative and communication purposes. 2 of the nominated signatures are required to sign cheques. Because Barclays will currently only allow 3 signatories on the mandate, if one of these is not the Clerk, then the latter will not be able to access the bank accounts, either on-line or on the phone. The risk of there being insufficient number of authorised cheque signatories available to sign cheques is recognised by the Council. The 2 Council signatories on the bank mandate were still Council members at the end of the current financial year.




9. Year-End Procedures Comments & Recommendations

9.1 Year-end accounts prepared on correct accounting basis? Yes No Day to day and year-end accounts are prepared on a Receipts and Payments basis.

9.2 Bank statements and ledger reconcile? Yes No A full reconciliation of each bank statement to the corresponding account in the ledger as at 31

st March was prepared and reviewed and approved by the Council.

9.3 Underlying financial trail from records to presented accounts?

Yes No The manual accounting system provides a satisfactory audit trail to the underlying financial records.

9.4 Where applicable, debtors and creditors properly recorded? Yes No Although not required to be recorded in the Receipts and Payments Accounts (i.e. cash based accounts), no outstanding debtors or creditors were identified at the financial year-end.

9.5 Has Council agreed, signed and minuted sections 1 &2 of the Annual Return?

Yes No Section 1-Annual Governance Statement, to be signed and minuted by Council on 02/06/16 Section 2-Accounting Statement, to be signed and minuted by Council on 02/06/16.

10. Miscellaneous Comments & Recommendations

10.1 Have points raised at the last internal audit been addressed?

Ref Action Recommended

3.4 From 2014 Internal Audit report the Council considers implementing a Statement of Internal Control based on the specimen template provided. This statement outlines the responsibilities of the Council in ensuring the effectiveness of its policies and procedures. To be actioned in 2015, based on template from another local parish council. c/f

Yes No CURRENT STATUS:

ACTIONED (see section 3.5 above)

12.2 From 2014 Internal Audit report the Clerk includes a copy of the relevant bank statements with the bank reconciliation statement presented to Council for approval. This will enable the Council to verify the actual bank balances as listed in the bank reconciliation statement. This recommendation is brought forward from the previous year’s internal audit report. c/f.

Yes No CURRENT STATUS: Not yet actioned. RECOMMENDATION: See section 8.1 above i.e. That in accordance with the Statement of Internal Control, the bank reconciliations are reported to Council on a regular e.g. at least quarterly and are checked and an approved by a councillor.




10. Miscellaneous Comments & Recommendations

2.1 if and when the Council agrees to implement on-line payments, then the Financial Regulations should be amended to include the relevant references to this. NB: The recently issued NALC model Financial Regulations include reference to on-line payments.

Yes No CURRENT STATUS: Deferred, pending the introduction of internet banking.

5.3 the bank mandate is amended to replace Councillor Blankley with Councillor Ian Christie-Smith as an authorised signatory. Given that 2 councillors are required to sign cheques and only 2 signatories are allowed by Barclays, then this amendment should be actioned as soon as is possible.


ACTIONED (see section 8.4 above)

7.2 the Council approves the Clerk’s proposal to introduce an outsourced payroll function, thereby complying with HMRC requirement that parish clerks must be paid through PAYE. In implementing this change, the Council should also consider amending the status of the Clerk from self-employed to employed basis.


ACTIONED (see section 5.1 above). From 01/04/16, the Council has introduced an outsourced payroll service to enable the Clerk to move from self-employed to employed status.

9.3 Consideration is given to writing back the 3 unpresented cheques (823,824 & 099), totalling £334.99, which were issued prior to 2013.


ACTIONED (as listed on Summary Receipts & Payments Accounts 2015-16)

10.2 Has the Council adopted a Code of Conduct since July 2012? Yes No The Council adopted a Code of Conduct following the 2011 Localism Act in 2012, which has not been updated to date

10.3 Is eligibility for the General Power of Competence properly evidenced?

Yes No N/A. The Council is not yet eligible for this particular power.

10.4 Are all electronic files backed up? Yes No Data on the Clerk’s PC is backed up to memory stick on an ad hoc basis.

RECOMMENDATION: That a secondary back up of data on the Clerk’s PC is undertaken to provide extra data security.

10.5 Do arrangements for the public inspection of records exist? Yes No The Transparency Act requires a significant amount of Council data to be available on the Council’s website, which the Council is committed to implementing in 2016/17. Notice of audit displayed as per external audit instructions. Outside of this period, inspection of records can be undertaken by prior appointment.




11. Charities Comments & Recommendations

11.1 Charities reported and accounted separately? Yes No The Council is not a trustee, nor involved in the administration of any charity.

11.2 Have the Charity accounts been separately audited? Yes No N/A.

11.3 Have the Charity accounts and Annual Return been filed within the legal time limits?

Yes No N/A.

12. Burial Authorities Comments & Recommendations

12.1 All money received corresponds with the number of burials/cremations recorded and memorial permits issued?

Yes No N/A. The Council is not a burial authority.

12.2 Are fees levied in accordance with the Council’s approved scale of fees and charges?

Yes No N/A.

12.3 Have all statutory books been kept safe and up to date? If electronic copies are held, are these backed up regularly?

Yes No N/A.

12.4 Do all internment of ashes have a certificate of cremation? Yes No N/A.

12.5 Have the necessary permits, permissions, and transfer of Exclusive Burial Right (EBR) been completed correctly, documented and approved?

Yes No N/A.

13. Income Controls Comments & Recommendations

13.1 Is income properly recorded and promptly banked? Yes No Outside of the precept, the VAT reclaim and bank interest, most of the income received arises from on-off grants and donations. For all relevant income, a receipt will be issued and the monies banked correctly.

13.2 Does the precept recorded agree to the Council Tax authority’s notification?

Yes No The precept and CTSG were received in the following instalments and recorded in the accounts: April 2015: £9,004.00 (50.0% of annual precept). September 2015: £9,004.00 (50.0% of annual precept). The total precept received for 2015/16 was £18,008.00 (with Nil CTSG payment), as per the Charnwood Borough Council notification

13.3 Are security controls over cash adequate and effective? Yes No The Clerk is responsible for receiving, balancing, authorising and banking any cash and cheques received. Security controls for cash appeared to be adequate and effective.




14. Petty Cash Comments & Recommendations

14.1 Is all petty cash spent recorded and supported by VAT receipts where applicable?

Yes No The council does not operate any petty cash floats. Any small expenditure items incurred will normally be paid personally by the Clerk, which is then reimbursed through the Clerk’s expense claim.

14.2 Is petty cash expenditure reported to Council? Yes No The expenditure claim from the Clerk will be presented to Council for approval as part of the normal expenditure approval process.

14.3 Is petty cash reimbursement carried out regularly? Yes No The expense claim from the Clerk for reimbursement of out of pocket expenses is submitted together with the Clerks claim for contractual services provided i.e. as Clerk/RFO.




TRANSACTION SPOT CHECK

Check No. 1 2 3 4 5 6

Transaction type Purchase invoice Purchase invoice Purchase invoice Purchase invoice Pay Precept

Supplier/Customer George Walker Ltd Redwood Pryor Ltd Table Tennis Tables Co Burnt Oak Developments Sue Norledge Charnwood BC

Invoice/Transaction No. 66696 389 100388 573/562 Pay claim

Invoice/Transaction date 30/04/15 27/05/15 24/07/15 31/08/15/ 31/07/15 Jun-15 28/04/16

Goods/services supplied Supply/fit notice board Internal audit fee 2*table tennis tables Hedge cutting etc.

2*monthly contract Clerk’s services 2015/16 precept (50%)

Ledger date 14/05/15 04/06/15 06/08/15 03/09/15 02/07/16 28/04/16

Ledger Reference

Item/Budget heading Property Maint. Audit Table Tennis tables Grass Cutting etc. Clerk Precept

Ref/cheque No. 241 245 253 260 143 Bank trans

Authorised by 2*authorised signatories 2*authorised signatories 2*authorised signatories 2*authorised signatories 2*authorised signatories Clerk

Order Minute Ref

Delivery evidence Clerk check Internal audit report Clerk confirmed Visual inspection Clerk’s services Funds received

Payment minute ref 15/43g 15/53g 15/71g 15/82g 15/62g Receipts not minuted

Insurance value n/a n/a £631.67 n/a n/a n/a

Payment value £330.00 £132.20 £758.00 £507.60 + £357.60

Total £865.20 £275.36 £9004.00

Statement value £330.00 £758.00 £865.20 £275.36 £9004.00

Timely payment

VAT recorded £55.00 £26.44 £126.33 £84.60 + £59.60

Total £144.20 £0 n/a £0 n/a

S137 recorded in ledger n/a n/a n/a n/a n/a n/a

S137 minuted n/a n/a n/a n/a n/a n/a

Notes Expenditure included in asset register

Pass




Any further comments

Following a change to the recommended internal audit process by the ALC, a number of new audit questions have been introduced, primarily affecting Council governance and procedure, rather than of a financial nature. For this internal audit there are some recommendations made , all of which are a consequence of these new audit questions and as such should be considered as Opportunities for Improvement, rather than any reduction in the high standards of control that the Clerk continues to maintain.

The overall internal audit assurance rating remains as: GOOD.

Acknowledgments

As with the previous year’s internal audit, the help and co-operation of Sue Norledge, Clerk to the Council is much appreciated by the internal auditor.

Internal audit carried out by

(signed)

(print)

Richard Willcocks

Audit type (delete as appropriate) INTERIM ANNUAL

Date 19/05/2016

For internal auditor’s use only

Section 4 of Annual Return form completed and signed 14/05/2016

Internal audit report/letter sent to Council 19/05/2016

Section 2: Compliance Testing Report for ANYWHERE Parish Council

Year Ending: March 2016


ANNUAL RETURN Year Ending 31March

2015 Year Ending 31March

2016

1 Balances brought forward £ 22,752 £ 32,071

2 Annual precept £ 18,008 £ 18,008

3 Total other receipts £ 61,635 £ 945

4 Staff costs £ 3,851 £ 3,851

5 Loan interest/capital repayments £ 0 £ 0

6 Total other payments £ 66,473 £ 12,825

7 Balances carried forward £ 32,071 £ 34,348

8 Total cash and investments £ 32,071 £ 87,117

9 Total fixed assets and long term assets £ 86,585 £

10 Total borrowings £ 0 £ 0

11 Section 4 Annual return figures completed and cross referenced?

Internal Audit - Rearsby PC · The last claim made covered the period to 01/09/14, which was a...

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