REPORT ON THE INTERNAL AUDIT FOR THE FINANCIAL YEAR, 2022/23

 This Report has been provided by your Internal Auditor, RICHARD MOUNTFORD, IPFA.

Download original word version (35KB) of report on on the internal audit for the financial year 2022/23 accessible text below.

1.. PURPOSE OF REPORT

To thank the Council for appointing me as your independent Internal Auditor again and to report details and conclusions relating to the Internal Audit carried out for the Financial Year 2022/23. Also to enable Councillors to carry out a review of the Council’s Internal Audit arrangements.

2.. INTRODUCTION

Council is required by the Accounts and Audit Regulations to ‘undertake an effective Internal Audit to evaluate the effectiveness of its risk management, control and governance processes’. The Internal Audit also influences my completion of the statutory Section 4 of the Annual Governance and Accountability Return.

3.. CONCLUSION OF THE INTERNAL AUDIT

I have pleasure in confirming that I have completed the Audit tests as required in the Audit Programme. This will now enable me to sign off Section 4 of the Annual Governance and Accountability Return as required by the Accounts and Audit Regulations. All entries on the Return will be made on an unqualified basis and I can report that there are no matters of any significance that need to be brought to your attention.

4.. MATTERS TO BE CONSIDERED

I am pleased to report that I have completed my Internal Audit for the Financial Year, 2022/23 which was carried out between 17th April, 2023 and 19th May, 2023 in accordance with the agreed Audit Plan and Audit Programme. The Audit tests required are listed in the Audit Programme which I have now signed (Appendix attached).

I have found your Final Accounts to be as accurate and informative as usual. The Budget and Final Accounts provide a meaningful, detailed, analysis of income and expenditure which should significantly assist with decision taking and they significantly exceed compliance with the requirements of Governance and Accountability for Smaller Authorities in England.

Council should be aware that the audit tests carried out during the audit cannot be relied on to identify the occasional omission or insignificant error, nor to disclose breaches of trust or statute, neglect or fraud which may have taken place and which is the responsibility of Members of the Council to guard against through their internal control procedures.

When completing the audit, it did reveal a number of less significant, minor items which have been provided both to your Town Clerk and Treasurer, in writing, for their consideration and action. A copy can be provided to Members on request.

 

5.  REVIEW OF POLICY CONSIDERATIONS

 A. Working Balance

Council policy is to maintain a minimum Working Balance of at least £70,000. As at 31st March, 2022 it was £98,066 and therefore a very acceptable figure.

B. Budgetary Control

Satisfactory budgetary control was carried out during the financial year as required by the Council’s Financial Regulations. The level of detailed analysis of services for budgeting is commendable. This detail enables the Treasurer to provide Members with detailed explanations for significant overspendings and savings, firstly in his reports on the Budget and also in his Report on the Final Accounts. These Reports enable members to examine, question and finally approve significant variances as appropriate.

The Treasurer has implemented a replacement IT Financial Management System from 1st April, 2022. The new system is much better placed to cope with the growth in services under the Localism Policy. Introducing any new system can be time consuming before it is operating as required and achieving the benefits expected. It is understood that, as expected, there were initial challenges. One of the biggest of these was to integrate the Town Council’s budget reporting system. As a result of hard work by your Treasurer the new FMS system was successfully installed early in the financial year and is now working as anticipated. The Council’s financial management and accounts are to be commended.

C. Localism

Council has resolved to take on a number of services from Wyre Forest District Council under the Localism Policy. Reports have correctly been made to Councillors on progress, the effect on staffing and financial consequences. Adequate financial provision for additional costs have been provided for in the Budget when Council approved the precept. Providing these additional services has also presented many challenges to the Town Clerk and staff. This transfer of services has also had a significant impact on the Town Council’s Budget. The Actual Net Expenditure spend has increased from £262,222 in 2021/22 to £334,447, an increase of 27.5%. However, the Audit has not detected any significant reduction in the established high quality of service administration.

 

6. REVIEW OF OF INTERNAL AUDIT ARRANGEMENTS

It is considered to be proper practice for the Council to carry out an annual review of its Internal Audit arrangements. This Report should significantly assist in that review as it covers work done during the last financial year by me, a qualified accountant, totally independent of Members and officers. Your considerations should also take into account the quality and scope of this Internal Audit Report and also Internal Audit prior planning.

7. CONCLUSION

I would like to thank your staff for their time, help, information and assistance freely given during this audit which has taken place during continued implementation of increased service provision under the Localism Policy.

 

8. RECOMMENDATIONS

a)      It is recommended that the contents of this Internal Audit Report are noted.

 

b)     That the Internal Audit arrangements for the Financial Year, 2022/23 are reviewed and approved.

 

 This Report has been provided by your Internal Auditor, RICHARD MOUNTFORD, IPFA.

Appendix

AUDIT PLAN 2022/23

 

1.. SCOPE OF INTERNAL AUDIT

 

The scope of Internal Audit will span the whole range of the Council’s activities and includes the review of those controls designed to ensure:

 

  • The Council’s policies are put into practice
  • The Council’s values are met
  • Financial laws and regulations are complied with
  • Processes are adhered to
  • Financial information is accurate and reliable
  • Human, financial and other resources are managed efficiently and effectively

 

 2.. UNPLANNED WORK FOR INTERNAL AUDIT

 

If necessary work will include areas where significant weaknesses are identified. No contingency for unplanned work has been included in the plan and each issue will be dealt with as it arises. Examples of unplanned work are:

 

  • Investigations
  • Requests from the Council’s Finance Committee
  • Additional work required on planned activities

 

 3.. REPORTING REQUIREMENTS

 

 Reports will be provided to Council  summarising:

 

  • Work carried out
  • Significant findings
  • Agreed actions
  • Recommendations
  • Performance against the Audit Plan

 

The Audit Plan will be kept under continuous review within the context of achieving overall

objectives. Should significant amendments be necessary these will be discussed and reported on at the earliest opportunity.

 

 

Appendix (Cont.)               

AUDIT PROGRAMME 2022/23

 

I certify that I have carried out the tests detailed below in accordance with the suggested approach contained in the 2023 edition of ‘Governance and Accountability in Local Councils in England and Wales – A Practitioners Guide’.

 

Signed: R. J. Mountford IPFA                                       Date: 19th May, 2023

Tests carried out
INTERNAL CONTROL   TESTING REQUIRED
1. Proper bookkeeping 

 Is the cashbook maintained and up-to-date?

 Is the cashbook arithmetically correct?

 Is the cashbook regularly balanced?
2.  Standing Orders &  Financial Regulations 

Has the Council formerly adopted Standing Orders & Financial Regulations?

Has a Responsible Officer been appointed to carry out financial administration?
3.  Payment Controls  

 Has expenditure on services above the de minimus amount been competitively purchased?

Are payment in the cashbook supported by Invoices, authorised and the monthly summary total minuted?

Has VAT on payments been correctly identified, recorded and reclaimed?

Is Section 137 expenditure separately recorded and within statutory limits?
4. Risk Management Arrangements    

Does a review of the minutes identify any unusual financial activity?

Do the minutes record the Council carrying out an annual risk assessment?

Is insurance cover appropriate and adequate?

Are internal financial controls adequate and regularly reviewed?

Has the Council carried out a financial risk assessment?
5. Budgetary Control    

Has the Council prepared an annual budget in support of its precept?

Is actual expenditure against the budget regularly reported to the Council?

Are there any significant unexplained variances from budget?

Is the budget matched to year end outturn to enable consistent comparison of financial performance?

Are year end variances explained ?
6. Income Controls     

Is income properly recorded and properly banked?

Does the precept recorded agree to the Council Tax authorities’ notification?

Are security controls over cash adequate and effective?
7. Petty Cash Procedures      

Are all petty cash payments  recorded by a signed voucher and any VAT recorded?

Is petty cash summarised and expenditure recorded in the cash book? 

Is petty cash reimbursed in accordance with the Imprest System?
8. Payroll Controls    

Do all employees have contracts of employment with clear terms and conditions?

Do salaries paid agree with those approved by the Council?

Are other payments to employees authorised, reasonable and agreed by the Council?

Have PAYE and NIC been properly operated by the Council as an employer?

9. Asset Controls      

Does the Council maintain a register of all material assets owned or in its care?

Are the asset and investment registers up-to-date?

Are investments monitored and reviewed regularly?

Do asset insurance valuations agree with those in the asset register?

10. Bank Reconciliation  

Is there a bank reconciliation for each account?

Is a bank reconciliation carried out regularly and in a timely fashion?

Are there any unexplained balancing entries in any reconciliation?

11. Year End Procedures    

Has a year end reconciliation been carried?

Are year end accounts prepared on an income and expenditure basis?

Do accounts agree with the cash book?

Is there an audit trail for underlying financial records to the accounts?

Where appropriate have debtors and creditors been properly recorded?

12. Audit Recommendations

Has the Council acted on the recommendations and comments of the Internal and External Auditors?