INTERNAL AUDITOR’S REPORT TO
WEST WITTERING PARISH COUNCIL
This report covers the completed audits carried out for the financial years up to and including 2006-07, and the ongoing work for 2007-08. It recognises the changes and improvements to systems and procedures that have been effected in recent years. The audits have carried out a thorough review of all accounting transactions and sampled other activities of the Council based on my assessment of risk. On a day-to-day basis, the management of the Council’s finances is one of the duties of the Clerk, in her capacity as Responsible Finance Officer (RFO), supported by all members of the Council. The Council remains responsible for the assessment and management of risk and the provision of good governance.
The financial statements, governance arrangements and controls are reviewed annually by the Council’s external auditors, Mazars LLP. Audits have been completed for the years to 2005-06 and the audit for 2006-07 is being undertaken now. It is comforting to note that, other than the need to ensure that the annual financial statements are completed and approved by the Council much earlier than has been the case, the auditors have made no significant recommendations.
Detailed examinations of transactions have taken place to ensure that the financial records are up-to-date, the arithmetic is correct, the accounts balance. This was found to be satisfactory. In my opinion, the accounting system operated by the RFO was unnecessarily complicated, and I made suggestions for an alternative approach which have been adopted. A further improvement would be for the paid invoices to be cross-referenced to the Council minute which approved the payment.
2. Section 137 payments
Section 137 of the Local Government Act 1972 (as amended) enables the Council to spend up to the product of £5.44 per head (2006-07 rate) on the electoral register for the benefit of people in its area on activities and projects not specifically authorised by other powers. Generally, this will be grants and donations made to support the work of local organisations. The Council should ensure that, when this power is used, the minutes record that the payment is being made under Section 137 powers.
The Council is able to recover all VAT paid provided there are correct supporting invoices showing the VAT due. The RFO should ensure that all invoices are correctly addressed to the Council, and not to individual councillors, and that a valid VAT invoice is provided by suppliers. The work undertaken by the RFO to ensure that VAT recovery was maximised, and claimed on a prompt basis, during the construction of the pavilion on Rookwood Road was exemplary. All other VAT has been correctly recovered, however, a procedure should be agreed for regular repayment claims to be made; I would suggest half-yearly.
4. Financial Regulations
The Council adopted financial regulations in 2006. They are still appropriate for the needs of the Council. As stated in the introduction to this report, improvements to procedures have been effected during recent years and, in my opinion, within a few months the Council will be fully compliant with the regulations. The only variations in procedures that need improvement, and which are being addressed, are budgetary monitoring, authorisation of payments and ensuring that all orders for goods and services are placed by the RFO.
As a check that all payments are correct, the two councillors who sign cheques should also initial the cheque book stub and the supporting invoice to indicate that the amounts and payees shown are correct and in accordance with the schedule of payments produced by the RFO. This had not always been the case and councillors should ensure they perform this task. Some payments are made by standing order or by direct charge to the Council’s bank account. These should also be reported by the RFO in the schedule of payments, and should be reviewed by the Council at least every three years to verify that the goods and/or service are still required.
The procedures for the receipt of money due to the Council have been reviewed and found to be satisfactory.
7. Petty Cash
The records of petty cash transactions have been sampled and found to be satisfactory.
Regular bank reconciliations are completed and the balances are reported to the Council at each meeting. The RFO keeps the accounts under review to try to ensure that all available cash is invested effectively. However, no recent comparison has been made of the services available from other banking providers, and there could be a benefit obtained from undertaking a review.
The budgetary procedures appear effective and the annual precept correctly assessed. As part of the budgetary process, the Council should ensure that its level of reserves is assessed for reasonableness. Monitoring of financial performance against the budget has not been effective but steps have been taken to remedy this deficiency.
The Council has carried out regular reviews of the salary of the Clerk and payments have been made in accordance with Council approvals. However, the National Agreement on Salaries and Conditions of Service of Local Council Clerks 2004, which was recommended by the National Association of Local Councils for adoption by councils from 2005, has not been considered by the Parish Council. The Council is recommended to review the Clerk’s salary in line with the recommendations contained in the Agreement, which would be adopting best practice in the sector.
11. Risk management
The Council should ensure that any unusual activities are fully minuted, and annual risk assessments carried out. Insurance cover is considered to be appropriate, but should be reviewed annually. Frequent, at least fortnightly, inspections of Council property, including buildings, machinery and play equipment, should be carried out and the findings documented and retained.
12. Asset control
The asset register has been reviewed annually and found to be complete. In order to meet a recommendation from the external auditor, the community owned land, including the allotments, should be given a nominal value of £1 and included as such in the asset register and annual financial statements.
13. Year-end procedures
The year-end procedures have been reviewed and found to be correct, which is supported by the external auditor’s review. The Council produces financial statements on an income and expenditure basis, which is in excess of the requirements of the Accounts and Audit Regulations 2003 (as amended) which require no more than a simple receipts and payments analysis. I would recommend that the Council continues its current practice.
In recent years the statements have not been produced, and approved by the Council, in a timely manner. Significant improvements have been made in recent months and, currently, there is no backlog. However, the Council must comply with the Accounts and Audit Regulations for the current year, ending 31 March 2009, and approve its financial statements for this year by no later than 30 June 2009.
SUMMARY OF RECOMMENDATIONS
1. Cross-referencing of paid invoices to the Council minute which approved the payment.
2. The Council should ensure that, when the Section 137 power is used, the minutes record that the payment is being made under that Section.
3. The RFO should ensure that all invoices are correctly addressed to the Council, and not to individual councillors, and that a valid VAT invoice is provided by suppliers.
4. A procedure should be agreed for regular VAT repayment claims to be made.
5. The two councillors who sign cheques should also initial the cheque book stub and the supporting invoice to indicate that the amounts and payees shown are correct and in accordance with the schedule of payments produced by the RFO.
6. Payments made by standing order, or by direct charge to the Council’s bank account, should be reported by the RFO in the schedule of payments, and should be reviewed by the Council at least every three years to verify that the goods and/or service are still required.
7. A review of available banking providers should be considered.
8. As part of the budgetary process, the Council should ensure that its level of reserves is assessed for reasonableness.
9. Monitoring of financial performance against the budget should be reviewed by the Council on a regular basis.
10. The Council should consider reviewing the salary of the Clerk in line with the recommendations contained in the National Agreement on Salaries and Conditions of Service of Local Council Clerks 2004.
11. The Council should ensure that any unusual activities are fully minuted, and annual risk assessments carried out.
12. Insurance cover should be reviewed annually.
13. The Council should consider arranging for frequent inspections of Council property, including buildings, machinery and play equipment.
14. The Council should consider giving a nominal value to the community owned land, including the allotments, and incorporating this in the asset register and annual financial statements.
15. The Council should ensure that the recent improvement in the production of annual financial statements is maintained, and that it complies with the Accounts and Audit Regulations for the current year, ending 31 March 2009, by approving its financial statements for this year by no later than 30 June 2009.
Thorncroft, Piggery Hall Lane, West Wittering, PO20 8PZ
20 June 2008