HEELIS&LODGE

Local Council Services • Internal Audit

Year End Internal Audit Report for Halstead Town Council - 2010/11

Income:  £338,487             Expenditure:  £332,190        Reserves: £376,805

Annual Return Completion:

Section One:   Yes

Section Two:  Yes

Section Four:  Yes

The following Internal Audit was carried out on the adequacy of systems of control and incorporate the Interim Internal Audit reports dated 11 January 2011 and 8 March 2011.  The following recommendations/comments have been made:

Proper book-keeping       Cash Book, regular reconciliation of books and bank statements.  Supporting vouchers, invoices and receipts

All were found to be in order. LGAs137 and VAT payments are tracked and identified within the year end accounts.  The Sage cashbook is referenced providing a clear audit trail.   Supporting paperwork is in place and well referenced.

Financial regulations   Standing Orders and Financial Regulations

Tenders

Appropriate payment controls including acting within the legal framework with reference to council minutes

Identifying VAT payments and reclamation

Cheque books, paying in books and other relevant documents

Standing Orders in place:      Yes     Adopted: July 2010 (item 319)

Financial Regulations in place: Yes     Adopted: July 2010 (item 319)         

Financial Regulations and Standing Orders are in place.  Standing Orders include procedure on contracts

and tenders. 

 

The Council has clear Terms of Reference in place for the Finance & General Purposes Committee, Amenities Committee and Planning Committee.

 

The Council operate the Sage Accounting system.

 

The Council should ensure the correct powers are used for expenditure as not all grants/donations given to other organisations come under LGAs137 eg A grant to the Friends of Halstead Public Gardens was made under LGAs137, where a more appropriate power would have been the LGA1972s144.

 

Recommendations: 

To identify powers of expenditure, for one-off items and LGAs137 expenditure to other organisations,

within the minutes.

                                 

 

Risk Assessment         Appropriate procedures in place for the activities of the council

Risk Assessment document in place:          No

Insurance was in place for the year of audit. 

Fidelity Cover:                £444,000

 

Whilst the Council manage the risks involved with the business of the Council through day to day

management, insurance and good procedures and systems, there are no written risk assessments in place.

It is noted that the Clerk is currently undertaking the completion of risk assessments on the Council's

activities. 

 

These will include detailed risk assessments on:

 

• Finance
• Trips/outing that the Council run
• Car parks, including collection of monies
• Office
• Assets
• Queen's Hall

 

The Clerk will then produce a consolidated risk assessment which will give a brief overview of all the

above.

 

Recommendation: To carry out a Risk Assessment of all areas of Council business and review on an

annual basis.                     

 

Budgetary controls      Verifying the budgetary process with reference to council minutes and

supporting documents

Precept:                       £137,000           Date:  21/1/2010 (item 227)

                                 

The Council have a good budgeting system in place. The precept was agreed in full council and the precept

decision has been clearly minuted.

                                 

The Clerk ensures the council are aware of responsibilities, commitments, forward planning and the need

for adequate reserves. Budget papers are prepared in order for the council to make informed decisions.

Income and expenditure are monitored throughout the year against the budget.

 

Income controls          Precept and other income, including credit control mechanisms

All were found to be in order. Income controls were checked and income received and banked cross

referenced with the Cash Book .

 

The Council have a number of income streams including:

 

• Hall/room/hire
• Rents
• Miscellaneous sales
• Car parks
• Trips

                                 

Supporting paperwork is clearly referenced enabling a clear audit trail from receipt to banking.

 

There is a very good system in place for recording the income for the car parks which enables effective

cross referencing between the cash sheets, paying in books and machine ticket printouts.  All takings are

checked by 2 members of staff prior to banking which provides an example of good internal controls. 

Changes or anomalies are clearly explained.

 

Cash and cheques received through the office are recorded on a cash sheet which is well referenced.  All

cash received is receipted which supports good internal controls.  Monies are banked daily which reduces

the level of cash on the premises and therefore the level of risk. 

                                                                       

Petty Cash                  Associated books and established system in place

                                          

A satisfactory petty cash system is in place with supporting paperwork.  Payments were cross referenced

against receipts and all were found in order.

 

Recommendation: to incorporate a reconciliation of the petty cash record against cash in hand which is

then recorded on the petty cash sheet. 

Payroll controls          PAYE and NIC in place where necessary.

Compliance with Inland Revenue procedures

Records relating to contracts of employment

PAYE System in place:     Yes        

Regular payments have been made to HMRC. Salaries are paid via Payflow which are countersigned by 2

signatories. The year end P35 has been submitted successfully and there were no outstanding monies at

the year end.  The Council is signed up to the Essex Pension Fund.

A separate asset register is in place. The asset register is currently undergoing a review which will entail all

assets to be valued and asset details to be expanded in order to make it a more useful and thorough

document which will meet the recommended format.

 

Asset headings should include:

 

• Date of purchase (if known)
• Details of asset
• Cost purchase price (if not known use insurance value)
• Insurance value
• Location
• Date of disposal
• Reason for disposal
• Notes

 

The upgrading of the asset register will be a significant piece of work, which will include researching values

of a number of individual assets in order to ensure the asset register is complete.

 

It is noted that the Council does not currently depreciate assets, this report reinforces that there is no

requirement to depreciate assets.

 

Guidance relating to the current requirements for the asset register has been given to the Clerk.

Bank Reconciliation    Regularly completed and cash books reconcile with bank statements

The bank statements below* reconciled with the end of year accounts and bank reconciliations for all

accounts.   

 

Year end reconciled balances:

 

Current account                  xxx7870                  £34,615.09

Base Rate Tracker              xxx9110                  £38,598.35

Community account        xxx4545                   £2,792.58

Charity account                  xxx2588                £165.20* (to be included)

 

It is noted that the bank reconciliation for 31/3/11 (Mayor's account) identifies deposits to the amount of

£732.81 as ‘in transit'.  These deposits are shown on the bank statement as having cleared by 31/3/11 and

are therefore no longer ‘in transit'.

 

The Charity account does not appear in the bank reconciliation or the year end accounts.  Section 1 of the

Annual Return states that the Town Council is not a sole trustee, therefore the funds should be included in

the year end accounts and marked as ‘gifted funds'.

 

The following are a list of Bonds shown to be held by the Council on 31/3/11:

 

Bank	A/c No	Amount	Maturity Date
Santander	xxx3819	50,000.00	01/12/2011
Santander	xxx2443	842.00	None
Nat West	xxx5497	50,000.00	07/11/2011
Barclays	xxx9110	50,000.00	15/07/2011
Santander	xxx3180	50,133.85	01/07/2011
Standard Life	xxx4686	50,000.00	26/04/2011
Nat West	xxx3099	50,000.00	12/04/2011
Total		300,975.85

                                 

 

 

 

 

 

 

 

 

 

 

The following is noted:

 

• There is no final statement for the closed Santander account (no: xxx2443), however, the transfer form is on file for £50,000 to be transferred to account xxx3819.
• Following investigation by the Clerk it has been confirmed that the accrued interest to 31/3/11 has remained in account no: xxx2443 and not transferred to the Town Council. This account therefore remains active.
• The above will affect the final bank reconciliation. The additional interest should be included in Income for the year and all the above accounts included in the bank reconciliation.

 

Recommendation:

• To include the Charity bank account in the year end cash balances
• To include account no: xxx2443 in the bank reconciliation as above
• To amend the Income figures
• To amend the bank reconciliation
• To amend boxes 3 and 7 on section 1 of the Annual Return
• For future clarity of identification of the individual Bond Accounts that the Town Council holds it is recommended that the account number (or part of) be included in all reference papers

Year-end procedures   Appropriate accounting procedures are used and can be followed through from

working papers to final documents

Verifying sample payments and income

Checking creditors and debtors where appropriate.

End of year accounts are prepared on a Income and Expenditure basis. Sample audit trails were

undertaken and all were found to be in order.  Debtors and creditors are identified as are year end

earmarked and capital reserves.

 

Recommendation: to amend the balance sheet to take into account the amendments required to the

bank reconciliation and Income figures.

 

 

 

Sole Trustee                   The Council has met its responsibilities as a trustee

The Council is not a sole trustee.

Internal Audit

Procedures                     The Council have satisfactory internal financial controls in place.  The Clerk

provides comprehensive financial reports to council meetings.  Councillors are provided with information to

enable them to make informed decisions.

 

The Council has prepared an Audit Plan (12/3/11) as part of the review of the effectiveness of Internal

Audit.  This will be considered by the full Council at a meeting to be held on 12 May 2011.

 

The Council meets the requirements of 2 signatories (Financial Regulations).  The Clerk is not a signatory

on the main Council accounts but is a signatory on the Santander Bond accounts for administrative

purposes. 

 

The 2009/10 Interim Internal Audits reports were considered by the Town Council at meetings held on 18

March 2010 and 19 November 2010. There were no recommendations made in the year end audit.

 

Matters arising from the External Audit for 2009/2010:

• The Council had not carried out a review of the effectiveness of the internal audit.
• A financial and non-financial risk assessment had not been carried out during the year.
• To accrue interest up to 31 March.
• Develop the fixed assets register and ensure values correspond with Box 9.
• It was noted that the Council had increased its Fidelity Cover to £444,000 in 2010/11.

Additional Comments/Recommendations

• Ø The Annual Town Council meeting is required to be held on the first Thursday in May (SO No 2(b) and in an election year on the Thursday next following the fourth day after the ordinary day of elections (SO No 2(a)). The Annual Town Council meeting was held on 6 May 2010, within the required timescale.
• Ø The Annual Town meeting was held on 22 April, within the required timescale.
• Ø There are no additional comments/recommendations to make in relation to this audit.
• Ø I would like to record my appreciation to the Clerk to the Council and Council staff for their assistance during the course of the audit work

Heather Heelis

Heelis & Lodge

19 April 2011

Contact details : Hall Farm House, Loudham Lane, Pettistree, Suffolk, IP13 0NQ

Tel: 01728 747789

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Heather Heelis Dip HE Local Policy PILCM

Lynne Lodge Dip HE Local Policy