[PDF document] Appendices to Internal Audit report (Cabinet, 24May 2004, item 14)

Dick Sadler, Audit Manager, Snc

Description

Appendix 1 AUDIT WORK DELIVERED COMPARED WITH THE AUDIT PLAN Project description Planned Days days delivered SYSTEMS AUDIT Receipt, handling and banking of 20 20remittances, sundry debtors and Housing Act advances Accountancy services ** 35 30Housing Benefit & Council Tax Benefit ** 30g Improvement Grants & Loans ** 10 10House sales and right to buy 10 10 Corporate matters 20 20 Leisure – other services 10 10 Performance indicators 10 10Car park income 5 2.5 Supported housing 15 0 TOTAL SYSTEMS AUDIT 165 142.5 COMPUTER AUDIT 20 Financial management system – post 13implementation review ** Audit needs assessment 3TOTAL COMPUTER AUDIT 20 16 EXTRA WORK Key controls 10 Homelessness 15 TOTAL EXTRA WORK 25 ** Management summaries (abridged) are attached for information. Appendix 2 Internal Audit Report - Accountancy Services Management Summary (abridged) Audit Opinion Controls were generally operating satisfactorily within most areas. However, there were some concerns, which are detailed below under the respective headings. Treasury Management The review identified an example of a poor investment decision made by the external fund manager which resulted in the Council not obtaining approximately £50,000 of income which it could have reasonably expected to have earned. Although the investment was in government gilts, which was permitted under the terms of the Council’s Treasury Management Strategy, there is an ...

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• Publié par: Fuem
• Nombre de lectures: 18
• Langue: English

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Appendix 1

AUDIT WORK DELIVERED COMPARED WITH THE AUDIT PLAN

Project description

Planned

days

Days

delivered

SYSTEMS AUDIT

Receipt, handling and banking of

remittances, sundry debtors and Housing

Act advances

20

20

Accountancy services

**

35

30

Housing Benefit & Council Tax Benefit

**

30

30

Housing Improvement Grants & Loans

**

10

10

House sales and right to buy

10

10

Corporate matters

20

20

Leisure – other services

10

10

Performance indicators

10

10

Car park income

5

2.5

Supported housing

15

0

TOTAL SYSTEMS AUDIT

165

142.5

COMPUTER AUDIT

20

Financial management system – post

implementation review **

13

Audit needs assessment

3

TOTAL COMPUTER AUDIT

20

16

EXTRA WORK

Key controls

10

Homelessness

15

TOTAL EXTRA WORK

25

** Management summaries (abridged) are attached for information

.

Appendix 2

Internal Audit Report - Accountancy Services

Management Summary (abridged)

Audit Opinion

Controls were generally operating satisfactorily within most areas. However, there were

some concerns, which are detailed below under the respective headings.

Treasury Management

The review identified an example of a poor investment decision made by the external

fund manager which resulted in the Council not obtaining approximately £50,000 of

income which it could have reasonably expected to have earned. Although the

investment was in government gilts, which was permitted under the terms of the

Council’s Treasury Management Strategy, there is an associated risk with such

investments where market fluctuations can result in capital losses. The probable

completion of LSVT in the near future will result in a considerable sum being available

for investment and it was felt that the structure, content and formal distribution of

investment reporting needed re-evaluating.

Control Accounts

Although considerable progress had been made since the previous audit in reconciling

the major control accounts on a regular basis, this process is still not adequately

structured and monitored and there are few formal written procedures in place.

Banking

No formal written evidence could be provided during the audit of either the

Council’s current bank facilities or the agreement to the 2 year extension to the

banking contract.

Asset Register

The Asset Register was not currently being used to process monthly depreciation

charges and only one member of staff had received training in how to access and use

the system.

Main Accounting System

Controls over the administration of the main accounting system were generally found to

be adequate. There is a need however to substantiate the procedures for authorising

new codes.

Recommendations

Priority

rating

Number of

recommendations

High

4

Medium

8

Low

1

The recommendations rated as high priority are:

Treasury Management

•

The structure, content and formal circulation of investment reports

both internal and external need to be re-evaluated in anticipation of

LSVT.

•

The Council must ensure that a prudent approach to investments is

adopted and monitored. In particular, funds under external

management should focus on an appropriate spread of risk.

Control Accounts

•

The ‘Reconciliation Schedule’ currently in use must be completed on

a more formal structured basis. In particular, officers performing

reconciliations must ensure that the schedule is signed and dated

when the reconciliation is completed. The ‘Reconciliation Schedule’

should be signed by the officer responsible for the reconciliation

process and by the Principal Accountant.

•

Formal written procedures should be prepared describing what steps

need to be taken to carry out each control account reconciliation

including any documentation or reports required

.

Internal Audit Report – Housing Benefit and Council Tax Benefit

Management Summary (abridged)

Audit Opinion

Whilst controls were generally operating satisfactorily within most areas, particularly

over the assessment process and the fraud investigation service, there were some

concerns which require management attention.

The system of file checking had been allowed to lapse in 2003/4 and should be

reintroduced as a matter of priority.

There was a failure to promptly identify unpresented cheques, more than often waiting

until they became out of date and this is an issue which will acquire even more

importance when the review periods for claims are relaxed in 2004/5.

Although now being addressed, there is a need for improved controls over the recovery

and reporting of overpayment debts.

Although it is acknowledged that reconciliation procedures are in place between the

benefits system and the general ledger there is a need to formally document and

regularise this process, including the introduction of an independent check in order to

confirm its accuracy.

Recommendations

Priority

rating

Number of

recommendations

High

4

Medium

4

Low

1

The recommendations rated as high priority are:

•

A regular systematic checking of a sample of claims back to

supporting evidence should be introduced as soon as possible. This

checking process should aim to cover a minimum sample coverage

of 10%.

•

All cheques still unpresented after a maximum of 4 weeks must be

identified and the reasons for not having been cashed, fully

investigated. To help this process, the possibility of using a report

from the IBS system should be investigated.

•

The Council must ensure that adequate resources are made available

and appropriate action taken to improve recovery performance of

benefit overpayment debts.

The introduction of a formal monitoring

system must be adopted as soon as possible.

•

Formal documentation should be prepared to record the

reconciliation process between the housing benefits system and the

general ledger/council tax systems. This documentation should

include:

a) written procedures detailing the reconciliation process;

b) a formal review and signing off procedure involving another

officer;

c) standard documents to record the results of the

reconciliation.

Internal Audit Report – Housing Improvement Grants and Loans

Management Summary (abridged)

Audit opinion

Controls were generally operating satisfactorily with regards the processing of housing

improvement grants, under the previous legislation.

An approved Policy Document has been established and publicised in accordance with

statutory requirements, although there is a need to establish a clear protocol for dealing

with any potential breaches in the loan conditions. However, since no loans had actually

been processed, compliance with specified controls could not be tested.

Some unforeseen matters, particularly legal issues regarding the wording of the

application forms and offer letters, have delayed the implementation of the Policy. That

has created a situation where, 3 ½ months after the new policy came into effect, no

loans have been processed under the new guidelines. This has prevented potential

applicants from receiving the financial assistance to which they may have been entitled

and could result in a budget under spend

for the current financial year, although precise

details were unknown at the time of audit.

Other weaknesses identified related to the lack of timely reconciliations and

verification

thereof, between expenditure appearing on the FLARE system in Environmental Health

and the Financial Management system (Integra), the approval process for approving

additional costs for unforeseen works and the need to notify applicants that the Council

is not responsible for any shortcomings of any contractors it has suggested for carrying

out any works.

Recommendations

Priority

rating

Number of

recommendations

High

0

Medium

6

Low

1

Internal Audit Report – Financial Management system – post implementation

review

Management Summary (abridged)

Audit opinion

The main barriers preventing the success of the project are:

•

Staff resistance to change;

•

Not tailoring training needs to different levels of user; and

•

The need to review existing processes.

However, if these issues are resolved, the remaining modules and functionality

should be implemented.

The project set up to manage the implementation of the new Financial System

appeared initially to be well controlled. However, when the project was examined in

depth, it became clear that a number of project management areas had not been

carried out at all or had not been carried out during the early stages of the project

when they should have been, such as budget monitoring.

Internal Audit have been

informed that there was an issue regarding the initial Project Manager, who was

removed from the project when problems concerning the technical aspects of the

project emerged, and that this affected the level of monitoring carried out on the

Project documentation.

There were also three Heads of Financial Services during

the overall period of the project, two during the implementation stage, which affected

the constitution of the Project Board and caused uncertainty over project ownership.

Internal Audit were informed during the review that the new system had not been

well received by the users, key modules have not yet been implemented and that

the expected benefits had not been realised.

It is Internal Audit's opinion that the

tendering and selection process had been carried out as carefully as possible and

that the choice of supplier has not been responsible for the majority of the problems

experienced.

Although, there is a Project Management Standard, the standard was not always

followed and where it was followed, there are incidences where the documentation

was produced but not used to manage the project.

The risks identified in the

Business Case is an example of this.

In addition, although Internal Audit

understood that the project had been managed using PRINCE2, the review found

that the Project Management Standard formed the basis of the project methodology

used and that it does not fully conform to PRINCE2 principles.

Recommendations

Priority rating Number of

recommendations

High

18

Medium

8

Low

1

The recommendations rated as high priority are:

•

Risks identified during a project should be reviewed regularly to

ensure that the risk is being managed effectively.

•

A review of the benefits achieved should be carried out in order to

identify and enable communication of the positive achievements.

•

Communication to staff should be carried out regularly, using

different methods, to ensure that user buy-in is maintained.

•

Once the actual benefits have been identified, they should be

compared to the expected benefits and any gaps identified.

•

The benefits which have not been achieved should be examined in

order to identify areas where the most benefits are to be gained

•

The project plan and budget should be monitored by the Project

Manager throughout the project.

•

Internal Audit recognise that the Project Manager was changed

during the course of the project, which uncovered poor management

practices.

However, it is important that the Project Board are

satisfied that such monitoring is taking place in the first place.

•

The project target should be realistic and take account of the work

required or the resources available.

•

Exception reports should be used for any issue which significantly

impacts the project.

The report should contain the issue, the

reasons why, the impact on the project and options for the Project

Board to consider.

•

Acceptance criteria should be established at the beginning of the

project and agreed by the Project Board to ensure that the delivered

product meets the criteria before the product is accepted.

•

Before the system is accepted, the Project Manager should ensure

that sufficient testing has been undertaken to ensure that the system

meets with the agreed acceptance criteria.

•

Differences between the delivered system and that stated in the

acceptance criteria should be documented and reported to the

Project Board along with explanations and recommendations for

further action.

•

An issues log should be kept of all issues which arise during the

project.

The log should contain details of the issue, who raised it, its

severity or impact on the project and the action taken to resolve it.

•

System acceptance should be clearly signed off by the Project Board

or nominated individual.

•

A quality plan should be produced for every project to ensure that

the project receives the appropriate quality assurance.

In addition, a

communication plan helps to ensure that the necessary

communication takes place at the right time.

•

Lessons learnt should be communicated to future projects by the

Head of E-Government.

•

The work processes of the Finance team should be reviewed in order

to align them more closely to the Integra system.

•

Reports of critical or unusual transactions from the audit trail should

be obtained and monitored regularly, including System

Administrator events, to ensure that any unusual or fraudulent

events are identified.

•

The Council should consider whether the network password policy

should be amended in line with best practice, which is enforced

change every 30 days and preventing re-use of passwords.