interim audit report IJL August 2005 v3

I-Langdon

Informations

• Publié par: Thowyug
• Nombre de lectures: 40
• Langue: English

Extrait

Audit Summary Report Date Last saved: 11/08/2005 15:29:00

Review of Core Processes and Governance Arrangements

Weymouth and Portland Borough Council Audit 2004/2005

The Audit Commission is an independent body responsible for ensuring that public money is spent economically, efficiently and effectively, to achieve high-quality local and national services for the public. Our remit covers more than 15,000 bodies which between them spend nearly £125 billion of public money every year. Our work covers local government, housing, health, criminal justice and fire and rescue services.

As an independent watchdog, we provide important information on the quality of public services. As a driving force for improvement in those services, we provide practical recommendations and spread best practice. As an independent auditor, we monitor spending to ensure public services are good value for money.

Document Control

Author

Filename

Ian Langdon

interim audit report IJL August 2005 v3

Status of our reports to the Council

Our reports are prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Reports are prepared by appointed auditors and addressed to non-executive directors/members or officers. They are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any director/member or officer in their individual capacity, or to any third party.

Copies of this report

If you require further copies of this report, or a copy in large print, in Braille, on tape, or in a language other than English, please call 0845 0560566.

© Audit Commission 2005 For further information on the work of the Commission please contact: Audit Commission, 1st Floor, Millbank Tower, Millbank, London SW1P 4HQ Tel: [phone] Fax: [phone] Textphone (minicom): 020 7630 0421 www.audit-commission.gov.uk

Review of Core Processes and Governance Arrangements│Contents3

Contents Introduction Background Audit approach Main conclusions

Appendix 1 – Action Plan

4 4 5 6

8

Weymouth and Portland Borough Council

4Review of Core Processes and Governance Arrangements│Audit Summary Report

Introduction

1 This report sets out the results of our interim audit work, which will contribute to our assessment of the Council’s arrangements in two areas of our audit responsibilities: •audit opinion on the Council’s annual financial statements, considering our the core processes which form the basis for the preparation of the Council’s accounts • financial aspects of corporate governance. 2 We have carried out this work by: • reviewing Internal Audit’s work • discussion with relevant officers •review and testing of relevant documentation a •the Council's arrangements against aspects of the Audit reviewing Commissions CPA criteria. 3 The recommendations arising from our review are set out in an action plan at Appendix 1.

Background 4 The Council's core processes have operated satisfactorily in recent years. These are important to ensuring that the statements are accurate, are produced in a timely manner and enable effective budgetary control. We place significant reliance on the effective operation of the core processes and need to ensure each year that your procedures remain adequate and effective. 5 Aspects of the Council's corporate governance arrangements were reviewed as part of the CPA progress assessment and a separate overview of risk management has been carried out. The results of this work have been communicated separately. This interim audit does not revisit the elements of these earlier reviews when considering financial aspects of your corporate governance.

6 To assist the Council in their arrangements to detect and prevent fraud and corruption the Audit Commission has run a national data matching exercise, called the National Fraud Initiative (NFI). The data enables comparisons to be made across the key financial systems from a wide range of Local Government and NHS bodies. The data collected and held by the Audit Commission complies with Data Protection and human rights legislation. 7 The NFI is designated by the Audit Commission to be part of the statutory external audit and audited bodies are legally obliged to provide the relevant data to auditors under Section 6 of the Audit Commission Act 1998. The data was to be extracted as at, or as near as possible to, 11th October 2004. Matches were

Weymouth and Portland Borough Council

Review of Core Processes and Governance Arrangements│Audit Summary Report5

returned to the Council for further enquiry by internal Audit and investigation where appropriate. The data matches include:- • employees on more than one payroll within one employer or different employers •or invalid national insurance numbers missing •claiming income support or other state benefits employees • linking creditor records to payroll data

Audit approach

Core Process Review 8 We have a responsibility to give an audit opinion on the Council’s annual financial statements. In advance of the detailed testing of the completed financial statements, we reviewed the core processes that contribute to the preparation of the financial statements, to determine whether the final accounts are likely to be free from material misstatement. 9 In this review we considered the following areas: •accounting system; main • budgetary control processes; and • annual accounts closedown arrangements.

Financial Aspects of Corporate Governance 10 Our work has been structured around key elements of your governance arrangements, in line with our Code of Audit Practice responsibilities. These include: • financial standing •systems of internal financial control •of financial conduct, and the prevention and detection of fraud and standards corruption 11 This year our approach includes:- • a review of the Council’s arrangements for implementing the Audit Commission’s National fraud Initiative, a data matching exercise,

•

the triennial review of Internal Audit

Weymouth and Portland Borough Council

6Review of Core Processes and Governance Arrangements│Audit Summary Report

Main conclusions

Main Accounting system We have concluded that the key controls on the main accounting system continue to operate satisfactorily. The review of Internal Audit’s file has provided assurance that the controls have been adequately tested during the year and are operating effectively.

Budgetary control 12 The system in place has continued to develop and provide the Council with sound information following the base budget reviews in 2003/04 and 2004/05. The monthly reporting cycle of variances and year-end projections, indicate the Council will increase balances by £100,000 by 31 March. 13 We have concluded that the key controls on the budgetary control system continue to operate satisfactorily. The review of Internal Audit work on the budgetary control process has provided assurance that the Council's predictions and monitoring procedures are satisfactory and can be relied upon.

Systems of internal financial control 14 We have again relied on the work of Internal Audit as part of our joint working protocol to test the key controls of the Council’s significant systems. Last year we recommended that the Council clarify the working arrangements of the Audit and Control Officer as the role compromised the independence of the internal audit function. This has been followed up as part of our triennial internal audit review.

Internal Audit Review

15 Our review of the work undertaken by internal audit has provided us with sufficient assurance that we can continue to rely on their approach and work completed. We have recommended a number of procedural improvements.

16 The role of the Audit and Control Officer remained an issue throughout 2004/05 as he still creates and inputs some journals in the main accounting system. The Audit Manager has indicated that revised arrangements will be fully in place for 2005/06.

17 The Internal Audit review of payroll undertaken during the year has not tested any 2004/05 transactions. It is important that internal audit review the current year's transactions of key systems annually. Additional testing will be undertaken prior to the commencement of the audit of the statements of account.

18 We also identified that individual Internal Audit files do not indicate that the follow up of previous recommendations has occurred or that the system in place is unchanged and fully documented. We have now received assurance that the procedure in place to ensure all recommendations are implemented in a timely manner is effective.

Weymouth and Portland Borough Council

Review of Core Processes and Governance Arrangements│Audit Summary Report7

19 We have also suggested that the Audit Manager consider establishing a consistent approach in identifying a consistent sample size for testing which is based upon the risk or assurance required.

20 There is an absence of adequate internal control within the Creditors Section due to the low staff numbers and all staff being able to amend standing data and input new creditors. Internal Audit should address the fraud risk through the risk management process and consideration of specific fraud testing of the BACS and creditor master files should be considered.

21 A number of recommendations to address these issues have been included in the Action Plan at Appendix 1.

Prevention of fraud and corruption

National Fraud Initiative

22 Internal Audit is currently reviewing of the NFI data. The Council's auditor attended a presentation by the Audit Commission to demonstrate the best method of data interrogation to maximise the benefits of the comparisons provided. An initial review of the approach indicates satisfactory principles have been followed.

23 The Council plans to submit an initial data return to the Audit Commission on 31 May. Other key dates for data submissions for NFI 2005 are 30 September and a final date, to ensure results are included in the national report issued by the Audit Commission, is the 31 December.

Legality 24 We have followed up the Council's compliance to the introduction of the Local Government Act 2003 and found the key measures are in place. The Council has set and monitored its prudential indicators and established it risk based minimum balance as required by section 26.

Financial Standing

25 The Council's financial standing continues to improve and the 2004/05 budget report adopted by members in February 2004 indicates that the revenue reserve is marginally in excess of the minimum reserve established under the Local Government Act 2003.

26 The reserves are set to improve further during 2004/05 following the forecast budget underspend. We will update our review of financial standing in our annual audit letter.

Weymouth and Portland Borough Council

8Review of Core Processes and Governance Arrangements│Appendix 1 – Action Plan

Appendix 1 – Action Plan Page Recommendation Priority Responsibility no. 1 = Low 2 = Med 3 = High

R1 The review of main accounting key controls undertaken by the Audit and Control Officer should be reviewed independently of the accountancy function R2 The Audit Manager should ensure that fundamental system audits are not undertaken early in the year. This would avoid the oversight which occurred as part of the Payroll review. Additional testing for 2004/05 should be completed R3 Internal Audit should ensure that they

3

3

2

Weymouth and Portland Borough Council

Internal Audit Manager

Internal Audit Manager

Internal Audit manager

Agreed

Yes

Yes

Yes

Comments

The roles have been clarified and appropriate internal check will be operating in 2005/06.

The testing of new starters, leavers, amendments, timesheets, exception reports and access controls in place during 2004/05 will be reviewed prior to the commencement of the statements of accounts audit.

The audit approach will be reviewed to ensure documentation remains current

Date

Page no.

Recommendation

record and update systems documentation for key systems. R4 The Audit Manager should consider the introduction of preventative fraud work on the creditors system. R5 The Audit Manual should provide guidance on sample sizes to be used for the testing of controls. This should include guidance on sample sizes in respect of compliance, substantive or risk/fraud testing.

Review of Core Processes and Governance Arrangements│Appendix 1 – Action Plan 9

Priority 1 = Low 2 = Med 3 = High

2

2

Responsibility

Internal Audit Manager

Internal Audit manager

Agreed

Yes

Yes

Comments

and is part of the current arrangements.

The inclusion of specific fraud tests will be considered.

A section on sample sizes will be considered

Date

Weymouth and Portland Borough Council

10Review of Core Processes and Governance Arrangements│Appendix 1 – Action Plan

Weymouth and Portland Borough Council