Internal Audit Report 2022-23 Final

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Chard Town Council
Internal Audit Report 2022-23 (Final update)

Stuart J Pollard
Director
Auditing Solutions Ltd

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Background and Scope
Statute requires all town and parish councils to arrange for an independent Internal Audit (IA)
examination of their accounting records and systems of internal control and for the conclusions
to be reported each year in the Annual Governance and Accountability Return (AGAR).
This report sets out the work undertaken in relation to the 2022-23 financial year, during our
two onsite visits to the Council, which took place on 31st January and 16th March 2023, plus our
final remote review on 3rd May 2023 following closedown of the year’s Omega accounts.

Internal Audit Approach
In conducting our review for 2022-23 and in accordance with the requirements of the IA
Certificate in the AGAR and the requirements of the “Practitioner’s Guide”, we have again paid
due regard to the materiality of transactions and their susceptibility to potential
misrepresentation in the Accounts / AGAR, together with examining the overall governance
framework. Our aim is to ensure that the Council continues to operate robust control systems
and that transactions are, as far as we are reasonably able to ascertain, processed in accordance
with national and locally approved legislation and controls.

Overall Conclusion
We are pleased to record that no significant concerns have been identified from the review work
undertaken this year, although we noted a few areas at our interim visit where we considered
some improvements were required: specifically, the Financial Regulations required amendment
to reflect actual working practice in one or two areas together with a few other matters where we
considered action was required to address potential areas of potential weakness / concern: full
detail of all such issues is set out in the body of the detailed report following with resultant
recommendations also summarised in the appended Action Plan. We are pleased to note the
actions taken to address these issues with detail of their current status duly recorded in the body
of the report and appended action Plan.
No further issues have been identified during our update visit and final remote review
warranting formal comment or recommendation and we have duly signed off the IA Certificate
in the year’s AGAR assigning positive assurances in each relevant area.
We take this opportunity to remind the Council of the requirements of the guidance notes in the
preface to the year’s AGAR in relation to the documentation that should be displayed on the
Council’s website and the timing requirements for publication of the Notice of Public Rights to
examine the Council’s documentation for the financial year.

This report has been prepared for the sole use of Chard Town Council. To the fullest extent permitted by law, no responsibility or
liability is accepted by Auditing Solutions Ltd to any third party who purports to use or rely, for any reason whatsoever, on this report,
its contents or conclusions.

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Detailed Report
Review of Accounting Arrangements & Bank Reconciliations
Our objective here is to ensure that the Council’s accounting records are being maintained
accurately and currently and that no anomalous entries appear in cashbooks or financial ledgers:
we also aim to ensure the integrity of the data and that appropriate arrangements are in place for
its security. Three accounts are in operation with the Co-op bank with Current and Deposit
account transactions recorded in a single cashbook with a daily sweep operating between the
two accounts to retain a £2,000 balance in the former. The third account holds a small
proportion of the Council’s surplus funds with detail recorded in a separate cashbook in the
accounting software: we note that there have been no transactions on this account to date in
2022-23. We have: ➢ Ensured the accurate carry forward of the prior year closing balances as reported in
the certified 2021-22 AGAR to the current year’s accounting records;
➢ Ensured that a comprehensive, meaningful and appropriate nominal coding and cost
centre structure remains in place;
➢ Checked and agreed transactions in the combined current and deposit account
cashbook to the supporting Co-op Bank statements for three months (April and
December 2022 plus March 2023);
➢

Verified the reconciliation of the Co-op bank accounts between the cash books and
the relevant bank statements as of 31st December 2022 and March 2023; and

➢

Ensured the accurate disclosure of the combined cash and bank balances at the
financial year-end in the AGAR at Section 2, Box 8.

We also note the approved move of banking arrangements from the Co-op Bank to Lloyds,
which still retains a branch in the town and will ensure the accurate transfer of funds at our next
review visit.
Conclusions
We are pleased to note that bank reconciliations are now being reviewed by a nominated
councillor, as required by the adopted Financial Regulations (FRs - Para 2.2 refers), with an
email certificate confirming their review and agreement of detail being provided and retained
in electronic format, together with the Omega reconciliation statement. Whilst accepting this
form of evidencing of agreement of the reconciliation detail, the above FR paragraph
reference will require amendment to reflect actual working practice, as it currently requires
that the reconciliation and original bank statement (or similar document) be signed as
evidence of verification.
R1. The adopted Financial Regulations (Para 2.2) should be revised to set out detail of the
actual process now in place for the review and certification of bank reconciliations. The
Financial Regulations have been amended accordingly giving a clear description of the
process to be followed.
R2. The email certificate confirming member review of bank reconciliations should be
retained on the electronic file together with copies of the bank reconciliation statement
and supporting month-end bank statements. All detail is now being held in electronic
format.
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3rd May 2023

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Review of Corporate Governance
Our objective here is to ensure that the Council has a robust regulatory framework in place, that
Council and Committee meetings are conducted in accordance with the adopted Standing
Orders (SOs) and that, as far as we may reasonably be expected to ascertain as we do not attend
meetings, no actions of a potentially unlawful nature have been or are being considered for
implementation. To meet that objective, we have:
➢ Noted that both SOs and Financial Regulations (FRs) were reviewed, updated in line
with the latest NALC model documents being further revised and re-adopted by the
Council at its November 2022 meeting;
➢ Noted that payments continue to be reviewed and approved at Council meetings,
together with budgetary performance reports; and
➢

Continued our review of Council and standing committee (excluding Planning) minutes
reading those for the financial year as posted on the Council’s website and provided in
electronic format to ensure that no issues affecting the Council’s financial stability either
in the short, medium or long term exist.

We are also pleased to note that the external auditors issued a clear certificate on the 2021-22
AGAR and that the requisite Notice of Public Rights was displayed on the Council’s website for
30 working days.
As a larger Council, we also suggest that consideration be given to splitting the roles of Chief /
Proper Officer and Responsible Financial Officer as and when a new Town Clerk is appointed /
takes up the post.
Conclusions
We are pleased to record that no matters have been identified in this area warranting formal
comment or recommendation other than in relation to paragraph 2.2 of the FRs as referred to
above. We shall continue to monitor the Council’s approach to governance at future visits,
also continuing our examination of Council and Committee minutes.

Review of Expenditure
Our aim here is to ensure that: ➢ Council resources are released in accordance with the Council’s approved procedures
and budgets;
➢ Suitable documentation supports the payments, either in the form of an original trade
invoice or other appropriate form of document confirming the payment as due and/or an
acknowledgement of receipt, where no other form of invoice is available;
➢ All discounts due on goods and services supplied are identified and appropriate action
taken to secure the discount;
➢ An official order has been raised on each occasion that one would be anticipated; and
➢ VAT has been identified accordingly for recovery.
We have selected a test sample of 65 individual payments processed in the financial year for
compliance with the above criteria. Our test sample includes all payments individually in excess
of £2,500, plus a more random selection of every 30th payment as listed in the cashbook: the test
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sample totals £481,720 equating to 69% by value of non-pay related payments in the year. We
are also pleased to note that two members continue to visit the Council offices, checking and
signing off the certification stamp affixed to each invoice.
We have also ensured the accurate recovery of expended VAT each month during the year by
reference to the underlying control account in the financial edger.
Conclusions
We are pleased to record that no concerns have been identified in this area of our review
process.

Assessment and Management of Risk
Our aim here is to ensure that the Council has put in place appropriate arrangements to identify
all potential areas of risk of both a financial and health and safety nature, whilst also ensuring
that appropriate arrangements exist to monitor and manage those risks to minimise the
opportunity for their coming to fruition.
We note that an updated Risk Register had been re-adopted by the Council in January 2023 and
have reviewed the resultant document and consider that it remains appropriate for purpose.
We have examined the current year’s insurance schedule with Aviva and consider that the level
of cover in place remains appropriate for the Council’s present requirements with Employer’s
and Public Liability each standing at £10 million, together with Fidelity Guarantee cover at
£700,000 and Business Interruption “Loss of Revenue” cover in place at £100,000.
Conclusions
We are pleased to record that no concerns exist in this area warranting formal comment or
recommendation.

Budgetary Control & Reserves
In considering the Council’s approach to budget determination and precept setting, we aim to
ensure that decisions are made based on sound information and that an appropriate level of
precept is determined to meet the Council’s future planned expenditure.

We are pleased to note that, following due deliberation, the Council discussed and approved its
budget and precept requirements for 2022-23 at the January 2023 full Council meeting, setting
the latter at £775,334.
We are also pleased to note that members continue to be provided with detailed budget
performance information based on the Omega accounting software at each meeting throughout
the financial year and have reviewed the year-end budget outturn report seeking and obtaining
appropriate explanations for the few significant variances existing.
We have reviewed the level of retained reserves at the financial year-end noting that funds
totalling £533,597 are held at the financial year-end (£749,872 at 31st March 2022), comprising
the General Reserve balance of £114,242 (£221,630 at the prior year-end), together with “ring
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fenced capital receipts” of £5,862 and total earmarked reserves of £522,380 (£623,362 at 31st
March 2022). The General Fund balance equates to approximately 1½ months’ revenue
spending at the present level and is below the generally recognised target level of between three
and twelve months’ revenue spending at the 2022-23 level.
Conclusions
We are pleased to record that no issues arise in this area warranting formal comment or
recommendation, although we urge the council to keep a close watch on the level of retained
General Fund balance with a view to increasing it to align more closely with the
recommended minimum level of three months’ revenue spending.

Review of Income
In examining the Council’s sources of income, we aim to establish that robust procedures are in
place to ensure that income due to the Council is identified and invoiced accordingly (where
appropriate); that arrangements for the secure handling of any cash income are in place and that
income due to the Council is recovered within a reasonable time span.
At our interim update review, we checked detail of income arising from allotments, burial and
associated fees and room hire fees at the Guildhall, with detail of the work undertaken set out in
the following paragraphs.
Allotment rents
Allotment rental fees fall due on 1st October annually: the Council uses the Rialtas allotments
software to manage the invoicing and control of fee recovery in this area with a raft of reports
available. We have reviewed the “Allotment fees, paid in full” report ensuring that income
received has been brought to account in the Omega accounting software with no rents remaining
unpaid at the financial year-end.
Burial and associated fees
A detailed spreadsheet register of interments, memorial headstones, etc applications is
maintained. We have examined the documentation relating to a sample of 11 burials in April
and May 2022, ensuring that the appropriate fees were invoiced and that each was supported by
undertakers applications and the legally required burial /cremation certificates, noting that the
certificates were seemingly not held for three of the test sample (ref. nos. W51, Y63 & W95).
We have also examined the invoices relating to those 11 interments ensuring that the
appropriate fees were charged and recovered. Six stonemasons’ applications for erection of new
headstones / addition of further inscriptions were also received in April and May 2022: we have
similarly reviewed the invoices raised, again ensuring that the appropriate fees had been charged
and have been recovered.
Guildhall hires
The Council uses the Rialtas booking software to manage bookings at the Guildhall with
invoices raised at the start of the month following the booking. We have acquired detail of the
various chargeable bookings in October 2022 ensuring that invoices have been raised for each
and that the appropriate fees have been charged in accordance with approved scale of fees and
charges and are pleased to record that no issues arise in this respect.
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Unpaid debts
We have examined the Omega Sales Ledger “Unpaid invoices by date” reports on Sales Ledgers
1, 2 & 3 noting that on Sales Ledger 1 2 invoices in respect of Abri Group dating from October
2021 and September 2022 still remain unpaid and understand that these are being actively
pursued for settlement through the small claims court. The Omega report also records 2
“unmatched” receipts of 40 pence, each presumably arising from overpaid fees: we had
suggested following our interim update visit, that these should be corrected appropriately prior
to the financial year-end closedown of Omega, but note that no action has been taken to clear
them.
On the Sales Ledger 2 report we note the existence of 5 “receipts / credit notes” one or two of
which appear to match invoices raised but that have not been cleared against each other. We
note that some action has been taken in this respect following our initial 2022-23 review and
again urge that, where appropriate, these credits be set-off against relevant invoices and that the
residue, if resulting from overpaid invoices or misallocated receipts, be further examined and
cleared from the Sales Ledger. We also note that two invoices issued prior to 31st December
2022 also remain unpaid at the financial year-end.
Conclusions and recommendation
As indicated above, action is required to pursue the long-standing debts and to establish the
reasons for the unmatched receipts and to ensure their prompt clearance from the Sales
Ledgers.
R3.

Continued action should be taken to pursue the few long-standing debts. The two longstanding unpaid invoices are being pursued actively, but will, if recovery attempts
remain unsuccessful, be referred to Council / the Finance and Audit Committee for
formal write-off approval.

R4. Where invoices are overpaid, the resultant surplus credit receipt should either be adjusted
on a subsequent invoice or be coded to a miscellaneous income code thereby clearing
detail from the Sales Ledgers.

Petty Cash Account
We are required, as part of the Annual IA certification process, to provide assurance on the
satisfactory (or otherwise) operation of any petty cash accounts at the Council. A relatively
small account is in place within the admin office, being operated on an imprest basis with a cash
float of £300, the balance being “topped-up” generally monthly from the Current account.
During the course of our first interim visit for 2022-23, we checked the physical cash holding
(£135.86) which, together with supporting receipts (£164.14), equated to the Imprest holding of
£300.00. However, we noted the existence of a further Petty Cash account cashbook in Omega
(nominal code 203) which showed a balance of £281.36 at 30th November 2022 (the latest date
of entry on the backed-up version of Omega provided for that review). We also noted the
existence of a further Petty cash account on Omega (control account code 212) which recorded a
cash holding of £249.56 unchanged throughout the year to that date.
We note the action taken to clear one of these accounts, a NIL balance now being recorded in
Omega, and that a revised procedure will be implemented in 2023-24 following agreement of an
appropriate process with the externally contracted accountant.
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We also checked and agreed the supporting invoices / till receipts spreadsheet records for
November and December 2022 at our first visit for the year with each payment appropriately
supported. In doing so, we noted that the spreadsheet had incorrectly identified VAT for
recovery on a number of non-vatable purchases such as catering supplies. Care should be taken
to ensure that VAT is only identified on vatable purchases.
Conclusions and recommendations
As indicated above, action is required in a few areas relating to the operation of the petty cash
account, together with an appropriate adjustment to the account’s balance in the financial
ledger.
R5.

As indicated in the body of the report, one of the two petty cash accounts recorded in the
Omega Trial Balance should be closed down, ideally that being operated as a cashbook
(Code 203), with the balance charged as a miscellaneous expense thereby reducing the
balance to Zero. This has been adjusted as recommended and detailed in the body of the
report.

R6.

The balance recorded in the Omega nominal Petty Cash account (Code 212) detail should
be adjusted to ensure that the balance is increased to £300.00 with an appropriate journal
reducing the expenditure to date on a relevant expense code accordingly. The account
balance has been adjusted appropriately and now reflects the actual physical cash
holding.

R7.

Care should be taken to ensure that VAT on petty cash expenditure is not recorded as
recoverable on non-vatable items such as catering supplies. Noted and is now being
applied appropriately.

Review of Staff Salaries
In examining the Council’s payroll function, we aim to confirm that extant legislation is being
appropriately observed as regards adherence to the Employee Rights Act 1998 and the
requirements of HMRC legislation in relation to the deduction and payment over of income tax
and NI contributions, together with meeting the requirements of the local government pension
scheme in relation to employee contribution percentages. We note that the Council continues to
use an external agent to prepare the monthly payroll on behalf of the Council providing the
Council with full supporting documentation, including copy payslips. At our first review visit,
we: ➢ Obtained a copy of the staff establishment detailing staff in post, their spinal point on the
national pay scale and basic working hours;
➢ Noted that the 2022-23 national pay award was implemented and paid, together with
arrears backdated appropriately to 1st April 2022, with the November 2022 salary
payments;
➢ Checked all staff salaries paid in November & December 2022 to ensure that they were
in line with the establishment record; and
➢

Checked and verified the November & December 2022 NI / tax and pension deduction
calculations by reference to the relevant HMRC and Pension Fund Administrator’s
detailed tables.

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Conclusions
We are pleased to record that no issues arise in this area warranting formal comment or
recommendation.

Fixed Asset Registers
We acknowledge that the Council’s Accounts, previously prepared by the former external
contract accountants, had included detail of new acquisitions each year, that detail forming the
basis of the asset value recorded in each year’s AGAR at Section 2, Box 9. We have also noted
previously the acquisition of the Pear Technology Asset Register software with data initially
entered based on the asset register detail maintained by the former contract accountants.
The RFO has provided us with an updated spreadsheet asset register with values recorded as at
31st March 2023 totalling £3,523,023, which value is duly reported in the AGAR at Section 2,
Box 9.
Conclusions
We are pleased to record that no concerns arise in this area this year.

Investments and Loans
As indicated earlier in this report the Council currently holds funds in three accounts with the
Co-op bank together with two term deposits with the Nationwide Building Society: as above, we
also acknowledge the impending move of the main accounts to Lloyds Bank. As indicated
previously, we remain concerned that, with such significant sums effectively held in only two
banking institutions, the Council is potentially at a degree of risk of loss should either bank
“fail” and again suggest that the Council considers a greater degree of diversification of its
surplus funds.
As also advised previously, Central Government legislation changed with effect from 1st April
2018 requiring all councils with combined cash / bank balances in excess of £100,000 to
develop an appropriate Investment Policy / Strategy (this previously only applied to councils
with funds in excess of £500,000). We have recorded previously that the Council’s Treasury
Management Policy was examined with the Council resolving, at its meeting in February 2020,
to move surplus funds to an “instant access account” with the further intention of re-examining
the Treasury Management Policy in the near future. This was, obviously, put on hold due to the
Covid-19 situation and does not appear to have been revisited subsequently. Consequently, we
again urge that appropriate action be taken to protect public funds as soon as practicable with
diversification of funds into additional accounts.
The Council has one outstanding loan repayable half-yearly to PWLB: we have verified the two
repayment instalments for the financial year by reference to the PWLB demand advices as part
of our aforementioned review of payments, noting that the loan has now been repaid in full with
a NIL balance at the financial year-end..

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Conclusions and recommendation
The Council should ensure that surplus funds are appropriately “invested” to maximise
interest earning potential, whilst ensuring, as far as they are reasonably able, that public
funds are securely invested. The extant Investment Strategy / Treasury Management Policy
should be subjected to periodic review and, if appropriate, amendment and formal readoption.
We shall undertake further work in this area at future reviews, including confirming the
accurate disclosure of the value of the outstanding loan liability as at 31st March 2023 by
reference to the PWLB website where all local government loan detail is published as at each
financial year-end.
R8.

Consideration should be given to the diversification of surplus funds in other banking
institutions, as approved at the February 2020 full Council meeting, to minimise the risk
of loss should, albeit probably unlikely, the existing banks should ever “fail”, whilst also
ensuring that interest earning opportunities are maximised.

R9.

The Council’s Investment Strategy / Treasury Management Policy should be subjected to
periodic review, update and formal re-adoption ideally as a minimum every other year.

Statement of Accounts and AGAR
The AGAR forms the Council’s statutory annual Statement of Accounts subject to external audit
review and certification. We note that the year-end closedown of the Omega accounts has been
undertaken by an external contractor. The software effectively generates the information for
inclusion in the year’s AGAR, excepting that in relation to Section 2, Boxes 9 & 10 (Year-end
asset and outstanding loan liability values) and we have duly ensured the accurate transfer of all
data to the year’s AGAR at Section 2, also verifying the accurate recording of the last two
values to the relevant underlying documentation.
Conclusions
No issues arise in this area this year and, based on the generally satisfactory conclusions
drawn in each review area covered by the IA Certificate in the year’s AGAR, we have duly
signed-off that certificate assigning positive assurances in each relevant area.

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Rec.
No.

Recommendation

Response

Review of Accounting Arrangements and Bank Reconciliations
R1

The adopted Financial Regulations (Para 2.2) should be revised to set out detail of the actual process now in
place for the review and certification of bank reconciliations.

The Financial Regulations have been amended
accordingly giving a clear description of the process to be
followed.

R2

The email certificate confirming member review of bank reconciliations should be retained on the electronic
file together with copies of the supporting month-end bank statements.

All detail is now being held in electronic format.

Review of Income
R3
Continued action should be taken to pursue the long-standing debts.

R4

The two long-standing unpaid invoices are being pursued
actively, but will, if recovery attempts remain
unsuccessful, be referred to Council / the Finance and
Audit Committee for formal write-off approval.

Where invoices are overpaid, the resultant surplus credit receipt should either be adjusted on a subsequent
invoice or be coded to a miscellaneous income code thereby clearing detail from the Sales Ledgers.

Petty Cash Account
R5
As indicated in the body of the report, one of the two petty cash accounts recorded in the Omega Trial
Balance should be closed down, ideally that being operated as a cashbook (Code 203), with the balance
charged as a miscellaneous expense thereby reducing the balance to Zero.

This has been adjusted as recommended and detailed in
the body of the report.

R6

The balance recorded in the Omega nominal Petty Cash account (Code 212) detail should be adjusted to
ensure that the balance is increased to £300.00 with an appropriate journal reducing the expenditure to date
on a relevant expense code accordingly.

The account balance has been adjusted appropriately and
now reflects the actual physical cash holding.

R7

Care should be taken to ensure that VAT on petty cash expenditure is not recorded as recoverable on nonvatable items such as catering supplies.

Noted and is now being applied appropriately

Investments and Loans
R8

Consideration should be given to the diversification of surplus funds in other banking institutions, as
approved at the February 2020 full Council meeting, to minimise the risk of loss should, albeit probably
unlikely, the existing banks should ever “fail”, whilst also ensuring that interest earning opportunities are
maximised.

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Rec.
No.

Recommendation

Response

Investments and Loans (Continued)
R9

The Council’s Investment Strategy / Treasury Management Policy should be subjected to periodic review,
update and formal re-adoption ideally as a minimum every other year.

Chard TC: 2022-23 (Final update)

3rd May 2023

Auditing Solutions Ltd