Chard TC Interim update report 2021-22

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Chard Town Council
Internal Audit Report 2021-22 (Interim 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 2021-22 financial year, during our
two interim visits to the Council, which took place on 6th October 2021 and 15th February 2022:
it will be updated following completion of the final review for the year, which we have agreed
with the Executive Officer (EO) will be undertaken remotely following closure of the accounts
by the Council’s external contracted accountant.

Internal Audit Approach
In undertaking our review for 2021-22 and in accordance with the requirements of the IA
Certificate in the AGAR and the requirements of the recently updated “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 to date this year, although we have noted a few areas where the Omega accounting
records require further scrutiny and correcting / updating to reflect a more accurate position of
the Council’s financial affairs. These issues are highlighted in the body of the detailed report
following with appropriate recommendations also summarised in the appended Action Plan.

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. Two further deposit accounts are in place with the Nationwide Building
Society with interest earned generally added once yearly on 31st March. We have: ➢ Checked for the accurate carry forward of the prior year closing balances as reported
in the certified 2020-21 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, August
and December 2021); and
➢

Checked the reconciliations of the Co-op bank accounts between the cash books and
the relevant bank statements as of 30th April, 31st August and December 2021.

Conclusions and recommendation
We are pleased to record that no significant issues arise in this area currently, noting at our
first visit for the year that the previous long-standing uncleared bank deposit of £183.24 had
been written-off and cleared through the cashbook accordingly at the end of July 2021.
However, during the course of this update visit, we noted the existence of a balancing
adjustment of £89.31 recorded as a payment to SSDC on 1st July 2021 on the latest (31st
December 2021) reconciliation: we have discussed this with the Finance Officer during the
course of this update review visit and she has made the necessary amending entries.
We also note that members have not been reviewing and signing-off bank reconciliations
during the year, most probably due to the varying levels of Covid restrictions applying, and
remind the Council that the adopted Financial Regulations (FRs) require a nominated
councillor, not the Charman, to undertake this review assigning-off the reconciliations and
bank statements together with the cashbooks as evidence of their verification of the
reconciliation detail.
We shall undertake further work in this area at our final review, including ensuring the
accuracy of the year-end bank reconciliations and disclosure of the combined cash and bank
balances in the year-end AGAR at Section 1, Box 8.
R1.

Where apparent imbalances or long-standing uncleared deposits or payments are
identified in the month-end bank reconciliations they should be investigated as soon as is
practicable and appropriate adjustments be made in the Omega accounts.

R2.

The Council must ensure compliance with its adopted regularity framework with a
nominated councillor undertaking a formal review of balk reconciliations at least

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quarterly, signing the off, together with the supporting bank statements and cashbook
closing balances.

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 FRs have been reviewed, updated in line with the latest NALC
model documents and been adopted formally by the Council in the early months of
2021-22;
➢ 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 to date in 2021-22 as posted on the Council’s website and provided in hard
copy format by the Executive Officer during this update visit to ensure that no issues
affecting the Council’s financial stability either in the short, medium or long term exist,
also noting the implementation of a revised standing committee structure in recent
months with revised Terms of Reference adopted for each.

We are also pleased to also note that the external auditors issued a clear certificate on the 202021 AGAR.
Conclusions
We are pleased to record that no matters have been identified in this area currently
warranting formal comment or recommendation. 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; and
➢ An official order has been raised on each occasion that one would be anticipated.
We have again reviewed the control procedures in place over ordering of goods and services,
together with the payment approval and release procedures, all of which we consider sound and
appropriate for the Council’s requirements. However, we understand that, as recorded at our
first review for the year, the Finance Officer is setting up online payments with the Executive
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Officer releasing them following review and sign-off of the supporting documentation, which is
also signed-off by two councillors. These two officers are currently the only personnel with
online access to perform these roles, which could potentially leave the Council exposed to
delays in processing payments and financial penalties for late payments in the event that one or
both are absent for any lengthy period.
We have now selected an extended test sample of 44 individual payments processed in the
financial year to 31st January 2022 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 totalling £437,200 and equating to 73% by value of nonpay related payments in the year to the above date. We are also pleased to note that, following
relaxation of Covid restrictions, two members are again visiting the Council offices, checking
and signing off the certification stamp affixed to each invoice.
Conclusions and recommendation
We are pleased to record that no concerns have been identified in this area of our review
process to date, although we urge that action be taken to add further signatories to the bank
accounts to afford cover in the event that either the Executive or Finance Officers are absent
for an extended period. We will extend our test sample of processed payments against the
above criteria at our final review. We will also review further VAT reclaims prepared and
submitted to HMRC monthly for repayment ensuring appropriate disclosure of the year-end
balance in the AGAR.
R3.

The Council should consider the inclusion of at least two councillors as bank signatories
to afford cover in the event that either or both the Executive and Finance Officers are
absent preventing the timely payment of trades invoices, which could lead to payment
delay penalties.

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 are pleased to note that an updated Risk Strategy and Strategic Risk Register have been
prepared by the Executive Officer and been adopted by the Finance and Audit Committee in
January 2022 we consider the resultant documents appropriate for purpose.
We have examined the current year’s insurance schedule with WPS and consider that the level
of cover in place remains appropriate for the Council’s present requirements with Employer’s
and Public Liability standing at £10 million and £15 million respectively, together with Fidelity
Guarantee cover at £700,000 and Business Interruption “Loss of Revenue” cover in place at
£125,554.
We have discussed the operative arrangements for the conduct of health and safety reviews of
the Council’s play areas, etc. noting that a RoSPA accredited company undertake an annual
review, the outcome of which is reported to Council for approval and agreement of any
necessary repair work. This annual review is supported by weekly or more frequent in-house
reviews by Council staff: the outcome of these were previously recorded and retained, although
that appears to have potentially ceased happening following a number of staff changes. We urge
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that the position be reviewed with regular evidenced weekly reviews undertaken and suggest
that the Executive Officer liaises with the Council’s insurer to determine the extent of
documentation that should be completed and retained, bearing in mind that claims for injuries
can be lodged by individuals up to the age of 21.
Conclusions and recommendation
Whilst no significant concerns exist in this area, we urge that the Council seeks guidance
from its insurer on the extent of documentation required to be prepared and retained in
relation to the play area, etc. inspections.
R4.

The Council should ensure that all necessary documentation is prepared and retained, as
may be required by their insurers in the event of any claim arising, ideally seeking
guidance from the insurer accordingly.

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 2022 full Council meeting, setting
the latter at £681,685.
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 latest budget performance report, as at 31st January
2022, seeking and obtaining appropriate explanations for the few significant variances existing.
Conclusions
No issues arise in this area currently: we shall undertake further work in this area at our
final review examining the final year-end budget outturn seeking explanations for any
significant variances that may arise and considering the ongoing appropriateness of the level
of retained reserves both in the General and Earmarked funds.

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.
We have consequently examined income arising from the burial ground, allotments, hire of
rooms at the Guildhall and from market stalls in relation to the weekly indoor market held at the
Guildhall.
Burial ground: At our first review for the year, we examined the spreadsheet control record for
a sample of 10 interments that had occurred to that date ensuring that the appropriate supporting
documentation (undertakers’ applications and legally required burial / cremation certificates)
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were held and that the appropriate fees had been charged and invoiced to undertakers
accordingly and settled within a reasonable time frame.
We also examined a sample of 10 memorials by reference to the Finance Officer’s controlling
spreadsheet, again ensuring that the appropriate fees had been invoiced and recovered within a
reasonable time frame. We are pleased to record that no issues arose in either review area.
Allotment rents: the Council manages some 170 individual allotment plots using the bespoke
RBS Rialtas Allotments package. Rents fall due on 1st October annually with invoices raised
through the allotment software. We have examined the register of tenants noting that all but 5
had been repaid at the time of this interim update review visit. These are being actively pursued
at the present time with one tenant being issued with a notice to quit: the remaining three have
only recently taken over the plots and been invoiced accordingly. Consequently, no issues arise
in this area warranting further comment, although we shall recheck the year-end position at our
final review.
Hire of Guildhall: The Council uses the bespoke RBS Rialtas Hall bookings package to
manage the hire of rooms at the Guildhall; invoices raised using this software is linked to the
Omega accounts software. Consequently, we have acquired detail of the rooms hired by clients
in November 2021 and checked the Omega Sales Ledger detail ensuring that fees have been
charged in accordance with the approved scales of fees and charges and that hirers have
completed and signed the appropriate Terms and Conditions of Hire. We have also, by reference
to the Omega Sales Ledger ensured that the invoices have been settled accordingly, noting that
none remain unpaid.
Market stall rents: weekly indoor markets are held at the Guildhall with stall holders charged
accordingly and generally paying their fees in cash which is collected by hall staff and banked
periodically.
We have also examined the two Omega Sales Ledgers’ “unpaid invoices by date” reports as of
31st January 2022 noting that a number of “unmatched receipts exist, together with one
relatively long-standing significant (by value) debt with SSDC. We have discussed these with
the FO during the course of this update review with action taken to address the situation
offsetting receipts against invoices wherever practicable. We understand that the SSDC debt is
being actively pursued and will revisit this area at our final review and comment further, as
necessary, at that time.
Conclusions and recommendation
Obviously, the Covid situation has again impacted to an extent on the Council’s ability to
generate the usual level of income in much of the financial year and will undertake further
work in this area at our final review.
R5.

Appropriate action should be taken to remove / resolve the three long-standing items on
the two Sales Ledgers. We are advised that these have been actioned accordingly, but
will re-examine the position at our final review.

Petty Cash Account
We are required, as part of the Annual Internal Audit Report process, to provide assurance on
the satisfactory (or otherwise) operation of any petty cash accounts at the Council. A relatively
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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 once quarterly from the Current account.
A spreadsheet record is maintained of the transactions analysing the individual payments to the
appropriate nominal expense code in Omega, with a separate column identifying any VAT
incurred. Two such spreadsheets were in place for transactions to the first interim review date,
the first to 30th June recording expenditure of £139.48 and the second to 23rd September
recording expenditure of £178.77. The first was “repaid” on 1st July 2021 and the second on 24th
September 2021. The control account should, if operated as intended, always record a balance of
£300.
At our first visit, we checked and agreed the supporting invoices / till receipts to the two
aforementioned spreadsheets with no issues arising other than noting the purchase of a number
of vatable items in the period for which till receipts bearing the traders’ VAT Registration
numbers were held, although the VAT element had not been identified on the spreadsheets for
recovery. Where a valid VAT registration number is recorded on the till receipts and / or
invoices, the VAT should be identified for recovery: whilst the amounts involved are not
significant, the Council should ensure that all recoverable income is identified and posted
accordingly in Omega for inclusion on the VAT reclaims to be submitted to HMRC.
We also checked the physical cash holding during the course of our first review visit, it totalling
£250.11, which together with, at that time un-reimbursed invoices / till receipts totalling £49.89
equated to the anticipated £300.00 float. We have seen no evidence of any periodic independent
(of the holding officer) review of the physical cash holding and its reconciliation to the float
level of £300.00 to date in the financial year.
We also suggest that, in future, when setting up the reimbursement from the Current bank
account, albeit generally entered via the Purchase Ledger, the total reimbursement value be
purely recorded in the Current account as a payment with the expense analysis set up in the
Purchase ledger, rather than as a transfer to the petty cash account: by that means the petty cash
account balance on coded 212 should remain as £300.00 throughout the year.
Examination of the control account in the Omega accounts (Code 212) at this update visit
reveals that the account records a total cash holding of £549.56 comprising, as recorded in our
first report for the year, a few apparent duplicated / anomalous entries in respect of
reimbursements of the cash float. No transaction entries have been made in the account since
October 2021 and we understand that the contract accountant is due to review and possibly
revise the manner in which transactions are recorded and provide the FO with further training in
this respect.
Conclusions and recommendations
The operation of the petty cash account needs to be reviewed with more appropriate and
timely data entry into the Omega accounts than appears to have occurred to date in 2021-22.
The control account balance should always equate to the £300 imprest value.
R6.

The existing accounting entries in the Omega nominal Petty Cash account (Code 212)
detail require review and amendment to ensure that they accurately reflect the petty cash
account transactions during the year ensuring that a balance of £300.00 is recorded and
remains in place for the remainder of the year.

R7.

The physical petty cash float holding, and un-reimbursed vouchers should be subjected to
periodic independent and evidenced check during the year.

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R8.

Care should be taken to ensure that all recoverable VAT on petty cash expenditure is
identified and recorded in Omega accordingly to ensure its recovery from HMRC when
VAT reclaims are submitted.

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 (Lentells) to prepare the monthly payroll, who also process the monthly
payments through the Council’s Co-op bank account and provide 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;
➢ Checked all staff salaries paid in September 2021 to ensure that they were in line with
the Executive Officer’s establishment record; and
➢

Checked and verified the September 2021 NI / tax and pension deduction calculations by
reference to the relevant HMRC and Pension Fund Administrator’s detailed tables.

Conclusions
We are pleased to record that no issues arise in this area warranting formal comment or
recommendation. We understand that no final 2021-22 pay award settlement has been agreed
with the unions at the present date and will advise the Council accordingly as soon as we hear
that a settlement has been reached.

Investments and Loans
As indicated earlier in this report the Council holds funds in three accounts with the Co-op bank
together with two term deposits with the Nationwide Building Society. As indicated in prior
reports, we remain concerned that, with such significant sums 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 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 noted in last year’s report that the Council’s Treasury Management
Policy had been 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: however, we again urge that appropriate action be taken to protect public
funds as soon as practicable with diversification of surplus 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 payment requests as part
of our aforementioned review of payments.
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Conclusions and recommendations
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.
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 2022 by
reference to the PWLB website where all local government loan detail is published as at each
financial year-end.
R9.

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

Review of Accounting Arrangements and Bank Reconciliations
R1

Where apparent imbalances or long-standing uncleared deposits or payments are identified in the month-end
bank reconciliations they should be investigated as soon as is practicable and appropriate adjustments be
made in the Omega accounts.

R2

The Council must ensure compliance with its adopted regularity framework with a nominated councillor
undertaking a formal review of balk reconciliations at least quarterly, signing the off, together with the
supporting bank statements and cashbook closing balances.

Review of Expenditure & VAT
R3

The Council should consider the inclusion of at least two councillors as bank signatories to afford cover in
the event that either or both the Executive and Finance Officers are absent preventing the timely payment of
trades invoices, which could lead to payment delay penalties.

Assessment and Management of Risk
R4

The Council should ensure that all necessary documentation is prepared and retained, as may be required by
their insurers in the event of any claim arising, ideally seeking guidance from the insurer accordingly.

Review of Income
R5

Appropriate action should be taken to remove / resolve the three long-standing items on the two Sales
Ledgers.

We are advised that these have been actioned
accordingly, but will re-examine the position
at our final review.

Petty Cash Account
R6
The existing accounting entries in the Omega nominal Petty Cash account (Code 212) detail require review
and amendment to ensure that they accurately reflect the petty cash account transactions during the year
ensuring that a balance of £300.00 is recorded and remains in place for the remainder of the year.
R7

The physical petty cash float holding and un-reimbursed vouchers should be subjected to periodic
independent and evidenced check during the year.

R8

Care should be taken to ensure that all recoverable VAT on petty cash expenditure is identified and
recorded in Omega accordingly to ensure its recovery from HMRC when VAT reclaims are submitted.

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Rec.
No.

Recommendation

Response

Investments and Loans
R9

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.

Chard TC: 2021-22 (Interim update)

15th February 2022

Auditing Solutions Ltd