Chard TC Final update report 2018-19 (002)

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Full Town Council Meeting 17th June

agenda item #2019/98

Chard Town Council
Internal Audit Report 2018-19 (Final update)

Stuart J Pollard
Director
Auditing Solutions Ltd

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Background and Scope
Statute requires all Town and Parish Councils to implement an independent internal audit
examination of their Accounts and accounting processes annually. This report sets out those
areas examined during our three visits to the Council for 2018-19, which took place on 4th
September 2018, 7th January & 18th May 2019.

Internal Audit Approach
In conducting our review for 2018-19 in accordance with the requirements of the Internal Audit
Report in the Annual Governance and Accountability Return (AGAR) and the latest edition of
the Governance and Accountability Manual, 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.
We have reviewed progress on implementing / addressing issues raised previously and are
pleased to acknowledge the actions taken by officers, especially given the long-term absence of
the former clerk prior to her resignation at the close of 2018 and other staff changes during the
year.

Overall Conclusion
We are pleased to record that, in the areas examined this year, the Council’s financial systems
overall continue to operate effectively, although we have identified a few areas where we
consider improved recording and controls are required.
We have duly signed off the Internal Audit Report in the year’s AGAR assigning positive
assurances in each relevant area.

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 bank accounts are in operation with the Co-op bank with the 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 attracting minimal interest payable at halfyearly intervals with detail recorded in a separate cashbook in the accounting software. Two
further deposits of surplus funds are held in Nationwide Building Society accounts attracting
interest which is received annually. We have: ➢ Ensured the accurate roll over of the prior year closing balances 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 (June and
November 2018, plus March 2019);
➢ Verified the reconciliation of Co-op bank accounts (including the Co-op 14-day
deposit account) between the cash book and the relevant bank statements as at 30th
June and November 2018, plus 31st March 2019;
➢ Considered controls over the completion and checking of bank reconciliation detail;
➢

Reviewed the procedures in relation to the raising and checking of journals on the
accounting software; and

➢ Ensured the accurate disclosure of the combined cash and bank balances at 31st March
2019 in the AGAR at Section 2, Box 8.
Conclusions and recommendations
We noted in our first report that the independent scrutiny of bank reconciliations was not
being evidenced with the signatures of either the preparer or reviewer in the printed copies of
cashbooks and bank reconciliations held on file and are pleased to note that the nominated
member is now routinely signing them off.
We noted at the time of our first interim review that the reconciliation at 30th June 2018
included a reconciling item of £230.20 being unbanked receipts from 30th April, noting that
this had been amended appropriately in the August 2018 cashbook. We also noted that the
June 2018 cashbook held on file included detail of sales receipts actually banked on 6th July
2018 (£174.50), although the amount is not shown as an adjusting entry on the June
reconciliation held on file.
A similar situation has been identified in the November 2018 cashbook with both a few
receipts and payments entered in November’s cashbook, but with a December date.
Consequently, the printed cashbook balance as at 30th November 2018 records a different
value to the cashbook balance reported on the printed bank reconciliation.
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We also note that the previous practice whereby the Clerk reviewed journals prepared by the
RFO and signed them off has, understandably in her absence, not taken place this year.
In order to assist members undertaking the review of month-end bank reconciliations, they
should be ensuring that the following detail corresponds to supporting documentation: • Bank statement balance - should agree to that balance at the month-end as recorded
on the account’s bank statement
• Cashbook balance – should agree with the balance at the foot of each month’s
cashbook as printed off of Omega
• The calculated cashbook balance (i.e. bank balance less uncleared payments plus
uncleared deposits) should match the bottom-line cashbook balance on the
reconciliation.
Additionally, members should be checking to ensure that no long-standing payments or
receipts appear as uncleared on the reconciliation.
R1. The bank reconciliations prepared at the close of each month should be “signed-off” by
the preparing officer and be subjected to independent member scrutiny, as required by the
Governance and Accountability Manual (G&AM) and the Council’s own Financial
Regulations (Paragraph 2.2 refers) with that scrutiny duly and appropriately evidenced. A
nominated member is now signing off the reconciliations.
R2. As we have recommended previously, cashbooks should be entered in the month when the
transaction occurs: i.e. receipts should be recorded on the date of receipt rather than
banking and payments on the date issued. Consequently, the cashbook balance recorded
in the bank reconciliation should match that on the printed cashbook at each month-end
and the nominated member checking them should ensure that the two values agree as part
of their scrutiny of the reconciliation detail.
R3. The regime of reviewing and signing off journals should be re-introduced with either the
new clerk, once appointed, or a nominated member undertaking and evidencing the
review.

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 we are, as far as we may reasonably be expected to ascertain, 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) have been reviewed and readopted in the past year with a consistent value of £25,000 identified in both for formal
tender action, although we note that the former still make reference to the Public
Contracts Regulations 2006, which were superceded in 2015, as reflected in the FRs;
➢ Noted that the Council has reviewed its data protection arrangements, although they
have not yet been formally adopted;
➢ Noted that payments continue to be reviewed at Council meetings, together with budgets
and that arrangements for signing cheques have been reconfirmed; and

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➢ Continued our review of the Council and standing committee minutes for the financial
year and to date in 2019-20 as posted on the Council’s website to ensure that no issues
affecting the Council’s financial stability either in the short, medium or long term exist.
Conclusions and recommendation
Whilst no significant issues have been identified in this review area, the extant SOs require
clarification to reflect the latest Public Contracts Regulations legislation (i.e. those issued in
2015). We shall continue to review minutes and consider the Council’s approach to
governance issues at future visits.
R4.

The Standing Orders should be subjected to further review and update to include
appropriate clarification and reference to the 2015 Public Contracts Regulations.

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 the ordering of goods and services,
together with the payment approval and release procedures, all of which we consider generally
sound.
We have selected a test sample comprising 57 individual payments processed during the
financial year including all those individually in excess of £1,750, plus a more random selection
of every 25th payment as listed in the cashbook: we have also verified the Guildhall and
Cemetery NNDR payments processed monthly over ten months and the monthly insurance
payment to Aviva to supporting documentation. Our test sample totals £262,100 and equates to
63% of non-pay related payments in the year.
We have also examined the VAT reclaims for the current year, generally submitted each month
to HMRC, agreeing detail to the underlying detail in the Omega control account.
Conclusions
We are pleased to record that no issues have been identified in this area of our review process
warranting formal comment.

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
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that appropriate arrangements exist to monitor and manage those risks to minimise the
opportunity for their coming to fruition.
We note from our review of minutes that risk assessments using the LCRS software were
presented to and adopted by the Council at the meeting in May 2018 and have reviewed the
relevant output, which we consider appropriate for the Council’s present requirements.
We have examined the year’s insurance schedule, cover again being provided by Aviva, and
consider that appropriate cover is in place with both Employer’s and Public Liability standing at
£10 million, Fidelity Guarantee cover at £700,000 and Business Interruption cover “Loss of
Revenue” cover in place at £90,000.
We have previously also discussed the Council’s arrangements for the review of play / sports
equipment and grounds safety noting that a staff member undertakes weekly reviews
supplemented by an independent review undertaken by the District Council in December 2018
on behalf of the Council. This, we understand, identified a number of significant issues
requiring urgent action to improve safety that has been actioned accordingly. Consequently,
staff undertaking the routine weekly checks is to receive further accredited training. We remind
members that claims may be lodged against the Council up to 21 years after an accident /
incident has occurred and that it is essential that appropriate documentation detailing the results
of the health and safety checks are prepared and retained for this time period.
Conclusions and recommendation
We urge that members approve the costs of necessary training and accreditation to undertake
routine weekly health and safety checks at the Council’s various premises: we shall continue
to monitor the Council’s approach to risk management at future visits, reporting our
conclusions accordingly.
R5. Urgent action should be taken to arrange appropriate training and accreditation for
Council staff to undertake health and safety checks of Council premises with full and
appropriate documentation retained for the requisite time span in case of any claim
against the Council. Appropriate arrangements are being made for staff to receive
appropriate training and accreditation.

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 note that, following due deliberation, members agreed the budget and precept requirements
for 2019-20, formally approving and adopting the latter at £629,500 at the January 2019 full
Council meeting.
We are again pleased to note that members continue to be provided with detailed budget
performance information based on the Omega accounting software at regular intervals
throughout the financial year. We have reviewed the year-end budget outturn noting that
expenditure marginally exceeded the planned budget (104%) whilst income totalled 94% of the
anticipated level. We have duly sought and obtained appropriate explanations for the few
significant variances existing.
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We have again reviewed the level of retained reserves at the financial year-end noting that funds
totalling £937,388 (£902,189 as at 31st March 2018) are held, comprising the General Reserve
balance of £340,380 (£441,486 at 31st March 2018), together with “ring fenced capital receipts”
and total other reserves earmarked for specific projects. We consider the spread of these
reserves appropriate for the Council’s ongoing revenue spending and development plans.
Conclusions
No issues arise in this area this year with the General Fund balance equating to 3½ months’
revenue spending at the current level.

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 reviewed a sample of Guildhall hire income, together with income received from the
outside market and burial / memorial fees.
In relation to the Guildhall, at our first interim visit, we examined a sample of bookings between
23rd April and 6th May 2018, noting that the booking system is integrated with the Omega
accounting software with booking diary entries automatically fed into the Omega sales ledger,
which generates an appropriate invoice. We duly examined three bookings ensuring that
appropriate invoices had been raised and settled accordingly. We also examined further / all
income generating bookings in this period ensuring that signed agreement forms were in place.
With regard to the “outside market”, we note that a schedule of traders and amounts received is
retained for each weekly market identifying the traders’ names, the size of their pitch; the
amount collected and detail of the issued receipt number. We have traced a sample for the year
to August 2018, plus March 2019 through onto the Omega ledger with no issues arising.
At our second interim visit, we examined a sample of 20 burials between August and November
2018, ensuring that the appropriate fees had been invoiced and recovered from the undertakers
in every case, especially in relation to “out-of-parish” interments, which attract higher fees: we
also ensured that an appropriate undertaker’s application form was held for a sample of 10 of
the interments in the same period and are pleased to record that no issues were identified in that
respect. We also examined a sample of ten memorial application forms again ensuring that the
appropriate fees were recovered.
We have again examined the two Omega Sales Ledgers “All unpaid invoices” reports noting the
continuing existence of a few long-standing debts and “unmatched” receipts. We acknowledge
the work pressures facing the RFO for much of the year with staff vacancies and turnover and
have again drawn these to her attention for appropriate corrective action, also noting that a few
long-standing debts were written-off during the year.
Finally, in this area, we have examined the detailed Omega income transaction reports for the
financial year and are pleased to record that, as far as we are reasonably able to ascertain, no

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miscodings have occurred with all anticipated income duly received and appropriately
accounted for.
Conclusions and recommendation
We are pleased to record that no significant issues arise in this area, although we consider
that a more rigorous review of outstanding accounts and unmatched receipts should be
undertaken, although we again acknowledge that the absence of the Town Clerk and other
staff changes during the year will have impacted on the time available to undertake this
review.
R6.

More frequent action should be taken to ensure that no debts remain uncleared for any
undue time period, also ensuring that “unmatched” receipts are further investigated and
“cleared” appropriately. Noted and will be actioned appropriately now that the staffing
position has settled down.

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 now uses 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. We have at our two visits this year:
➢ Obtained a copy of the staff establishment examining at the first visit a random sample
of 4 staff to payroll relevant appointment / contract update letters signed by the Clerk,
who we understand has delegated authority, confirming the pay/spinal column point
(SCP) of the employee as recorded on the establishment list;
➢ At this update visit, we have undertaken a further review of the payroll examining all
copy staff payslips for November 2018 ensuring that all staff (excluding the former
clerk) salaries for the month are in line with the above establishment list;
➢ Also checked the November 2018 NI / tax and pension deduction calculations for
November by reference to the relevant HMRC and Pension Fund Administrators detailed
tables;
➢ Duly agreed the amounts paid to each individual in November 2018 by reference to their
payslips; and
➢ Agreed the HMRC analysis in the Lentells reports to HMRC payment recorded on the
Omega control account.
We noted in our first Final report that the May 2018 payroll was adjusted to take account of the
national pay award applying from 1st April 2018. In reviewing the June 2018 payroll, we noted
that the May pay file was mistakenly run rather than the correct file resulting in staff effectively
receiving the back dated pay award twice with an overall net error of £1,330.35. The error was
identified when a difference was noted on the control accounts and has, we are pleased to
record, been corrected subsequently. We are also pleased to note that officers are now receiving
a different report from Lentells showing amounts actually paid, which should assist avoid
similar errors.
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Conclusions
We are pleased to record that no residual issues arise in this area.

Asset Registers
We have noted previously that the Council’s external contract accountants have provided the
Council with detail of asset values as at 31st March annually taking account of asset movements
in the year. We have also noted previously that the Council acquired the Pear Technology asset
register software but, as yet, has not had an opportunity to fully complete input.
Conclusions
No issues arise in this area, although we note that due to the staffing position during the year,
the asset register has not been updated other than for the contract accountants including
detail of new assets acquired during the financial year appropriately added to the detailed
Statement of Accounts prepared by them and consequently also reported in the AGAR at
Section 2, Box 9.

Investments and Loans
As indicated earlier in this report the Council holds surplus funds in a 14-day account with the
Co-op bank together with the two Nationwide Building Society deposits, the latter having total
deposits in excess of £500,000 which have contributed interest just over £1,600 in the year
equating to less than 0.2% on the total cash balance for most of the year.
Whilst we cannot act as financial advisors, several of our clients have placed surplus funds with
CCLA in their Deposit Fund Account which is potentially offering a better rate of interest: we
suggest that consideration be given by members to such an option in order to further improve
the return on its surplus funds.
Central Government legislation changed with effect from 1st April 2018 requiring all councils
with 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 note that the Council
has a Treasury Management Policy in place, which is dated 2014 and needs review and update
to ensure compliance with the current requirements for such a document.
The Council has one outstanding loan repayable half-yearly to PWLB: we have verified the two
repayment instalments for the current financial year by reference to the PWLB demand advices,
also, at this final visit, ensuring the accurate disclosure of the residual loan liability as at 31st
March 2019 in the AGAR at Section 2, Box 10.
Conclusions and recommendation
The Council should ensure that surplus funds are appropriately “invested” to maximise
interest earning potential, whilst ensuring, as far as they reasonably can, that public funds
are securely invested.
R7.

The Council should ensure compliance with current regulations reviewing the existing
Treasury Management Policy and / or developing an appropriate Investment Policy /
Strategy.

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R8.

In line with the above, consideration should be given to the placement of surplus funds in
a more appropriate, than currently, form of investment providing an improved rate of
interest return.

Statement of Accounts and AGAR
The AGAR now forms the Council’s statutory annual Statement of Accounts subject to external
audit review and certification. However, as at many councils, DCK Accounting are contracted to
prepare a more detailed Statement of Accounts, which provides members and the electorate with
more informative detail of the Council’s financial standing and activities.
We have reviewed the content of the detailed Statements ensuring consistency with the
underlying financial and other supporting records and are pleased to report that no significant
errors or anomalies have been identified in this year’s detailed Accounts or data to be reported at
Section 2 of the AGAR.
Conclusions
No issues arise in this area warranting formal comment or recommendation and, based on
the work undertaken during the course of our visits to the Council for 2018-19, we have duly
signed off the Internal Audit Report in the AGAR assigning positive assurances in each
relevant area.

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Rec.
No.

Recommendation

Response

Review of Accounting Arrangements and Bank Reconciliations
R1

The bank reconciliations prepared at the close of each month should be “signed-off” by the
preparing officer and be subjected to independent member scrutiny, as required by the Governance
and Accountability Manual (G&AM) and the Council’s own Financial Regulations (Paragraph 2.2
refers) with that scrutiny duly and appropriately evidenced.

A nominated member is now signing off the
reconciliations.
A Member, who are not cheque signatory, to sign bank
reconciliations quarterly

R2

As we have recommended previously, cashbooks should be entered in the month when the
transaction occurs: i.e. receipts should be recorded on the date of receipt rather than banking and
payments on the date issued. Consequently, the cashbook balance recorded in the bank
reconciliation should match that on the printed cashbook at each month-end and the nominated
member checking them should ensure that the two values agree as part of their scrutiny of the
reconciliation detail.

Noted for future action.

R3

The regime of reviewing and signing off journals should be re-introduced with either the new clerk,
once appointed, or a nominated member undertaking and evidencing the review.

The interim Town Clerk will sign journals off until the
new Town Clerk is appointed

Review of Corporate Governance
R4

The Standing Orders should be subjected to further review and update to include appropriate
clarification and reference to the 2015 Public Contracts Regulations.

Assessment and Management of Risk
R5
Urgent action should be taken to arrange appropriate training and accreditation for Council staff to
undertake health and safety checks of Council premises with full and appropriate documentation
retained for the requisite time span in case of any claim against the Council.

To be reviewed and bought back to Council

Appropriate arrangements are being made for staff to
receive appropriate training and accreditation.

Review of Income
R6

More frequent action should be taken to ensure that no debts remain uncleared for any undue time
period, also ensuring that “unmatched” receipts are further investigated and “cleared” appropriately.

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Noted and will be actioned appropriately now that the
staffing position has settled down.

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Rec.
No.

Recommendation

Response

Investments and Loans
R7

The Council should ensure compliance with current regulations reviewing the existing Treasury
Management Policy and / or developing an appropriate Investment Policy / Strategy.

Investments reserved due to uncertainty about spending
plans pending the strategic planning starting on 13th July

R8

In line with the above, consideration should be given to the placement of surplus funds in a more
appropriate, than currently, form of investment providing an improved rate of interest return.

“ “

Chard TC: 2018-19 (Final update)

28-May-2019

Auditing Solutions Ltd