Appendix B(1)
Management Summaries of Completed Audit Assignments
Report No. NN/12/03 – Final Report issued 25 October 2011
Audit Report on Waste Management
Audit Opinion
Limited Assurance given
Rationale supporting award of opinion
The audit work carried out by Internal Audit indicated that:
•
Weaknesses in the system of internal controls are such as to put the client’s
objectives at risk.
•
The level of non-compliance puts the client’s objectives at risk.
•
A number of weaknesses have been identified with the monitoring arrangements
regarding the new Waste Management and Grounds Maintenance Contract,
which has resulted in one high and six medium priority recommendations being
raised.
•
The previous report (NN110 - Waste Management) issued in April 2011, was
awarded Adequate Assurance with one medium priority recommendation having
been raised. However, since the previous review focused on the arrangements
for monitoring the previous contract, and the procurement of - and plans for
monitoring the new contract, it is not deemed appropriate to provide a direction of
travel indicator.
Summary of Findings
Contract Monitoring
The contract between the Council and Kier for the provision of Environmental Services and
Grounds Maintenance commenced on 1st April 2011. A summarised operation guide is in
place, which outlines key performance indicators (KPIs) and high-level contract monitoring
arrangements, this is being developed as the contract continues.
The KPIs within the contract require revision in order to make them more meaningful in
respect of the current working arrangements and to improve the management information.
Payments to Kier have been appropriately authorised and are in line with contractual
specifications. Variations have been authorised, although the Council and Kier are still
determining whether these should be invoiced as they arise or on a quarterly basis.
Income due to the Council for garden waste collections has not been paid over to the Council
since the contract commenced on 1st April 2011. Due to initial issues, these charges were not
issued to customers until June 2011. The Council is in the process of establishing
reconciliation and recovery processes with Kier for this income on a monthly basis. There are
also issues with reconciling income from bulky waste collections collected by Kier, which are
also still under review.
Control processes for receipt of grounds maintenance income require review, in particular
bowling green leases and validating pitch and putting income.
Issues remain with the interface between the Council’s M3 and Kier’s Whitespace waste
management systems regarding the ability to confirm the accuracy of service activity by both
parties. Data validation checks are still progressing to try to resolve the matter.
A grounds maintenance visit schedule for 2011/12 inspections has not been established.
Contractor meetings are being held and budget monitoring controls exist.
The claim for reimbursement of mixed recyclable credits covering the period April-July 2011
had been promptly submitted to Norfolk County Council in August 2011.
Whilst it was evident that recovery action was taking place in respect of trade waste
customers, potential weaknesses exist through the absence of independent checking of
recovery action as well as the inconsistent retention of supporting documentation.
Performance Information
Environmental Services performance indicators mirror the KPIs outlined within the Waste
Management and Grounds Maintenance contract, although issues with the KPIs exist as
previously stated. Issues with the data collection arrangements have been identified.
Risk Management
Risks have been identified by Environmental Services and will be subject to review in October
2011. Mitigation plans have been documented to reduce the impact and likelihood of risks
identified. It must be noted that risks identified relate to the pre-Kier contract for
Environmental Services. We have noted throughout audit testing that the key issues
identified within this audit are being progressed and monitored (i.e. garden waste income
recovery and system interfacing), hence no recommendation has been raised.
The following number of recommendations has been raised:
Adequacy
and
Effectiveness
Assessments
Area of
Scope
Adequacy
of
Controls
Contract
Monitoring
Performance
Information**
Risk
Management
Total
Effectiveness
of Controls
Recommendations
Raised*
Amber
Amber
High
1
Medium
6
Low
0
Green
**Amber
0
0
0
Green
Green
0
0
0
1
6
0
** Recommendations have been raised within the ‘Contract Monitoring’ section which impact
on the ‘Performance Information’ area of the audit.
High Priority Recommendations
We have raised one high priority recommendation as a result of this audit. This is in the
following area:
Contract Management – Garden Waste and Bulky Waste Income Process
•
All income due from Kier in respect of garden waste income since commencement of the
contract on 1st April 2011 should be paid over to the Council as soon as practicable. The
Council should also ensure it recovers all income for bulky waste collections since the
transfer of responsibility for income collection (i.e. from 1st August 2011).
Reconciliations for income should be undertaken on a monthly basis. Supporting records
should be provided to the Council by Kier which clearly outline the payments received for
garden and bulky waste collections, which should then be reconciled to M3 prior to
raising an invoice to Kier for recovery of the income collected.
•
Written procedures should be produced and agreed by both parties for recovering and
reconciling income relating to garden and bulky waste collections.
Management Responses
Management have accepted all recommendations raised.
Appendix B(2)
Report No. NN/12/05 – Final Report issued 2 November 2011
Audit Report on Accountancy Services
Audit Opinion
Adequate Assurance given
Rationale supporting award of Opinion
The audit work carried out by Internal Audit indicated that:
•
While there is a basically sound system of internal control, there are weaknesses,
which may put some of the client’s objectives at risk.
•
There is evidence that the level of non-compliance with some of the control
processes may put some of the client’s objectives at risk.
•
This opinion results from the fact that we have raised one medium and two low
priority recommendations.
•
The system was previously audited in 2009/10 and was awarded ‘Adequate
Assurance’ as a result of us having raised seven recommendations. Although
there is evidence of improvement since the last review, the assurance level has
remained the same. Hence the direction of travel is unchanged.
Summary of Findings
Treasury Management
An approved Treasury Management Strategy is in place which meets the requirements of the
CIPFA Code of Practice and the Prudential Code.
A contract is in place with Arlingclose to provide the Council with support and guidance in
respect of its Treasury Management activities.
An approved counterparty list exists for assisting with decision making. However, in a couple
of instances the decision to invest with particular institutions had not been formally
documented. Both investments had been made with the most advantageous terms available
and had been appropriately approved by Council officers
Reconciliations are undertaken between records of investments and the general ledger and to
bank statements. All key functions are segregated within the department.
Fidelity insurance cover is provided for officers within the Council.
Reports are provided to management and members on a six-monthly basis in line with the
Treasury Management Strategy.
Treasury management records are password protected and held within the Finance shared
drive with restricted access.
Control Accounts
Policies and procedures exist for the completion of control account reconciliations. Control
account reconciliations are undertaken on a monthly basis as verified through review of the
payroll and the VAT control accounts. No issues of concern were noted. The suspense
account was reviewed as part of a separate audit on Receipt, Handling and Banking of
Remittances (NN1207) with no issues being raised.
Banking
Policies and procedures exist for administering the Council’s bank accounts. A bank mandate
is in place to notify the bank of authorised signatories. Bank charges are checked and
verified to the Council’s records.
Bank Reconciliations
Bank reconciliations are completed although issues were noted with regards their prompt
completion and the absence of independent review in some cases.
Asset Register
Additions to and disposals from the asset register are correctly processed with supporting
documentation retained. Assets are subject to revaluations on a rolling five year programme.
The asset register is reconciled to the general ledger at year-end due to limited activity.
Budgetary Control
Budgets are set according to a timetable and are agreed with service heads prior to being
reviewed and approved by Corporate Management Team, Cabinet and Full Council.
Budgets are entered onto the general ledger and are reconciled to confirm accuracy.
Budget monitoring reports are produced on a monthly basis with variances of +/- £2,000
requiring explanation / remedial action. However, we found that in a couple of cases,
explanation / remedial action had not been recorded. Budget monitoring reports are
produced for management and Members for periods four (July), six (September), nine
(December) and ten (January) which provide updates on the status of the Council’s budget
position. There is also formal ongoing monitoring between accountants and budget holders
and the monitoring reports are further supplemented by the Revised and Base budget reports
which are provided to Cabinet and Full Council.
Journal Entries
Journal transfers are completed in accordance with laid down procedures, including
countersigning those over £100,000 by the Financial Services Manager/Acting Financial
Services Manager. Appropriate documentation and audit trail exists to explain and support
each journal.
A wider issue over access rights to e-financials generally, referred to in the previous report on
the work to support the annual governance statement (NN1113), remains outstanding. The
Group Accountant had planned to undertake a review of all user access to e-financials by the
end of May 2011. We established that a revised deadline has been set of 31st December
2011 for the review to be completed. Progress with this will be covered as part of the next
audit of work to support the annual governance statement (NN1212) scheduled to be
completed in February 2012 with an appropriate recommendation if the review has not been
completed.
Performance Information
Performance / progress reports are provided to management and members in respect of
treasury management activity and budget monitoring. There are no other reporting
requirements pertaining to the areas under review.
Risk Management
The review of Corporate Governance and Risk Management (NN1111) identified issues with
risk management throughout the Council. An exercise on developing risk management is
being undertaken by the Interim Accountancy Services Manager and progress with this is
being monitored through Internal Audit’s follow up arrangements on progress with outstanding
recommendations.
The following number of recommendations has been raised:
Adequacy
and
Effectiveness
Assessments
Area of Scope
Adequacy
of
Controls
Effectiveness
of Controls
Treasury
Management
Control
Accounts
Banking
Bank
Reconciliations
Asset Register
Budgetary
Control
Journal Entries
Performance
Information
Risk
Management
Green
Amber**
High
0
Medium
0
Low
1
Green
Green
0
0
0
Green
Green
Green
Amber
0
0
0
1
0
0
Green
Green
Green
Amber
0
0
0
0
0
1
Green
Green
Green
Green
0
0
0
0
0
0
Amber***
Amber***
0
0
0
0
1
2
Total
Recommendations
Raised*
**Includes one recommendation raised within area of Bank Reconciliations
***Refer to recommendations raised in audit NN1111 Corporate Governance and Risk
Management
High Priority Recommendations
We have not raised any high priority recommendations as a result of this audit
Management Responses
Management have accepted all recommendations raised.
Appendix B(3)
Report No. NN/12/07- Final Report issued 4 November 2011
Audit Report on the Receipt, Handing and Banking of Remittances
Audit Opinion
Adequate Assurance given
Rationale supporting award of Opinion
The audit work carried out by Internal Audit indicated that:
•
While there is a basically sound system of internal control, there are weaknesses,
which put some of the client’s objectives at risk.
•
There is evidence that the level of non-compliance with some of the control
processes may put some of the client’s objectives at risk.
•
The level of assurance is based on the fact that three medium and two low
priority recommendations have been raised.
•
The previous audited of Remittances (NN1015) was awarded an ‘Adequate
Assurance’ opinion. Hence the direction of travel indicator remains unchanged.
Summary of Findings
Policies and Procedures
Policies and procedures relating to remittances exist and are available to relevant staff.
Payment methods are clearly notified to debtors. Insurances are in place to mitigate the loss
of income relating to remittances.
Physical Security
Income received via the post room is opened in a secure environment before being logged
and passed to another department for processing and banking. Access rights to the cash
receipting system and telephone payment system is restricted to relevant officers. The
Council still use Card Holder Not Present forms (CNP) for processing credit card payments as
the current MOTO and telephone payment systems are not capable of adding surcharges.
There is an inherent risk with recording card holder payment details for these payments,
however no recommendation has been raised as the new cash receipting system (currently
being tested) will make the use of CNP forms redundant. Segregation of duties exists in
respect to receipt, handling and banking of remittances. However, we were unable to obtain
evidence that staff in the Payments Control Team are required to declare any personal
interests they may have in customer accounts.
Receipting
Controls exist over receipt of income through electronic means. Income is banked promptly.
Unidentified payments are automatically posted to the suspense account and subsequently
reallocated. Income from Tourist Information Centres (TICs) is reconciled to income records
on a weekly basis, from review of receipting arrangements we identified that additional
controls are required for TIC stock takes. The suspense account and TIC reconciliations are
not currently subject to independent review.
Posting of Income
Income is posted promptly and accurately.
Actual cheques requiring departmental
authorisation before processing should not be passed to the relevant departments. Delays
were also noted in processing these payments.
Reconciling Income
A recommendation was raised in NN1205 Accountancy Services audit for the monthly bank
reconciliation to be undertaken in a timely manner. A monthly cash and deposits
reconciliation is undertaken by the Exchequer Services section, although delays with their
completion were identified and the reconciliation is not subject to independent review.
Performance Information
Performance indicators are in place for monitoring of TIC income. Despite this, performance
information has not been monitored through the Council’s performance management system,
TEN during 2011/12.
Risk Management
Risks have been identified under the Customer Services service area regarding remittances,
in particular, in respect of implementing the new cash receipting system and the potential
failure of the telephone payment system. Mitigating controls have been put in place to reduce
the impact and likelihood of risks adversely affecting the Council’s objectives.
The following number of recommendations has been raised:
Adequacy
and
Effectiveness
Assessments
Area of
Scope
Adequacy
of
Controls
Effectiveness
of Controls
Green
Green
High
0
Medium
0
Low
0
Amber
Amber
0
1
0
Green
Green
Amber
Amber
0
0
1
1
1
0
Green
Amber**
0
0
0
Amber
Green
0
0
1
Green
Green
0
0
0
0
3
2
Policies and
Procedures
Physical
Security
Receipting
Posting of
Income
Reconciling
Income
Performance
Information
Risk
Management
Total
Recommendations
Raised
High Priority Recommendations
We have not raised any high priority recommendations as a result of this audit
Management Responses
Management have accepted all recommendations raised.