2002/2003
A C T I O N P L A N
SA002-07-2003 AP
August 2003

audit
2002/2003
Issue Effect Recommendation
CORE PROCESSES
Main Accounting system
The accounting adjustments agreed in the 2001/2002 audit had not been actioned on the 2002/2003 opening balances at April 2003.
A monitoring schedule was introduced in
2002/2003 to help to ensure that all reconciliations are carried out regularly.
It is not always clear from the current monitoring schedule when reconciliations are due to be done, or when they have actually been done by the responsible officer. For example, it should be clear that quarterly reconciliations are to be undertaken by responsible officers in June, September,
December and at year end. Similarly the periods for twice yearly reconciliations should be stipulated.
The opening balances are incorrectly stated in the MAS.
Failure to complete reconciliations at the required time may go unnoticed.
R1 Entries should be posted at the earliest opportunity to ensure the MAS holds accurate records.
R2 The reconciliations schedule should be redesigned by:
 splitting the schedule between responsible officers as staff only need to be concerned about their own lists
 listing across each month of the year
 requiring responsible officers to enter the value of the account per SAP at the time of the reconciliation
 requiring responsible officers to annotate the schedule with the date of the reconciliation and details of any errors or issues with the balance.
3
3
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
ACTION PLAN
C.
Hesketh
Opening balances for 2002/03 were adjusted on SAP during the final accounts closure process.
C.
Hesketh
Recommendations accepted – the schedule will be revised and instructions issued to accountants
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP1

audit
2002/2003
Issue Effect Recommendation
CORE PROCESSES
Main Accounting system
Whilst the maintenance of adequate audit trails for control account reconciliations at the year end is an accepted practice, the evidencing of the in-year reconciliations is variable. Some of the reconciliations are not documented and do not have an audit trail of what was done, by whom and when.
In these cases the lack of an audit trail means no evidence of the control having been exercised is available.
R3 Responsible officers should ensure that they retain a sufficient audit trail of the reconciliations they have been charged with carrying out. The trail should be capable of showing what was reconciled, when it was reconciled and by whom.
3
Priority
1 = Low
2 = Med
3 = High
The bank reconciliation was last carried out at the end of December 2002 and had not been carried out regularly for each month of the year. At the
December reconciliation there was an imbalance of £36,316.
Errors in the financial records would not be identified, and corrected, at an early stage.
R4 Bank reconciliations should be carried out in full at least monthly and there should be no unexplained imbalances.
3
Officer resp.
Response
ACTION PLAN
G.
Topping
Recommendation accepted.
Accountants were advised on the completion and documentation of accounts at briefings in February
2003. Group Accountants are required to check that working papers are adequate on a sample basis.
The District Auditor should notify specific cases where the audit trail is deemed inadequate so that appropriate guidance/training can be provided.
M. Lyons The reconciliation at March 2003 was completed during the closure of accounts. The implementation of
PARIS in March 2003 has facilitated regular reconciliations which have now been completed for June and
July 2003
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP2

audit
2002/2003
Issue Effect Recommendation
CORE PROCESSES
Main Accounting system
There continues to be a large number of journal entries raised by the Authority.
It is not possible to differentiate between different types of journals eg those raised to post computer generated entries that are supported by a financial system, and those raised by accountants to alter the posting of expenditure.
There is no authorisation of journals.
The inability to identify journal postings by type and agree in total those postings relating to supporting systems reduces the integrity of the system.
R5 Journal entries should be structured to make it easy to identify the different type of journal.
R6 The authorisation required for the different types of journal, such as those supporting entries from financial systems, should be reviewed.
2
2
Priority
1 = Low
2 = Med
3 = High
Officer resp.
In the past internal debtors and creditors have not been agreed during the year, and in previous years there has been a large imbalance between them at year end. The Council are planning to undertake a full reconciliation at the end of 2002/2003 and introduce quarterly reconciliations in future years.
Failure to introduce the regular reconciliations could mean inaccurate in-year budget monitoring and year end problems with imbalances.
R7 Internal debtors and creditors should be fully reconciled at year end and on a quarterly basis in future as planned.
3
Response
ACTION PLAN
G.
Topping
C.
Hesketh
There are 15 journal identifiers set up in SAP. These are used mainly to distinguish 'batch' journals from other systems from other journals.
Additional journal types can be created in consultation with the
District Auditor.
It is considered that the preauthorisation of journals would not improve control and is likely to delay postings to the ledger.
Internal debtors and creditors have been reconciled at March 2003. The majority of these items relate to schools for which quarterly outstanding debt statements are prepared and issued to schools and school accountants so that matching creditors can be included and outstanding debt reduced.
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP3

audit
2002/2003
Issue
ACTION PLAN
Effect Recommendation
CORE PROCESSES
Budgetary Control
During 2002/2003 there were no formal corporate guidelines on the frequency of budgetary reporting. Consequently this was largely left to the discretion of the individual service accountants. However from April 2003 directorates will be required to submit reports monthly although adherence to this guideline has not been tested as part of this audit.
Different budget monitoring procedures may be followed by the various directorates.
R8 Directorates should produce monthly budget monitoring reports as planned.
Currently budget monitoring reports may not reflect the information contained on the accounting system.
This is because accountants have to use their discretion to make amendments for items that are not entered on the system eg revising the budget profile, accruing for expenditure.
The need to make amendments to the figures on the ledger increases the scope for errors in the reporting.
R9 Budgets should be profiled on the accounting system and disciplines of monthly closedowns, including accruals, should be implemented.
3
3
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
G.
Topping
G.
Topping
Agreed. This requirement is also included in the CPA Action Plan for
2003/04. Accountants are required to undertake budget monitoring each month with reports to be considered by appropriate Lead Members monthly (subject to meetings being held). Budget monitoring is reported to Budget Committee monthly.
Agreed that significant budgets should be appropriately profiled so that monitoring reports in SAP more accurately reflect the financial position.
Monthly closedown is accepted in principle but the implications of introducing such a process need to be given detailed consideration which will be undertaken by March
2004.
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP4

audit
2002/2003
Issue
ACTION PLAN
Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Internal financial control
Management have been slow to respond to some of Internal Audit’s reports. This particularly applies to those covering the new payroll, accounts payable and accounts receivable systems. It took between 10 and 12 months for management to respond to the 2000/01 reports and between 5 and 7 months to respond to the 2001/02 reports. At the end of June there had not been a response to the 2002/03 accounts receivable report which was issued mid
May. This is despite a turnaround target of one month.
Weaknesses in key systems may not be addressed promptly.
R10 Internal Audit should issue reports without a management response if this has not been forthcoming within a reasonable time.
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
3 C.
Griffiths
A response was received to the
Accounts Receivable report on
9/7/03.
First draft reports for Payroll and
Accounts Payable were issued on
14/08/03 and a management response was received on 20/08/03.
Management fully accept the need to respond to all reports within the agreed timescale and will ensure that they are given the appropriate priority.
The issuing of a report without a management response is something to be done only as a last resort, after all attempts have been made to obtain a response. Agreed protocols should ensure responses are received to all future reports but if a response is not received the report will be issued stating that a management response is still awaited.
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP5

audit
2002/2003
Issue
ACTION PLAN
Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Internal financial control
Internal Audit’s work on these key financial systems has been hampered by the slow management responses.
Testing had to be tailored around this and the time lags between the various reports have meant that it is difficult to ascertain the latest position in relation to individual controls within systems.
This has been further hampered by the failure to record implementation dates within action plans although this been rectified from 2002/2003 onwards.
Internal Audit cannot be certain as to when controls within key systems were implemented.
In addition the late management responses mean that Internal Audit have not been able to test the operation of many new controls.
R11 The payroll, accounts payable and accounts receivable systems should be subject to full Internal
Audit reviews in
2003/2004.
R12 Internal Audit reports should contain the date of issue for both draft and final versions.
Currently the post of Principal Risk
Auditor on the Salford City Council
Internal Audit Team is vacant. This post is key to the effective delivery of the
Internal Audit Plan. The Section is in the process of recruiting to the post.
Failure to fill the post with appropriately qualified staff could have a detrimental effect on the delivery of the
Salford City Council audit.
R13 Every effort should be made to ensure that an appropriately qualified auditor is appointed to the key vacant post on the
Salford City Council Team
3
2
3
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
C.
Griffiths
C.
Griffiths
Agreed. Full Internal Audit reviews of the payroll, accounts payable and accounts receivable systems are included in the 2003/2004 Internal
Audit Plan.
Agreed. The date of issue of both draft and final Internal Audit reports is now included on the front cover of the reports.
D.
Simpson
Agreed
Whilst a professional qualification has been stated as being highly desirable for the vacant post, many other attributes are required and the recruitment process will be undertaken to appoint a suitable person.
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP6

audit
2002/2003
Issue
ACTION PLAN
Effect
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Internal financial control
Recommendation
The current financial regulations are due for revision to reflect new guidance issued by CIPFA. It is anticipated that this revision will be completed by
May 2003.
The financial regulations may not reflect current best practice.
R14 Financial regulations should be updated to reflect the recent CIPFA guidance.
3
Interim Audit Memorandum – Audit 2002/2003
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
D.
Simpson
Achieving a suitable mix of appropriately qualified and experienced staff is being given a high priority in the unit, and considerable progress has already been made. A variety of qualifications are being sought including IIA, QiCA and CCAB, as the wide range of services operated by the unit requires a multi-disciplined team.
In addition, all posts within the unit are now being assessed within a competency framework for internal audit (CFIA) and appropriate training, both in house and externally, will be provided to ensure staff possess the necessary skills to fulfil their duties.
The Head of BRC has reviewed the current financial regulation and established the need to update. The latest anticipated date for completion is the end of September 2003.
Date by
Salford City Council – Page AP7

audit
2002/2003
Issue
ACTION PLAN
Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Internal financial control
Documents on the Salford Intranet eg
Standing Orders, Financial Regulations do not include details of when they were last reviewed.
It is difficult to assess how current the documents are.
R15 Documents on the intranet should include a review date.
2
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
G.Chinn Ways of including a review date on documents within the constitution on the intranet are being examined. It is proposed that each part of the constitution will include the date that the section was last updated. It is expected that this will be completed by September 2003. A general review of the whole of the constitution is nearing completion.
Date by
Financial systems
A key control to help prevent ‘ghost’ employees on the payroll is to ask individual directorates to periodically, say annually, verify the accuracy of their payroll data. Currently this check does not take place.
Taxation
The partial exemption calculation has not been agreed with Customs and
Excise. Plans are in place to use consultants to obtain the agreement.
An important opportunity to carry out an independent check on the payroll is being missed.
Failure to agree the calculation could result in additional tax charges
R16 Directorates should be asked to periodically, say annually, verify the payroll data (name and pay rate) for staff being charged to their budgets.
3
R17 The partial exemption calculation should be agreed with Customs and Excise.
3
K.
Mashede r
Agreed, however for a proper and regular check to be undertaken – it is consider that reports should be issued at manager level. Reporting options are currently being evaluated.
C.
Hesketh
The partial exemption calculation was completed in July 2003 and submitted to the Customs and
Excise. It will be discussed at their next visit to Salford in September
2003.
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP8

audit
2002/2003
Issue Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Taxation
The 2001/2002 P35 was returned late and was not reconciled to the payments.
Incorrect payments may have been made to the Inland
Revenue.
R18 Controls should be brought in to ensure that the P35 is returned by the due date and agrees to the payments previously made.
Dispensations to allow the Council to provide items to employees eg clothing without attracting an income tax charge have not been updated for some time.
There may be tax liabilities on employees or the
Council that are avoidable.
R19 Income tax dispensations should be updated.
Fraud and corruption
The Council has circulated officers to obtain information about gifts and hospitality and interests for inclusion in the respective registers. Hard copies of these returns are held by Corporate
Services. There are plans to computerise the registers and make them available on the intranet so that declarations can be completed on-line.
As the computerised system is taking some time to develop the registers are not operating in the most efficient way.
R20 The computerised system for registering gifts and hospitality and interests via the intranet should be made available as soon as possible.
3
2
2
Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response
ACTION PLAN
K.
Mashede r
The P35 for 2002/03 was submitted on 1 st May 2003 (due 19 th May
2003) and reconciled to the payments made in the year
V.Weeds Income tax dispensations were applied for and the appropriate dispensations have been granted by the Inland Revenue
G.Chinn Work is in progress to implement the new computerised system for registering gifts and hospitality to officers and priority will be given to completing this as soon as possible.
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP9

audit
2002/2003
Issue Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Fraud and corruption
The prototype of the new on-line system contains some weaknesses that need to be addressed before the system is introduced across the whole authority.
The main ones are that:
 in order to get to the relevant forms employees have to follow a long and complicated path of menus
 when entering a declaration a series of complex questions appear that require a ‘yes/no’ answer
 the same employee can register a gift or hospitality and give permission for it to be accepted on behalf of the head of the directorate.
Failure to address these weaknesses will make the system difficult to use.
R21 The computerised on-line system should be strengthened by:
 simplifying the path for accessing the system
 simplifying the process for entering a declaration so that rather than to trying to foresee every situation a text box asks ‘What action was taken?’
 introducing a security measure that will prohibit an officer/member from signing off their own registration of gifts, hospitality or interests.
Some of the recommendations from our original report on interests, gifts and hospitality are still outstanding because the Head of Law and Administration is awaiting a response from the trade unions.
The arrangements surrounding gift and hospitality are not as comprehensive as they could be.
R22 Implement the outstanding recommendations on gifts, hospitality and interests as soon as a trade union response is received.
2
2
Priority
1 = Low
2 = Med
3 = High
Officer resp.
G.Chinn
G.Chinn
Response
See response to R20.
ACTION PLAN
Date by
The outstanding recommendations relating to officers’ interests will be included within a general review of the officers’ code of conduct. Trade union joint secretaries have been informed that the review is to take place for completion by March
2004. A letter was sent to all staff with payslips regarding the declaration of gifts and hospitality.
Once all forms are available electronically further reminders will
Salford City Council – Page AP10 Interim Audit Memorandum – Audit 2002/2003

audit
2002/2003
Issue
ACTION PLAN
Effect Recommendation
FINANCIAL ASPECTS OF CORPORATE GOVERNANCE
Fraud and corruption
The NFI data matches have now been extended beyond housing benefit to include other areas such as payroll and rents. The NFI has been used to help to identify housing benefit fraud for a number of years and there are well established procedures in the Benefit
Fraud Unit for dealing with identified data matches. The same diligence is not being applied to the identification of matches in other areas.
The Council may not be getting the most out of the NFI data matches.
R23 The importance attached to the NFI data matches in the
Benefits Fraud Unit should be mirrored in the other sections of the Council where data matches have been identified.
Legality
3
In the Autumn of 2002 the Head of Law introduced new procedures for ensuring that potential legal issues were identified and properly considered.
Essentially he nominated specific legal officers to liaise with directorates and to review their agendas. Our review has shown that, whilst the new arrangements are generally being applied, some important matters are slipping through the net. We found two examples of issues that had been taken forward without proper legal input.
The Authority may inadvertently enter into an illegal transaction.
R24 Directorates and legal officers should be reminded of the need to operate the new arrangements for identifying potential legal issues.
R25 The further strengthening of the arrangements through the use of committee administration staff should be implemented as intended.
3
3
Priority
1 = Low
2 = Med
3 = High
Officer resp.
V.Weeds
Response be issued to staff.
Date by
A.
Eastwood
The Head of law and Administration has reminded directorates and also the Legal Team of the arrangements for identifying legal issues within reports. Individual officers have also been contacted where the correct procedure has not been followed.
The role of the Committee Services staff has changed and from April
2003 they are focusing on the more important “decision making” meetings and have adopted the new role as “guardians of the
Constitution” . As part of the ongoing training a further session is being run by the Head of Law
Salford City Council – Page AP11 Interim Audit Memorandum – Audit 2002/2003
Data matches for payroll were received in May 2003 and have been actioned (no significant issues were identified). A further set of data matches were received in July
2003 which are to be actioned by
October 2003. An additional temporary resource has been employed on the payroll team to process the potential benefit fraud cases relating to employees.

audit
2002/2003
Issue Effect Recommendation Priority
1 = Low
2 = Med
3 = High
Officer resp.
Response and Administration on 3 rd
September 2003
ACTION PLAN
Date by
Interim Audit Memorandum – Audit 2002/2003 Salford City Council – Page AP12