MKC INTERNAL AUDIT SERVICE
TECH SERVICES - FUEL ISSUES
INTERNAL
AUDIT REPORT
TECHNICAL SERVICES FUEL ISSUES
Lynda Baker – Audit Manager
AUDIT REPORT - E272/07
MAY 2006
MKC INTERNAL AUDIT SERVICE
SECTION
TECH SERVICES - FUEL ISSUES
INTERACTIVE INDEX
PAGE
EXECUTIVE SUMMARY
1
INTRODUCTION
1
2
CONCLUSIONS
2
3
WAY FORWARD
2
FINDINGS SUMMARY
4
GOOD INTERNAL CONTROLS
3
5
RISKS AND CONTROL WEAKNESSES
4
MANAGEMENT ACTION PLAN
6
CONTACTS & CIRCULATION
8
AUDIT REPORT - E272/07
MAY 2006
MKC INTERNAL AUDIT SERVICE
TECH SERVICES - FUEL ISSUES
Return to Index
EXECUTIVE SUMMARY
1.
INTRODUCTION
1.1
Background
Fuel is stored and dispensed by Technical Services from Bleak Hall depot to
vehicle and plant users. Diesel, gas oil, petrol and LPG are stocked, with the
issue of fuel being controlled by officers at Bleak Hall using the Merridale fuel
system, that requires key operation and keypad entry. In addition to this,
depots at Woughton, Wolverton and Newport Pagnell stock gas oil.
The costs below represent the amount of fuel issued from the depots during
financial year 2005/2006.
LPG
Unleaded
Diesel
Gasoil
£5,095
£26,445
£155,612
£28,559
This was a planned audit from the 2006/2007 Audit Plan.
1.2
Objectives and Scope
The objectives of the audit were to ensure that:
• There are adequate procedures to monitor the consumption of fuel
(Monitoring Fuel Consumption).
• The issue of fuel is for valid purposes only (Valid Fuel Issuing).
• Stock is properly controlled and recorded (Stock Control).
• Provision of fuel is cost effective (Cost Effectiveness).
• Financial losses are not made in relation to fuel income and
expenditure (Income and Expenditure).
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MKC INTERNAL AUDIT SERVICE
TECH SERVICES - FUEL ISSUES
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2.
CONCLUSIONS
2.1
The audit findings demonstrate that the system of control is basically
sound, although there are minor weaknesses, which may put some of
the system objectives at risk.
2.2
Fuel is always available to authorised council staff through the depots,
however further improvements to the system could be made.
Movement of stock is only reconciled once at year-end which means that
any discrepancies occurring early in the year may not be identified until the
year-end. Also the Merridale system is not yet used to its full potential in
relation to monitoring vehicle mile per gallon trends in order to identify any
fuel misappropriation.
2.3
All ‘Good Internal Controls’ identified are recorded (Section 4) and all ‘Risks
and Control Weaknesses’ identified that give rise to a recommendation are
summarised in a table (Section 5).
3.
WAY FORWARD
3.1
All the recommendations identified are included in the Management Action
Plan (Page 6). However, the key recommendations are set out below to
provide a summary of those areas where management are required to focus
their attention:
3.1.1
Income and Expenditure – Fuel Reconciliations
Twice yearly reconciliations of fuel stock should be carried out to
identify discrepancies so that action can be taken as necessary to
ensure significant fuel loss does not occur.
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TECH SERVICES - FUEL ISSUES
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FINDINGS SUMMARY
4.
GOOD INTERNAL CONTROLS
The following areas were tested and confirmed as having good internal
controls with no problems to report: -
4.1
Monitoring Fuel Consumption
4.1.1
Fuel purchased from garages is recorded on the Merridale system for an
accurate reflection of fuel purchases/consumption.
4.1.2
Fuel is obtained by users as per the assignment set to individual vehicle fuel
keys.
4.2
Valid Fuel issuing
4.2.1
There are appropriate records in place to record which fuel keys have been
assigned and to which vehicle.
4.2.2
Fuel keys reported as out of use are cancelled from the Merridale system,
ensuring they cannot be used.
4.3
Cost Effectiveness
4.3.1
Technical Services are informed of the changes to fuel prices on a weekly
basis.
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FINDINGS SUMMARY (continued)
5.
RISKS AND CONTROL WEAKNESSES
Ref
Theme
Findings
Risks
(Implications)
Recommendation
1
Income and
Expenditure
The Finance department has not
satisfactorily reconciled the opening
balance of fuel stock with the closing
balance taking into account movements of
stock during the year.
Stock may be
misappropriated
for
which
no
explanation
has
been sought.
Reconciliations should be carried out between
fuel purchases and issues on the balance sheet
at least twice yearly and compared to a stock
take. The Technical Service should investigate
any discrepancies.
2
Income and
Expenditure
There is no system in use for management
to monitor income received from fuel users
against expenditure on fuel purchases.
Financial losses
may
not
be
identified.
A process should be developed and used for
Income received from fuel users to be monitored
against the service's expenditure on fuel
purchases in order to ensure that no significant
financial loss is made.
3
Monitoring
Fuel
Consumption
The performance of vehicles using the
Council’s fuel is not monitored in terms of
miles per gallon (MPG).
Fuel could be
misappropriated.
MPG trends should be regularly monitored for
vehicles that use fuel from the Technical
Service.
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TECH SERVICES - FUEL ISSUES
Ref
Theme
Findings
Risks
(Implications)
Recommendation
4
Stock Control
Re-order levels on “fuel dip” record sheets
are constant throughout the year and do
not take into account the seasonal
variances of fuel usage.
Hired
Council
vehicles may need
to purchase more
expensive
fuel
elsewhere if stock
levels run low.
“Fuel dip” record sheets should clearly show the
agreed re-order levels (taking into account
seasonal variances) and these levels should
consistently be adhered to.
NB Any cost implications arising from implementation of the recommendations by HBS must be agreed in advance with the appropriate Client Officer and the Partnership Delivery
Manager.
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MANAGEMENT ACTION PLAN
The recommendations are categorised on the following basis:
Essential - Implementation is required with immediate effect to address a weakness that fundamentally undermines the control of that system.
Important - Implementation is required within a short period of time to address weaknesses that seriously undermine the control of that system.
Standard - Management need to take recommended action within a reasonable period to address weaknesses that may undermine system control.
Ref
1
Recommendation
Income
and
Reconciliations
Expenditure
-
Fuel
Categorisation
Management
Comments
Manager
Responsible
Target Date
Important
Agreed
Acting Transport
Manager
30/11/2006
Standard
Agreed
Acting Transport
Manager
30/11/2006
Reconciliations should be carried out between
fuel purchases and issues on the balance sheet
at least twice yearly and compared to a stock
take. The Technical Service should investigate
any discrepancies.
2
Income and Expenditure - Monitoring Fuel
Income against Expenditure
A process should be developed and used
Income received from fuel users to
monitored against the service's expenditure
fuel purchases in order to ensure that
significant financial loss is made.
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MKC INTERNAL AUDIT SERVICE
TECH SERVICES - FUEL ISSUES
Ref
Recommendation
Categorisation
Management
Comments
Manager
Responsible
Target Date
3
Monitoring Fuel Consumption - Mile per
gallon of Vehicles
Standard
Agreed
Acting Transport
Manager
31/08/2006
Standard
Agreed
Acting Transport
Manager
30/06/2006
MPG trends should be regularly monitored for
vehicles that use fuel from the Technical
Service.
4
Stock Control - Re-order Levels for Stock
“Fuel dip” record sheets should clearly show the
agreed re-order levels (taking into account
seasonal variances) and these levels should
consistently be adhered to.
NB Any cost implications arising from implementation of the recommendations by HBS must be agreed in advance with the appropriate Client Officer and the Partnership Delivery
Manager.
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