Oakham Town Council
Internal Audit Plan 2012-2013
1.
Fulfilment of statutory obligations – Audit and Accounts
Regulations
Preliminary
September
December
April
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Control environment
Internal Control (Regulation 4)
( Regulation 4 of the 2003 Regulations was amended in 2006 to require
the findings of the review of the effectiveness of the system of internal
control (referred to in Regulation 4(2)) to be considered by a committee of
the relevant body, or by the members of the body meeting as a whole.
Whilst Regulation 4 does not require the establishment of an audit
committee, such a committee would provide an appropriate means
through which to consider the findings of the review.)
Obtain evidence of the Council’s review of internal controls
including on what evidence the Council relied in order to
determine its conclusion.
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ii. Is there any documentation that shows the method of internal
control e.g. a flowchart, manual or other documented
system?
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i.
iii. How on a day to day basis do staff and or committees ensure
that the procedures are adhered to?
iv. Has the Council considered the extent of internal controls
required by detailing and analysing the risk to which it
feels it is potentially exposed. What does the council
consider to be the major risks faced?
v. Are there specific policies and procedures to prevent and or
detect fraud?
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vi. When were financial regulations last reviewed and do they
reflect the most recent legislative changes?
Specific preliminary test
Internal audit to
(a) review and report on the scope of financial regulations and
(b) test the requirements of the regulations are fulfilled in
practice – see 2 below
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Internal Audit (Regulation 6)
(The 2011 Accounts and Audit regulations now require that local councils
undertake an adequate and effective internal audit of its accounting records
and of its system of internal control in accordance with the proper practices
in relation to internal control)
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Does the Council consider it has fulfilled its responsibilities
under S6 – by what means was it able to satisfy itself that
it had done so?
Did the Council approve the internal audit plan and was it
satisfied as to its understanding of the plan?
Prepared by Roger Snowdin, Snowdin Accountancy Services Limited July 2012
Oakham Town Council
Internal Audit Plan 2012-2013
iii. Has the Council defined its perception of ‘risk’ and is it satisfied
that internal control systems and internal audit fully
address that risk?
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iv. Confirm the Council included as p[art of its review of internal
controls the effectiveness of internal audit.
Other regulatory matters
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Confirm that the Council’s accounts for 2013 confirm to the
requirements of Regulation 9 and that the correct basis
has been used.(see also 7 below)
Confirmation that the Council’s accounting system is adequate
for the purpose and that it facilitates the provision of
management reports and reconciliations etc.
Confirmation that the system identifies S137 expenditure.
Confirmation that the system monitors actual expenditure
against budget.
Confirm that the Council has a system to ensure that it only
incurs expenditure where it has a legal right to do so and
devise test(s) to ensure the effectiveness of the
procedure.
Confirm that the Council has given proper opportunity for the
exercise of electors’ rights and that the public notices
have been displayed for the required period.
Confirm that the Council has displayed a notice confirming the
conclusion of the external audit for 2012 and that the
audit was signed off by the statutory due date (30th
September)
Confirm that both internal and external audits reports have
been received and acted upon as appropriate.
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2. Testing documented internal controls – Financial Regulations
and Standing orders
i.
ii.
Draft testing schedules designed to test the effectiveness of
documented internal controls relating to:
(a) Annual Estimates – completion of committee
revenue and capital project proposals for 2012-2013.
(b) Formulation and agreement of final budget proposals
by the end of January.
Review 2012-2013 budget to identify:
(a) Proposed capital expenditure & adherence to
financial regulations
(b) The means by which financial control is facilitated.
(c) Active comparison of actual versus budgeted income
and expenditure including detailed analytical review
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Prepared by Roger Snowdin, Snowdin Accountancy Services Limited July 2012
Oakham Town Council
Internal Audit Plan 2012-2013
and investigation of variances.
(d) that all expenditure to date has been met from the
appropriate committee budget.
(e) Consider also:
Position regarding reallocations and transfers to
Reserves.
iii.
iv.
Review quarterly (or lesser interval) income and expenditure
accounts (revenue & capital).
Accounts - accounting software package – ascertain system
attributes and reporting capability.
Test effect of cut-off relating to dates and inclusion in
reports.(see also 1)
v.
Bank reconciliations - What is the frequency of bank
reconciliations? (obtain copies of two months/quarters)
vi.
Receipts payments and banking arrangements – Test control
systems as detailed under financial regulation no 5
‘banking arrangements’& standing order no. 39 and also
financial regulation no 6 ‘payment of accounts.
Specifically test control relating to payments by
BACS(only after resolution by council)
Examine bank mandate to confirm signatories
See 2 re payments testing and incorporate into that as
extended test
vii. Salaries and Wages – Test authorisation of timesheets &
payments in accordance with payroll records (Also see
later re wages salaries and paye)
Software system for calculation of wages and PAYE –
consider reporting capabilities
Confirm contracts of employment have been issued and
are up to date.
viii. Loans and investments – if appropriate agree tests to ensure
adherence to current legal requirements creation of
designated reserves etc.
ix.
Income – Test current practice is within the scope of financial
regulation no 9.
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Orders for goods and services – sample test that letters or
orders for all goods and services are issued. If appropriate
test for value for money e.g. tenders quotes etc. (but see
also contracts below and substantive payments testing).
xi.
Contracts – if contracts have been entered into that fall within
financial regulation no 11, test re contracts over £1,000
but under £10,000 have been awarded in accordance with
the regulation. For contracts over £10,000 test that the
contract was put out to tender.
(Although unlikely effect of EU legislation relating to
competition for public services)
(Incorporate into substantive payments testing)
(Consider tests relating to financial regulation no 12
payments for building or other construction works)
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Prepared by Roger Snowdin, Snowdin Accountancy Services Limited July 2012
Oakham Town Council
Internal Audit Plan 2012-2013
xii. Stores – requirement for deliver notes – incorporate into tests
re orders etc.(Substantive payments testing)
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xiii. Properties and estates – location of title deeds.
xiv. Asset sales over £500 – confirm council authority. Confirm
proceeds have only been used for capital expenditure. (via
walk through tests- see below)
xv. Insurance – confirm annual review & all cover is up to date.
Value of fidelity guarantee cover in relation to maximum
and average reserves.
Identify procedure relating to change of insurance risk e.g.
change of vehicle asset acquisitions and disposals.
3.
i.
Minutes.
Review minutes of full Council and Committee meetings to
identify any matters that might be of relevance to internal
audit e.g. contracts, risk assessment, payments approval
planned projects etc..(connection to 1 above)
4.
Substantive testing of income and expenditure
i.
Payments – sample test bank payments through the system
viz. Legal authority for expenditure - Goods services
ordered – delivery note -Invoice received – invoice
authorised by clerk/RFO – agreed in Council (minutes) –
payment made (&within 30 days) – cheque book c/foil –
bank clearance. (see also financial regulations testing –
this test will also test ‘the system’.
ii. Chairman’s allowance - Examine the Chairman’s allowance
records to confirm that all expenditure is within the scope
of the allowance and that all payments are strictly
towards defraying the costs of office.
iii. S137 payments – identify payments made and confirm that
these have been by resolution. Where payments exceed
£2,000 has the Council obtained written evidence of what
the payment was used for
iv. Receipts – test by bulk proof i.e. are all receipts in accordance
with existing agreements etc or where appropriate
supported by vouchers.
Grants – obtain evidence that grants have been spent in
accordance with the donor’s conditions.
v. Petty Cash – test payments supported by vouchers and proper
authorisations made. Financial regulations require a float
of £100.
vi. Salaries wages and PAYE – test through system for
authorisation of timesheets correct payments and
adherence to contract. Test cut-off for PAYE remittances.
vii. VAT – Test validity of input tax claimed by reference to
vouchers and investigate any large or unusual claims e.g.
where payment(s) may be directly grant funded.
Test period end balance
5.
Risk assessment
i.
Ascertain the Council’s assessment of the financial risk it faces
and its general view of the effectiveness of the measures
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Prepared by Roger Snowdin, Snowdin Accountancy Services Limited July 2012
Oakham Town Council
Internal Audit Plan 2012-2013
ii.
iii.
it has taken to mitigate risk.
Obtain evidence to confirm that an annual review of internal
controls has been carried out by the Council and that the
Council has fully considered the risks to which it believes it
is exposed.(see also 1 above)
Obtain confirmation that all insurances policies, including
fidelity guarantee, have been reviewed and reported on
by the Clerk.
6.
Asset Register
i.
Ascertain location of all significant fixed assets & when last a
physical check was carried out.
Test by reference to capital expenditure whether the asset
register is fully up to date.
Agree / reconcile asset register values to annual accounts
notes.
Ascertain whether the register fully records dates of
acquisition and disposal and location.
ii.
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7.
2013 Accounts
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Confirm correct basis of accounting used.(see also 1 above)
Confirm accounts totals to underlying records.
Confirm bank and cash balances shown in the accounts.
Agree annual return Section 1 entries.
Agree underlying evidence exists to support S2 responses.
8.
Reporting
i.
Prepare internal audit reports.
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Prepared by Roger Snowdin, Snowdin Accountancy Services Limited July 2012
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