INTERNAL AUDIT REPORT – 2019/2020
PELTON PARISH COUNCIL
1.	Background
1.1.	Following the abolition of the Audit Commission a new organisation has been established which is responsible for issuing proper practices in relation to the accounts of smaller authorities. It is called the Smaller Authorities Proper Practices Board (SAPPB), and is made up of members of the SLCC, NALC, CIPFA, the Department of Housing, Communities and Local Government (DHCLG), the Department of Environment, Food and Rural Affairs (DEFRA), the National Audit Office and a representative of the external audit firms appointed to smaller authorities.

1.2.	Every smaller authority in England that either received gross income or incurred gross expenditure exceeding £25,000 must complete Part 3 of the Annual Governance and Accountability Return (AGAR) at the end of each financial year.   The AGAR is made of 3 sections along with an annual internal audit report. which is to be completed by the Parish Council’s independent internal auditor, who is to give an opinion of the Parish Council’s internal controls.
.
1.3.	CDALC have provided Councils with a checklist to be used, this annual audit uses this list as the minimum of the tests to be carried out.

2.	Objectives of the Audit
2.1.	To examine the system of internal controls to ensure that the Parish Council may obtain an adequate level of assurance for its activities.

3.	Scope of the Work and the areas of Audit Work examined.
3.1	The Scope of Work covers the key control tests identified in page 3 of the A.G.A.R.
•	Payroll
•	Creditors
•	Risk Management
•	Income collection and Banking arrangements
•	Assets
•	Debtors
•	Budgetary Control (including year end procedures)
•	Exercise of the public rights for 2018/19

3.2.	The audit findings of this report have been discussed with the Clerk of the Council and any audit recommendations have been agreed with her.

4.1.	Findings
4.2.	Payroll 
4.2.1.	The Council outsources its payroll system to an accountancy firm who complete payslips and 	notify the Council on the payment to be made to HMRC.  Having an external provider 	provides a good internal control for the Council. 

4.2.2	The Council employees a Clerk and 2 litter pickers during the year. Timesheets are completed 	and signed by the litter pickers and authorised by the Clerk.  The Clerk is paid the same every 	month and this is included in the accountancy firms master file.  

4.2.3.	On examining the timesheets and the payroll information all payments had been correctly 	authorised, processed and paid. 

4.2.4.	Annual Leave sheets were properly completed and authorised.
 
4.3.	Creditors
4.3.1.	The Council has good Financial Regulations in place (reviewed 21st May 2019) regarding Banking Arrangements and Authorisation of Payments (Section 5) and Instructions for the making of Payments (Section 6), which provides good internal controls for the Council.

	There are no separation of duties regarding Finance and Administration at the Council as the Clerk is the Officer responsible. Compensating checks are carried out by Members of the Council.
	The Clerk prepares a schedule of payments (included as an appendix to the minutes) which require authorisation at the Council meeting. Any payment needing authorization by Committee is  recorded in the minutes. The invoices when certified by the Clerk confirm that the goods have been received or services provided, are checked to the schedule and the payments approved.
	All payments for 2019/20 have been confirmed to the Cash book1 - current bank account report which also records vat.  A few queries were given to the Clerk on a spreadsheet for investigation but these do not affect the internal controls of the Council

	The new Clerk had previously introduced a new payment voucher for every payment which identifies what method of payment and provides good internal checks for the Council with the cheques being signed by 2 members of the Council, and to  indicate approval the cheque counterfoil is initialed.

4.3.2.	The finance system (Rialtas - RBS) records all income and expenditure and produces transaction lists.  All income and expenditure was input into the system for 2019/20 and this has been examined and found to be accurate with adequate reports produced from the system.

4.3.4.	During the year all donations (Section 137) paid had been agreed (and minuted) by the Council prior to the payment being made and properly recorded in the records.

4.3.5.	There is no petty cash held by the Council.

4.4.	Governance/Risk Management
4.4.1.	A recommended list of policies and procedures was previously received from SLCC and NALC showing what policies the Council must have regarding statutory requirement, those which are good to have and are an audit requirement.  Throughout the year, policies were reviewed and approved at Council meetings when required. Updated Financial Regulations and Standing Orders have been agreed at the Council Annual General meeting on  21st May 2019.
 
4.4.2.	An effectiveness of internal control report, asset register and financial report was to be approved on 6th April 2020 but because of the Coronavirus this was canceled and will be approved by e-mailing Councilors the reports.    See 4.4.5.

4.4.3.	Risk Assessment policy was to be agreed at 25th March 2020 meeting which was also cancelled and was included in the e-mail attachments to Councillors to agree. See 4.4.5.

4.4.4.	A Medium-Term Finance Plan was agreed at the MTFP meeting on 8th October 	2019.

4.4.5.    In March due to the Coronavirus pandemic the Council approved an emergency planning protocol 	which on recommendation form The National Association of Local Councils (NALC) it reviewed its 	delegation scheme to ensure that the Council remained functional.

4.4.6	The announcement of the public rights for 2018/19 was dated 4th June 2019 with the inspection of 	the accounts available between 10th June and 19th July 2019 and placed on the Council’s website.

 4.5.	Income collection and Banking arrangements          
4.5.1.	Financial Regulations of the Council (Section 9) state that the collection of all sums due to the Council shall be the Responsibility of the Responsible Finance Officer (Clerk).

4.5.2.	Income is received during the year by the Council consisting of:
	-	Precept
	-	Allotment Rents
	-	VAT claim.
	-	Bank Interest.

4.5.2.	During the year all income was input into the new accountancy system and I examined all the income records for the year including the allotment rents and parish council receipt books, and confirmed that all income had been properly collected, banked and recorded.

4.5.3	During the year the Clerk received VAT owing to the Council for the previous year, and for 2 	periods up to December 2019 for the current year, the third period for 2019/20 is to be reclaimed.

4.5.4.	During the previous year a risk was identified of the Council holding large amount of monies in one bank account (especially when the precept amount is received) and not covered by the Financial Compensation scheme.  The Council discussed using other possible banks so as the Council is protected.   Therefore, the Council now has:
-	2 Current account for day to day transactions
-	2 Deposit account for holding monies to obtain interest

4.5.5.	I confirmed the bank balances at the end of the year to the Income and Expenditure records.  

4.6.	Accounting Records
4.6.1.	The Council uses  Rialtas Alpha accountancy system and all income and expenditure is recorded in here which produces adequate financial reports for Members to scrutinize when required, and also satisfactory end of year reports for the accounts.

4.7.	Assets
4.7.1.	An Asset Register was updated and approved by the Council (see paragraph 4.4.2.)

4.8.	Debtors
4.8.1.	There are no invoices sent out for debts.

4.9.	Budgetary Control
4.9.1.	The budget setting process commences each year in December/January where the preparation of budget for 2020/21 was discussed.  This includes any fees and charges for allotment rents. 

4.9.2.   A Full Council meeting discussed the budget on 22nd January 2020, following a Special Budget 	meeting on 14th January 2020, the annual budget was prepared to support the precept.

4.9.3. 	Reports are produced from the finance system which enables Members to carry out budgetary control each month where actual income and expenditure is compared to the budget. A more detailed review is carried out during the budget setting process.

5.	Conclusions/Recommendations               
5.1.	With the introduction of the new finance system the previous year there has been an improvement of the records produced and of the internal controls for the Council and the level of assurance on these controls is good.
       
Gordon Fletcher  (C.M.I.I.A.)				
Internal Auditor to the Council
Date:  28th April 2020