Scope of the Internal Audit

Adopted by the Parish Council

at the meeting on Nov 26^th 2008

page 313 min 78.1

&nb= sp;

The Internal Auditor and the Scope of the Internal= Audit

for Exbourne with Jacobst= owe Parish Council

&nb= sp;

Aim =

The objective of the internal audit is to enable the Council to assure itself t= hat it is being managed and run in accordance with its own Standing Orders, the Code of Conduct and all relevant statutory regulations.

Internal Auditor

The Internal Auditor (IA) shall be independent of the Council and shall have no role in the Council (other than Auditor)= or its decision making. The IA s= hall have free and unhindered access to all Council documents and Officers of the Council.
The IA is an officer of the Council and may make proposals directly to the Coun= cil and as an Officer of the Council take part in discussions on relevant topic= s at Council meetings. All Council= lors and officers of the Council are required to assist the IA in the preparatio= n of his/her report if requested to do so.

The Council should ensure that the Internal Auditor= has access to suitable training courses if required.

The IA is not required to be professionally qualified however they should<= /o:p>

·         understand basic accounting &n= bsp;

·         understand the role of reviewing procedures rather than carrying out= detailed checks

·         understand basic risk management

·         understand the legal framework and requirements of local councils      =

The IA may or may not be paid for the work carried out, but any remuneration mu= st be approved by the Council before any work is carried out. Remuneration should be agreed annu= ally.

Reporting

The IA may carry out as many investigations as he/she thinks fit however an Ann= ual statement of assurance is required and this should coincide with the requirement of the Audit Commission External Audit report. Whenever possible there should also= be at least one interim report (normally 6 months after the Annual Review).

The investigations should as a minimum cover the tests as suggested in Appendix= 9 of the Governance And Accountability For Local Councils – An Approach To Internal Audit Testing (see attached). Further testing may be carried out= if required at the discretion of the IA.

Fraud

If as part of his audit the IA suspects or identifies fraudulent practices he should if it is identified in

Councillors, rep= ort his findings to the Clerk of the Council.

Officers of the Council, he should report his findings to the Clerk.=

The Clerk, repor= t his findings to the Chairman of the Council.

Scope of the Annual R= eport.

The annual report should be commensurate with the size of the Council and the r= isk that the Council is exposed to. It should provide an adequate level of assurance for the council to complete t= he required assertions in its annual governance statement.

Governance and Accountability for Local Councils │Appendix 9 - An

approach<= /span> to internal audit testing

Inter= nal Control

Sugge= sted Testing

Proper bookkeeping

• Is the cashbook maintained and up to date?

• Is the cashbook arithmetic correct?

• Is the cashbook regularly balanced?

a) standing orders

and financial

regulations adopted

and applied; and

b) payments controls<= /o:p>

• Has the council formally adopted standing orders and financial

regulat= ions?<= /o:p>

• Has a Responsible financial officer been appointed with specific

duties<= /span>?<= /o:p>

• Have items or serv= ices above the de minimus amount been

competi= tively purcha= sed?

• Are payments in the cashbook supported by invoices, authorised and

minuted= ?<= /o:p>

• Has VAT on payments been identified, recorded and reclaimed?

• Is s137 expenditure separately recorded and within statutory limits?

Risk management=

arrangements

• Does a review of t= he minutes identify any unusual financial activity?

• Do minutes record = the council carrying out an annual risk

assessm= ent?<= /o:p>

• Is insurance cover appropriate and adequate?

• Are internal finan= cial controls documented and regularly reviewed?

Budgetary Controls

• Has the council prepared an annual budget in support of its precept?

• Is actual expendit= ure against the budget regularly reported to the

council= ?<= /o:p>

• Are there any significant unexplained variances from budget?

Income Controls=

• Is income properly recorded and promptly banked?

• Does the precept recorded agree to the Council Tax authority’s

notific= ation?<= /o:p>

• Are security contr= ols over cash and near-cash adequate and

effecti= ve?<= /o:p>

Petty cash

procedures

• Is all petty cash spent recorded and supported by VAT

invoice= s/receipts?<= /o:p>

• Is petty cash expenditure reported to each council meeting?

• Is petty cash reimbursement carried out regularly?

Payroll Controls

• Do all employees h= ave contracts of employment with clear terms and

conditi= ons?<= /o:p>

• Do salaries paid a= gree with those approved by the council?

• Are other payments= to employees reasonable and approved by the

council= ?<= /o:p>

• Have PAYE/NIC been properly operated by the council as an

employe= r?<= /o:p>

Assets controls=

• Does the council maintain a register of all material assets owned or

in its ca= re?

• Are the assets and Investments registers up to date?

• Do asset insurance valuations agree with those in the asset register?

Bank Reconciliation

• Is there a bank reconciliation for each account?

• Is a bank reconciliation carried out regularly and in a timely fashion?=

• Are there any unexplained balancing entries in any reconciliation?

• Is the value of investments held summarised on the reconciliation?

Year-end procedures

• Are year end accou= nts prepared on the correct accounting basis

(Receipts and Payments or Income and Expenditure)?

• Do accounts agree = with the cashbook?

• Is there an audit trail from underlying financial records to the

account= s?<= /o:p>

• Where appropriate, have debtors and creditors been properly

recorde= d?<= /o:p>