APPENDIX B

NEWPORT PARISH COUNCIL

INTERNAL AUDIT REPORT 20010-11

1. INTRODUCTION

All Local Councils in England are required to complete an annual return summarising
their financial records at the end of the financial year. Section 4 of the Annual Return
needs to be completed by an Internal Auditor who shall be independent of the
Council. The Audit Commission (the Councils External Auditor) needs to place
reliance on the work of the Internal Auditor and provides guidance on the minimum
level of testing required to provide this assurance.

2. SCOPE OF AUDIT

The audit includes for examination on a test basis of evidence relevant to the amounts
and disclosures as contained in the accounts. This examination has included the
following-

Matching of financial statements to invoices and receipts

Examination of budget preparation & precept setting
Inspection of bank statements
Matching of cheques to payment records
Security of information & back up records.
Requisite number of cheque signatory’s were applied

3. FINDINGS

(1) Arrangements for PAYE are carried out by the Isle of Wight Council, who provide
Her Majesty’s Revenue and Customs (HMRC) with all statutory documentation. No
checks have been made on Isle of Wight Council procedure or records but it has a
well tested payroll system which is audited by the Audit Commission on a regular
basis. The charge for payroll services has been raised substantially with effect from
April 2011 and it is recommended that the service provision be reviewed.

(2) The accounting records, bank statements and bank reconciliation for the year
ended 31st March 2011 have been examined and agreed. A bank reconciliation is
presented to the Council on a monthly basis, which is considered good practice.
A number of receipts are paid into the bank using a paying in book, in order to
assist the audit process it is recommended that the payment stub is detailed with the
detail of each receipt.

(3) The Council has adopted Financial Regulations and Standing Orders and the Clerk
is its designated Responsible Financial Officer (RFO).

(4) The accounts have been produced on a receipts and payments basis and it is
recommended that this continues as the turnover remains well below the £200,000
threshold where an income & expenditure basis has to be adopted.
APPENDIX B

(5) The Council had prepared an annual budget in support of its precept for 2011-12,
which was approved at its meeting on the 31st January 2011. An Excel spreadsheet is
prepared for the Council on a monthly basis detailing all expenditure & income.. A
budget monitoring report is also produced on a monthly basis

(6) Expenditure and Income had been fully documented. The Isle of Wight Council’s
policy is to pay the full precept in one payment and the precept for 2010-11 was
received in April 2010. Supporting invoices and documents had been kept to support
all transactions. VAT had been properly accounted for and VAT paid in the 2009-10
financial year had been fully recovered from HMRC.

(7) The level of Fidelity insurance was increased to £133,400 during the year in
accordance with a recommendation from the 2010-11 audit., and is in accordance with
the guidance from the Audit Commission

(8) The level of reserves has increased from £69,530 as at 1st April 2010, to £73,317
as at 31st March 2011. The budget paper for 2011-12 indicates that this includes a
carried forward figure of £9,000 in respect of Parish Elections. The Isle of Wight
Council have advised that they will not fund future Parish & Town Council Election
costs and a further sum of £9,000 has been included in the budget for 2011-12. Total
reserves also include a sum of £2,800 received from the IW Council in respect of
deposits from allotment holders, this sum should be earmarked as a deposit and not
form part of available financial reserves. The level of reserves held by the Council is
considered satisfactory.

(9) The Council has maintained a Fixed Asset’s Register and its content valuation is
contained in the Annual Return to the Audit Commission.

(10) In February 2011 the Council conducted a review of the effectiveness of its
Internal Audit arrangements. This is in accordance with the recommendations of the
Audit Commission and relevant NALC guidance.

(11) The Councils Risk Assessment document was also reviewed by the Council in
February 2011 and reviews will continue to be made on an annual basis.

(12) The Council has maintained a Bonus Saver account to maximise the interest on
its cash balances .Financial Regulations provide the RFO with the responsibility to
undertake treasury management activity on behalf of the Council.

(13) The Council took over responsibility from the Isle of Wight Council for
allotments in the Newport Parish, and the new arrangements were considered by
an interim audit as reported to Council in February 2011.

(14) The Council now rents office space at the Riverside Centre in Newport. This
followed a review of available office premises and the annual rental of £3,000 was
found to be the most cost effective means of office provision.

RECOMMENDATIONS

(i) That the Council review the method of provision of its payroll services.
APPENDIX B

(ii) That sums received as deposits from allotment holders be earmarked as deposits
and not form part of general reserves.

(iii) That the paying in booklet stubs be marked with the detail of each receipt being
banked.

(iv) The Council continue to maintain an Election Fund to provide for the cost of
future elections.

Having regard to the above I am of the opinion that I have adequate assurance to
complete and sign Section Four of the Annual Return to the Audit Commission.

GARETH HUGHES
BA(Hon) CPFA 1st May 2011