“The past is a foreign country: they do things differently there” L.P.Hartley
And so it was for Shepway District Council with regards to there Statement of Accounts for 2010/11 & 2011/12.
The Auditor when they look at the Statement of Accounts looks at three areas. These are
The Accounts (The Money)
Governance (The Procedures)
Performance (Value For Money)
In 2010/11 when the Auditor, who was the Audit Commission (now defunct) gave an unqualified opinion of the accounts, did however, identify weaknesses in key controls over payroll and the sales ledger both mentioned in the Annual Governance Report:
■ Payroll controls: as reported in June 2011 audit progress report to this committee, we were unable to rely on controls at your outsourced payroll provider for 2010/11.
■ Sales Legder controls: our testing identified 5/14 (35%) cases where sales ledger authorisation was not operating as expected. Forms were either not used or in some cases simply not signed.
both of these are Governance issues, i.e. that Procedures were not followed adequately.
In 2011/12, the auditor, The Audit Commission (now defunct) identified The following weaknesses in internal control (Governance – the procedures)
Leaver Access Controls: Our sample testing identified that 4/20 (20%) leavers did not have access to e-fin removed after they left.
(e-fin is the electronic financial management system)
Related Party Transaction Returns – Although appropriate arrangements are in place, at the time of audit, two returns from members (Read Cllrs) were outstanding. I am satisfied that this does not materially impact on my opinion. It is important however that all Members ensure that they comply with Council policy and disclosure on Related Party Transactions.
Sales Ledger Controls (again see 2010/11 above): Our audit identified a weakness in control over authorisation of invoices.
East Kent Housing Accruals: Our sample testing of accruals identified one case where the accrual was incorrectly overstated by £20,000.
(Accruals are adjustments for 1) revenues that have been earned but are not yet recorded in the accounts, and 2) expenses that have been incurred but are not yet recorded in the accounts. The accruals need to be added via adjusting entries so that the financial statements report these amounts.)
Both sets of accounts were signed off. However, what immediately springs to ones attention is that Shepway District Council had issues with their procedures. For two years in a row, their sales ledger authorisation was highlighted by the auditor.
The Sales Ledger is the debtors, accounts receivable, the sum total of the money you are owed. It is part of the balance sheet and part of the main ledger.
Since 2012/13 Grant Thornton, not the Audit Commission have been our Auditors.
Grant Thornton were the bean counters who advised Dominic Chappell, who bought BHS. and as two committees of MP’s state were “increasingly aware” of the “manifold weaknesses” of Chappell’s acquisition vehicle, yet were “content to take generous fees and lend both their names and their reputations to the deal”. There was no admission that Grant Thornton lost its moral compass or has lessons to learn apparently.