REVIEW OF INTERNAL CONTROL POLICY FOR THE YEAR ENDING 31 MARCH 2023
- SCOPE OF RESPONSIBILITY
Melton Parish Council (the Council) is responsible for ensuring that its financial management is adequate and effective and that it has a sound system of internal control which facilitates the effective exercise of the Council’s functions and which includes arrangements for the effective management of risk.
- THE PURPOSE OF THE SYSTEM OF INTERNAL CONTROL
Internal control is designed to reduce financial risk to the Council; the system of internal control is designed to ensure that the Council’s activities are carried out properly and as intended. Internal controls are set up by the Clerk and Executive Officer/Responsible Finance Officer (RFO) but it also falls to Council Members to ensure that they have a degree of control and understanding of those controls. Controls will include the checking of routine financial procedures; the examination of financial comparisons; the recording of assets and liabilities; the identification of risk and to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.
- PERSONNEL INVOLVED WITH THE INTERNAL CONTROL
3.1 The Council
- The Council has appointed a Chair who is responsible for the smooth running of meetings and for ensuring that all Council decisions are lawfully taken.
- Chair of Committees and Working Groups exercise similar responsibilities under delegated authority within their terms of reference.
- The Chair of each meeting signs each page of the minutes which record the proposer and seconder of all resolutions passed at Council and Committee meetings.
- Decisions made are within the Standing Orders and Financial
Regulations laid down and approved by the Council. These are kept regularly under review.
- The Council reviews its obligations and objectives and approves budgets for the following year at its January meeting.
- The January meeting of the Council approves the level of Precept for the following financial year.
- The Council and Finance, Employment and Risk Management (FERM) receive regular financial statements which they approve at their meetings.
- Payments are made in accordance with Standing Orders and Financial Regulations. The appointment of authorised signatories is kept under review.
- Increasingly all payments are now made using internet banking. These will be first authorised by the RFO/Assistant Clerk and then second authorised by a designated Councillor in accordance with Financial Regulation 6.9. In an emergency, for example if no Councillor is available to second authorise a payment, the payment can be initiated and authorised by the Clerk and Assistant Clerk and reported to the next meeting of Full Council.
- Two Councillors (from the currently authorised signatories) or the RFO under delegated authority together with one Councillor must sign all cheques. The signatories will also initial the cheque stub. The signatories will ensure that the cheque agrees with the amount of the invoice and the payee named on the invoice.
- Internal control issues are reviewed regularly by Full Council and FERM.
- All Council policies are reviewed annually for accuracy in relation to the policy areas they reflect, changes in legislation and current best practice.
- The Council has an up to date Risk Register which is reviewed at each meeting of Full Council and actions are put in place to either control, mitigate or remove risks as they occur.
3.2 Clerk and Executive Officer to the Council / RFO
The Council has appointed a Clerk and Executive Officer to the Council who acts as the Council’s advisor and principal administrator. The Clerk is also the Council’s RFO and is responsible for managing the Council’s finances. The RFO is responsible for the day to day compliance with legislation and policies and for managing risks. The RFO ensures that the Council’s procedures, control systems and polices are maintained. The RFO also exercises responsibility for the Council’s banking arrangements in conjunction with FERM. The duties of the Clerk/RFO are laid down in a Job Description which is subject to review. It was last reviewed and updated with effect from 1 January 2022.
The RFO manages the timetable for the audit programme, Council approval of the annual return, and the compliance with the electors’ rights. The RFO submits all the requested information to the External Auditor by the agreed date and arranges for the required publication of notices, accounts and returns.
The Treasurer’s account with Lloyds Bank has a debit card which is restricted to use by the RFO for use in single transactions with a maximum value of £1000. The use of this card is controlled by Financial Regulation 6.16.
The RFO will retain all relevant documents relating to the financial year for 6
years (Annual Return, VAT Returns, PAYE/NIC information, Public notices,
Fixed Asset register, risk assessments; accounts and supporting information).
3.3 Internal Auditor (IA)
The Council has appointed an Independent Internal Auditor (the IA) who will report to the Council on the adequacy of the Council’s:
- Records, procedures and systems
- Book-keeping and bank reconciliations
- Financial regulations and standing Orders
- Budgetary controls
- Asset management
- Payment controls
- Risk management
- Statutory / regulatory compliance
- Regular reviews of the effectiveness of internal control.
The effectiveness of the internal audit is reviewed annually, and the Council
reviews the appointment of the IA. The IA, who is competent and independent, will carry out the work required in accordance with the Governance and Accountability Guide for Local Councils and additionally will be advised of any additional work required by the Council.
The scope of the work of the IA is reviewed annually and the review and the appointment is minuted.
The IA will inspect the accounts at the year end (prior to completion of the Annual Return pages 2 and 3) and will complete page 5 of the Annual Return.
The IA will write a separate report to the Council (a copy of which is sent to the Chair) detailing any findings they might have.
The report of the IA is copied to all members of the Council and considered as an agenda item at their next meeting. Recommendations from the report will be recorded in the minutes.
3.4 External Audit
The Council’s External Auditors submit an External Auditor’s Report, which is presented to the Council.
- REVIEW OF EFFECTIVENESS
The Council has responsibility for conducting an annual review of the effectiveness of the system of internal control. The review is informed by the work and any issues identified by:
- Full Council – identification of new activities
- l Clerk to the Council/RFO who has responsibility for the development and maintenance of the internal control environment and managing risks
- l IA, who reviews the Council’s system of internal control and who makes a written report to the Council
- l The Council’s External Auditors, who make the final check using the Annual Return, a form completed and signed by the RFO, the Chair and the IA. The External Auditor issues an annual audit certificate – action arising from Audit Report.
- SIGNIFICANT INTERNAL CONTROL ISSUES
No internal control issues were identified during the financial years ending 31 March 2018 to 2023.
- EXTERNAL AUDIT OPINION
The audit reports in respect of the financial years to 31 March 2019, 31 March 2020, 31 March 2021 and 31 March 2022 were clear and unqualified.
- BUSINESS PLANNING AS AN AID TO INTERNAL CONTROL
In 2018 the Council developed a Business Plan which aims to improve decision-making by focusing on what it intends to do over the next few years and how it intends to do it. It will enable the Council to act in a more co-ordinated way, demonstrate that it knows where it is going, and how it plans to use elector’s money effectively. The Business Plan will align with and drive the direction of all internal strategies and resources, through both the budget setting process, and via key strategic policies. Decision-making will become more consistent and more in line with core strategies, which in turn will improve both management of risk and more effective use of resources. This is particularly important in the context of the Council’s need to account within the terms of the statutory framework for its use of monies received under the Community Infrastructure Levy (CIL). The Business Plan affords a mechanism to ensure that spending decisions on parish infrastructure to support growth are made in the most robust and transparent way. The Business Plan was last updated in September 2022, to reflect decisions in terms of capital investment to support growth.
- DATA PROTECTION COMPLIANCE
The Council has fully complied with the Data Protection legislation which came into force in the United Kingdom on 25 May 2018 and keeps its compliance under regular review. Risks associated with Data Protection are reviewed by Full Council on a six-monthly basis.
Members are requested to consider this Statement of Internal Control Policy and to agree it. On agreement the Chair will sign off the policy.
Cllr Alan Porter Chair
22 March 2023