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SHROPSHIRE COUNCILAUDIT SERVICESFINAL INTERNAL AUDIT REPORTPAYROLL 2017/18Assurance LevelGoodCustomerWest Mercia EnergyDistributionJo Pugh – Finance ManagerNigel Evans – DirectorAuditorsMark SeddonMark YoungFieldwork datesDebrief meetingDraft report issuedResponses receivedFinal report issuedNovember 201730th November 201730th November 20175th December 20176th December 2017
Introduction and Background1.As part of the approved internal audit plan for 2017/18 Audit Services haveundertaken a review of Payroll.2.This audit has been conducted in accordance with the Public Sector Internal AuditStandards.3.Audit Services would like to express their thanks to the officers who assisted duringthe course of the audit.Scope of the Audit4.The scope, incorporating the objectives of the audit, was agreed with key contacts atthe commencement of the audit.Follow up of the previous recommendations and audit of the payroll control process,including overtime claims, travel and subsistence expenses and the reconciliationprocess in place for transferring payroll costs into the Sage nominal ledger, usingestablished documentation and testing.The Payroll and Human Resources function within West Mercia Energy is anadministrative and authorisation process with the actual payroll calculations, statutorydeductions and payment being carried out by Shropshire Council and recharged on amonthly basis.5.Audit work was undertaken to give assurance on the extent to which the followingmanagement control objectives are being achieved: To ensure that previous recommendations have been implemented. There are adequate segregation of duties in place. Payroll data is correctly transferred and accurately processed. Permanent and temporary variations to the payroll are valid, appropriatelyauthorised, and processed accurately. Travel and subsistence is appropriately controlled and actioned in a timelymanner. Management information is produced in an accurate and timely manner andsubject to review. Workforce Requirements and costs are appropriate to the tasks undertaken andthe policies of the organisation.6.The audit was delivered on time and within budget.Audit Opinion7.An opinion is given on the effectiveness of the control environment. This indicates thelevel of assurance that can be given based upon testing and evaluation of the system.This opinion will be reported to the Joint Committee and will inform the AnnualPage 1
Governance Statement which is included in the Annual Statement of Accounts. Thereare four levels of assurance; Good, Reasonable, Limited and Unsatisfactory.As a result of the evaluation and testing of the controls that are in place in the areasexamined, from work undertaken Audit Services are able to give the followingassurance opinion:GoodThere is a sound system of control in place which is designed toaddress relevant risks, with controls being applied consistently.8.Responsibility for the maintenance of a sound system of internal control rests withmanagement. The audit process is designed to provide a reasonable chance ofdiscovery of material weaknesses in internal control by means of sample testing. Itcannot however guarantee absolute assurance against all material weaknesses, theoverriding of management controls, collusion, or instances of fraud or irregularity.9.Audit recommendations are rated Fundamental, Significant, Requires Attention orBest Practice according to their level of priority. Details are included in the ExceptionReport provided to management and the Action Plan attached at Appendix 1.Implementation of these recommendations will serve to address the risks identifiedand enhance the procedures that are currently in place. The following tablesummarises the number of recommendations made in each ention4Best Practice010. The review identified the following areas where appropriate management controlswere in place and operating satisfactorily and, upon which, positive assurance can begiven: To ensure that previous recommendations have been implemented. There are adequate segregation of duties in place. Payroll data is correctly transferred and accurately processed. Permanent and temporary variations to the payroll are valid, appropriatelyauthorised, and processed accurately. Travel and subsistence is appropriately controlled and actioned in a timelymanner. Management information is produced in an accurate and timely manner andsubject to review. Workforce Requirements and costs are appropriate to the tasks undertaken andthe policies of the organisation.11. Recommendations accepted by management at the previous audit have beenreviewed and are detailed below:Number of recommendations accepted by management at the last audit 3Page 2
Recommendations implementedRecommendations partially implementedRecommendations supersededRecommendations not actioned2001Reasonable progress has been made in the implementation of previousrecommendations. Recommendations which remain outstanding are included in theattached Exception Report and Action Plan.Audit Approach12. The approach adopted for this audit included: Review and documentation of the system. Identification of key controls. Follow up of previous recommendations. Tests of controls to confirm their existence and effectiveness. Evaluation of the controls and identification of weaknesses and potential risksarising from them.13. Internal Audit report by exception; the exception report provided to managementidentifies only those areas where control evaluation and audit testing revealed controlweaknesses and/or errors. Recommendations to improve controls or enhanceexisting practice are detailed against each exception and the associated risk, and arealso included in the Action Plan at Appendix 1. A more detailed report covering all ofthe work undertaken can be provided on request. This will be, available in a workingpaper format.14. In accordance with the Public Sector Internal Audit Standards, recommendations willbe followed up to evaluate the adequacy of management action that has been takento address identified control weaknesses.Ceri PilawskiHead of AuditThis report is produced solely for the use of West Mercia Energy. Its contents should notbe shared, copied, quoted or referred to in whole or in part without our prior written consentexcept as required by law. Shropshire Council will accept no responsibility to any thirdparty, as the report has not been prepared, and is not intended for any other purposes.Page 3
APPENDIX 1ACTION PLAN FOR PAYROLL 2017/18RecRef.RecNo.RecommendationRec Rating2.11The Service Level Agreement withShropshire Council should bepursued and agreed as soon aspossible.RequiresAttention2.22All policies should include a reviewclause.RequiresAttentionYesAgreed2.33The additional hours payment claims Requiresforms should be completed fully toAttentioninclude a detailed record of hoursworked on particular days betweencertain times. Alternatively, theemployee time keeping spreadsheetsshould clearly and in detail record theadditional hours worked and shouldbe attached to the overtime claims asa supporting document.YesThese are held on the Jo Pughsystem, but goingforward these will beprinted and attached tothe overtime claimforms.December20172.44The overtime claim forms should besubmitted for payment at the end ofYesNoted and claims will be Jo Pughmade at the end of Yes/No/ResponsePartiallyYesAgreed. This has beenrequested on severaloccasions and iscurrently with the s151Officer of ShropshireCouncilLeadOfficerDate to beActionedNigel Evans December2017 (butdependentonShropshireCouncil)JulieWassallMarch 2018Page 4
RecRef.RecNo.Recommendationthe month in which the work wascarried out to ensure payment thefollowing month.(Updated from the previousrecommendation made and agreed inthe 2016/17 audit).Rec adOfficerDate to beActionedmonth when theovertime wasperformed, wherepossible.Page 5
1. As part of the approved internal audit plan for 2017/18 Audit Services have undertaken a review of Payroll. 2. This audit has been conducted in accordance with the Public Sector Internal Audit Standards. 3. Audit Services would like to express their thanks to the officers who assisted during the course of the audit. Scope of the Audit 4.
