FINAL

Protected
Internal Audit
Report
Bank
Reconciliation
Document Details:

Reference: 1.1 2014/15

Date: 11th May 2015

This report is not for reproduction publication or disclosure by any means to unauthorised persons.
 Internal Audit Report – Bank Reconciliation

1. Executive Summary
Introduction
Internal Audit has recently completed an audit of bank reconciliation procedures.
The objective of the review was to provide assurance that appropriate and effective
systems of control are in place to manage the bank reconciliation process.

The Council changed provider in October 2013 and the bank accounts were
transferred from HSBC Bank to Barclays Bank with the HSBC accounts still in use
for some outstanding transactions until the last account was closed in August
2014.

A review was undertaken of the overall reconciliation process of the Barclays

accounts: County Fund, Direct Debit, Pension Fund and Pension Fund Investment
Account. A walk through of the reconciliation process was carried out for the above
accounts for January 2015. The Pension Fund Investment Account was only set up
in January 2015 but was still included in the review.
Overall Opinion
It is pleasing to see that the Bank Reconciliation Procedure document has been
recently updated and there were only two 'Low' priority findings this year.

In the previous year's audit there were two risks identified around a lack of
segregation of duties; the Principal Accountant and Project Accountant have the
Bank Reconciliation Role on SAP and also have SAP access for the authorisation
of orders, and the Accounting Technician for the Pensions Bank Reconciliation
also carries out the preparation of CHAPS payments and inter-account transfers,
both of which are still the case. The management response was that 'The number
of and roles of the staff involved in the process make this inevitable. We
understand the risks and are aware of the need for manual process segregation'.

Based on the risks identified above the overall opinion is Significant Assurance.

Overall Audit Opinion

Full assurance Full assurance that the system of internal control meets the
organisation’s objectives and controls are consistently applied.

 Significant Significant assurance that there is a generally sound system of

assurance control designed to meet the organisation’s objectives. However,
some weaknesses in the design or inconsistent application of
controls put the achievement of some objectives at some risk.

Limited Limited assurance as weaknesses in the design or inconsistent

assurance application of controls put the achievement of the organisation’s
objectives at risk in some of the areas reviewed.

No assurance No assurance can be given on the system of internal control as

weaknesses in the design and/or operation of key control could result
or have resulted in failure(s) to achieve the organisation’s objectives
in the area(s) reviewed.

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 Internal Audit Report – Bank Reconciliation

2. Summary of Conclusions
2.1. The conclusion for each control objective evaluated as part of this audit was as
follows:
Control Objective Assurance
Full Significant Limited No

CO1: Any matters arising from the previous audit  

have been addressed.
CO2: Segregation of duties is adequate

CO3: Bank reconciliations are carried out regularly 

by an independent employee.
CO4: Bank reconciliations are accurate and 
complete
CO5: Completed reconciliations are reviewed on a 
regular basis

2.2. The recommendations arising from the review are ranked according to their level of
priority as detailed at the end of the report within the detailed audit findings.
Recommendations are also colour coded according to their level of priority with the
highest priorities highlighted in red, medium priorities in amber and lower priorities in
green. In addition, the detailed audit findings include columns for the management
response, the responsible officer and the time scale for implementation of all agreed
recommendations.

2.3. Where high recommendations are made within this report it would be expected that
they should be implemented within three months from the date of the report to ensure
that the major areas of risk have either been resolved or that mitigating controls have
been put in place and that medium and low recommendations will be implemented
within six and nine months respectively.

3. Limitations Regarding The Scope of The Audit

3.1. The audit work was limited to a walkthrough of the bank reconciliation with the
Principal Accountants for Bank Reconciliation and the Pension Fund. Along with
limited testing of individual transactions to SAP.

4. Acknowledgements
4.1. Audit would like to thank all involved for their assistance during this review

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 Internal Audit Report – Bank Reconciliation

5. Detailed Audit Findings

Ref. Priority Findings Risk Arising/ Recommendation Management Response Responsibility Recommendation
Consequence and Timescale Implemented
(Officer & Date)
CO3: Bank reconciliations are carried out regularly by an independent employee.
1 Low The bank reconciliation Errors may not be The bank reconciliations The April 2014 bank
summary sheets had mainly identified in a timely should be carried out on a reconciliation was completed
been signed and dated within manner. monthly basis. The and signed on 10/06/2014 in
one month with the exception completed summary sheet part due to the reconciliation
of April for the pension bank signed and dated by the being the first after the
reconciliation which was person carrying out the change of bank accounts to
signed and dated in June (over reconciliation. The Barclays and also due to the
one month from the end of the reconciliation should be work pressures of final
month being reconciled. reviewed and signed. All accounts close down. The
within the month following process was improved in
the month to which it applies. 2015 with the April 2015
reconciliation complete and
signed on 22/05/2015.
CO4: Bank reconciliations are accurate and complete.
4 Low During the year there has been Errors may not be All differences should be The amounts are identified in
a small difference in the resolved in a timely researched and corrected. the month they arise. No
County Fund Account which manner. action is taken due to the
started at £0.92 and reduced small value as this requires
to £0.90 in August. This is the bank to take action.
detailed as 'Difference
between actual and calculated
issues - Difference between
value of cheque issued and
presented'.

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 Internal Audit Report – Bank Reconciliation

Key to Priorities

High This is essential to provide satisfactory control of serious risk(s)

Medium This is important to provide satisfactory control of risk

Low This will improve internal control

Limitations relating to the Internal Auditor's work

The matters raised in this report are limited to those that came to our attention, from the relevant sample selected, during the
course of our audit and to the extent that every system is subject to inherent weaknesses such as human error or the deliberate
circumvention of controls. Our assessment of the controls which are developed and maintained by management is also limited to
the time of the audit work and cannot take account of future changes in the control environment.