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Audit Committee

7th Report, 2004 (Session 2)

The 2002-03 Audit of the Scottish Parliamentary Corporate Body

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SP Paper 170

Session 2 (2004)

 

Contents

REMIT AND MEMBERSHIP

THE REPORT

ANNEXE A - EXTRACTS FROM THE MINUTES

Extract from the Minutes - 1st Meeting 2004 (Session 2)

Extract from the Minutes - 4th Meeting 2004 (Session 2)

Extract from the Minutes - 8th Meeting 2004 (Session 2)

Extract from the Minutes - 10th Meeting 2004 (Session 2)

Extract from the Minutes - 11th Meeting 2004 (Session 2)

ANNEXE B - ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

WRITTEN EVIDENCE

Submission from Mr Paul Grice, 5 January 2004

Submission from Mr Paul Grice, 25 February 2004

4th Meeting 2004 (Session 2), 2 March 2004

ORAL EVIDENCE

Mr Paul Grice, Clerk and Chief Executive, Scottish Parliament

Mr Derek Croll, Head of Corporate Services, Scottish Parliament

SUPPLEMENTARY WRITTEN EVIDENCE

Letter from Mr Paul Grice to the Clerk, 21 May 2004 29


Remit and membership

Remit:

1. The remit of the Audit Committee is to consider and report on-

(a) any accounts laid before the Parliament;

(b) any report laid before or made to the Parliament by the Auditor General for Scotland; and

(c) any other document laid before the Parliament concerning financial control, accounting and auditing in relation to public expenditure.

2. No member of the Scottish Executive or junior Scottish Minister may be a member of the Committee and no member who represents a political party which is represented in the Scottish Executive may be convener of the Committee.

(Standing Orders of the Scottish Parliament, Rule 6.7)

Membership:

Mr Brian Monteith (Convener)

Rhona Brankin

Susan Deacon

Robin Harper

Margaret Jamieson

George Lyon

Mr Kenny MacAskill (Deputy Convener)

Committee Clerking Team:

Clerk to the Committee

Shelagh McKinlay

Senior Assistant Clerk

Joanna Hardy

Assistant Clerk

Christine Lambourne

 

The Committee reports to the Parliament as follows-

INTRODUCTION

1. In considering the report of the Auditor General for Scotland (AGS) entitled "The 2002-03 Audit of the Scottish Parliamentary Body" the Committee took evidence on 2 March 2004 from Mr Paul Grice, Clerk and Chief Executive, Scottish Parliament and Mr Derek Croll, Head of Corporate Services, Scottish Parliament.

2. In taking evidence, the Committee sought to examine:

· The events leading up to the qualification of the 2002-03 accounts of the Scottish Parliamentary Corporate Body; and

· What lessons have been learned in order to avoid the qualification of accounts in the future.

BACKGROUND

3. In December 2003 the AGS reported to the Parliament the results of his audit of the 2002-03 accounts of the Scottish Parliamentary Corporate Body (SPCB). He provided an unqualified opinion on the presentation of the Corporate Body's accounts for the year but qualified his opinion on the regularity of its expenditure.

4. The AGS report, made under section 22 of the Public Finance and Accountability (Scotland) Act 2000, records that the "combined net total of unreconciled entries (as at 24 November 2003) was very small, at just over £300. But the combined value of the 290 underlying transactions which had not been matched was significantly greater, some £5.3 million."1

5. Since the AGS report was published, work continues to resolve the few outstanding items from the 2002-03 accounts. At the time of taking evidence, there were fewer than 50 items still to be reconciled. At the time of drafting, there were four items still outstanding.2

6. At the Committee meeting of 6 January 2004, the AGS made the following comments:

· "...although there was sufficient evidence to confirm that the accounts are not materially mis-stated, there were important shortcomings in the corporate body's internal financial controls." (Col 263)

· "My qualification does not mean that there is evidence that any actual financial losses have occurred as a result of shortcomings in control. However, I considered that a qualification was necessary because of the uncertainty created by the control weaknesses and because of the serious potential risks arising." (Col 263)

· "It is fair to take away from this session the reassurance that no financial loss has been discovered and neither is there any indication that expenditure has been made inappropriately. However I indicate to the Committee that the control weaknesses were serious." (Col 273)

· "...we [Audit Scotland] are very satisfied with the progress that has been made since April of the current financial year in tackling these matters, not least in addressing the reconciliations." (Col 271)

Establishment of the Scottish Parliament Accounting System

7. The tight timescale for the establishment of the new Parliament led to the adoption of much of the then Scottish Office's administrative practice and procedure. For example, in place of dedicated Standing Financial Instructions, the Parliament relied largely on the Public Finance Manual, which provided general guidance for the Scottish Office and non-departmental public bodies. The manual had to be interpreted to operate within the parliamentary context. (Col 351-352)

8. The implementation of Scottish Executive Accounting System (SEAS) in the final quarter of 2001-02 was described by Paul Grice3 as "the root cause of bank reconciliation problems". SPCB were aware that there were reconciliation issues relating to the 2001-02 accounts though these accounts were signed off without qualification. Audit Scotland assisted in undertaking the reconciliation work in order to avoid the risk of qualification for that year. (Col 344)

Reconciliation of the 2002-03 Accounts

9. Audit Scotland, in its management letter4 of 14 February 2003, placed a high priority on monthly bank reconciliations which were duly instigated. (Col 343)

10. An Interim Financial Controller was appointed with effect from 31 March 2003, following the departure of the previous Head of Finance. An Audit Scotland Note records that, in April 2003, he was informed by Audit Scotland that reconciliations were a possible qualification issue for the 2002-03 accounts. Extra resources were deployed to address the problem of historical reconciliations. (Col 341)

11. During evidence, the Accountable Officer stated "we certainly understood as early as February 2003 that we had to take action on reconciliations." Mr Grice also gave evidence that the Finance team considered that appropriate action was in hand to address the issue of reconciliations and that he, as Accountable Officer, shared that view. However, Mr Grice also stated that "In the final event, that action was not sufficient and it is ultimately our responsibility to ascertain such information." (Col 351)

12. In August 2003, a decision was taken by the Interim Financial Controller "on value-for-money grounds" that historical reconciliations had been taken as far as possible and work was ceased. This decision was not communicated to the Accountable Officer, who stated in evidence that "it should not have been taken at that level." (Col 346)

13. In September 2003, at the start of the 2002-03 audit, Audit Scotland informed the Accountable Officer that the remedial action which had been undertaken since April 2003 was insufficient and that qualification of the 2002-03 accounts was therefore possible. (Col 345)

14. A Permanent Financial Controller took up post in March 2004 - almost a year after the permanent Head of Finance left in April 2003.

CONCLUSIONS AND RECOMMENDATIONS

Events leading to the qualification of the 2002-03 SPCB Accounts

15. The Committee considers it very important that there has been no suggestion or evidence of fraud having occurred within the Parliament. Furthermore, the recent work carried out to resolve outstanding entries (following the finalisation and qualification of the 2002-03 accounts) has not revealed any irregularities.

16. Evidence submitted to the Committee indicates that the use of the inherited Scottish Executive Accounting System (SEAS), which did not meet the Parliament's requirements in a number of ways, placed extra pressure on the Finance Department at a time when the SPCB was a new organisation and, as such, under pressure to bed down new systems.

17. Audit Scotland communicated their concerns regarding the 2002-03 accounts to appropriate staff in the Corporate Body and Paul Grice gave evidence that "Audit Scotland's concerns over internal financial controls in general and the 2002-03 bank reconciliation in particular were clearly not properly appreciated by SPCB staff."5

18. The Committee considers that the problems leading to the qualification of the 2002-03 accounts arose as a result of difficulties with SEAS, exacerbated by a series of system failures along with flaws in the working relationships between the Finance Department and the Accountable Officer.

19. The Committee further considers that the decision to halt reconciliations in August 2003 without reference to the Accountable Officer and without seeking assurance from the auditors that this course of action would be acceptable was a critical factor leading to the qualification of the accounts. The absence of Standing Financial Instructions may have been material in this failure.

20. The Committee recommends that SPCB review internal audit arrangements in advance of the finalisation of the 2003-04 accounts in conjunction with the Audit Advisory Board.

21. The Committee considers that the delay in the appointment of a Permanent Financial Controller may have been a contributory factor in the qualification of the 2002-03 SPCB accounts. However, it considers that the responsibility for ensuring a clean audit certificate lies ultimately with the Accountable Officer.

2003-04 Accounts

22. The Committee welcomes the current improved arrangements in place in the Finance Department. These include:

· An Action Plan, which has been put in place as a result of the issues raised by the AGS; (Col 342)

· A Permanent Financial Controller has been appointed and took up post in March 2004; (Col 342)

· Bank reconciliations are now carried out on a monthly basis (this has been the case since April 2003); (Col 343)

· The Head of Corporate services provides the Accountable Officer with monthly reports on bank reconciliations; (Cols 342 and 349 -350)

· Invoices are no longer posted to the fixed asset register by block posting but invoice by invoice, enabling a clearer audit trail; (Col 355)

· A comprehensive set of Standing Financial Instructions has been completed. A draft was due to be considered by the Audit Advisory Board on 27 May;6 (Col 353)

· The reporting line between the Accountable Officer and the Financial Controller has been shortened; (Col 342)

· SEAS has been operating satisfactorily since June 2002.7

23. The Committee expects the SPCB to ensure that all necessary measures are put in place to ensure that the SPCB Accounts for 2003-04 meet the requirements of the Auditor General for Scotland.

ANNEXE A

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

MINUTES

1st Meeting, Session 2 (2004)

Tuesday 6 January 2004

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened at 10.04 am

Scottish Parliamentary Corporate Body: The Committee considered a briefing by the AGS on the report by the AGS entitled `The 2002-03 Audit of the Scottish Parliamentary Corporate Body`. The Committee agreed to invite Mr Paul Grice, Clerk/Chief Executive, to give evidence on the report.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

MINUTES

4th Meeting, 2004 (Session 2)

2 March 2004

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened in private at 9.36 am

Scottish Parliamentary Corporate Body: The Committee took evidence from-

Mr Paul Grice, Clerk and Chief Executive, Scottish Parliament

Mr Derek Croll, Head of Corporate Services, Scottish Parliament

Scottish Parliamentary Corporate Body: The Committee considered the evidence taken at agenda item 3. The Committee agreed to write to Mr  Grice and the Auditor General for Scotland to obtain further information and copies of relevant correspondence. The Committee also agreed to consider a paper from the Clerk in private at a future meeting.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

MINUTES

8th Meeting, 2004 (Session 2)

Wednesday 21 April 2004

Members Present:

Rhona Brankin Susan Deacon

Margaret Jamieson George Lyon

Mr Kenny MacAskill (Deputy Convener) Mr Brian Monteith (Convener)

Apologies were received from Robin Harper.

The meeting opened at 12.50 pm.

Scottish Parliamentary Corporate Body (in private): The Committee considered further written evidence and possible findings and recommendations on the report by the Auditor General for Scotland entitled "The 2002-03 Audit of the Scottish Parliamentary Corporate Body". The Committee agreed to write to Paul Grice seeking clarification on a number of points raised during discussion and to consider a draft report at a future meeting.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

MINUTES

10th Meeting, 2004 (Session 2)

Tuesday 11 May 2004

Members Present:

Susan Deacon Robin Harper

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

Apologies were received from Rhona Brankin and Margaret Jamieson.

The meeting opened at 10.06 am

Scottish Parliamentary Corporate Body (in private): The Committee considered possible findings and recommendations on the report by the Auditor General for Scotland entitled "The 2002-03 Audit of the Scottish Parliamentary Corporate Body". The Committee agreed to write to Mr Paul Grice, Clerk and Chief Executive, seeking further information on points raised during discussion and to consider a draft report at a future meeting.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

MINUTES

11th Meeting, 2004 (Session 2)

Tuesday 25 May 2004

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened at 10.05 am

Scottish Parliamentary Corporate Body (in private): The Committee considered a draft report on its inquiry into the report by the Auditor General for Scotland entitled "The 2002-03 Audit of the Scottish Parliamentary Corporate Body". The report, as amended, was agreed to.

ANNEXE B

WRITTEN EVIDENCE

LETTER FROM PAUL GRICE, CLERK AND CHIEF EXECUTIVE, SCOTTISH PARLIAMENT

TO THE CONVENER

I understand that the Audit Committee is to consider a briefing from the Auditor General for Scotland (AGS) on the report by the AGS entitled `The 2002-03 Audit of the Scottish Parliamentary Corporate Body' at its meeting on 6 January 2004.

We are actively looking at all the issues raised by the AGS in conjunction with the SPCB and the Advisory Audit Board and will formulate an action plan to address these in the next few weeks. I will write to you again with this action plan once it has been agreed by the Corporate Body.

However, I thought it might be helpful if you had an update from me now regarding the actions we are taking, or have already taken, in respect of the points raised by the AGS.

· It is worth stressing that the acknowledged internal control weaknesses caused by the implementation of the SEAS system were mitigated to a very large extent by the Corporate Body's strong controls over the letting of contracts; the authorisation and payment of invoices; and strict validation of members' allowances.

· As disclosed in the Accounts, the bank account reconciliation exercise for 2002-03 is continuing and there are now less than 200 outstanding items to clear. Work is continuing on this exercise with the aim of reconciling all items.

· Our internal auditors, Deloitte & Touche LLP, have examined the bank reconciliation exercise and have confirmed that the reconciliation process is sound.

· The process of matching and clearing the remaining items from the reconciliation has uncovered no indication of financial irregularity or duplicate payments.

· Bank reconciliations have been performed regularly every month in the current financial year.

· Recruitment of a permanent Financial Controller to head up the Finance Office is in progress. The shortlisted candidates will be interviewed next week.

· We have engaged a senior auditor from City of Edinburgh Council to assist us in formalising a set of standing financial instructions. This is on track for completion in March 2004.

· Controls over and supporting documentation for journal entries have been significantly improved with effect from 1 April 2003.

I will let you have a more detailed report in due course. In the meantime, I would be happy to address any specific points the Committee might have in the light of tomorrow's briefing from the Auditor General.

Paul Grice

Clerk/Chief Executive

5 January 2004

LETTER FROM PAUL GRICE, CLERK AND CHIEF EXECUTIVE, SCOTTISH PARLIAMENT

TO THE CONVENER

2002-03 AUDIT OF THE SCOTTISH PARLIAMENTARY CORPORATE BODY

Thank you for inviting me to give evidence on the Auditor General's report entitled "the 2002-03 Audit of the Scottish Parliamentary Corporate Body". I will be happy to address any specific points the Committee may wish to raise at your meeting on 2 March.

In order to assist your consideration of the issues, I thought it might be helpful if I provided a brief summary of the actions we are taking, or have already taken, in respect of the points discussed on 6 January, when the Auditor General gave his briefing to the Committee.

General

Firstly, I would like to stress that both I, as Principal Accountable Officer, and the SPCB are addressing the issues raised in the Section 22 Report very seriously. Our aim is to ensure that the SPCB's systems of internal control are seen as an exemplar amongst public bodies. To that end we have drawn up an action plan, in consultation with Audit Scotland, to tackle those areas where improvements are required. A copy of this action plan is attached for your information.

Background

The root cause of the bank reconciliation problems experienced in the 2002-03 financial year was the implementation of the Scottish Executive Accounting System (SEAS) by the Scottish Executive in the final quarter of 2001-02. The implementation of this general ledger system was driven by the Scottish Executive to their timetable and the system was incorrectly configured to meet the SPCB's requirements.

The SEAS system was unable to generate the correct accounting entries for payments until June 2002. Extensive manual payments were required in the intervening months together with complex manual journal entries to correct the system generated postings. These problems affected the closing quarter of 2001-02 and the opening quarter of 2002-03.

It is important to record that the acknowledged internal control weaknesses caused by the implementation of the SEAS system were mitigated to a very large extent by the Corporate Body's strong controls over the letting of contracts; the authorisation and payment of invoices; and strict validation of Members' allowances.

The disruption caused by the SEAS implementation and subsequent reconciliation in the Finance Office also had the effect of delaying the introduction of planned improvements to other aspects of the overall financial control environment (e.g. standing financial instructions).

Bank Reconciliations

We have made very substantial progress in clearing the outstanding items from the 2002-03 bank reconciliations. Of the 290 entries which were outstanding at the conclusion on the audit in December, we have now successfully resolved 235 (81%) of the transactions. The net value of the remaining 55 unmatched items is less than £3k. The combined gross value of all the remaining individual amounts (i.e. ignoring the fact that debits and credits offset each other in a double entry accounting system) has also been substantially cleared - from £5.3m at the conclusion of the audit to just £81k (a reduction of 98.5%).

The process of investigating and clearing the remaining entries is continuing with the aim of reconciling all items.

As I reported in my letter of 5 January, the process of matching and clearing the items from the reconciliation has uncovered no indication of financial irregularity or duplicate payments.

The bank reconciliations for the current financial year have been performed regularly every month since April 2003.

Financial Controller

I am pleased to report that we have now made a permanent appointment of a Financial Controller to head the Finance Office with a start date of 18 March.

There was some discussion at the Audit Committee meeting on 6 January of why we had not replaced the previous Head of Finance earlier. At the time the previous Head of Finance resigned (31 March 2003) it was essential to bring in a highly experienced individual as an interim replacement at short notice to manage the imminent year end process. Indeed, the AGS, in his evidence to the Audit Committee on 6 January, commended the SPCB "for making arrangements to fill the post immediately - albeit on an interim basis - to ensure that the work could continue."

We used a fixed term contract to ensure continuity over the extended period of accounts preparation and audit. We were also keen to review the structure of the Finance Office to ensure that it was appropriate before rushing to appoint a like for like replacement. In doing this we have strengthened the job description in respect of the experience required in the key areas of financial control and accounts preparation. We have also recently upgraded the financial accountant post, which reports directly to the Financial Controller, to further strengthen the accounting expertise in the Finance Office.

The new job title of "Financial Controller" is also an important distinction and emphasises the importance the SPCB places on the financial control aspects of the role.

Standing Financial Instructions

We are on track to produce a consolidated set of standing financial instructions in March 2004, which will provide a framework of policies and procedures to govern the arrangements for financial management and control within the SPCB. This will replace the individual procedures that were either inherited from the Scottish Office when the Parliament was set up or have been implemented to meet specific changes arising from new systems and other developments.

We have engaged a senior internal auditor from City of Edinburgh Council to assist us in this exercise.

Bank Balance at 31/3/03

The bank balance of £20m at 31 March 2003 arose as a result of the drawdown of cash from Treasury to meet the forecast expenditure on the Holyrood project. Forecasts for the monthly drawdown of cash require to be prepared some 2 months beforehand and, in the event, some of the money was not required until April. However, the funds remained within the Office of the Paymaster General and there was therefore no effect on the public purse. Cash balances since March have been much reduced.

Other Reconciliations

The attached action plan documents the work which is underway to provide full reconciliations between the SPCB's general ledger and its associated financial systems.

We have commenced significant reviews to improve the SPCB's financial processes in several key areas.

Communication and financial reporting

Audit Scotland's concerns over internal controls in general and the 2002-03 bank reconciliation in particular were clearly not properly appreciated by SPCB staff. I acknowledge the need for the SPCB to improve the flow of financial information to senior management, the Advisory Audit Board and ultimately the Corporate Body.

From the point at which Audit Scotland raised their concerns to me on the 2002-03 bank reconciliation, in September 2003, we became, and have remained, fully engaged with the issues at all levels. The Advisory Audit Board and Corporate Body have been fully committed to resolving the identified shortcomings in our internal financial controls.

I now receive a regular monthly report of financial key indicators from Finance, which includes the status of bank and other reconciliations. In addition, the attached action plan is reviewed regularly and updates provided to the Corporate Body. The Advisory Audit Board has also met twice in February to review the action plan and Audit Scotland provided very helpful input to these discussions.

The Auditor General attended a meeting of the SPCB on 24 February, at which he confirmed that successful completion of the actions set out in the attached action plan would deliver substantial improvements in the SPCB's internal financial controls.

There is now a much clearer understanding of Audit Scotland's expectations and our staff are in regular dialogue with the audit team.

Accounts Preparation

We have been in close consultation with Audit Scotland to agree the information we will produce to support the SPCB's 2003-04 accounts. Audit Scotland has helpfully provided us with a comprehensive list of their audit requirements, which will allow us to ensure that all the appropriate supporting documentation for the accounts is prepared before the 2003-04 audit commences.

Paul Grice

Clerk/Chief Executive

25 February 2004

Ref

Issue

Actions

Due date

Status

 

 

 

 

 

 

Financial Controls and Procedures

 

 

 

 

 

 

 

 

1.1

Cash and bank reconciliation for 2002-03 financial year

All outstanding items from 2002-03 financial year to be investigated and cleared

31/3/04

On target

1.2

Cash and bank reconciliations for 2003-04 financial year

Monthly reconciliations of all bank accounts

monthly

Implemented from April 2003

1.3

 

Monthly report to Clerk/Chief Executive on completed reconciliations

monthly

Implemented from December 2003

 

 

 

 

 

2.1

Standing Financial Instructions

Production of an authorised set of standing financial instructions to consolidate existing SPCB guidance and procedures and to specify levels of authorisation for write offs

 

 

2.2

 

- Project plan and scope established

30/11/03

Completed

2.3

 

- Draft financial instructions preparation

06/02/04

Largely complete

2.4

 

- External review and editing of financial instructions

29/02/04

In progress

2.5

 

- Completion of standing financial instructions for approval by AAB and SPCB

31/03/04

 

 

 

 

 

 

3.1

Other financial controls

Revised journal input controls and procedures

09/10/03

Implemented

3.2

Bank balance of £20m at 31/03/03

Review the cash forecasting process for Holyrood project expenditure to improve accuracy

06/02/04

Month end cash balances have been greatly reduced in the current year

 

 

 

 

 

 

Leadership of the Finance team

 

 

 

 

 

 

 

 

4.1

Interim Arrangements

Interim Financial Controller appointed on fixed term contract to provide focus and continuity for the production and audit of the SPCB's 2002-03 accounts

31/3/03

In place since 31/03/03 and retained to provide continuity for 2003-04 accounts

4.2

 

Role and responsibilities of Finance Office reviewed including revised job description for permanent head of office

30/10/03

Completed

 

 

 

 

 

4.3

Financial Controller

Post advertised

21/11/03

Completed

4.4

 

Agree short list of candidates for interview

19/12/03

Completed

4.5

 

1st and 2nd interviews concluded

23/01/04

Completed

4.6

 

Job offer made

26/01/04

Completed

4.7

 

Start Date

18/03/04

 

 

 

 

 

 

4.8

Reporting Arrangements

Restructure of Directorates to give a shorter reporting line from Finance to the Clerk/Chief Executive

18/08/03

Implemented

4.9

 

Development of regular reporting of management information and key performance indicators to provide early warning of actual or potential problem areas. To include confirmation of reconciliations and progress against key milestones in the agreed action plan.

monthly

ongoing

 

 

 

 

 

4.10

Review

Review of finance function to meet future requirements and to establish training and development needs of staff

tbc

Target date to be set once Financial Controller in post

 

 

 

 

 

 

Systems and Structural Issues

 

 

 

 

 

 

 

 

5.1

Fixed Asset System (Britannia)

Revise procedures to post individual invoice amounts to Britannia, rather than block posting monthly totals.

01/04/03

Implemented from April 2003

5.2

 

Undertake monthly reconciliations of Fixed Asset System to the Ledger

monthly

Implemented from April 2003

5.3

 

Review block postings made to the Britannia Fixed Asset System in previous financial years to assess if any retrospective adjustments are required

30/06/04

 

 

 

 

 

 

6.1

Reconciliation of the Allowances feeder system (CASE) to the general ledger

Review and document process flows to provide the starting point for the review set out in 6.3

31/12/03

Completed

6.2

 

Investigate key processes that create reconciling entries between the systems (eg timing differences, NI treatment, shared expenses)

31/01/04

Completed

6.3

 

Review and report by Internal Audit (D&T) of short term, medium term and long term options to improve the reconciliation process

31/03/04

 

6.4

 

Decision on options proposed by internal audit review

30/04/04

 

 

 

 

 

 

6.5

 

Full year reconciliation between CASE and the general ledger for current financial year. Due to the complexity of current processes and timing differences between the systems, this is a significant reconciliation exercise.

 

 

6.6

 

- 1st 9 months to 31/12/03

31/03/04

On target

6.7

 

- full 12 months to 31/03/04

30/06/04

 

 

 

 

 

 

7.1

Payroll system (Chessington)

Review and document process flows to provide the starting point for the review set out in 7.3

31/12/03

Completed

7.2

 

Investigate key processes that create reconciling entries between the systems (eg timing differences, NI treatment)

31/01/04

Completed

7.3

 

Review and report by Internal Audit (D&T) to assess the control environment in relation to Payroll and Personnel.

31/03/04

 

7.4

 

Decision on options proposed by internal audit review

30/04/04

 

7.5

 

Full year reconciliation between Chessington payroll and general ledger for year to 31/03/04

30/04/04

On target

(payroll reports reconciled individually each month up to Nov 03 )

 

 

 

 

 

8.1

General Ledger system (SEAS)

New Financial Controller to review SPCB's use of the SEAS system to optimise functionality within the overall system constraints set by the Scottish Executive.

tbc

Target date to be set once Financial Controller in post

 

 

 

 

 

Note: The two reviews to be undertaken by Internal Audit will be managed by a project board consisting of the Director of Legal Services, the Head of Corporate Services and the senior internal auditor from City of Edinburgh Council, who is currently working on our standing financial instructions. The reviews will examine options to improve the reconciliation process between the Allowances system and the general ledger and will assess the internal control environment in relation to Payroll and Personnel.

 

SUPPLEMENTARY WRITTEN EVIDENCE

LETTER FROM PAUL GRICE, CLERK AND CHIEF EXECUTIVE, SCOTTISH PARLIAMENT

TO THE CLERK

2002/03 AUDIT OF THE SCOTTISH PARLIAMENTARY CORPORATE BODY

In response to your inquiry arising from the Audit committee meeting of 11 May, I am pleased to provide further information as requested.

As at 18 May, there are 5 items outstanding in the bank reconciliations relating to 2002/03. We have identified the supporting transactions for these items and will process the necessary correcting action clearing the bank reconciliation position in the 2003-04 financial accounts. I have asked our Financial Controller to keep you up to date with progress in clearing these 5 items. No write off action will be required to finalise the 2002/03 exercise. Bank reconciliations have been completed for each month of 2003/04.

We are proceeding to plan with the preparation of the 2003/04 accounts in close consultation with Audit Scotland. We are making strenuous efforts to achieve a favourable outcome to the audit of the 2003/04 and believe we are tackling all areas of concern raised by the Auditor General for Scotland as set out in our action plan.

Paul Grice

Clerk/Chief Executive

21 May 2004

THE FOLLOWING PRIVATE SUBMISSIONS WERE ALSO RECEIVED BUT ARE NOT PRINTED HERE:

LETTER FROM THE AUDITOR GENERAL FOR SCOTLAND TO THE CLERK, 8 JANUARY 2004

SUBMISSION FROM THE SCOTTISH PARLIAMENTARY CORPORATE BODY, 17 MARCH 2004

SUBMISSION FROM THE AUDITOR GENERAL FOR SCOTLAND, 18 MARCH 2004

LETTER FROM MR PAUL GRICE TO THE CLERK, 29 APRIL 2004


Footnotes

1 AGS Report, "The 2002-03 Audit of the Scottish Parliamentary Corporate Body", para 8

2 Email from Finance Department to Clerks, 24 May 2004

3 Letter from Paul Grice to the Convener, 25 February 2004

4 Management Letter from Senior Audit Manager to Clerk/Chief Executive dated 14 February 2003

5 Letter to Committee from Paul Grice dated 25 February 2004

6 Email to Clerks from Finance Department 24 May 2004

7 Letter to Committee from Paul Grice 17 March 2004

 

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