FINAL London Waste and Recycling Board Compliance Review of Scheme of Delegation May 2019 2018/19
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London Waste and Recycling Board Compliance Review of Scheme of Delegation May 2019 FINAL 2018/19
Executive Summary
OVERALL ASSURANCE ASSESSMENT OVERALL CONCLUSION
Reasonable assurance has been provided in respect of effectiveness of
the controls and implementation of the Organisations Scheme of
Delegation as there are still some areas that require improvement.
Confirmation of budget holder approval for purchases is not being
documented;
Not all tender specification approval is being retained and this
requirement is not explicitly stated in the procedures;
The Organisations electronic approval system for purchases and their
Scheme of Delegation are not in line;
ReceiptBank is not being regularly reviewed and contained some
expense receipts that were 12 months old;
The Organisations Personal Expense procedure does not stipulate a
time frame when expense claims must be submitted.
SCOPE ACTION POINTS
The review considered the operation of the LWARB’s financial regulations and
delegated authorities and the extent to which the arrangements support effective
authorisation and decision making, including the point at which any commitment is
made.
Urgent Important Routine Operational
The will not consider the appropriateness of any delegated financial thresholds and
will not seek to identify any significant differences in levels of operation.
0 0 7 0
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Compliance Review of Scheme of DelegationManagement Action Plan - Priority 1, 2 and 3 Recommendations
Rec. Risk Area Finding Recommendation Priority Management Implementation Responsible
Comments Timetable Officer
(dd/mm/yy) (Job Title)
1 Compliance Prior to any purchases being made Budget holder expenditure 3 Expenditure above £500 currently 01/06/19 Head of
budget holders are required to confirm verification prior to purchase be requires a purchase order to be Finance and
that there is adequate budget to cover the recorded for all purchases over raised, which is approved by the Operations
purchase being made. However this £500 on the relevant purchase appropriate manager – which
check is only carried out as a verbal order. includes an implicit
confirmation and is not documented. acknowledgement that sufficient
funds are available.
Managers will be reminded of this.
2 Compliance The tender specification details used for Evidence of tender specification 3 Agreed. 01/06/19 Head of
the IT contract were verbally approved approval be kept in the relevant Finance and
and evidence that this conversation took supplier contract folder to support Operations
place could not be located. the process.
3 Compliance The Organisations procurement The Procurement Procedures be 3 Agreed. 01/06/19 Head of
procedure does not explicitly state that updated to explicitly state that Finance and
tender specifications require formally tender specifications require Operations
documented approval. formally documented approval in
line with best practice.
4 Compliance The scheme of delegated responsibilities The scheme of delegation be 3 Agreed. The Scheme of Delegated 06/06/19 Head of
were compared to the level of approvals updated with an appendix that Authority requires a major revision Finance and
set in ApprovalMax the Organisations explicitly states approval limits for to reflect a recent organisational Operations
online purchase order and approval officers within the Organisation that restructure. As part of this, we will
system. The delegated limits did not reflect actual working practices for ensure that AprovalMax is in line
always reflect the scheme of delegation invoice and purchase order with the Scheme of Delegated
limits. approvals. Authority.
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Compliance Review of Scheme of DelegationRec. Risk Area Finding Recommendation Priority Management Implementation Responsible
Comments Timetable Officer
(dd/mm/yy) (Job Title)
5 Compliance A review of the ReceiptBank system A regular review of the ReceiptBank 3 Agreed. A review of outstanding 01/06/19 Head of
showed that it contained a number of system be carried out to identify any items within receipt bank will be Finance and
documents, mainly expense receipts and old/outstanding receipts/invoices included as a part of the bi-weekly Operations
invoices that appear to not have been that have not being correctly payment run.
processed for payment. The documents processed.
are dated April 2018 to March 2019.
6 Compliance 42 documents captured in ReceiptBank All of last year expense receipts be 3 Agreed. 01/05/19 Head of
were identified as expense receipts promptly processed to ensure that Finance and
totalling £1,053.96 in pounds plus all previous financial years liabilities Operations
£867.67 in foreign currency, that still need are accounted for.
to be processed.
7 Compliance A review of LWARB personal expenditure Personal expenditure procedures 3 Agreed. A three month limit on 01/07/19 Head of
procedures shows that there is no time be updated to include instructions expense claims will be imposed. Finance and
limit stated by which personal expenses that all claims be submitted for Operations
must be submitted for payment. processing within a defined time
limit.
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Compliance Review of Scheme of DelegationOperational Effectiveness Matters
Ref Risk Area Item Management
Comments
No operational effectiveness matters have been identified
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Compliance Review of Scheme of DelegationDetailed Findings
Introduction
1. This review was carried out in April 2019 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall
adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.
Background
2. The London Waste and Recycling Board (LWARB) works in conjunction with the Mayor of London and London Councils to improve waste and resource management
in the capital. The LWARB focus their advice and support for London Councils and communities to help them transition to a low-carbon circular economy. A circular
economy is one in which resources are kept in in use for as long as possible, extracting the maximum value from them whilst in use, then recover and regenerate
products and materials at the end their life. It is a more efficient and environmentally sound alternative to the traditional linear economy in which we make, use and
dispose of resources.
Materiality
3. The London Waste and Recycling Board (LWARB) is funded by a combination of unspent funds, released commitments, recovered funds form previously invested
projects, repayments to the efficiency review fund, repayments of interest and principal from loans. Funding is also received form EU grants, the Waste and
Resources Action Programme (WRAP) and the private sector. This will provide LWARB an available budget for the period April 1st 2018 to 31st March 2020 of
£16.5m.
Key Findings & Action Points
4. The key control and operational practice findings that need to be addressed in order to strengthen the control environment are set out in the Management and
Operational Effectiveness Action Plans. Recommendations for improvements should be assessed for their full impact before they are implemented.
Scope and Limitations of the Review
5. The review considered the operation of the LWARB’s financial regulations and delegated authorities and the extent to which the arrangements support effective
authorisation and decision making, including the point at which any commitment is made. The review will not consider the appropriateness of any delegated financial
thresholds and will not seek to identify any significant differences in levels of operation.
6. The definition of the type of review, the limitations and the responsibilities of management in regard to this review are set out in the Annual Plan.
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Compliance Review of Scheme of DelegationDisclaimer
7. The matters raised in this report are only those that came to the attention of the auditor during the course of the internal audit review and are not necessarily a
comprehensive statement of all the weaknesses that exist or all the improvements that might be made. This report has been prepared solely for management's use
and must not be recited or referred to in whole or in part to third parties without our prior written consent. No responsibility to any third party is accepted as the report
has not been prepared, and is not intended, for any other purpose. TIAA neither owes nor accepts any duty of care to any other party who may receive this report
and specifically disclaims any liability for loss, damage or expense of whatsoever nature, which is caused by their reliance on our report.
Risk Area Assurance Assessments
8. The definitions of the assurance assessments are:
Substantial Assurance There is a robust system of internal controls operating effectively to ensure that risks are managed and process objectives achieved.
The system of internal controls is generally adequate and operating effectively but some improvements are required to ensure that risks are managed
Reasonable Assurance
and process objectives achieved.
The system of internal controls is generally inadequate or not operating effectively and significant improvements are required to ensure that risks are
Limited Assurance
managed and process objectives achieved.
No Assurance There is a fundamental breakdown or absence of core internal controls requiring immediate action.
Acknowledgement
9. We would like to thank staff for their co-operation and assistance during the course of our work.
Release of Report
10. The table below sets out the history of this report.
Date draft report issued: 1st May 2019
Date management responses received: 24th May 2019
Date final report issued: 31st May 2019
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Compliance Review of Scheme of Delegation11. The following matters were identified in reviewing the Key Risk Control Objective:
Compliance Risk: Failure to comply with approved policy and procedure leads to potential losses.
Purchases
11.1 To confirm that adequate and appropriate approval of purchases had been carried out a random sample of 10 paid invoices were selected from a report of
the last six months paid invoices. The organisation uses a manual system to place orders with suppliers, if the purchase is over £500, then a formal purchase
order is required to be produced prior to the purchase being made. To facilitate this process the organisation uses web based software called ApprovalMax
which works in conjunction with the finance system (Xero) which can produce electronic purchase orders and also retains a workflow of the organisations
approval limits.
11.2 The organisation has a procurement procedure that supports all types of purchasing, from single items through to raising tenders for bigger purchases via
contracts. This document was last reviewed by the Audit Committee on the 22nd May 2018.
11.3 Prior to any purchases being made budget holders are required to confirm that there is adequate budget to cover the purchase being made. However this
check is only carried out as a verbal confirmation and is not documented.
Recommendation: 1 Budget holder expenditure verification prior to purchase be recorded for all purchases over £500 on the relevant
purchase order.
Priority: 3
11.4 The sample of 10 invoices were reviewed to determine that they had been approved prior to payment in line with the scheme of delegation. No areas of
concern were identified.
11.5 A further sample of two supplier changes, specifically changes to bank account details made in the current financial year were selected to ensure that the
changes had been approved in line with the scheme of delegation. No areas of concern were identified.
11.6 A sample of two recently awarded tendered contracts were selected to confirm that they had been secured and approved in line with the organisation’s
procurement procedures and their scheme of delegation.
Contract Process
11.7 Two contracts were selected, one was for Information Technology (IT) services and the other was for Internal Audit Services, to confirm that the contracts
were awarded in line with the organisation’s procurement procedures and their scheme of delegation. A few anomalies were noted, firstly the specification
details used for the tender process for the IT contract were verbally approved and evidence that this conversation took place could not be located.
Recommendation: 2 Evidence of tender specification approval be kept in the relevant supplier contract folder to support the process.
Priority: 3
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Compliance Review of Scheme of Delegation11.8 It was also noted that the procurement procedure does not explicitly state that tender specifications require formally documented approval.
Recommendation: 3 The Procurement Procedures be updated to explicitly state that tender specifications require formally documented
approval in line with best practice.
Priority: 3
11.9 No areas of concern were noted in respect of the other contract in respect process or how it was approved.
Scheme of Delegation
11.10 A review of ApprovalMax approval limits was completed to confirm that the approval levels set up in the system accurately reflect the organisations scheme
of delegation approval limits.
11.11 The Organisations scheme of delegation covers a number of delegated approval circumstances which indicates from an operational point of view what
employees are able to sanction in terms of expenditure in different scenarios. Such as expenditure against their budgets, corporate expenditure in respect
of engaging with suppliers via tendered contracts.
11.12 When these delegated responsibilities were compared to the level of approval set in ApprovalMax the organisations online purchase order and approval
system the delegated limits did not always reflect the scheme of delegation limits. This disparity was discussed with the Head of Finance and Governance
and Secretariat Officer who explained that from a practical point of view a level of expedience was required to process payments and approve invoices.
Therefore key staff approval limits in ApprovalMax have been set as “any amount”, with the expectation that additional approval would be sought for higher
value amounts that exceed their limits.
Recommendation: 4 The scheme of delegation be updated with an appendix that explicitly states approval limits for officers within the
Organisation that reflect actual working practices for invoice and purchase order approvals.
Priority: 3
11.13 To facilitate the processing of invoices and expense returns the Organisation makes use of a web based software called ReceiptBank. The system uses
optical character recognition (OCR) functionality which assigns a cost centre code to both invoices and receipts that are scanned into the system. It is
possible to publish invoices and receipts into Xero the Organisations finance system to enable payments to be made.
ReceiptBank
11.14 A review of the ReceiptBank system showed that it contained a number of documents, mainly expense receipts and invoices that appear to not have been
processed for payment. The documents are dated April 2018 to March 2019, and made up of the following;
• 42 were identified as expense receipts totalling £1,053.96 in pounds plus £867.67 in foreign currency, that still need to be processed;
Recommendation: 5 A regular review of the ReceiptBank system be carried out to identify any old/outstanding receipts/invoices that have
not being correctly processed.
Priority: 3
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Compliance Review of Scheme of Delegation• Two documents totalling £85,824.65, one dated September 2018 and one dated March 2019 were checked and confirmed as being remittance advices
which should have gone straight into the Xero system;
• An invoice totalling £1,275.00 dated June 2018 was confirmed as having been paid, likely on a copy invoice with the original remaining in ReceiptBank
and;
• Four invoices totalling £8,414.32 that need to be investigated by the Organisation to confirm that they have been paid and if not to be processed for
payment promptly.
Recommendation: 6 All of last year expense receipts be promptly processed to ensure that all previous financial years liabilities are
accounted for.
Priority: 3
11.15 A review of LWARB personal expenditure procedures shows that there is no time limit stated by which personal expenses must be submitted for payment.
Recommendation: 7 Personal expenditure procedures be updated to include instructions that all claims be submitted for processing
within a defined time limit.
Priority: 3
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