Audit of the cashbook

For Mr Mustard this audit of the cash book for 2007/08 dated 21 December 2010 is a really worrying one. Control of the cashbook is fundamental to the control of any organisation and nowhere that he has worked has let it get out of control but we are now in Broken Barnet and cash book control is well and truly broken. The words in blue come from the audit report of Barnet Council. Any comment by Mr Mustard is in red.

The objective of the Cashbook Reconciliation process is to ensure that the balances as per the bank records match the balances as per the SAP (accounting package) Mr Mustard is sure that he has been told that SAP is more than just an accounting package - he forgets for now but perhaps he was told that it was in fact a £20m disaster. General Ledger and other organisation records such that any discrepancies / timing differences may be correctly identified and rectified.

The Cashbook section is required to ensure a timely and accurate preparation of reconciliations for all main accounts. Standard operating procedure except in Barnet.

There are five main accounts; General (income), expenditure payments, expenditure Housing Benefits, expenditure Salary and Wages, and Returned Cheques. ( Mr Mustard added a comma to make this clearer, although it is clear as mud why these 5 particular accounts are chosen  )

The Cashbook section are also responsible for ensuring that unidentified items are investigated promptly and action is taken to clear suspense accounts of unallocated payment and income items. ( Suspense accounts are the black hole of accounting and it is best to simply not allow them )

The scope of the audit was to assess arrangements to ensure the timely and accurate preparation of reconciliations for all main accounts and was focussed on:

Reconciliation procedures and guidelines;

Cash book, bank and ledger reconciliations;

Cash book reconciliation records and supporting documentation;

Roles and Responsibilities

Access Rights & Back Up Arrangements; and

End of year procedures.

We noted the following areas of good practice during the audit:

Procedure notes for some of the key Cashbook processes exist and are available to staff within the Cashbook section; ( some, what percentage ? )

Systematic reconciliations are performed for all the Council’s main bank accounts; ( eventually, and so they should be )

Reconciliations performed for the General account and expenditure accounts are subject to independent review from a Senior Officer; ( at their level of pay I should think so )

Reconciliation Summary Reports are created to provide an adequate audit trail for variances that are highlighted by the reconciliation of the bank accounts; ( a reconciliation without a report would be useless )

Roles and responsibilities within the Cashbook team have been clearly defined and there is minimal duplication in work; ( I wonder which departments have maximal duplication ? )

There is adequate segregation of duties between officers responsible for the reconciliation of items on SAP to the bank accounts, and those responsible for reconciliation of amounts from AXIS to SAP. ( AXIS ? thanks Baarnett for the explanation - being a newboy my command of common Council words & acronyms is still building up )

However the following issues were identified during this audit: ( here comes trouble )

A number of procedural notes have not been fully compiled with and there is no protocol for reporting anomalies and variances in a number of the relevant procedure notes; ( rules - why should I waste my time on those ? )

Independent review of cashbook reconciliations performed is not always conducted in a timely manner; ( Late again )

Variances have not been adequately escalated, investigated and resolved; ( There are lots of entries that cannot be identified but its not our money so who gives a stuff ? )

Cashbook reconciliations are not always performed in a timely manner; ( where's the fire ? )

Reconciliations performed for the Returned Cheque suspense account are not subject to independent review from a Senior Officer; ( too busy with the king in his counting house to do any real work )

Bank statements/ files are not stored securely; ( whose desk did I leave those statements on ? or was it on the copier, or at lunch - I really cannot remember )

and

Suspense accounts are not always promptly cleared of unallocated payments. (Hercule Poirot couldn't work these out )

There was one priority 1 (high) recommendation from this audit: ( If we don't do these we are in hot water - and if what priority 1 is needs explaining then you might as well just put "High" in the first place ? - KISS - Keep Things Simple Stupid )

Cashbook reconciliations performed in a timely manner – 

Cashbook reconciliations should be performed in a timely manner, before the next period end date. ( because the longer we leave it the worse it gets )

So money comes in and money comes out but it isn't our money so who gives a fig.

Mr Mustard is struggling to believe that an organisation the size of Barnet Council, with all those expert consultants available to it has taken its eye off the ball to such an extent that a basic foundation stone of good accounting has been left to rot.

Yours frugally

Mr Mustard