Internal Audit Report Embassy Theatre

Transcription

1 Internal Audit Report Embassy Theatre Auditor Stacey Toach Audit Manager Emma Bee Date: 15 October 2013 Distribution Rob Barlow Section 151 Officer Stuart Davy Chief Executive Alison Penn Director Mark Humphreys Strategic Development Manager Aeneas Richardson Interim Theatre Manager

2 Introduction Following some concerns raised by the Interim Theatre Manager, we have completed a review of the systems and processes in place at the Embassy Theatre, Skegness. Our audit covered the following areas: Cash handling and banking Security of cash Bar stock and Bar income Artist agreements Ticket income Complimentary tickets Petty Cash and P Cards Agency Bookings Page 1 of 14

3 Executive Summary Assurance Opinion No Assurance We have identified that a number of key controls have lapsed in respect of: Stock Evaluations Use of Petty Cash Security of Cash Income reconciliation Policy and Procedural Framework An Interim Audit report was produced and issued to address the key control weaknesses immediately. We have found a number of contracts in place where there is insufficient evidence to give assurance that Council s Contracts Procedure rules have been complied with. For Ice Cream and Bar stock there has been no market testing, and there is no contract in place. It is therefore not known if value for money is being achieved. Show contracts are not consistently signed by both the Agent and the Theatre; this leaves the contract open to legal challenge. Significant concerns have arisen with regard to Data Protection practices at the Theatre both generally and specifically around the Giant Cash Bonanza Lottery Scheme, these will be addressed in a separate report. I would like to take the opportunity to thank the Interim Theatre Manager for his support during the audit and it is important to note that the majority of improvements needed were immediately implemented during the course of the review. Management Response All report recommendations have been treated as a priority and the appropriate corrective action(s) has been implemented. Once briefed, a number of site staff have worked extremely hard to implement the required changes within a very short timeframe. There remains some additional work generally regarding the site policy & procedure reviews, these are currently ongoing. The General Manager is now overseeing this piece of work. Current practices have now become standard with operational site staff and they fully appreciate the reason(s) such change was required. - Interim Theatre Manager Page 2 of 14

4 Recommendations and Agreed Actions Findings Reference Recommendations Agreed Actions Priority Responsibility & Timescale 1.1 Stock Evaluations - Bar and Ice Cream Stock evaluations be completed on a monthly basis A full stock evaluation be carried out for 2012/13 Agreed Embassy Information Manager 1.2 Petty Cash Petty cash only be used on an emergency basis for small value purchases. The Theatre no long require Petty cash and it is in the process of being paid back into Finance 31 October 2013 General purchases be made via the P Cards Stock levels be properly managed with purchases being made from approved suppliers 1.3 Cash Security The Box Office safe be kept locked at all times with the key held securely and access restricted to nominated staff. New process for cash security is now in place All keys be securely held with access restricted to a small number of nominated staff. Page 3 of 14

5 Findings Reference Recommendations Agreed Actions Priority Responsibility & Timescale 1.4 Bar and Ice Cream Ice cream Income be rung through the till once collected and verified Unique User ID numbers for till transactions be allocated to staff A record be maintained of who has cashed up on daily cash records 1.5 Procurement All purchases should be made in accordance with Contracts Procedure Rules. Working a lot closer with Technical Services and Procurement Lincs All documentation to be retained securely in relation to all tendering exercises 1.6 Suppliers A review of suppliers at the Theatre be undertaken in order to ensure that value for money is being obtained and appropriate suppliers are appointed and used in accordance with Council s Contracts Procedure Rules. Held within the Delta system. A review will be carried out every couple of months due to the requirements of the Theatre Receipts for all P Card transactions be retained. Page 4 of 14

6 Findings Reference Recommendations Agreed Actions Priority Responsibility & Timescale P Card transactions be reviewed and authorised by a Senior Officer 1.7 Agency Bookings Outstanding agents fees be recovered Regular reconciliations be undertaken to verify that Agency income is fully collected. These are being carried out monthly by the Front of House Manager Clear guidance be provided to staff around invoicing and internal recharges Medium Invoices only be raised where the value exceeds in accordance with approved policy Agreed and implemented Medium 1.8 Ticket Income Authorisation of refunds be clearly recorded. Staff have been reminded 1.9 Procedural Policies and procedures are reviewed and Agreed. There is going to Framework updated accordingly be a full review of all policies to bring them in line with the IMS procedures at the Leisure Centres. This A signed record of acknowledgement be will include ensuring that obtained from all staff and retained each member of staff has signed to confirm that they Medium Medium Medium General Manager 30 September 2014 Page 5 of 14

7 Findings Reference Recommendations Agreed Actions Priority Responsibility & Timescale have read and understood the policies and this is retained on their induction files. 2.0 Artist Agreements Each contract be signed by both the Theatre and the Agent and retained on file. Subsequent amendments to an agreed contract be formally recorded with signed agreements by both parties All documentation relating to the show should be retained. This is now all on the Artifax system Income reconciliations be checked for accuracy prior to issue of the invoice Medium 2.1 Complimentary tickets A full record be maintained of all complimentary tickets Page 6 of 14

8 Low Priority Advisory Comments The following items are advisory comments arising from the audit, which management may wish to consider implemented to improve the system or performance. No Findings Advisory Comment 1 We reviewed access permissions to the Databox system and Access permissions should be kept up to date identified a member of staff who had previously left the Authority around 2 years ago. We also reviewed access permissions to the Theatre s Facebook webpage. A high number of staff had access which was deemed unnecessary and since Communications have removed their access. Administrators of the Theatre s Facebook page should be kept to a minimum. 2 There is a 700 float in the box office. This is an historical value and has never been reviewed. The Box Office review the float value to see whether this can be reduced to reduce the value of cash held on site 3 An instance was identified where no income had been received by the Theatre for the sale of merchandise from a show due to low merchandise sales. There was no record of authorisation or the actual value of sales. 4 At the end of each show volunteers collect donations on behalf of the Rotary Club. The money is not counted, just placed in a sealed envelope which is collected the next day by a Rotary representative. Written authorisation be obtained in order to default from the agreed income share Cash collected on behalf of the Rotary be counted and handed over with a record of value and receipt maintained There is no written confirmation that the Rotary has received the cash from the Theatre. Page 7 of 14

9 Findings 1.1 Stock Evaluations - Bar and Ice Cream Stock counts have been completed on a regular basis but no reconciliation to sales income had been carried out since July This is a key control in preventing fraud and error. During 2012/13 revenue from the Theatre Bar and Ice Cream sales was 86, and respectively Since the issue of the Interim report stock evaluations have been completed for April 2013 August The most recent stock evaluation is showing a small surplus for the Bar and a small deficit for the Ice Cream The full 2012/13 stock evaluation is in progress. Stock evaluations be completed on a monthly basis A full stock evaluation be carried out for 2012/ Petty Cash It was highlighted that petty cash was being used for general purchases, Councils Financial Procedure rules state that no more than 50 should be spent in any one transaction with Petty Cash; however some instances were identified where purchases had exceeded this limit. A large proportion of Petty Cash receipts were for the purchase of stock for the bar from local supermarkets. Stock levels should be continually monitored to ensure that purchases are made through an appropriate supplier and if an immediate purchase is required then a P Card should be used. The Theatre has two 100 petty cash floats however they are in the process of obtaining two additional P Cards which should ensure that petty cash is only used for small, emergency purchases. Petty cash only be used on an emergency basis for small value purchases. General purchases be made via the P Cards Stock levels be properly managed with purchases being made from approved suppliers Page 8 of 14

10 The petty cash float be reduced to Cash Security The safe in the Box Office holds a 700 float and is left unlocked throughout the day. Inside the safe were a number of unlocked cash tins which held the money. Although there is a combination password on the door to the Box Office, most members of staff have access. The key cabinet in the back Admin office containing keys to bar safes and the freezers is also kept unlocked with no access restrictions. There has recently been an incident whereby cash has gone missing from the safe but as a result of the unrestricted access it has not been possible to establish how that happened or who was responsible. Access to cash and stock should be strictly controlled to a number of key nominated staff to reduce the risk of misappropriation. The Box Office safe be kept locked at all times with the key held securely and access restricted to nominated staff All keys be securely held with access restricted to a small number of nominated staff. 1.4 Bar and Ice Cream Ice Cream is sold within the auditorium during intervals but the income is simply counted, placed in envelopes and placed in the safe. To reduce the risk of error and theft and in order to provide a proper audit trail Ice cream income should be rung through the till once collected and verified. The tills in the bar have the facility to provide unique User ID numbers for staff but these are no longer being assigned. Each member of bar staff should be allocated a user ID so that there is a full audit trail of their transactions. No record is made of which staff member has cashed-up the bar till; this record should be maintained should any queries arise. Ice cream income be rung through the till once collected and verified Unique User ID numbers for till transactions be allocated to staff. A record be maintained of who has cashed up on daily cash records Page 9 of 14

11 1.5 Procurement We reviewed four purchases where expenditure was in excess of One of the suppliers was the sole provider of the item therefore no quotes were obtained. The other three suppliers were all for works relating to the Theatre refurbishment in 2012 with spend of 10,680, 7476 and Technical Services staff have stated that quotes were obtained however no evidence was provided and we therefore cannot provide assurance that the purchases were made in accordance with Contracts Procedure Rules. All purchases should be made in accordance with contracts procedure rules All documentation to be retained securely in relation to all tendering exercises 1.6 Suppliers The two current suppliers of Bar stock and Ice Cream have been used for a number of years, during 2012/13 we identified that the Theatre spent 20, and 6, with these companies for Ice Cream and Bar stock respectively. No market testing or tendering has been undertaken and it is not therefore known if value for money is being achieved. We found that a high proportion of P card and Petty cash spend is on bar stock. P Card spend between June 2012 and June 2013 included: 21, at Bookers Cash and Carry 4, at Tesco 2, at Morrisons We were unable to locate receipts for all P Card transactions and testing showed that the Embassy Information Manager had authorised the majority of claims including the Team Leader s. A Senior Officer should authorise all transactions. A review of suppliers at the Theatre be undertaken in order to ensure that value for money is being obtained and appropriate suppliers are appointed and used in accordance with Council s Contracts Procedure Rules. Receipts for all P Card transactions be retained P Card transactions be reviewed and authorised by a Senior Officer Page 10 of 14

12 1.7 Agency Bookings External agents sell tickets on behalf of the Theatre in return for a percentage of sales income. An instance was highlighted where an agent had not been invoiced for income due resulting in an amount of not having been collected. There is no reconciliation undertaken to verify that income has been received from the Agents as expected. Reconciliation is a key control and should be undertaken on a regular basis. A number of invoices were identified that had been raised for less than 40 which is the minimum value set in the AR Operational Policy to ensure that the cost of raising an invoice was recovered. Outstanding Agents fees be recovered. Regular reconciliations be undertaken to verify that Agency income is fully collected Clear guidance be provided to staff around invoicing and internal recharges Invoices only be raised where the value exceeds in accordance with approved policy 1.8 Ticket Income - Refunds We found that refund reports are printed daily and signed by the Front of House Manager retrospectively. The Front of House Manager stated that verbal authorisation is obtained prior to a refund being processed but there is not a consistent record of this. Recommendation Authorisation of refunds be clearly recorded 1.9 Procedural Framework Policies and procedures were in place at the Theatre but some had not been updated since 2009/10. The testing performed during the review indicated that agreed policies and procedures were not being followed and internal control had lapsed in virtually all areas. The Embassy Information Manager stated that all staff had signed an acknowledgment of all procedure notes both when they were initially introduced and Page 11 of 14

13 following subsequent reviews however we were unable to evidence this as these forms could not be located. Given the findings detailed in this report it is important that all policies and procedures in respect of the Theatre be reviewed, updated and issued to all staff. A signed acknowledgement of receipt should be obtained and retained. Policies and procedures are reviewed and updated accordingly. A signed record of acknowledgement be obtained from all staff and retained. 2.0 Artist Agreements A contract is produced for each show however they are not consistently signed by both the Theatre and the Agent. Legal Lincolnshire have advised that there should be a contract signed by both parties to ensure that the agreement is legally binding. Verbal discussions take place between the Theatre and the Agent; however these are not recorded which leaves the Council open to legal challenge should a dispute arise. Reconciliation of show income is carried out after each show; however we found an instance where an incorrect figure had been used to calculate the invoiced amount which led to the Agent overpaying the Theatre by This Agent has another show booked with the Theatre and the overpayment will be deducted from their next invoice. The artist agreement files did not contain all documentation relating to the show. It is important that all documentation is securely retained. Each contract be signed by both the Theatre and the Agent and a copy retained on file Subsequent amendments to an agreed contract be formally recorded with signed agreement by both parties. Income reconciliations be checked for accuracy prior to issue of the Invoice. All documentation relating to the show should be retained Page 12 of 14

14 2.1 Complimentary tickets Inadequate records were maintained in respect of complimentary tickets, we found instances where complimentary tickets had been verbally agreed and issued and for one show we were unable to verify who all the complimentary tickets were for or whether they had been issued or collected. A full record of the authorisation and issue of complimentary tickets should be maintained in order to reduce the risk of fraud or error and protect the Theatre in the event of challenge by the Show Promoter. A full record be maintained of the authorisation and issue of all complimentary tickets Page 13 of 14

15 Appendix 1 Full Assurance Assurance Definitions 1 Our critical review or assessment on the activity gives us a high level of confidence on service delivery arrangements, management of risks, and the operation of controls and / or performance. The risk of the activity not achieving its objectives or outcomes is low. Substantial Assurance As a guide there are a few low risk / priority actions arising from the review. Our critical review or assessment on the activity gives us a reasonable level of confidence on service delivery arrangements, management of risks, and operation of controls and / or performance. There are some improvements needed in the application of controls to manage risks. However, the controls are in place and operating sufficiently so that the risk to the activity not achieving its objectives is medium to low. As a guide there are low to medium risk / priority actions arising from the review. Limited Assurance Our critical review or assessment on the activity identified some concerns on service delivery arrangements, management of risks, and operation of controls and / or performance. The controls to manage the risks are not always being operated or are inadequate. Therefore, the risk of the activity not achieving its objectives is medium to high. As a guide there are medium and a few high risk / priority actions arising from the review. Our work did not identify system failures that could result in any of the following: - damage to the Council s reputation - material financial loss - adverse impact on members of the public - failure to comply with legal requirements No Assurance Our critical review or assessment on the activity identified significant concerns on service delivery arrangements, management of risks, and operation of controls and / or performance. Our work identified system failures that could result in any of the following: - damage to the Council s reputation - material financial loss - adverse impact on members of the public - failure to comply with legal requirements The controls to manage the risks are not being operated or are not present. Therefore the risk of the activity not achieving its objectives is high. As a guide there are a large number of medium and high risks / priority actions arising from the review. 1 The assurance opinion is based on information and evidence which came to our attention during the audit. Our work cannot provide absolute assurance that material errors, loss or fraud do not exist. Page 14 of 14