Internal Audit Consultancy. Abingdon BID February 2018 VALE OF WHITE HORSE DISTRICT COUNCIL

Transcription

1 Consultancy Abingdon BID February 2018 VALE OF WHITE HORSE DISTRICT COUNCIL Draft issued: 20 March 2018

2 CONTENTS Page 1. Introduction 2 2. Background 2 3. Main Findings 3 4. Acknowledgements 6 5. Observations 7 Appendix 1 Interviewees and report distribution 9 Statement of responsibility 10 Abingdon BID 2017/2018 1

3 1. INTRODUCTION 1.1 This report details the findings from a consultancy review that has been conducted by internal audit within Abingdon BID. The review has been undertaken following concerns raised with the Head of Development and Regeneration by the interim chairman of Abingdon BID advisory board. This work has been undertaken as part of the contingency allowance within internal audit s 2017/2018 audit plan, agreed with the audit and governance committee of Vale of White Horse District Council (VWHDC). 1.2 The following areas have been reviewed to establish if: 2. BACKGROUND Governance arrangements, including roles and responsibilities, within Abingdon BID Limited are operating effectively and in accordance with terms of the operating agreement and any relevant policies, procedures and legislative requirements. Accounting procedures and financial transactions are correct and there is an audit trail evidencing review and authorisation of transactions. 2.1 A Business Improvement District (BID) is covered by the Business Improvement Districts (England) Regulations 2004 and such amendments to those regulations which may be made by the Secretary of State pursuant to Section 48 of the Local Government Act The regulations cover developing BID proposals, BID ballots, BID revenue account operation (for managing the collection and pay-over of the levy) and termination of BID arrangements. They do not cover how the levy is to be managed once it is passed over to the BID company, but do refer to the business plan. The BID body is responsible for setting out how the BID will operate. 2.2 Abingdon (BID) is in place within a specific area of Abingdon, having been voted in by local businesses in October This was based on a business plan for the period 2016 to 2021, with an aim of investing almost 800,000 into Abingdon town over a five-year period. Abingdon BID Limited (AbBID) is a not for profit company fulfilling the role of the BID body. 2.3 VWHDC, as the billing authority, is responsible for collecting the BID levy from relevant businesses and administering the BID revenue account used to transfer levy funds to AbBID. Whilst VWHDC can support and advise, AbBID are responsible for operating the BID and utilising the levy funds, along with any other funding obtained, to provide the projects agreed within the business plan. 2.4 AbBID employed a company, In Publications (IP), to manage delivery of the BID projects. During the course of this review, IP gave notice of their termination of the agreement with AbBID. 2.5 Businesses paying the BID levy have asked for details of how their funding is being spent and there is a perceived lack of openness and transparency. Concerns have been raised with the council s Head of Development and Regeneration, by the interim chairman of AbBID advisory board, regarding how Abingdon BID 2017/2018 2

4 AbBID is operating. Queries have not been notified regarding the collection of the levy and transfer of funds to AbBID by VWHDC. 3. MAIN FINDINGS 3.1 Governance arrangements - VWHDC An operating agreement between VWHDC and AbBID from 6 July 2016 sets out how the Abingdon BID levy is collected and managed. Under this agreement, the council has set up the BID revenue account to manage receipt of levied funds, implemented the collection process and is passing collected funds to AbBID. The collection process has not been covered within this consultation as issues have not been raised in this area The operating agreement includes a requirement for there to be regular liaison meetings with the council and quarterly meetings to review progress of AbBID in achieving the aims of the BID proposal business plan and BID company aspirations, as well as reviewing collection and enforcement of the levy. Two quarterly monitoring meetings have taken place as at February From review of action notes from the two quarterly meetings, financial details of the BID levy collection rates and debts are discussed. The purpose of the monitoring meeting was clarified by VWHDC at the outset and the May 2017 meeting and specifically referred to the requirements of the operating agreement. However, the update from AbBID at the January 2018 meeting focused on specific issues rather than progress against the plan. ( observation 2) Other than the terms of the operating agreement, there is no clearly defined and documented framework for the council providing support and guidance to AbBID. The council should not, and does not, have a representative within AbBID or on its board, as this is an independent company with differing roles and responsibilities as far as the Abingdon BID. It was noted that a VWHDC officer has attended seven of the 12 AbBID board meetings to date. ( observation 1) 3.2 Governance arrangements - AbBID AbBID are registered as a limited company through Companies House. Articles of association for AbBID set out the object of the company is to develop businesses within Abingdon to improve security marketing of the town, grounds etc. No reference is made to delivery of the Abingdon BID business plan or operation of the company as a BID. Internal audit has not had sight of formal procedures or rules setting out the role of the board directors, composition of board meetings and the decision making process as far as Abingdon BID. The 26 September 2017 board minutes state that the board looked at BID board responsibilities, but do not record any agreement or approval of arrangements. The role of AbBID directors in decision making and managing the Abingdon BID is not clear. ( observation 3) As at 28 February 2018, there were two AbBID directors registered with Companies House. One of these existing directors no longer works within Abingdon, so stepped down as chairman from September 2017 but remains a director until the position can be filled. The other director also announced Abingdon BID 2017/2018 3

5 his stepping down from the board and as director in September 2017 but remains registered with Companies House. Two further directors were in position, one from 6 April 2016 until 8 May 2017 and the other, who was the Abingdon BID Manager, was director from 28 June 2016 until 13 February The Articles of Association sets no maximum for AbBID directors but does refer to quorum for transaction of business at a meeting to be never less than two, unless otherwise fixed or if there is only one director. Only having two directors makes achieving a quorum more challenging. ( observation 4) AbBID have board meetings approximately every two months which are attended by local businesses as well as board directors and board members. From review of minutes, the highest recorded number of businesses attending was six and vacant board member positions were noted on the Abingdon BID website in the section about the team. There have been 12 board meetings since May Two of these only had one director in attendance, so do not appear to have been quorate. ( observation 5) From review of minutes of AbBID board meetings, since June 2017 individual minute items are not numbered. Resolutions are no longer clearly stated, or in bold, within minutes but agreements have been recorded in recent minutes. Minutes were seen to list some attendees as an observer, but roles of other attendees are not stated, for example who is chairman, who are directors or board members. It is not clear what the role of the chairman is as minutes have shown meetings opened by the AbBID chairman but then handed over to the Abingdon BID Manager. Where previous meeting minutes are agreed the date of the meeting they relate to is not stated. Agendas and supporting documents were not available to support items referred to in the minutes. ( observation 6) In order to deliver the Abingdon BID aims, AbBID appointed a private company, In Publications (IP). A service agreement between IP and AbBID was signed 1 May 2016 based on a proposal dated 3 April A BID Manager to deliver projects in the plan was provided by IP under their proposal for 20 hours per week with support provided by BID consultants no less than 4 full days per month. A job description for the role of the Abingdon BID Manager was not available. Details of reporting and accounting requirements were not set out in the service agreement. IP have subsequently terminated the agreement and it is understood that the BID Manager role is vacant. ( observations 3, 7 and 8) 3.3 Accounting and financial transactions - VWHDC The operating agreement between VWHDC and AbBID includes a requirement for AbBID to provide financial statements to the council in the form of a BID company report and copies of accounts to be filed at Companies House. The definition of the BID company report as set out in the operating agreement is financial statements covering: income & expenditure analysed into main categories Other income and expenditure that is not the BID levy Actual and pending deficits Abingdon BID 2017/2018 4

6 Initiatives and schemes upon which the levy has been spent by Abingdon BID Limited. The reports are to be provided by the 31 July each year from 2017 to 2020 in respect of the previous financial years. As recorded in above, VWHDC clarified operating agreement requirements at the 23 May 2017 monitoring meeting. However, the full detail required has not been provided by AbBID. ( observations 2c and 13) From review of transactions as at 20 February 2018, a total of 218, BID levy was paid by VWHDC to AbBID. This comprised of 108, regarding 2016/2017 collections and 110, regarding 2017/ Accounting and financial transactions - AbBID AbBID annual report and unaudited financial statements uploaded to Companies House for 8 March 2016 to 31 March 2017 comprise of a balance sheet and notes to the financial statements. These are prepared in accordance with FRS 105, the Financial Reporting Standard applicable to the Micro-Entities Regime. FRS 105 requires financial statements to include a statement of financial position, which is fulfilled by the balance sheet, and an income statement. Notes to the accounts record that the board approved and authorised the statement 8 August However, minutes of the board meeting of 8 August 2017 do not record consideration or approval of the financial statement. ( observation 9) AbBID provided internal audit with copies of their nominal ledger transactions for 2016/2017 and for 2017/2018 as at 20 February 2018 along with copies of bank statements. The ledger transactions were compared VWHDC s records of payments made to Abingdon BID Limited and transactions were found to match. A further check of bank statement receipts with the nominal ledger also matched Excluding VAT, AbBID financial transactions as at 20 February 2018 record a total of 218, received from VWHDC from the BID levy. This comprised of 101, received during 2016/2017 and 117, during 2017/2018 to date. Allowing for payments of 6, made during 2017/2018 in respect of the 2016/2017 levy, the amounts match that recorded by VWHDC A 2016/2017 annual report produced by IP, on behalf of AbBID, states income and expenditure compared with the original business plan. It was noted that the business plan expenditure within the report was stated as 159,000 but should be 151,000, which is the sum of the items listed. The stated BID levy of 108,492 is correct for the amount handed over to AbBID relating to 2016/2017 but, as explained in above, the amount paid over during 2016/2017 was 101, Stated income could be made clearer and tied back to the levy due and collected to provide greater transparency. No accounting or reporting procedures or guidelines have been provided by AbBID for review. ( observations 9-11) Financial transactions for AbBID record a total of 96,000 passed to IP during 2016/2017 for delivery of the BID plan plus a management fee of Abingdon BID 2017/2018 5

7 5,000 plus VAT giving a total of 102,000. Whilst access was not available to records of IP financial transactions, an informal statement was provided to AbBID of IP s income and expenditure for 2016/2017 and for 2017/2018 to January The IP records differ to that in AbBID s records and the lack of detail does not facilitate reconciliation to explain the variances. Furthermore, IP stated expenditure by category differs to that set out in the annual report. ( observations 7, 8 and 12) As set out in above, AbBID are required to submit a BID company report to VWHDC under the operating agreement. Whilst the accounts filed with Companies House have been provided to VWHDC, these do not cover the requirements detailed within the BID company report as set out in the operating agreement. The detail level in the annual report, referred to in above, does provide a summarised list of expenditure by main category, but does not cover individual schemes and initiatives upon which the BID levy has been spent. Hence AbBID reports do not fulfil the requirements of a BID company report as defined in the operating agreement as per above. ( observation 2c and 13) 4. ACKNOWLEDGEMENTS 4.1 Internal audit would like to take this opportunity to thank all those involved for their assistance with the review. Abingdon BID 2017/2018 6

8 5. OBSERVATIONS Internal audit has made the following observations which, if addressed, could assist with increasing the likelihood of success for the Abingdon BID. GOVERNANCE VWHDC 1. VWHDC guidance and support to AbBID Other than the terms of the operating agreement, there is no clearly defined and documented framework for the council providing support and guidance to AbBID GOVERNANCE VWHDC and Abingdon BID 2. VWHDC and AbBID Monitoring and liaison meetings a) Monitoring meetings between should take place quarterly as per the operating agreement. b) Agreement should be recorded as to the frequency and purpose of liaison meetings as per the operating agreement. c) A standard agenda could be used to prompt provision of required AbBID reports at the meetings , and GOVERNANCE Abingdon BID 3. Abingdon BID Limited - company governance documentation a) Governance procedures for managing Abingdon BID should be in place. These should include the role of the board directors, role of board members, details of the decision making process, and record keeping requirements. b) Procedures should also include a requirement for declarations of interest from BID board members and how potential conflict or bias should be managed. c) Job descriptions should be in place for paid roles such as the Abingdon BID Manager. 4. Abingdon BID Limited - company directors AbBID should ensure that sufficient directors are appointed to the role who are able and willing to fulfil agreed requirements. 5. Board meetings - attendance AbBID should encourage sufficient representation at board meetings from a spread of businesses. 6. Board meetings - minutes and agendas AbBID minutes of board meetings should be formal and have numbered minutes, clearly state resolutions, list roles of attendees, state dates of any previous minutes being agreed, include declarations of interest and either be supported by agendas and reports referred to within minutes, or have reports appended to the minutes and Abingdon BID 2017/2018 7

9 7. AbBID IP service agreement termination AbBID should ensure there is handover of all relevant documentation and equipment prior to the end of the service agreement. Details of previous and ongoing projects should be obtained along with records supporting income and expenditure to date and Accounting and financial transactions Abingdon BID 8. AbBID financial statements independent review and authorisation AbBID financial statements should be subject to review and agreement at AbBID board meetings and evidenced as such in minutes. 9. AbBID annual report 2016/2017 AbBID should review the detail provided in the 2016/2017 annual report and reconcile back to records to ensure it is accurate. Income and expenditure should reflect transaction during the financial year, or explain where this differs, such as payments made during the next year relating to the previous year. 10. AbBID annual report 2017/2018 When producing the 2017/2018 annual report, AbBID should consider including details of the BID levy due and collected as well as that available for spending to provide comprehensive details. 11. AbBID financial procedures AbBID should ensure there are formal financial and accounting procedures that are regularly reviewed and agreed. These should clearly state roles and responsibilities for decision making, require independent review of records and set out documentation required. 12. Expenditure on Abingdon BID projects AbBID should ensure detailed records are available evidencing the spend to date, and going forward, on Abingdon BID projects. Expenditure should be reconciled back to reported income and expenditure. 13. AbBID company report AbBID should provide VWHDC with the BID company report as set out in the definitions within the operating agreement , and and Abingdon BID 2017/2018 8

10 APPENDIX 1 INTERVIEWEES AND REPORT DISTRIBUTION 1. INTERVIEWEES 1.1 Suzanne Malcolm, Head of Development and Regeneration Melanie Inness, Interim Chairman Abingdon BID advisory board 2. REPORT DISTRIBUTION 2.1 A copy of this draft report has been distributed to the following officers: Suzanne Malcolm, Head of Development and Regeneration Mark Stone, Chief Executive William Jacobs, Head of Finance (S151 Officer) Melanie Inness, Interim Chairman Abingdon BID advisory board Bryan Brown, Abingdon BID Director Paul Holt, Abingdon BID Director Abingdon BID 2017/2018 9

11 STATEMENT OF RESPONSIBILITY Internal audit takes responsibility for this report, which is prepared on the basis of the limitations set out below. INTERNAL AUDIT MARCH 2018 Contact Persons: Sandy Bayley Interim Audit Manager Tel: The matters raised in this report are only those which came to our attention during the course of our review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by you for their full impact before they are implemented. The performance of internal audit work should not be taken as a substitute for management s responsibilities for the application of sound practices. We emphasise that the responsibility for a sound system of internal control rests with management and work performed by internal audit should not be relied upon to identify all strengths and weaknesses that may exist. Nor should internal audit work be relied upon to identify all circumstances of fraud or irregularity should there be any, although our audit procedures have been designed so that any material irregularity has a reasonable probability of discovery. Even sound systems of internal control may not be proof against collusive fraud. Internal audit procedures are designed to focus on areas as identified by management as being of greatest risk and significance. Effective implementation of our recommendations by management is important for the maintenance of a reliable internal control system. This report has been prepared solely for VWHDC and Abingdon BID Limited use. No responsibility to any third party is accepted as the report has not been prepared, and is not intended, for any other purpose. Abingdon BID 2017/