Situation & Challenges

Client: This organisation is a joint venture partnership between a private global services organisation and two local government councils. It provides a one-stop-shop for information & services to the public, as well as internal resources for Finance, HR and IT to the two councils.

Issue: During the course of the 2005/06 external audit, a number of process issues and control weaknesses were identified by the Audit Commission in respect of fixed assets:

• poor transactional data integrity
• no reconciliation of fixed asset register to service departments records
• non-compliance with Statement of Recommended Practice (SORP)
• allocation of expenditures to incorrect financial periods
• inconsistent application of internal accounting policies
• lack of line manager capabilities to appropriately address issues
• poor standard of audit working papers

The value of the fixed asset portfolio was £1.6bn as at 31 March 2007 and the number of fixed assets transactions for the twelve months ending on that date was in excess of 22,000.

Objective: The above issues needed to be addressed within a compressed timescale to meet the accelerated 2006/07 annual accounts closedown timetable.

Actions The client selected KB  for this project as he has a track record of identifying business process improvements and developing plans that mitigate audit risk.

Keith consulted with various line managers and developed a rigorous plan that delivered a sustainable step change in capability and addressed the financial control issues.

Keith undertook the following in accordance with the plan:

• validated a sample of fixed asset transactions for each asset group
• checked that the controls around data capture and the means for extracting information from the corporate ERP system were working properly
• ensured that nominated staff understood their roles and responsibilities in understanding fixed assets transactions and could resolve any new issues
• "got behind" the capital transactions to assess the underlying business processes
• reviewed and amended internal capital accounting policies
• ensured compliance with 2006/07 SORP

Outcome

All significant financial control issues identified by the Audit Commission were addressed and a full set of audit working papers prepared.

In addition, the following added-value tasks were completed;

• Critical success factors were identified to measure the ongoing success of managing audit risk and improving SORP compliance
• Improvements to thirteen business processes were introduced to ensure sustainable capability in accounting for capital transactions
• Weaknesses in other business processes were identified, logged and an assessment of audit risk made. All items were evaluated as low risk
• Follow on recommendations were made to further improve the business processes for capital transactions as part of CSD's continuous improvement programme

Conclusion

The Audit Commission's report on the external audit identified:

• High standard of audit working papers
• Increased knowledge of staff in responding more fully and ably to auditor queries
• No material errors in accounts
• Unqualified audit opinion

The Client's Director of Finance commented:

"This is where we wanted to be post-audit and is excellent progress in moving forward to becoming a centre of excellence".

The Client provided the following feedback in relation to Keith's work:

"Keith understood that we needed a bloodhound and not a watchdog. Coupled with an innovative and flexible approach, the Project would not have been a success without him."