Independent audit finds fundamental weaknesses and failings within Morecambe Town Council
The audit - which focused on the financial year ending March 2019 - made 49 recommendations, many of which were based on "fundamental weaknesses that represent a serious risk to the control systems and that require immediate attention".
The audit report compiled by Internal Audit Yorkshire concluded: "There have been fundamental weaknesses of legal, procedural and governance failings that has exposed the council to error, omission, manipulation, and risk of fraud due to inadequate internal controls that placed the system objectives at serious risk.
"As a result of the findings, our objective opinion is to provide the council with none assurance for the effectiveness of the financial and internal control systems that were in place for the financial year ending March 31 2019."
Internal Audit Yorkshire made a total of 49 recommendations for the council to consider.
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Of these, 37 are described "fundamental weaknesses that represent a serious risk to the control systems and that require immediate attention".
The report also included a response from former Town Clerk Robert Bailey, and council chairman Janice Hanson.
They said that the review was requested by the council as a result of "concerns of alleged maladministration that had been raised by councillors and a promise that was subsequently made to our residents that a comprehensive audit would be undertaken".
They said: "The town council fully accepts the findings, conclusions and recommendations made resulting from this audit review."
They go on to say that the town council will now determine what further actions need to be taken as a result of the audit.
The audit found that the town council was operating with two bank accounts to pay suppliers and that "frequent internet bank transfers were taking place to move money from the one account to the other".
It found that the opening balances on the Scribe Accounting System had not been entered correctly, and the balances in the bank accounts showed a different set of figures.
It recommended that the opening balances are entered into a cashbook to ensure it is up to date and records the council's opening cash balances.
The audit also found that five payments made to Morecambe BID did not comply with the council's Financial Regulations - including two that did not have any council authorisation, purchase order, contract on file or retrospective council approval.
This included one cheque for £6,200 for planters on Morecambe Prom.
In reference to the Morecambe BID payments, auditors recommended that the council should consider recovering the funds if deemed appropriate.
The report also stated that if there is evidence of fraudulent intent from the parties involved in the transaction, the matter should be referred to the police.
Payments totalling £5,338.21 made to several business and organisations on behalf of Morecambe In Bloom were also questioned.
The audit said: "...we could not find any reference in council minutes or any formal agreements on file that confirm the town council's responsibility or financial contributions towards Morecambe In Bloom."
It noted that the town council had allocated a budget of £1,500 for the 2018/19 financial year for Morecambe In Bloom, however it was unclear if the money was being held on behalf of the third party.
It also noted that the organisation is made up of serving members on the town council.
The audit recommended that the council should not make payments on behalf of other organisations, and a full review of all transactions should be undertaken to identify council related expenditure.
Financial Regulations rules require the council to obtain three tenders for works between the value of £1,000 and £5,000.
The audit identified payments that had not followed these rules - one for Speeder Ltd (trans 95) for £3,335 plus VAT for a toilet door access system, and one for Bucket and Spade Marketing for four editions of the Town Council Newsletter at a cost of £3,200 plus VAT.
The audit also made recommendations on minute details, describing minute taking for authorising spending as "insufficient".
It found inadequate audit trails, incomplete invoices, and "significantly weak" controls over schedules of payments, recommendations and approvals which "left the systems exposed to error, omission or manipulation".
It found that payment schedules presented to the Financial and Management committee had been unsigned and the payments had not been recorded in the council minutes, making it "extremely difficult for the council to monitor recommended and approved expenditure".
It also identified some payments that had been missed off the payments schedule for approval.
Having reviewed council minutes, it found that on almost all occasions, the schedule of payments had been left unchallenged.
The Morecambe Town Council Internal Audit Report, which The Visitor and the Lancaster Guardian has obtained a copy of, was published on August 6
Luke Trevaskis, Proper Officer at Morecambe Town Council said: "Morecambe Town Council will be considering the matters raised in the audit report and intend to publish the report alongside a statement on October 1 2020."