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Homes for Northumberland – Review of Rent Debit and Reconciliations 2009/10
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Page 1 of 18
1 Introduction
1.1 This audit was undertaken in accordance with the agreed 2009/10 Annual Audit Plan.
1.2 Testing carried out during the audit has concentrated on transactions, processes and systems during the financial year
2009/10.
1.3 The Audit staff involved were Sam Wood, Auditor and Chris Henderson, Senior Auditor.
1.4 Recommendations set out in this report are categorised as follows:
Priority – High: A fundamental control issue, or other matter, that must be addressed immediately.
Priority – Medium: A significant control issue that must be addressed within three months
Priority – Low: An issue that must be addressed within the next year.
2 Background
2.1 Homes for Northumberland came into existence on 1 April 2009 following Local Government Reorganisation (LGR) in
Northumberland. The company was originally founded in February 2002 as an Arms Length Management Organisation
(ALMO) with the name of Blyth Valley Housing in order to manage the housing stock of the former Blyth Valley Borough
Council.
2.2 On 1 April 2009 the company changed its name to Homes for Northumberland and took over the management of the
housing stock of the former Alnwick District Council. Homes for Northumberland is a non-profit making company. The
new organisation manages over 8,500 homes on behalf of the Council under the terms of a formal management
agreement.
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2.3 Northumberland County Council is responsible for setting the rent levels on an annual basis. It should be noted that in
August 2009 for the first time a rent reduction exercise was carried out following an Amending Determination to the
Housing Revenue Account Subsidy Determination by the Department of Communities and Local Government (DCLG).
2.5 The former Rents Manager at Alnwick has recently been appointed to the Neighbourhood Housing Manager’s position
at Alnwick. Homes for Northumberland are now responsible for rent collection and reconciliations within the rent
system.
2.6 Blyth and Alnwick currently use different computer administration systems. Blyth uses the Anite OHMS system and
Alnwick uses the Northgate system. The Tenants Rental Account and Housing Revenue Account for both areas are
maintained within the General Ledger of Northumberland County Council’s Oracle E-Business Suite. Reconciliations
are therefore undertaken within the computer administration systems themselves and also with the Oracle E-Business
Suite.
3 Operational Structure
3.1 The Director of Resources at Northumberland County Council is ultimately responsible for provision and maintenance of
Northumberland County Council’s General Ledger within the Oracle E Business Suite.
3.2 The Director of Finance at Homes for Northumberland is ultimately responsible for the provision and maintenance of the
two computer administration systems used by Blyth and Alnwick.
4 Audit Objectives/Approach
4.1 During the course of the audit discussions have been held with the following officers:
Iain Henderson, Director of Finance and Resources, Homes for Northumberland
Richard Bryan, Regional Operations Manager, Blyth
Ian McLackland, Regional Operations Manager, Alnwick
Dave Swaddle, Rents Manager, Alnwick
Barry Gibson, Lettings Officer, Alnwick
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Fiona White, Technical Officer, Alnwick
Richard Tosney, Debit Control and Finance Officer, Blyth
Andrew McGregor, ICT Manager, Blyth
Philippa Storey, Housing Needs Manager, Blyth
Sandra Richardson, Accounting Assistant, Financial Management, NCC
Colin Logan, Head of Financial Services, NCC
Elaine Gibb, Development Officer, NCC
4.2 Our work has concentrated on the following areas:
Written Procedures
Rent Setting
Void Properties
Deleted/Sold Properties
Properties with ‘Nil’ rents payable
New Tenancies
Access to Computers and Security
Reconciliations between the Housing Rents Systems and the General Ledger
Reconciliations between the Housing Rents Systems and the Cash Collection System
Reconciliations between the Housing Rents Systems and the Housing Benefit Systems
Reconciliations at the 2008/09 Year End
4.3 Section 6 of this report highlights areas where it is recommended that improvements in control are made.
5 Audit Opinion
5.1 This section of the report is important in that it provides an audit opinion of the System/Service under review and highlights
the degree of reliance that can be placed upon the internal control mechanism. The Audit Service uses a Standard
Definition of Assurance document which categorises the levels of assurance as follows:
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Assurance Classifications
Full assurance Full assurance that the system of internal control is designed to meet the organisation’s
objectives and controls are consistently applied in all the areas reviewed.
Significant assurance Significant assurance that there is a generally sound system of control designed to meet the
organisation’s objectives. However, some weakness in the design or inconsistent application of
controls put the achievement of particular objectives at risk.
Limited assurance Limited assurance as weaknesses in the design or inconsistent application of controls put the
achievement of the organisation’s objectives at risk in the areas reviewed.
No assurance No assurance as weaknesses in control, or consistent non-compliance with key controls, could
result (have resulted) in failure to achieve the organisation’s objectives in the areas reviewed.
5.2 Homes for Northumberland came in to existence on 1 April 2009, at the same time that the newly formed Northumberland
County Council Unitary Authority came into existence following Local Government Reorganisation. As a result both
organisations have experienced significant ‘teething’ problems during 2009/10 as systems and processes become
embedded.
5.3 During the 2009/10 financial year Blyth and Alnwick have used different administration systems. Blyth has continued to use
the Anite system and Alnwick has continued to use the Northgate system for rents administration. It is understood that
plans are in place to migrate the data from the Alnwick Northgate System to the Blyth Anite System during 2010/2011. It is
important that this migration is progressed as soon as possible so that common procedures and practices can be adopted.
5.4 Audit testing has highlighted a lack of documented procedures in relation to reconciliations and a general lack of
independent checking. Issues regarding reconciliations at Alnwick, particularly between the Northgate System and the
General Ledger are also a cause of concern particularly as responsibilities at the time of the audit were not clear.
5.5 As a result of the problems identified above and within section 6 of this report we can only offer limited assurance as
weaknesses in the design or inconsistent application of controls put the achievement of the organisation’s objectives at risk
in the areas reviewed. We are, however, aware that this year has been particularly difficult as staffing structures are
reviewed and processes reviewed and embedded and we are confident that Homes for Northumberland will address these
issues, increase control and reduce future risk to the organisation’s objectives.
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6 Matters Arising and Recommendations
Findings from the 2009/10 review of Homes for Northumberland – Rent Debit and Reconciliations are detailed in the
following table:
Ref Risk System Details Finding Recommendation
Rent Debit
6.1 Objective: Procedures are operated in accordance with legislation and the organisation’s financial regulations and agreed
written policy
6.1.1 Without a clear policy The organisation should Rent calculation is currently the responsibility of 1. The responsibility for
misinterpretations have a clear, written, NCC. At Blyth the rent was calculated by an calculating rents for Homes
could occur formal policy on rent Accountant who has now left the Authority. At for Northumberland
calculation and collection Alnwick the rent has been calculated by the Rents Properties from 2010/11
Manager however he has recently transferred to onwards needs to be
the employment of Homes for Northumberland. determined.
The Accounting Assistant in Financial Priority: High
Management at NCC is now the key contact for Responsibility: NCC –
the Housing Revenue Account however she has Financial Management
never calculated rents before.
2. A policy for rent
There are no formal written policies at Alnwick or calculation should be
Blyth with regard to rent calculation although both documented.
use the Subsidy Determination issued by the Priority: High
DCLG. Responsibility: NCC –
Financial Management
6.2 Objective: There is documentary evidence to support the calculation of all gross rent amendments
6.2.1 Errors could be The calculation record The original rent calculation figures for both Blyth 3. Rent Setting calculation
made and go should be checked and and Alnwick were obtained for the 2009/10 should be checked and
undetected initialled as correct by an financial year. Although both sets of calculations signed as correct by a
experienced, senior were found to be correct neither set had been second employee to reduce
employee, checked and signed by a second employee. the risk of error.
It is understood that the figures for Blyth Priority: High
calculated by the Accountant have been checked Responsibility: NCC –
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by the current Finance Manager - Performance Financial Management
and Technical however there was no formal sign
off.
The Alnwick figures are calculated by the Rents
Manager and the Northgate Rents System also
generates a set of calculations based on
parameters entered into the system by the
Development Officer. A sample of properties are
checked to ensure that the spreadsheet
calculation and the system generated figures
agree.
6.2.2 Amendments could The originals of the Blyth 4. Suitable security should
subsequently be calculations should be The rent calculation spreadsheet is currently held be put in place to ensure that
made held independently of by the Accounting Assistant in Financial the rent calculation
housing Management at NCC. When asked to supply the spreadsheets for Alnwick
original rent calculations for April 2009 the and Blyth are not modified in
Accounting Assistant experienced difficulties any way.
accessing the spreadsheet due to its size. The Priority: High
sheet was found to be distorted however with the Responsibility: NCC –
help of Computer Services it was recovered and Financial Management
is now held on Financial Management’s Shared
Drive at NCC. Many people have write access to 5. A hard copy of the rent
this drive and it would be possible for the calculation spreadsheets
spreadsheet to be modified, either by accident or should be retained following
deliberately. each years calculation as a
Alnwick backup in case the electronic
The rent calculation spreadsheet for Alnwick is copy is lost, destroyed or
held on the Rent Manager’s own computer. The modified.
Northgate system also retains the parameter Priority: High
information input by the Development Officer. Responsibility: NCC –
Financial Management
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6.3 Objective: All relevant records and accounts are updated to record rent increases, payments and refunds
6.3.1 Properties may be Annual independent Blyth 6. Consideration should be
taken out of the checks should be Information regarding void properties is entered given to undertaking periodic
rental masterfile in undertaken to confirm directly onto the Anite system. There is no other independent checks to
error or deliberately that the dates when record held of void properties. The Homefinder ensure that for the
for personal gain. properties were shown as Section is mainly responsible for void control organisation’s properties the
void during the year however as the Anite system is the only system dates when properties were
agrees with the dates per used to record and monitor voids no independent shown as void during the
the masterfile checks are undertaken to ensure that the year agree with the dates in
information is correct. the Rents System.
Alnwick Priority: Medium
The Lettings Officer is mainly responsible for void Responsibility: HfN
control. Since October 2009 a spreadsheet has
been used to monitor voids on a weekly basis.
Prior to this a whiteboard combined with a paper
‘Record of Vacancies and Lettings’ form was
used. No independent checks are undertaken to
ensure that the information regarding voids on the
Northgate system is correct.
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6.4 Objective: Rent is charged on all housing property and is correctly calculated and valued
6.4.1 Failure to set up Checks should be made Blyth 7. Part of the rent setting
payment methods to ensure that the total Once the rent increase has been entered onto the process at Alnwick should
may result in the gross rents income figure Anite system by Northgate Consultants the Debit include checks to ensure that
build up of collectable per the Control & Finance Officer verifies that the correct the total gross rents income
unnecessary arrears masterfile (i.e. number of rents have been input by comparing values from figure collectable per the
properties multiplied by the original rent calculation spreadsheet to an system agrees to the gross
the rent per property) output report from the Anite system. The rent income expected per
agrees to the gross rent reconciliation for April 2009/10 was obtained. A manual calculation
income expected. small number of discrepancies had been noted spreadsheets.
and followed up by the Debit Control & Finance Priority: High
Officer at the time of the reconciliation. An overall Responsibility: HfN
difference of £1.99 was noted due to roundings.
Alnwick
The Rents Manager calculates the rents for each
property on a rent calculation spreadsheet. The
Development Officer inputs parameters onto the
Northgate System. The Rents Manager then
checks for a small sample of properties that the
figures agree. The overall gross rent figure on the
rent calculation spreadsheet is not reconciled to
the overall gross rent figure on the Northgate
system.
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6.5 Objective: All rent transactions are initiated promptly for new and existing tenants
6.5.1 Failure to set up Rent cards, standing Blyth 8. A record should be
payment methods order, direct debit The Homefinder Section sets up new tenancies maintained of the date that
may result in the mandates, swipe cards including the rent account and start date on the new tenants are issued with
build up of etc should be promptly Anite System. The Debit Control & Finance their rent card and/or
unnecessary arrears sent to new tenants prior Officer produces rent cards based on the account number and
to the date their first rent information he receives on the weekly allocation payment details. This could
payment is due. A reports from the Homefinder Section. be facilitated using the
statement should The Debit Control & Finance Officer has recently ‘notes’ section of the rents
accompany this showing started to maintain a record of when he issues system for each new
the gross and net rent rent cards, mainly as a result of some tenants account.
due claiming that they have not received them. Priority: Medium
On most occasions rent cards are issued Responsibility: HfN
following the start of the new tenancy. Most are
sent out either on the day the tenancy
commences or within a couple of days following
the start of the tenancy.
With regard to the annual rent increase in April
the Neighbourhood Housing Manager confirmed
that all rent cards are hand delivered prior to the
start of the financial year.
Alnwick
Rent Cards are no longer used at Alnwick. The
Rents Assistant informs new tenants of their rent
account number and rent payment details
following notification of new tenants from the
weekly allocation reports. No information is
retained to show when new tenants were sent
their payment and account details.
At both Blyth and Alnwick new tenants are
informed of their rent payments during sign up
meetings.
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6.6 Objective: Amendments could be made to commit fraud
6.6.1 Errors could have Independent checks No independent checks are undertaken at Blyth or 9. Ideally independent
been made on input should be undertaken to Alnwick to ensure that rents are being charged for reconciliations should be
resulting in loss of ensure that the correct all of the organisations properties. undertaken on a regular
income level of rent is charged for It is understood that the processes currently in basis at Alnwick to ensure
every property let place at Blyth would pick up any unauthorised that rents are being charged
changes to rent levels either through tenants on all the organisations
contacting their Housing Officer or through the properties and that the
weekly reconciliation process. correct levels are being
charged.
Priority: Medium
Responsibility: HfN
6.6.2 Fraudulent credits Independent Blyth 10. In order to prevent the
could be posted reconciliations should be A report was obtained from the ICT Manager risk of inappropriate or
against accounts in undertaken to ensure that listing all non payment credit postings. All fraudulent transfers between
order to hide all ‘non-payment’ credit transactions related to decoration allowance and accounts each transfer at
misappropriated rent postings are valid and tidy homes payments. A sample of 10 payments Alnwick should be supported
payments supported by adequate was chosen at random and the Debit Control & by adequate documentation
documentation Finance Officer provided suitable documentation and ongoing reconciliations
to support each transaction. carried out.
Alnwick Priority: High
A report was obtained from the Development Responsibility: HfN
Officer listing all non payment credit postings. A
number of negative cash adjustments and
payment transfers were noted. It was discovered
that the four negative cash adjustments related to
a system error. No documentation was provided
to support the payment transfers between
accounts all of which related to tenants moving
house and continuing to pay rent on their old
account numbers.
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Reconciliations
6.7 Objective: Rents received are posted to the correct accounts and are banked in full
6.7.1 Discrepancies may The Housing Rents In 2009/10 a six month reconciliation between the 11. The Housing Rents
go unnoticed system should be housing rents systems and the General Ledger system at Alnwick should be
reconciled at regular was undertaken at the end of the period from 1 reconciled at regular
intervals by a senior April 2009 to 30 September 2009. intervals (at least monthly) to
employee to the main Blyth the main accounting system
accounting system, The Debit Control & Finance Officer provided (Oracle E-Business Suite),
discrepancies should be details from the Anite system and these were discrepancies should be
reported and investigated reconciled to the figures on the Oracle E Business reported and investigated.
Suite. A number of discrepancies were recorded Priority: High
by the Debit Control & Finance Officer which are Responsibility: HfN
in the process of being corrected by Cashiers.
Monthly Journals are sent to the Accounting 12. Responsibility for
Assistant to enter onto the Tenants Rental undertaking reconciliations
Account on the E-Business Suite. between the Northgate
Alnwick System at Alnwick and the
The six month reconciliation had only been partly main accounting system
undertaken at the time of the audit. The Rents (Oracle E-Business Suite)
Manager at Alnwick had provided details from the need to be agreed.
Northgate System and these had been compared Priority: High
to figures produced from the E-Business Suite by Responsibility: HfN
the Finance Manager – Performance & Technical.
It was noted that many of the figures did not 13. The current system in
reconcile however it was understood that no one place for reconciling the main
had looked into reasons for non-reconciliation due accounting system to the
to a lack of time. housing rents system should
In the past reconciliations and journals at Alnwick be documented.
have only been processed at the year end. Priority: Medium
Responsibility: HfN
It was noted that the current system for
reconciling the main accounting system to the
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housing rent systems at Blyth and Alnwick was
not documented.
6.7.2 Errors may go Reconciliations should be Blyth 14. The procedure for
unnoticed carried out to ensure that There are currently no documented procedures reconciling the net rent
the net rent received for reconciling the net rent received to the net rent received to the net rent debit
equals the net rent debit debit at Blyth. should be documented.
The Debit Control & Finance Officer reconciles Priority: Medium
the debit on the Anite system on a weekly basis Responsibility: HfN
using the ‘Debit Reconciliation 2009/10’
spreadsheet. At the time of checking 15. Reconciliations of the
reconciliations were up to date. As a check net rent received to the net
during the audit the Week 42 Debit reconciliation rent debit at Alnwick should
was re-performed. be carried out regularly (at
Alnwick least monthly)
There are currently no documented procedures Priority: High
for reconciling the net rent received to the net rent Responsibility: HfN
debit at Alnwick.
The Rents Manager undertakes monthly debit
reconciliations. At the time of checking the
reconciliations were two months behind schedule.
As a check during the audit the week 35
reconciliation was re-performed.
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Void Properties
6.8 Objective: All relevant records and accounts are updated with all termination, transfer and exchange of tenancy details
6.8.1 Lack of information Procedures should Blyth 16. An extra column
available in cases of ensure that all void The Homefinder Section records termination dates detailing the date and time
queries or disputes properties are and the dates that keys were handed in on the that keys are returned should
immediately recorded, to Anite system. The Maintenance team then record be added to the “Rolling”
include dates vacated and when they pick up the keys, when the property is Voids spreadsheet used to
dates when keys were inspected when repairs are completed, and when monitor void properties at
returned the keys are handed back to the Homefinder Alnwick.
Section on the Anite system. The Homefinder Priority: High
Section then progresses the new tenancy. Responsibility: HfN
Alnwick
The “Rolling” void spreadsheet is maintained on a
weekly basis. The Lettings Officer explained that
if keys are not handed back by 12am on the
Monday following a tenancy termination a further
weeks rent is charged however it was noted that
the “Rolling” voids spreadsheet does not record
the date or time that the keys were returned.
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6.9 Objective: All void properties should be correctly calculated, valued and monitored
6.9.1 Lack of Regular management It was noted that the void management report 17. A column detailing the
management reports should be produced at Alnwick did not list the length of the length of the void period for
information produced (e.g. weekly) void period, if this was included it would help to each property should be
listing: highlight quickly and easily any properties nearing added to reports used for
(a) All void properties; the 25 day re let target. monitoring void properties at
(b) The reasons why each Alnwick.
property is empty; Priority: Medium
(c) Length of void period Responsibility: HfN
to date
6.9.2 Poor property Exception reports should There is evidence that voids are carefully 18. A report showing any
management be automatically monitored at Blyth and Alnwick. Information on re- voids which exceed the
performance would produced which show any letting times is included in the monthly organisation’s performance
not be identified voids which exceed the Performance Reports prepared by the target should be included as
organisation’s Performance and Quality Manager. a standard item in monthly
performance target Benchmarking with the Housemark National Club performance reports
is also undertaken on a Quarterly basis. including reasons for the
It is understood that regular exception reports are delays.
not produced which show any voids which exceed Priority: Medium
the organisation’s performance target of 25 days. Responsibility: HfN
During the audit a sample of 40 properties which
exceed the 25 day target was chosen (20 each 19. Controls should be put in
from Blyth and Alnwick). Explanations were place to ensure that void
sought for the delays in re letting. start and end dates are
It was noted that four of the properties chosen for entered correctly onto the
Blyth appeared on the Void Property report in Anite system.
error. On further examination it appears that the Priority: High
reason for these properties appearing as void Responsibility: HfN
when they are in fact occupied is because they
have been entered with a void end date prior to
the void start date on the Anite system.
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2008/09 Year End Rollover
6.10 Objective: Year End rollover is performed accurately and timely
6.10.1 Incorrect information Year End rollover should Blyth 20. Suspense account
and delays be performed accurately The Debit Control & Finance Officer provided a transactions at Alnwick
and timely copy of the ‘Debit Year End 2008/09’ spreadsheet should be reviewed and
for Blyth Valley Housing. This was then compared cleared on a regular basis, at
to a business objects report on the Tenants Rental least weekly
Account run from TASK (former Blyth Valley Priority: High
Borough Council accounting system). The Responsible: HfN
reconciliation between TASK and Anite was re-
performed. There were no matters to report.
Alnwick
At the start of the 2009/10 financial year the
Senior Auditor and Auditor undertook some work
on the 2008/09 Rent Account Reconciliation for
Alnwick following a request from the Director of
Resources at NCC. The scope of the work was to
review discrepancies in the Tenants Rent Account
Reconciliation for Alnwick, as follows:
A £10k discrepancy between the Rent System
and the General Ledger System
A small unexplained discrepancy between the
Rent Arrears carried forward and brought
forward figures (An explanation for this
discrepancy was provided by the Former Rents
Manager)
In addition to these there were general concerns
regarding processing and reconciliations at
Alnwick.
The review had two main objectives:
To resolve the discrepancies in the Rent
Account reconciliation between Northgate and
Page 16 of 18
the General Ledger System by working
alongside Accountancy staff at Alnwick
Consider underlying issues with regard to
processing and reconciliations at Alnwick.
The main conclusions were summarised as
follows:
Little confidence in arrangements in place for
reconciling the Rents System to the General
Ledger – at the time this was only done once
per year at the year end
Absence of procedures notes
Lack of staff knowledge and experience
Irregularity of clearing suspense accounts
No formal recommendations were made or
followed up in the report at the time. As a result
they will be made and followed up in this report.
(See also recommendations 11, 12 and 13 above)
7 Conclusion
7.1 The audit has revealed that there are a number of areas within Rent Debit and Reconciliation Systems where
improvements in control could be made. It is appreciated that this year has been particularly difficult and that a number of
systems and processes are still to be documented and embedded. We are however confident that Homes for
Northumberland will take on board the suggested improvements contained within this report. Implementation of the
recommendations in this report will increase the operational effectiveness and efficiency of rent debit and reconciliations
and reduce the risk of loss and error.
Northumberland County Council
Audit Service
5 May 2010
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Distribution:
Richard Tosney, Debit Control and Finance Officer, HfN
Bryan Turner, Neighbourhood Housing Manager, Income Management, HfN
Richard Bryan, Area Housing Manager, Blyth, HfN
Dave Swaddle, Rents Manager, NCC
Ian McLackland, Regional Operations Manager, Alnwick, HfN
Iain Henderson, Director of Finance and Resources, HfN
Colin Logan, Head of Financial Services, NCC
Alison Elsdon, Finance Manager – Adults & People, NCC
Paul Czerepok, Finance Manager – Performance & Technical, NCC
Ray Ashman, Head of Financial Management, NCC
Ian Morton, Audit Manager, NCC
Sue Bumby, Head of Audit
Steven Mason, Director of Resources
Page 18 of 18
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