Oakham Rutland and Rutland News Martin Brookes: Oakham Town Council Internal Audit Report 2025-26 A Highly Critical ("Bad") Audit Report

The Internal Audit Report for Oakham Town Council covering the 2025–2026 financial year presents a comprehensive assessment of the authority's administrative, financial, and regulatory frameworks. Prepared by internal auditor Stuart McDonald on behalf of the Leicestershire and Rutland Association of Local Councils (LRALC), the report examines the council's compliance against standard internal control objectives outlined in the Annual Governance and Accountability Return (AGAR).

From an objective local government governance perspective, this document must be classified as a significantly weak and highly critical ("bad") audit report for Oakham Town Council.

Out of the 14 active, applicable internal control objectives scrutinised by the auditor, the council failed to achieve standard regulatory compliance in eight key objectives, receiving an explicit "No" assurance marking for each. This represents an exceptionally high failure rate of 57%. While the auditor does not find or allege any instances of fraud or untoward financial misconduct , the document exposes pervasive administrative backlogs, repeated statutory failures, severe asset mismanagement, and critical operational risks.

Crucially, this is worsened by the fact that many of these failures are repeated omissions carried over from the previous 2024–25 financial year. Both the internal and external auditors (Moore) had previously issued formal warnings on these exact matters, which the council systematically failed to implement or correct.

To provide necessary context, the auditor notes that the 2025–26 financial year was plagued by severe staff turnover in the council office. The Responsible Financial Officer (RFO) position shifted rapidly: a sitting Councillor (Anna Douthwaite) acted as RFO from April to July 2025, after which the previously appointed RFO (Chris Evans) stepped back into the role. At the time the audit was conducted, Chris Evans was on long-term leave, requiring a newly hired Administrative Assistant (Melanie Palmer) to act as temporary RFO alongside a part-time locum clerk (Sam Haywood). As a result, the personnel tasked with facilitating the audit were not actually running the office during the period under review.

The core of the auditor's critique spans across nine operational, financial, and legal risk areas:

1. Severe Operational Vulnerability & Banking Access Failures (Objective C)

The auditor issued an explicit "No" because the council completely ignored recommendations from the previous year to update its Risk Register to mitigate the temporary or permanent loss of key staff. This lack of planning resulted in a series of operational blockages during the year:

Due to a lack of office-wide contingency planning, staff salary payments for May 2026 had to be executed from home by the primary RFO while he was off on leave.

The current acting RFO has been left with zero online access to the council's bank accounts, forcing a risky reliance on individual council members to log in and authorise day-to-day transactions.

Since the Deputy RFO took leave from the council in November 2025, absolutely no one at the authority has been able to access the Cambridge Building Society online account. Consequently, this investment balance remained entirely unverified at the financial year-end.

Unlawful Employment Status & Unvouched Salaries.

The council's payroll and personnel administration were found to be in direct violation of internal regulations and UK statutory law:

The current acting RFO has been working without an executed Contract of Employment, which is a core statutory requirement under UK employment law.

Barring a single reference to a locum’s wage, the auditor found no minuted evidence that the council had formally reviewed, agreed upon, or recorded the individual rates of pay for its employees. Individual salaries were obscured within an aggregated, high-level budget line item, which directly violates Financial Regulations 11.6 and 4.2.

Deep Deficiencies in Fixed Asset Accounting (Objective H)

While the council claims to hold £1,723,568 in fixed assets , its tracking mechanisms were described as heavily flawed:

The register does not log individual additions or disposals. For example, £17,516 worth of Christmas decorations present on the 2024-25 asset register completely vanished from the 2025-26 documents without an audit trail tracking their impairment or disposal.

Massive asset classes are grouped together blindly. "Play Equipment" is listed as a single block category valued at £350,636 with no individual sub-lists or itemized breakdowns available for verification.

The council mixed disparate valuation approaches within the same register, arbitrarily using "insured value," "replacement cost," and "historic cost".

On comparison, the values recorded in the asset register showed no structural correlation with the council's actual insurance policy schedules, presenting a significant risk of severe under- or over-insurance.

The register is unnecessarily cluttered with extremely low-value, consumable property logs (e.g., a £10 broom and a £20 cement trowel), ignoring standard local government practice of applying a de minimis capitalisation threshold of £250 or £500.

Failure to Perform Regular Bank Reconciliations (Objective I)

Reconciling cash books to bank statements is the primary internal control used to catch accounting errors and prevent fraud. The council failed this objective for the second consecutive year. Formal bank reconciliations were provided to councillors on only four occasions during the year ; at all other meetings, members were only given raw income/payment lists and bank statements. Furthermore, apart from a single sign-off in November 2025, there was no physical evidence that councillors had reviewed or signed off on these sheets, and no monthly reconciliations were prepared at all for the council's secondary bank accounts, directly violating Financial Regulation 2.6.

Non-Adoption of Mandatory Accounting Standards (Objective J)

Because Oakham Town Council commands an annual income well in excess of £200,000, it is statutorily required by the Practitioners’ Guide to prepare its statements on an Income and Expenditure basis (which incorporates debtors and creditors). Instead, the council continued running its ledger on a basic cash basis (Receipts and Payments), save for an isolated manual entry adjusting for a quarterly VAT debtor from HMRC.

Failure to Issue Invoices for Leases & Allotments (Objective E)

Though the council technically received a "Yes" for its income entry, the auditor unmasked a complete absence of basic financial oversight systems. The council does not issue proactive invoices to demand payments for its commercial leases or allotments. Instead, the office simply sits back and waits for tenants to voluntarily pay whenever they choose, leaving the council completely unable to generate an aged debtor listing or execute structured debt recovery.

Breach of Statutory Transparency & Public Rights Laws (Objectives M & N)

The council repeatedly failed to comply with public transparency requirements mandated by the Accounts and Audit Regulations 2015:

During the previous cycle, the external auditor penalised the council because it completely omitted the mandatory contact name of the person required to exercise public rights and delayed the statutory opening dates.

The council failed to publish its legally mandated Section 2 Accounting Statements and its Notice of Conclusion of Audit on its website. These crucial transparency files were completely missing from the public web space, a direct repetition of the previous year's omission.

Direct Violations of Digital and Data Compliance (Objective O)

The council is operating in breach of UK statutory accessibility law. Its public website does not comply with the legally mandated Web Content Accessibility Guidelines (WCAG) 2.2AA. Furthermore, in direct violation of mandatory section 1.54 of the Practitioners' Guide, the council lacks any formalized IT Policy governing how staff, clerks, and elected members utilize council-owned or personal devices to securely handle public records.

Wasteful Investment Strategy & Cash Inefficiencies (Note 1)

The auditor highlighted a major lack of commercial awareness regarding the management of public funds. The council ended the financial year holding approximately £450,000 in cash. Of this, £314,435 was left languishing in an HSBC deposit account yielding a meager, sub-market interest rate of 1.36%. Worse, a further £57,057 was left in an HSBC current account yielding 0.00%. An excellent internal proposal raised in August 2025 to review interest rates was completely abandoned, and an authorised transfer to Unity Trust Bank remained unexecuted as of May 2026.

Total Collapse and Inactivity of the Finance Committee (Note 2)

In a telling structural failure, the auditor discovered that despite explicit council policies requiring the Finance Committee to meet at least quarterly, neither the formal Finance Committee nor its temporary Working Group replacement met a single time during the entire financial year. By abandoning these meetings, the council eliminated its primary line of defense for detailed budgeting, strategic planning, financial risk review, and internal control oversight.

Summary of Council Responses & Next Steps

The saving grace of this audit report is the constructive, transparent manner in which the findings were received. The newly appointed Locum Clerks and acting RFO did not contest or defend these systemic failures. Instead, they appended clear, constructive responses in red ink across the report, taking immediate responsibility to fix these issues.

The new financial team has prioritised the following corrective actions:

Amending the official Risk Register to include staff absence contingencies and presenting it to the Full Council immediately.
Overhauling bank mandates to secure online access for the new acting RFO and resolving access issues with the Cambridge Building Society.
Formally adopting the mandatory Income and Expenditure accounting method for the 2026-27 cycle.
Resolving individual staff contract omissions and formalising clear salary scales in the public minutes.
Initiating a comprehensive physical asset audit, stripping out low-value items, and implementing a formal de minimis policy.
Re-establishing the Finance Committee to meet at least quarterly to ensure proper oversight moving forward.

For the residents of Oakham, ensuring that elected members fully support the new locum staff in executing these overhauls will be essential to restoring basic regulatory compliance, transparent financial reporting, and the proper protection of public funds.

Oakham Town Council Internal Audit Report 2025-2026

https://oakhamtowncouncil.gov.uk/wp-content/uploads/2026/06/Internal-Auditor-report-2025-26-with-Locum-Clerks-RFO-responses.pdf

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