FINAL INTERNAL AUDIT REPORT

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1 FINAL INTERNAL AUDIT REPORT Accounts Receivable (IA /F) Steve Allen, Managing Director, Finance Audit Conclusion: Audit Closed 5 August Issue categories Agreed actions Satisfactorily addressed Partially addressed No longer applicable Not addressed Priority Priority Priority

categories Agreed actions Satisfactorily addressed Partially addressed No

2 CONTENTS EXECUTIVE SUMMARY... 3 STATUS OF AGREED ACTIONS... 4 APPENDIX 1 DISTRIBUTION LIST... 8 Audit information Version 1 Draft versions issued 1 Draft report issued 31 July Audit Graham Tye Director of Internal Audit Clive Walker Page 2

3 EXECUTIVE SUMMARY Objective To provide assurance on the effectiveness of financial controls over non-fares revenue accounts receivable. Scope The audit focussed on the control environment in relation to the following key risk areas: Monitoring reporting, including mapping SAP accounts to the consolidated management accounts the Annual Report 2013/14 Credit control Invoice accuracy timeliness Completeness of revenue at period end Revenue receivables adjustments such as credit notes, contras, provisions write-offs, including VAT recovery Cash collection allocation The scope of this audit excluded non-fares revenue in the following companies or accounts because it had been audited recently, or was in the audit plan for 2014/15: London River Services (1007), Cycle hire scheme (1016), London Transport Insurance Guernsey (1015), Section 106 Contributions, Sponsorship. We also excluded the separate accounts receivable ledgers for Crossrail JNP. Summary of findings Our Interim Audit Report dated 26 January entitled Accounts Receivable identified two Priority 2, five Priority 3 issues resulting in nine management actions. We have now carried out a follow up review of the agreed management actions can confirm that seven have been satisfactorily addressed. Two are partially addressed, but appropriate action plans are in place to ensure they are completed in the near future. These two actions will remain open in Issue Track will be followed up as they become due according to their revised dates. Therefore this audit is now closed. Page 3

Annual Report 2013/14 Credit control Invoice accuracy timeliness Completeness of revenue at period end Revenue receivables adjustments such as credit notes, contras, provisions write-offs, including

4 STATUS OF AGREED ACTIONS Ref Agreed action Owner Status Further action required Priority 2 actions 1. Finance Data Management will review the SAP access roles with the Accounts Receivable Team. Stephen Slight, Finance Data Controller Partially addressed Finance Data Management has commenced a review of SAP access roles with the Accounts Receivable Team. However, this review has now been widened to include a review of Accounts Payable. The FSC is due to complete this with the IM SAP team support by the end of October. Complete the review of SAP access roles remove or reduce those deemed to be excessive. 30 October 2. Data Control Team will monitor high risk customers on a quarterly basis on a spreadsheet. Elizabeth McGrath, Finance Data Control, FSC Satisfactorily addressed The Data Control Team is monitoring new high risk customers on a quarterly basis on a spreadsheet. 31 January Page 4

However, this review has now been widened to include a review of Accounts Payable. The FSC is due to complete this with the IM SAP team support by the end of October.

5 Ref Agreed action Owner 3. The Credit Policy will be updated to specify that Request to Trade (RTT) forms should be submitted before work is completed, except in an emergency. Financial Status The Credit Policy has been updated to state: All RTT forms must be received by the FSC from the designated business unit representative. RTTs should be submitted in advance of work or services being completed/delivered, except in emergencies. Further action required Priority 3 actions 4. Accounts Receivable Team will review payment terms with the business areas quarterly. Kirk Fawcett, Financial Team Leader 31 January Extended to: 30 June Partially addressed. The review of payment terms has been referred to the Finance Relationship s the AR team is awaiting a response. Further discussions are required on the complexities of payment terms. Complete review of payment terms with the business areas. 30 September. Page 5

RTTs should be submitted in advance of work or services being completed/delivered, except in emergencies. Further action required Priority 3 actions 4.

6 Ref Agreed action Owner 5. The Credit Policy will be updated to state what supporting documents are required. FSC Financial Status The Credit Policy has been updated to state what supporting documents are required. Further action required 6. The Credit Policy will be updated to reinforce the need for timely invoicing. 7. The Credit Policy will be updated to stipulate that the bad debt provision to be calculated 56 days on due date. FSC Financial FSC Financial The Policy has been updated to reinforce the need for timely invoicing. The Policy has now been amended to stipulate that the bad debt provision is calculated on invoices which are calculated to be over 56 days on. Page 6

The Credit Policy will be updated to reinforce the need for timely invoicing. 7.

7 Ref Agreed action Owner Status Further action required 8. Update the spreadsheet to calculate the provision correctly. 9. The Credit Policy will be updated reinforcing the areas noted in the issue. Karen Leveridge, Financial Accounting Analyst 31 January FSC Financial The spreadsheet has been updated to calculate the provision correctly at 100 per cent of invoices with a greater than 56 days. The Credit Policy has been updated reinforcing the areas noted in the issue. Page 7

Karen Leveridge, Financial Accounting Analyst 31 January FSC Financial The spreadsheet has been updated to calculate

8 APPENDIX 1 Distribution list This report was sent to Steve Allen, Managing Director, Finance, by Clive Walker, Director of Internal Audit, copied to: Brian Davey Najam Israr Kirk Fawcett Stephen Slight Elizabeth McGrath Meena Patel Kris Worthington Andrew Pollins Patrick Doig Andrew Freeman Henry Gervaise-Jones Carol Lynton Nigel Blore Andrea Clarke Howard Carter Karl Havers Head of FSC Financial Financial Team Leader, Finance Data Controller Finance Data Control Senior Financial Accountant Financial Reporting Revenue Accounting Interim Chief Finance Officer Director of Finance, ST Head of Corporate Business Finance Head of Finance, Commercial Development as Key Risk Representative Head of Group Insurance Director of TfL Legal General Counsel EY Page 8

Head of FSC Financial Financial Team Leader, Finance Data Controller Finance Data Control Senior Financial Accountant Financial Reporting Revenue Accounting Interim Chief Finance Officer

FINAL INTERNAL AUDIT REPORT. Steve Allen, Managing Director, Finance

FINAL INTERNAL AUDIT REPORT. Steve Allen, Managing Director, Finance FINAL INTERNAL AUDIT REPORT Procure to Pay (IA 13 126/F) Steve Allen, Managing Director, Finance Audit Conclusion: Audit Closed 19 June 2015 Issue categories Agreed actions Satisfactorily addressed Partially