Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ Date: 1st Oct 2008 Auditor: Service Contact

Head of Finance Auditor Contact Closing meeting date and attendees 1. BACKGROUND As part of the 2008/09 Audit Plan a review of Insurance was undertaken. 2. SCOPE OF AUDIT To inspect the insurance policies for adequate cover and reasonable excesses. To ensure there is insurance for all items and areas where you would expect to see it. To ensure that applications for insurance give a true and accurate reflection of the facts as at that moment in time. View the procedures for processing claims and reporting to related parties. To ensure that all staff who claim business mileage are regularly asked to produce a copy of their personal insurance and driving licence. To ensure amendments to policies during the year are done in a timely manner.

3. AUDIT OPINION CONTROL OBJECTIVE To ensure that the authority has adequate and up to date insurance in place which offers value for money CONCLUSION Satisfactory Audit are satisfied that the policies in place give adequate cover. The base values quoted in policies reconcile to values held in the accounts of the council. To ensure that the Area of Management Concern procedures for reporting There are no procedures for incidents are adequate. reporting incidents. The majority of claims come from one service, Environmental Maintenance. They advise Finance of the circumstances and complete their own claim forms. There have been incidents where it has been felt that potentially high value/profile claims have not been communicated to all 1 RISK Low

Medium Medium

Medium

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ relevant parties due to the assumption that someone else has done it. The review confirms that this is the case. To ensure that the Area of Management Concern procedures for making There are no guidance notes or Medium claims are clear and procedures given to services, or concise members of the public, advising them how to make an insurance claim. Services often arrange for Medium property damage to be repaired before it has been agreed by the insurers. This has resulted in Hart having to stand the cost after the claim has been repudiated. Repair expenses are being Medium charged direct to cost centres for insurance claims paid in advance. Reimbursements from the insurers have been coded to different subjective codes, and in some cases different cost centres. Audit also came across several cases where VAT had been treated incorrectly. To ensure that all claims Satisfactory are dealt with in a timely From the records audit viewed, Low manner. claim forms and investigations were completed in a timely manner. Due to the manual system Medium Finance use to monitor and record claims, there is no diary function to act as a reminder to chase expected communication or funds, nor is there any back up of the claims register.

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ 4. OTHER FINDINGS Class 1a Business Insurance on private vehicles A random sample of 20 members and officers were contacted, and sight of their current personal insurance was requested to ensure they were covered for business mileage. All those contacted had made a business mileage claim in 07/08. 17 replied, 14 had business insurance and 3 did not, however those without are now requesting it is included in their cover. Despite a reminder email, 3 failed to reply. These 3 were made up of 1 Member, and 2 officers who are deemed to be essential car users. Health and Safety Code of Practice Number 14 gives guidance about driving whilst on HDC Business. Section 2e reminds managers of their responsibility to complete the annual motor checklist as part of the appraisal process, however Audit could only find 2 services who follow this practice. Recording of Claims Insurance claims are currently recorded manually in a book. Each claim is allocated a unique reference number which can be reconciled back to Summary Reports issued by Zurich giving status updates. Should anything happen to the claims record book, data could only be restored by relying upon the reports produced by Zurich, better practice would be for Hart to record claims on a computerised system. There are various options available for holding the data, ranging from an Excel spreadsheet, to Covalent.

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ 5. SUMMARY Insurance cover appears satisfactory at Hart, however the process of recording claims, and accounting entries could be improved. This is a consequence of Hart holding only manual records, and of no guidance of how to account for repair expenses paid in advance of insurance claims. Audit were disappointed with the response to the request to see sight of private motor insurance polices. Despite reminders, there were still 3 out of 20 who failed to even contact Audit, and others were unhappy with being asked to provide their insurance details as they felt it was a private intrusion. Each time an officer or member completes an expense claim form they are certifying they are covered for business insurance, however this obviously is not the case as 3 out of 17 were not insured. Ultimately, by not checking private insurance documentation, Hart is placed at risk of being sued by a third party should an accident occur whilst the driver is travelling on behalf of the Council. In April 2008 the Corporate Manslaughter Act 2007 was introduced which sets out a new offence for convicting an organisation where gross failure in the way activities were managed, or organised, results in a persons death. Zurich have already included cover in the policy, however Hart needs to ensure Health and Safety standards are met, especially those highlighted in the recent improvement notice issued to the Council by the Health and Safety Executive.

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ MANAGEMENT ACTION PLAN Risk Responsible Category Officer Adopt a Claims Handling Procedure, Head of Finance Medium including timescales and flow charts. RISK: No guidance. Head of Finance Medium a) Communicate all claims to Leadership Team for a period of 6 months. b) Thereafter, agree which type of claims need notification and how they are to be communicated. RISK: Leadership team are unaware of potentially high risk claims. Set up an electronic register of Head of Finance Medium claims and link it to scanned copies of documentation. Investigate the benefit Covalent would offer to the process RISK: Paper format may get misplaced, leaving Hart with no back up Set up a suspense account for Head of Finance Medium expenses paid out by Hart, which will be refunded by Insurance. RISK: Expense is reflected in the budget monitoring whilst awaiting refund. Recommendation 1 5 Target Officer Comments Date Dec 08 Agreed

a) WIE Agreed b) Dec Agreed 08

Dec 08 Agreed

Dec 08 Agreed

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ 5 Set up an expense code for those repairs Hart paid in advance, which are then not refunded by insurance. RISK: Expense paid out in error is not easily identifiable. Ensure the VAT element of claims is treated correctly RISK: Incorrect accounting of VAT. Profit made from reimbursement of claims. Have a designated officer within each service who will advise Finance of any adjustments required to insurance policies RISK: Policies are not up to date Management to comply with Health and Safety Code of Practice 14, requesting sight of personal motor insurance on an annual basis. RISK: Officers and Members drive on Council business whilst uninsured. Ensure the officers and members induction process includes having sight of personal motor insurance. RISK: New officers may drive until their first appraisal without the relevant insurance. Head of Finance Medium Dec 08 Agreed

Head of Finance Medium

Nov 08 Agreed

Corporate Director (V Evans)

Low

Dec 08 Agreed. Will arrange with Heads of Services.

Heads of Medium Service (lead Head of Finance)

Nov 08 Agreed

Heads of Medium Service (lead Head of Finance)

Nov 08 Agreed

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Insurance Audit 08/09 Appendix 1 Audit Number: 02/09 ______________________________________________________________ 10 Ensure immediate compliance with Health and Medium the Health and Safety Executive Safety Advisor Improvement Notice. RISK: Uninsured liability. Review the accounting Head of Finance Medium arrangements of insurance claims and issue guidance. RISK: Insurance claims are not accounted for in line with accounting principles. WIE Audit have been informed that procedures have already been put in place which comply with the issues raised.

11

Dec 08 Agreed

Recommendations Agreed Client Officer Recommendations Agreed Audit & Performance Manager

Date: .. Date ..

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