End of Year Accounts and Audit - March/April 2023 Edition

All parish and town councils must prepare accounts in accordance with the legal requirements.

The primary legislation is the Accounts & Audit Regulations (2003, 2006, 2011 and 2015). The regulations describe “proper practices”, and these are found in Governance and Accountability for Local Councils – A Practitioners’ Guide. The latest version was published in March 2023 and a copy can be found at https://www.northantscalc.com/uploads/practitioners-guide-2023-7.pdf.

Parish and town councils are subject to two levels of audit… the internal audit, which is carried out by a competent and independent person who is appointed by the parish or town council itself, and an external audit which is carried out by PKF Littlejohn, an independently appointed firm of accountants. All parish and town councils, and parish meetings, must complete an Annual Governance and Accountability Return (AGAR), which has 4 sections: the annual accounting statement, the annual governance statement, the external auditor certificate and opinion (AGAR Form 3 only) and the annual internal audit report. The Annual

Return must be completed by 30 June.

PKF Littlejohn has issued detailed instructions to every parish and town council and parish meeting in Northamptonshire by email. All of the information, guidance, and forms are at https://www.pkf-l.com/services/limited-assuranceregime/useful-information-and-links/. It includes a useful decision tree to assist in identifying which one of the six different forms needs to be completed. The external audit process is complex but not complicated. A calm, measured, and methodical approach is called for!

One of the issues that seems to always trip councils up is the explanation of significant variances. Essentially, the auditor is very interested in any figures in the accounting statement that have changed significantly from one year to the next. “Significant” means by more than 15% or by more than £100,000. For example, if staff costs have increased from £10,000 to £12,000 (+20%) an

explanation is required. A full narrative and numerical explanation are required, so “salary increased” is not a sufficient explanation, whereas “The clerk’s hours were increased from 12 hours per week to 14 hours per week, which combined with the contractual salary increment resulted in an increase in staff costs of £2,000.” PKF provides a useful and simple-to-use proforma and gives examples

of where explanations are required. If the explanation does not fit into the proforma, then further information can be provided separately. Where a council has prepared the explanation of variances in Excel the original file should be submitted to PKF. It should not be saved as a PDF (or anything else) first. Doing so creates difficulties and PKF is likely to ask for the file to be resubmitted, which causes delays.

The information in the AGAR form is compiled by the Responsible Finance Officer (RFO - usually the clerk) and is presented to the council for completion and approval. The AGAR must be approved for signature by the full council; it cannot be delegated to a committee. The AGAR is signed by the RFO and the chair of the meeting at which it was approved for signature.

For clerks going through the audit process for the first or second time it can be quite daunting. However, the internal audit and external audit are not designed to be heavy-handed and to trip anyone up. The purpose is to review the council’s internal controls and governance and accountability, and to identify any areas for improvement. Internal audit is described as “guide dog, not guard dog”.

If your council does need support with the end of year processes, please do let us know at Northants CALC (info@northantscalc.com). There is plenty of guidance and training that we can direct you to, and we have access to people who have

been through it all many times and can offer words of wisdom and comfort!