Annual Reports and Accounts

Arrangements for proper administration of financial affairs

Parish councils are subject to various Accounts and Audit Regulations made pursuant to the Local Audit and Accountability Act 2014.

Financial control arrangements for local authorities are normally given the title ‘financial regulations’. Whatever the size of a parish council’s budget and annual expenditure, it is essential that robust financial controls and checks are built in to its governing arrangements. A parish council’s financial control arrangements should include:

  • The formulation of spending plans, budget and precept, and provide for the approval of them;
  • Monitoring expenditure;
  • Transferring money between budget heads;
  • Authorising expenditure and payment, and making payment;
  • Internal and external audit of accounts;
  • Approving borrowing and capital expenditure;
  • Banking;
  • Payroll and pensions;
  • Receipt of Income;
  • Credit facilities;
  • Reviewing fees and charges;
  • VAT;
  • Register or inventory of assets (with review and update);
  • Insurance;
  • Use of IT facilities and records for accounting;
  • Reviewing and reporting on the integrity of these arrangements.

The nature and extent of the checks necessary will largely depend on the scale of a parish council’s activity and financial turnover. All financial control arrangements should identify which person or body is responsible for each aspect, what arrangements apply and when they apply.

For any receipt of income or expenditure incurred, a clear audit trail of responsibility and decision making will demonstrate a robust and transparent financial system of control.

Annual review is again essential in order to keep abreast of changing needs and developments.

The financial regulation arrangements and Standing Orders to be implemented by a parish council are complex and outside the scope of this Toolkit.

For detailed and practical information, parish councils should refer to “Governance and Accountability for Smaller Authorities in England” , (the “Practitioners’ Guide”) published jointly by the Joint Panel on Accountability & Governance (JPAG) which includes NALC and the SLCC. The Guide represents “proper practices” for local council accounting.

NALC has produced Model Standing Orders relating to matters of financial regulation and administration.

Standing Orders for entering into contracts

Parish councils may make Standing Orders with respect to the making of all contracts. They must make Standing Orders in respect of contracts for the supply of goods or materials or for the execution of works. Section 135 Local Government Act 1972 is aimed at securing competition and at regulating the way tenders are invited. Section 135 permits Standing Orders to stipulate a financial limit or special circumstances (such as emergency repairs to council office premises) when the normal tendering arrangements do not apply.

Annual Return 2024

This 2024 edition of the Guide applies in respect of financial years commencing on or after 1 

April 2024. Thus the ‘proper practices’ laid down in Sections 1 and 2 of this edition of the 

Guide must be applied in the financial year ending 31 March 2025 and the Annual 

Governance and Accountability Return (‘AGAR’) for the year ending 31 March 2025 (‘the 

2025 AGAR’) must be prepared in accordance with Sections 1 and 2 of this edition of the Guide. Note that the comparative figures (the figures for the year ended 31 March 2024 included in the 2025 AGAR) must be stated on the same basis as the figures for the year ending 31 March 2025. 

 

The ‘proper practices’ in this edition of the guide may be applied in preparing the AGAR for the year ending 31 March 2024 but this is not mandatory. Again, comparative figures must be stated on the same basis. 

 

In accordance with Section 6 of the Local Audit and Accountability Act 2014, an authority is a ‘smaller authority’ if the higher of the authority's gross income for the year and its gross expenditure for the year does not exceed £6.5m. For the purposes of the Accounts and Audit Regulations 2015, a smaller authority may also be referred to as a ‘Category 2 authority’. This guide uses the term ‘authority’ to refer to all types of smaller authority. For the purposes of the Practitioners’ Guide, this will include local councils (parish and town councils), parish meetings, internal drainage boards and ‘other’ authorities (including charter trustees, conservation bodies, port health authorities, harbour boards and crematorium boards). 

 

Smaller authorities with no financial transactions meet their responsibility to produce accounts by completing Form 1 of the Annual Governance and Accountability Return. 

 

Smaller authorities where the higher of gross income or gross expenditure was £25,000 or less, that meet the eligibility criteria set out in Regulation 9(3) of the Local Audit (Smaller Authorities) Regulations 2015, and that wish to certify themselves as exempt from a limited assurance review should complete Form 2 of the Annual Governance and Accountability Return. 

 

All remaining smaller authorities should complete Form 3 of the Annual Governance and Accountability Return. 

 

It is important to complete these returns on time and in line with the requirements set out here and in the AGAR. 

 

Section 1, 2 and 3 of this guide represents the proper accounting and governance practices 

(‘proper practices’) referred to in statute. They set out for responsible financial officers the appropriate standard of financial and governance reporting for smaller authorities and are mandatory. Although a parish meeting is a relevant authority, there are some circumstances where legislative requirements differ. As a result, JPAG has agreed on the way in which proper practices set out in this Practitioners’ Guide apply differently to parish meetings, and separate AGARs (suffixed PM) have been produced for this purpose: 

 

  1. The chair of the parish meeting should sign the Annual Governance and 

Accountability Return and Exemption Certificate where appropriate 

  1. It will be acceptable for parish meetings with no website to publish their notices on a noticeboard for a period of 14 days, as required by 22(5)(b)(ii) of the Accounts and Audit Regulations 2015, in relation to public rights and exemption from a limited assurance review. 

 

Section 4 of the guide sets out the non-statutory best practice guidance relating to internal audit which authorities are required to consider. 

 

Section 5 of the guide provides supporting information and practical examples to assist smaller authority officers to manage their governance and financial affairs and is not mandatory. 

 

The guide is intended as a working tool for smaller authorities, providing not only the common ‘rules’ for completing an Annual Governance and Accountability Return for use by responsible financial officers, but also as a reference work for auditors, both internal and external, councillors, other officers, and the public to aid understanding of the Annual Governance and Accountability Return and the reporting on the smaller authority’s governance and finances within it. 

 

For this reason, the guide is written with the intention to be as widely accessible as possible to all users within the constraints of it also representing the appropriate standards for public reporting by smaller authorities. 

 

JPAG is committed to a regular review of the guide to ensure that it remains fit for purpose for all smaller authorities in England. The guide is supported by the technical support teams at NALC, SLCC and ADA where you may address any questions about the content of the guide or suggestions for its improvement. 

         

Making provision for the exercise of public rights

Assertion 4 — Exercise of public rights 

We provided proper opportunity during the year for the exercise of electors’ rights in accordance with the requirements of the Accounts and Audit Regulations. 

 In order to warrant a positive response to this assertion the authority needs to have taken the following actions in respect of the previous year’s Annual Governance and Accountability Return: 

1.28 Exercise of public rights. The authority provided for the exercise of public rights is set out in Sections 26 and 27 of the Local Audit and Accountability Act 2014. Part 5 of the Accounts and Audit Regulations 2015 requires the RFO to have published, including on the authority’s website or another website: 

  • Sections 1 and 2 of the Annual Governance and Accountability Return; 
  • a declaration that the status of the statement of accounts is ‘unaudited’; and 
  • a statement that sets out details of how public rights can be exercised, as set out in Regulation 15(2)(b), which includes the period for the exercise of public rights. 1.External Auditor’s Review — A notice of the conclusion of the external auditor’s limited assurance review of the Annual Governance and Accountability Return, together with relevant accompanying information, was published (including on the authority’s website or other website) in accordance with the requirements of Regulation 16 the Accounts and Audit Regulations 2015. 
    1. A parish meeting may meet the publication requirements by displaying the information in question in a conspicuous place in the area of the authority for at least 14 days. 

Supporting information on the exercise of public rights can be found in Section 5 of the Practioners Guide 2024.

Explination of Variances 2023-2024

Reconciliation between Box 7 and Box 8 

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