Presentation on theme: "audit and accountability of local councils RECENT Developments"— Presentation transcript:
1 audit and accountability of local councils RECENT Developments Stephen ChristopherPartner, Mazars LLP
2 Topics for the session Recap on recent changes Repeal of s150(5) Local Government Act 1972Update of the Practitioners’ GuideThe Local Audit & Accountability Act 2014The Local Audit (Smaller Authorities) Regulations 2014 (Draft)Transparency Code for Parish Councils (Draft)
3 Repeal of s150(5) LG Act 1972 S150(5) required that: “every cheque or other order for the paymentof money shall be signed by two members of the council”No longer the law (following LRO) – but remains good practice.Government concerned that safeguards must remain:Removal of s150(5) “…should not leave the public funds controlled by parish councils at any greater risk of loss through misconduct or poor control” … (Rt Hon Grant Shapps MP, Minister for Housing and Local Government to NALC, SLCC and others - July 2010)“… safeguards be put in place (so) that all the payments made by parish councils are legitimate and that there is no misuse of the system”. (CLG Ministerial statement - 9 October 2010)
4 Repeal of s150(5) LG Act 1972 (Continued) Update to the Practitioners’ Guide:New Appendix 11 to 2010 Guide“Safeguarding public money”Approved by Joint Practitioners’ Advisory Group(JPAG) 17/02/2014Defines requirements – ‘must’, ‘should’ and ‘may’Incorporates fundamental principle of dual control:“Local councils must have in place safe and efficient arrangements to safeguard public money. It is a general principle that more than one person should be involved in any payments, whether that is before, at, or after the point at which the payment is made”
5 Roles and responsibilities of Members Councils must review regularly the effectivenessof their arrangements to protect money”Councils may delegate role of protecting money (e.g. to Clerk/RFO) but legal responsibility remains with Council and its members.Arrangements should demonstrate how the Council meets its responsibilities, support compliance with the general principle, specify duties of named individual(s)Councils may seek external advice. Periodic reviews may be carried out by members or by Internal Audit
6 Role and responsibilities of Responsible Financial Officer (RFO) Every local council must arrange for the proper administration of its financial affairs and that one of its officers has responsibility for those affairs. This officer is the RFO. (s151 LG Act 1972)If no formal appointment - by default RFO is ‘whoever keeps the council’s accounts’.RFO should be familiar with statutory duties for financial administration (s114, s151, A&A Regs)Responsibilities include advising the Council on:Financial positionKey financial controls for sound financial managementTreasury management (cash and investments)
7 Corporate arrangements for monitoring and security Councils:must identify and protect income and expenditure and the money represented by each. They must ensure controls over money are embedded in standing orders and financial regs.must not relinquish the ‘two member signatures’ control over cheques and other orders until they have put in place safe and efficient arrangements in accordance with this guidance.must approve the setting up of, and any changes to, accounts with banks or other financial institutions.must approve entry into ‘pooling’ or ‘sweep’ arrangements….must approve every bank mandate, authorised signatures for each account, limits of authority and any amendment to these.If held, credit cards must be set up to operate within defined limits and cleared monthly…
8 Corporate controls to manage risk, error and fraud Councils:Risk assessment and internal controls must focus on the safety of the council’s assets, particularly money.Segregation of duties where possible.Those with direct responsibility for money must undertake appropriate training from time to time.‘Shoulds’ include:Fidelity cover/risk assessed insuranceBank recs reported at each ordinary council meetingRFO issues the cheques etc. promptly after council approvalDetails of all accounts kept up to date and available to membersAnnual internal audit review/report on controls over moneyRequest written confirmation of balances periodically
9 Updated Practitioners’ Guide (March 2014) Sets out the “proper practice” to be followed with regard to… accounts and governance and also provides a range of additional guidance.Revised to follow consistent approach with Appendix 11 (Appendix 10 in 2014 Guide), with clear references to ‘must’, ‘should’ and ‘may’ throughout.Failure to comply with “proper practice” is potential audit qualification matter.
10 Local Audit and Accountability Act 2014 [Enacted 30 January 2014]Includes provisions for:Abolition of the Audit CommissionOn 31 March 2015Transfer of residual functions to other bodiesEstablishment of a new local audit frameworkAccounting arrangementsAuditing arrangementsRequires secondary legislationInitial consultation paper “The future of Local Audit” (Nov 2013)Further consultation in March and June 2014Draft regulations due to be finalised by end of 2014
11 What happens when the Audit Commission closes? Existing audit appointments continue until 2016/17“Public Sector Audit Appointments Limited” (PSAA)established by the LGA. Responsible for:Appointment of auditors to local government and part of NHSSetting scales of fees (local councils fixed until 2016/17)Making arrangements for certification of some grant claims/returnsNational Audit Office (NAO). Responsible for:Code of Audit Practice and any other guidance to auditorsCouncil accounts: a guide to your rightsJoint Practitioners Advisory Group (JPAG) = NALC, SLCC, ADA Responsible for:Maintaining and updating the Practitioners’ GuideProducing the Annual Return
12 Local Audit (Smaller Authorities) Regulations 2014 (Draft) Consultation in June – awaiting Government response“Specification of a person to appoint local auditors” (Appointing Body)From 2017/18 (to be in place from 2016), if contracts not extendedMay be a “sector-led body” or other arrangements (e.g. county-led?)Will appoint auditors to opted-in authoritiesWill set fee scales, length of appointmentCollect fees from opted-in authorityAuthorities can decide to “opt-in” or “opt-out”Opting-out requires:Decision by the full CouncilNotification to Appointing Body by 31 December in year of auditEstablishment of an auditor panel to advise on appointmentPanel must include independent members, who must be in a majority for panel to be quorate
13 Exemption from audit (turnover <£25k) Audit Exemption Policy (small authorities with gross income & gross expenditure or gross receipts & payments below £25k threshold.Can still choose to have an auditNot applicable if new (first 3 years)Not applicable if Public Interest Report/ item of accounts declared unlawful in previous yearIf choose not to have an audit:Do require auditor – but only to handle questions and objections from local electorsIf opted in – appointment will be made by Appointing Body (but only when needed)If opted out - must appoint an auditor, regardless of whether choose to have an audit.Must comply with requirements of Transparency Code for Parish Councils
14 Transparency Code for Parish Councils Applies to smaller authorities with turnover below £25k – from /18 onwards.Mandatory for all - even if choosing to have an auditExcludes Parish Meetings with turnover below £25k where there is no parish councilWill require to publish information from 1 July 2016= 2015/16 financial year accounts onwards!Transparency Regulations….“The intention is to lay regulations for making the transparency code for parish councils and other smaller authorities mandatory later on this year”….
15 Transparency Code for Parish Councils Continued Requirement to publish electronically (package of Government support?)What needs to be published?All items of expenditure above £100 (including non-recoverable VAT)End of year accounts, annual governance statements, annual internal auditor report (as contained in Annual return)Accounts should be accompanied by:Copy of bank reconciliation for relevant financial yearExplanation of significant variances from prior yearExplanation of any difference between year-end balances carried forward and total cash & investments (if accounts are on I&E basis)Agendas and approved minutes of formal meetingsList of councillor or members responsibilitiesDetails of public land and building assets owned by the authority
16 Rights of the publicContinues to apply to all local councils (includingthose exempt from audit)Arrangements change from 2015/16 auditCouncil must approve and publish accounts on website (or billing authority website) by 30 June 2016, along with a “Notice of public rights”RFO to set the timetable for the inspection periodInspection period changes to 30 working daysMust include a common national period (first 10 working days in July), but with flexibility on remaining daysRights of inspection can be exercisable on giving reasonable notice.Local electors can only question the auditor or make an objection to the accounts during the inspection period.