What was the issue?

Council K’s accounting records and financial control systems failed to comply with the requirements of the Accounts And Audit Regulations 2005 (as amended). The Council did not prepare its annual accounts for over two years. No records were kept of council meetings.

What happened?

There was no schedule or records kept of any council meetings. The Council was unable to demonstrate that any payments had been approved.

The council did not maintain its cash book during this time and was unable to provide supporting documentation for any payments it made. The council did not record any income from its hall and also failed to make payments for important bills such as utilities and tax and national insurance payments to HM Revenue and Customs (HMRC).

The Council also failed to prepare and approve the statement of accounts within the statutory timeframe.

The Council did not appoint an internal auditor. These issues only came to light during the external audit.

What was/could be the impact?

As a result of these failures, the Council had credit withdrawn by suppliers, risked having its utilities disconnected and suffered penalties of over £500 imposed by HMRC for non payment of relatively small bills.

The external auditor undertook significant amounts of additional work and charged a significant additional audit fee.

What improvements should be made?

To ensure the proper administration of public funds, the members should:

• be clear about their legal responsibilities for the stewardship of council funds and the maintenance of council documents;
• be clear about the clerk’s responsibilities;
• ensure that Statements of Accounts are prepared in accordance with legislation;
• ensure there is a sound financial control environment, including authorisation of payments and income records;
• insist on the proper reporting of the Council’s financial position and performance at each council meeting;
• ensure that they have an effective system of internal audit to comply with legislation; and
• ensure that the Council deducts the correct income tax and national insurance contributions.