A council's accounting records are its cash book/receipts and payments book or its computerised accounts and all supporting invoices and other financial records.
The Accounts and Audit (Wales) Regulations are secondary legislation issued by the Welsh Assembly Government under the Public Audit Wales Act 2004. The regulations provide a detailed framework for the responsibilities of the councils and the auditors regarding the preparation and audit of accounts.
The Welsh Assembly Government published guidance for community on the regulations.
The Accounts and Audit (Wales) Regulations can be found on the Office of Public Sector Information (OPSI) website.
The regulations were updated in 2007. The amended regulations can be found here.
Councils must provide an annual governance statement in their annual return. This statement confirms that the council had in place proper governance arrangements for their stewardship of their money and assets.
Before they complete the statement, councils must review their arrangements fully.
The annual return is published by the Auditor General for Wales it has several purposes:
Community councils hold two types of assets.
Current assets are assets such as cash, bank balances, stocks and debts owed to the council. Councils hold these assets and use them in the short term.
Fixed Assets are assets such as land, buildings, machines, office equipment etc. Councils hold these assets and use them for a longer period. Almost all councils have some fixed assets.
The Asset Register is an important record of the council's assets and supports the annual return entry for assets. It collects information on the cost or value of assets held and for insurance purposes, forms a record of assets held. It should recorded details such as:
This is an important internal control. It compares the council's cash book with the bank statements. Typically bank statements are received monthly. Some smaller councils may receive quarterly statements. It is good practice for the bank reconciliation to be prepared every time a bank statement is received. In all cases, the council should arrange for the reconciliation to be checked by a nominated council member or officer.
The budget is the council's estimate of its annual income and expenditure. The preparation of its annual budget is key statutory task. The budget allows the council to set its precept at the right level for the year and to monitor progress through the year.
This is the way the council manages its income and expenditure. Budget monitoring compares actual income and expenditure against the council's original plans. As good practice councils should monitor their finances against their budget monthly.
The cash book or receipts and payments book is a daily record of all money the council receives and spends. The totals in the cash book should be balanced regularly and reconciled to the bank statements. Many councils prepare their accounts directly from the cash book.
The clerk's role is to manage the administration of the council in accordance with its policies. It is essential for all clerks to ensure they understand their role and responsibilities. The Society of Local Council Clerks (SLCC) provide training for clerks on various aspects of their role.
Community councils are local government bodies serving local areas. They are the most numerous type of local council. They were formed by the local government act 1972. They provide a range of services in their local area.
In some areas the council is known as the Town council. Town councils often cover larger populations, have larger precepts and may provide a wider range of service.
The council's accounts show last year's figures to allow comparison with the current year.
Councils enter into contracts with suppliers of goods and services. Councils should always seek to get the best value for money possible. Their procedures should make sure that all decisions in relation to awarding contracts are transparent and reasonable.
Elected members come together to discuss and make decisions on community affairs. This will include:
Council meetings muct be open to the public and press. they can only be excluded by a council resolution for a particular occasion. They should only be excluded if the confidential nature of the business would prejudice the public interest.
A councillor or member is a person elected to serve on the council for a specified period of time which is currently four years. Collectively, the members form the political arm of the council and make the councils policies. Once elected, they represent all their constituents.
Although members can fulfil the responsibilities of an officer, including that of clerk, they cannot hold a paid office.
Members cannot be the internal auditor even if unpaid.
It is essential for all councillors to ensure they understand their role and responsibilities. One Voice Wales operate a training course for councillors explaining their role. In 2006, the Welsh Assembly Government published a guide for councillors.
Where councillors have an interest in any business of the council the members' code of conduct says they must declare this to the council. Declarations should be made at the start of each council meeting. They must then be recorded in the register of interests.
In certain cases the council may delegate its authority to sub committees, individual councillors or officers.
Examples of delegated powers include power to sign cheques and powers to approve emergency payments. It is good practice to clearly define the extent of delegated powers.
The Public Audit (Wales) Act 2004 gives local people the right to:
The Wales Audit Office leaflet, Your rights in Wales - Councils' Accounts, explains the public rights to inspect local councils accounts.
Councils annual accounts are audited by an auditor appointed by the Auditor General for Wales. The auditor will set a date from which the public can exercise their rights to inspect the accounts and ask the auditor questions or object to an item of account.
He/she sends the council a notice of audit telling the council when this will happen and advising the council what they need to do for the audit.
The council must advertise the audit and allow members of the public to exercise their rights. The council then sends the auditor the annual return and any other information requested.
The external auditor will look to see if the accounts have been properly prepared by the council.
After the audit is completed the auditor certifies the annual return and the council publishes that the accounts with a statement that the audit is now complete.
The Accounts and Audit Regulations state that the council must have an adequate and effective system of internal control. These controls are the financial checks and balances that the council uses to manage its money on a day to day basis.
The financial checks and balances make sure that:
Financial regulations provide a framework setting out the council's approved financial systems to secure the proper administration of its finances. They may contain regulations that must be followed and more general guidelines to achieve good financial control.
Fraud is an intentional deception made for personal gain or to damage another individual. Good internal controls and governance arrangements are essential to minimise the risk of fraud.
When council suffer fraud or theft it is often the case that the perpetrator has prepared false documents to disguise or to cover up the theft or fraud. In many cases the false documents include invoices and minutes.
This is how councils ensure that they are doing the right things, in the right way for the right people in a timely, inclusive, open, honest and accountable manner.
Insurance is one of the ways that the councils manage the risk of losses. It is good practice to insure against loss by:
The law requires councils to maintain adequate and effective system of internal audit. The internal auditor checks whether the internal controls (financial checks and balances) are working and if they are effective. The internal auditor's work should be proportionate to the activities of the council. It's essential that the internal auditor is independent of the council's decision making process and internal control procedures that are being reviewed. This means that councillors and clerks cannot act as the internal auditor. It's good practice for councils to review the internal audit arrangements at least once a year.
Councils secure an income from surplus monies through investments. Investments must be managed in accordance with the Assembly Government's guidelines.
Council members must comply with the members' code of conduct when representing or carrying out business on behalf of the council. Councils must adopt a code based on the model code published by the Welsh Assembly Government. Members must formally sign to demonstrate their agreement to adhere to the code.
If members do not undertake to abide by the code they cannot hold office.
A minute should be a short record of the item discussed and the decision reached. It is not necessary to record the majority by which a decision is made unless a member requires that the voting is recorded.
The law requires all councils to have a Monitoring Officer. The unitary authority's Monitoring Officer acts as the Monitoring Officer for community councils in the area.
The Monitoring Officer ensures that the council and its officers maintain the highest standard in all they do. The Monitoring Officer reports on matters:
One Voice Wales represents and provides support for community and town councils in Wales. Councils which are members of One Voice Wales have access to a library of resources and a training programme for councillors.
Employees pay income tax on a Pay As You Earn basis. Employers and employees pay National Insurance Contributions on employees' wages and salaries. The council as the employer must deduct these amounts from the employees' pay before paying the employee. The council must then pay the money deducted to HM Revenue and Customs (HMRC).
Failure to pay HMRC can result in fines and penalty charges on the council which can be substantial.
The council should receive and approve reports of all payments made.
Section 150 (5) of the local government act 1972 requires all cheques and orders for payment made by a council to be signed by two members. Councillors should only sign cheques that are fully completed and supported by invoices. These important controls reduce the risk of fraud.
As a public body a community council can only do what it has the statutory power to do. The main source of councils powers are found in the local government act 1972.
Governance and accountability for Local Councils - a Practitioners Guide (the Practitioners Guide) provides guidance on accounting practices and financial reporting for local councils in Wales. It is recognised as proper practices by the Assembly Government.
This is the council's income which is raised through the council tax. It is normally the council's main source of income. It is shown on the council tax bill.
This Act sets out a framework for the council's and auditor's responsibilities for the annual accounts and statutory external audit. The Act can be found on the Office of Public Sector Information website.
Sometimes councils provide services such as administration services on behalf of other public bodies. They may recharge the cost of these services to those bodies.
Councils must maintain registers of members' and officers' interests. The register seeks to identify potential conflicts such as relationships, financial etc so that risks of acting inapproprately can be avoided.
When councils spend less money than they receive in a year, they create a surplus. The council holds these surpluses as reserves.
A council needs to hold some reserves to make sure it can pay for unexpected events and to make sure it has enough money to pay bills until it receives income. Unless it has specific plans for future spending, councils should only hold reserves to provide a reasonable balance.
The responsible financial officer (RFO) administers the financial affairs for the council. Councils must by law appoint and RFO. The RFO will usually be the clerk but this is not necessarily the case. The RFO sets up financial systems to help councils live within their means. The appointment of an RFO does not mean that members do not have responsibility for the council's finances. They continue to be accountable for ensuring that the council does not live beyond its means.
Risk assessment identifies what can go wrong and how the council avoids or manages the consequences. The councils should receive and approve the risk assessment.
This legislation enables the council to spend a total of up to £5.50 (inflation adjusted) multiplied by the number of electors in the community.
This is an amount of money that councils can spend for the benefit of the community where it does not specifically have a statutory power. In most cases councils use section 137 to make grants to voluntary organisations within the community. For example, play groups.
Before using Section 137, the council must consider whether the expenditure will bring direct benefit to the area or its inhabitants.
SLCC represents local council clerks. It provides guidance, training and support for clerks regarding council administration. www.slcc.co.uk
Standing orders are the set of rules by which the council conducts its business. Typically, it would define how a council is to be conducted which would include how many members constituting a quorum. It must also define the arrangements for entering into a contract.
Model standing orders are obtainable from One Voice Wales.
The council must prepare an annual statement of account summarising its income and expenditure. Councils must:
Most councils publish their accounts in the annual return. The annual return is prepared by the Auditor General for Wales. The external auditor sends the annual return to the council for the council to complete the form. Guidance for preparing the accounts is found in the Practitioners' Guide.
External auditors ask councils to send them an explanation of variances with their annual return. This compares the current and previous year's figures. The auditor wants to know that councils understand the reasons for the changes. It should include a relevant analysis to support each explanation. The Practitioners Guide provides a number of examples to assist councils.
As a public body a community council can only do what it has a statutory power to do. If it acts outside these powers it is said to act ultra vires. If a council acts ultra vires its actions can be declared unlawful by the courts. Councils may incur public censure and significant legal costs if they act ultra vires.