Accounting systems include the computer software systems public bodies use to record and process transactions. These systems also include the systems of controls and checks in place to process the transactions.
Analytical procedures or analytical review procedures seek to obtain a broad understanding of the public body's financial position and results. They are also used to identify any items requiring further investigation. The procedures examine the relationships between transactions, ratios, trends, and changes in balances from one period to the next.
The procedures may examine past events using recorded transactions or may be predictive where historical data is used to develop an expected outcome. The expected outcome is then compared to the actual outcome.
An annual report is a comprehensive report on a public body's activities throughout the year. Annual reports give information about the company's activities and financial performance.
The Audit Committee is set up by the public body to oversee the arrangements for preparing the financial statements and systems of financial control. HM Treasury guidance on audit committees can be accessed here:
The audit opinion is part of the auditor's report on the financial statements. The opinion states whether or not the financial statements are materially correct.
The audit plan reflects the auditor's assessment of the risk for the public body. It sets out the work the auditor proposes to undertake in relation to the financial statements.
Auditors typically do not examine every transaction a public body makes. They test a range of transactions and draw conclusions on them. Auditors will undertake a range of different procedures. This will include examination of transactions, balances and other information.
The chief financial officer (CFO) is the director of finance/accounting officer/ responsible financial officer.
Whilst members/Board are accountable for the finances of the body, a CFO must be appointed for those affairs. The key duties of the CFO are:
As a minimum, the CFO should promote awareness amongst members that the accounts provide them with assurance that:
Other major tasks are securing other chief officers co-operation; appointing a supervising officer to manage the accounts production process; and liaising with external audit.
The Chartered Institute of Public Finance and Accountancy, CIPFA, is an accounting body incorporated by Royal Charter. It represents finance professionals in the public sector. CIPFA provides information, guidance and training on accounting and financial issues to the public sector. Along with the Local Authority (Scotland) Accounts Advisory Committee (LASAAC), CIPFA prepares accounting guidance for the local government sector in the form of a Code of Accounting Practice.
Auditors use their CAKE when planning their audits, identifying areas where work should be focussed. CAKE comes from the auditor's knowledge of:
All public bodies in Wales are required to have an external auditor. The statutory auditor for the Assembly Government and the National Assembly for Wales Commission and its sponsored bodies is the Auditor General. The Auditor General appoints the external auditor for local authorities in Wales.
The primary role of external auditors is to express an opinion on whether a body's financial statements are free of material error and misstatements.
Financial statements record the financial activities of public bodies. They are also referred to as the annual accounts or the statement of accounts.
Financial statements normally include:
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 a public body suffers 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.
International Financial Reporting Standards (IFRS) are Standards, Interpretations and the Framework adopted by the International Accounting Standards Board (IASB). IFRS are a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments.
These controls are the financial checks and balances that the public body uses to manage its money on a day-to-day basis. The financial checks and balances make sure that:
There are over 800 public bodies in Wales including the Welsh Assembly Government, the National Assembly for Wales, Assembly Government Sponsored Bodies, health boards, local authorities, police and fire authorities and town and community councils. Together these bodies spend in excess of £20 billion each year.
The arrangements for managing these bodies varies across each sector:
We have used the term Board to describe the arrangements for all of these bodies. Board members are responsible for the financial affairs of the public body. They should take an active approach to financial management throughout the year. In some cases, members only take an interest when a financial problem has caused or may cause bad publicity.
Senior managers are responsible for the direction and practices of public bodies. They include the following:
A public body's stakeholders are those persons, groups or organisations that can affect or be affected by the public body's actions. Stakeholders include:
Standing orders are the set of rules by which the audited and inspected body conducts its business. Typically, it would define how a council is to be conducted which would include how many members/non-executives constitute a quorum. It must also define the arrangements for entering into a contract.
The Generally Accepted Accounting Practice in the UK, or UK GAAP, are the overall body of regulation establishing how accounts must be prepared in the United Kingdom. This includes not only accounting standards, but also UK law.