(A pdf version of this policy is available to download here)
St Stephen in Brannel Parish Council is required by regulation 5(1) of the Accounts and Audit Regulations 2015 to “undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes, taking into account public sector internal auditing standards or guidance” *
The Parish Council will select and appoint an independent, competent internal auditor who has relevant knowledge of the public sector. Whilst there is no requirement for the person providing the internal audit service to be professionally qualified, they should be able to offer –
- An understanding of basic book-keeping and accounting processes; where an authority exceeds the £200,000 threshold, this understanding must include accrual accounting and balance sheets
- An understanding of the role of internal audit in reviewing systems rather than undertaking detailed checks that are more appropriately the responsibility of
management - An awareness of relevant principles and practice of financial and other risk management
- An understanding of proper practices in relation to governance and accounting requirements within the legal framework and powers of smaller authorities, as set out in Joint Panel on Accountability and Governance Practitioners Guide (knowledge of which is a prerequisite)
- An awareness of the most recent model Standing Orders and model Financial Regulations as published by NALC and how they are adopted by authorities
- An awareness of the relevance of VAT and PAYE/NIC rules as applied to the authority
- For larger authorities, a clear understanding of the risks and controls associated with ‘cut off’ procedures, particularly with respect to revenue-generating activities
The Parish Council will follow best practice guidance in ensuring that the internal auditor is independent and competent and consideration of this will be confirmed within the minutes when resolving the appointment or re-appointment.
Once the appropriate person has been selected, this appointment will be confirmed in a letter of engagement which will include the following –
- roles and responsibilities
- audit planning and timing of visits
- reporting requirements
- rights to access to information, members and officers
- period of engagement
- remuneration
- any other matters required for the management of the engagement by the authority
Whilst it is best practice, there is no legal requirement to rotate auditors but the independence and competence of the appointed person or firm should be reviewed every year.
As per guidance, it is requested that the following systems and processes are reviewed to enable that person to complete the relevant sections of the Annual Governance and Accountability Return –
- Appropriate accounting records have been properly kept throughout the year and periodic bank reconciliations were properly carried out during the year.
- The authority complied with its financial regulations, payments were supported by invoices, all expenditure was approved, and VAT was appropriately accounted for.
- The authority assessed the significant risks to achieving its objectives and reviewed the adequacy of arrangements to manage these.
- The precept or rates requirement resulted from an adequate budgetary process, progress against the budget was regularly monitored; and reserves are appropriate.
- Expected income was fully received based on correct prices, properly recorded and promptly banked; and VAT appropriately accounted for.
- Petty Cash payments were properly supported by receipts; all petty cash expenditure was approved, and VAT appropriately accounted for.
- Salaries to employees and allowances to members were paid in accordance with the authority’s approvals, and PAYE and NI requirements were properly applied.
- Asset and investment registers were complete and accurate and properly maintained (This section/assurance should be extended to include loans to or by the authority).
- Accounting statements prepared during the year were prepared on the correct accounting basis (receipts and payments or income and expenditure), agreed to the cashbook, supported by an adequate audit trail from underlying records and, where appropriate, debtors and creditors were properly recorded.
- If the authority certified itself as exempt from a limited assurance review in the prior year, it met the exemption criteria and correctly declared itself exempt.
- The authority publishes information on a free to access website / web page, up to date at the time of the internal audit in accordance with the relevant legislation.
- The authority has, during the previous year, correctly provided for the period for the exercise of public rights as required by the Accounts and Audit Regulations.
- The authority complied with the publication requirements for the prior year AGAR.
- Trust funds (including charitable) – the Council has met its responsibilities as a trustee
It is the expectation of the Parish Council that in addition to the annual internal audit report on the AGAR being completed, a narrative report that contains conclusion compatible with the entries on the AGAR is supplied.
Note: Whilst the Responsible Finance Officer will deal with any queries, any evidence of fraudulent activity within the Parish Councils financial transactions should be reported to the Chairman immediately – their contact details can be found here.
* Joint Panel on Accountability and Governance Practitioners Guide – March 2024 (2024: 24)
Adopted by Full Council at the meeting held on Wednesday 4th December 2024 under minute number FPC269/24. Due for review before March 2026.