#1 Preparation

Think about your cashbook, are you up to date in entering transactions? If you are a couple of months behind, book a few hours in your calendar throughout the week to get your transactions entered to date - consider how far behind you are, and the number of transactions that need entering when setting aside this time.

Check the accuracy of your transactions - have they been allocated to the correct budget heading and VAT rate? Corresponding paperwork can help with this, such as invoices and receipts, and this will help when you get to the internal audit.

The last thing you want at 31st March is to be trawling through months of emails, documents and correspondence to investigate a discrepancy in your records. Get into the habit of reconciling every month, even if it's only a handful of transactions. Ensure your last bank reconciliation is balancing before moving on to the following month. This means if you do discover a discrepancy at the end of March, you only have one months worth of data to look back on.

Now is also the time to ensure your VAT records are up to date. If you're VAT registered, you will be governed by your VAT dates as to when you need to submit a return. If you're not VAT registered, and claiming VAT back via Form 126, there is no specific timeframe in which you need to do this. We therefore recommend doing this annually and ideally in line with the financial year. This is where checking corresponding documents comes in handy - ensure you have a valid VAT invoice and the suppliers VAT number in order to claim VAT back.

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 Ensure your asset register is up to date. Have assets been disposed of throughout the year and correctly updated on the asset register? Have you purchased new assets throughout the year and added these to your asset register? A lot of questions tend to arise around the asset register.

There are two approaches that can be taken when completing the Accounting Statements section of the AGAR, and it's important to know which approach you'll be using. 

Receipts & Payments (also known as cash accounting) records receipts and payments at the point they are received or paid, regardless of when they relate to. 

Income & Expenditure (also known as accruals accounting) records transactions on the date to which they relate, rather than when they were received/paid.

Councils are required to work on an I&E basis when their gross income, or gross expenditure, exceeds £200,000 for 3 consecutive years. Councils can also voluntarily opt to complete year end in I&E if under this threshold.  

It's important to mention that although the role of the Clerk can feel isolating at times, there are resources and support groups there to help - you are never alone! If needed you can refer to the  Practitioner's Guide, which has a wealth of information on the year end process. There are also Facebook support forums with hundreds of Clerks on hand to answer your queries and support you through year end .

The Practitioner's Guide above, it's worth mentioning that it has a great checklist on the internal audit. 

So if it's your first internal audit this year, it gives a good idea of what to expect.

The internal audit for local councils should be carried out at least annually (the scope and extent will largely depend on the size of the council). It is essentially the process of evaluating the council's internal processes and systems to ensure they are functioning effectively and efficiently.   The internal auditor, which must be appointed by the council (not just the Clerk).

When appointing an internal auditor, you must ensure that they are:

 1) independent from the council 

 2) have good knowledge and understanding of local government finance and procedures.

• Minutes
• Cashbook, bank reconciliations and bank statements
• Budget, precept setting and reserves
• Risk assessment
• Asset register and insurance renewal
• Standing orders and financial regulations
• VAT submissions/reclaims
• Payroll procedures
• Balance sheet and reconciliation between  Line 7 & 8 (I&E only)
• Previous internal auditors report to ensure any points raised have been addressed

The internal audit can be carried out as soon as you have completed the financial year and have all documents readily accessible. It's good practice to have the internal audit carried out before the AGAR is approved by the council, as the internal auditors report will be available for them. If any matters are raised by the internal auditors report, these can then be addressed by the council.

There are 3 separate AGAR Forms, and the one you will complete depends on your financial activity:

• Form 1 is to be completed by local      councils with no financial activity for the year.
• Form 2 is to be completed by local      councils that wish to claim exemption, due to the higher of gross income      or gross expenditure not exceeding £25,000. You must still undergo the      internal audit, and there are further criteria you must meet in order to      claim exemption - this will be detailed on the AGAR.
• Form 3 is to be completed by all local      councils where the higher of gross income or gross expenditure exceeded      £25,000, but did not exceed £6.5 million.

This section is to be completed by your internal auditor, and and requires a ‘Yes’ or ‘No’ response to a set of statements. If the response to one of these statements is ‘No’, the internal auditor must state the implications and action being taken to address any weakness in the control identified - a separate sheet may need to be used and submitted for this.

This must be signed and dated by the internal auditor.

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This section is to be completed by the Clerk/RFO and approved at a council meeting before submission. The Annual Governance Statement is used to review the effectiveness of the system of internal controls and requires a ‘Yes’ or ‘No’ response to a set of statements. If responses to one of these statements is ‘No’, this must be accompanied by a separate sheet identifying weaknesses and how they will be addressed.

This must be signed by the Clerk/RFO and Chairman, with the date and minute reference of approval stated.

  This section is to be completed by the Clerk/RFO and approved at a council meeting before submission. The way you complete the accounting statements will depend on your accounting approach. The two key differences to be aware of is VAT & Year Adjustments.

Section 2 must be signed and dated by the Clerk/RFO, signed by the Chairman, and the date and minute reference of approval stated.

This is for local councils completing Form 3, that are not exempt from the external audit. This section is to be completed by your external auditor, who will provide a limited assurance review of sections 1 & 2 of the AGAR.

This is for local councils completing Form 2, who have claimed exemption from the external audit. The certificate of exemption must be completed, which includes stating the gross income and gross expenditure. NOTE: if you are certifying the council as exempt, you do not need to send the completed Internal Audit Report, AGAR Section 1 and Section 2 to the external auditor - these just need to be approved and signed by the council.

This must be signed and dated by both the Clerk/RFO and Chairman, with the date and minute reference of approval stated.

• Ensure your prior year Line 7 (closing      balances) matches your current year Line 1 (opening balances).
• Ensure the figures on the accounting      statements balance
• Section 1: Annual Governance Statement  must be completed on the same day, or before, Section 2: The Accounting  Statements
• You will need to send a year end bank      reconciliation and the commencement date for the exercise of public rights to the external auditor
• An explanation of significant variances must be provided in both words and numbers (e.g. Line 3 has increased by  £5000 due to a grant received in the year of £4800 and a 5% increase in allotment fees resulting in an additional £200 in income).