What to do now
Smaller Authorities
Audit of 2015/16accounts
Intermediate Audits
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AUDIT OF 2015/16 ACCOUNTS
INTERMEDIATEAUDITS - WHAT TO DO NOW
YOUR COUNCIL REQUIRES AN INTERMEDIATE AUDIT
PLEASE NOTE THE ADDITIONAL INFORMATION REQUIRED ON THE SEPARATE SHEET ENCLOSED WITH THIS PACK
Section / Page1 / What's new for 2016 / 2
2 / Inspection and Notice Period / 3
3 / Timetable / 4-5
4 / Fees / 6-7
5 / Information required for audit of the Annual Return / 8
a)Notice of the Date of Commencement of Period for the Exercise of Public Rights / 9
b)Bank reconciliation / 9-10
c)Explanations of significant variances on the Accounting Statements / 11-12
d)Reconciliation between Boxes 7 and 8 on Section 2 of the Annual Return (if applicable) / 13
e)Explanations for "No's" in Section1– the Annual Governance Statement / 14
f)Explanations for "No's" and "Not covered's" on the Annual internal audit report / 14
g)Details of any earmarked or restricted reserves held by the Authority at 31 March 2016 / 14
h)The information required for intermediate audit (see separate sheet enclosed)
6 / Top 20 common audit problems / 15
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Section 1
What's new for 2016?
There are twoimportant changes in 2015/16 that you need to be aware of:
1.The Annual Return
Your Annual Return will look differentthis year.The Annual Governance Statement is now Section 1 of the Annual Return and The Accounting Statements are now Section 2.
Section 1 must be approved before Section 2.
There is one Annual Return form for all types of Smaller Authority. The term Authority includes Parish Councils, Parish Meetings, Town Councils and Internal Drainage Boards. A complete list of the bodies that may be Smaller Authorities is in schedule 2 of the Local Audit and Accountability Act 2014.
2.The inspection and notice procedures
Theperiod during which the public can inspect the books and records of the Smaller Authority, make an objection to the accounts, or question the local auditor (the inspection and notice period) must be a single period of 30 working days and must include the first 10 working days of July.
The Responsible Financial Officer must publish prior to the external audit of the Annual Return:
- the Statement of Accounts (Section 2 of the Annual Return), accompanied by a signed declaration to the effect that the statement of accounts as published are unaudited and may be subject to change;
- the Annual Governance Statement (Section 1 of the Annual Return) whether or not it has yet been approved by the Authority; and
- a statement with details about the exercise of public rights.
Appointed external auditors are no longer required to set an appointed audit date for the exercise of public rights. However, we are seeking your help to send in your Annual Return and the other information we have requested by the requested submission date (due date) so that we can schedule your audit effectively and complete all the audits by 30 September 2016. Further information on this change can be found in Section 2 of this booklet.
The Responsible Financial Officer of the Smaller Authority must now inform us, the external auditor, of the date of commencement of the period for the exercise of public rights.
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Section 2
Inspection and notice period
What do you have to do now?
You must publish the Annual Return, the declaration that the Accounting Statements are unaudited (the Declaration) and the Notice for the Commencement of the Period for the Exercise of Public Rights (the Notice). Publication must be on the Authority's website. If the Authority does not have its own website there must be reference to publication on another website where the information is accessible to the public without the need to register or make payment. If you are a Parish Meeting, please see below as the rules are slightly different.
We have asked you to submit the Annual Return and its supporting documentation to us by the due date in the paragraph headed "Requested submission date for audit" of the letter accompanying the Annual Return. This is so we can schedule your audit as effectively as possible and complete all the audits by 30 September 2016. Please contact us immediately if you cannot meet this date so we can arrange another date.
Parish Meetings
If you are a Parish Meeting and do not have access to a website, you must display the Annual Return, Declaration and Notice in a conspicuous place in the area of the authority for at least 14 days. This requirement only applies to Parish Meetings, not other types of Authority. Authorities that are not Parish Meetings must publish the required information on the Authority's website or another website where the information is accessible to the public without the need to register or make payment.
The inspection period
The inspection period begins the day following the publication of the Annual Return and must be a single period of 30 working days. These 30 days must include the first 10 working days in July.
Therefore, the 2015/16 inspection period must be:
at the earliest between Friday 3 June 2016 and Thursday 14 July 2016; and
at the latest between Friday 1 July 2016 and Thursday 11 August 2016.
You do not need to wait until the start or end of the inspection period to send us your Annual Return. Please send us the Annual Return and other information required by the submission date we have requested.
You are required by law to let us know the date which you have published your Annual Return and commenced the period for the exercise of public rights. We have enclosed a template with your pack that you may send back to us or you can contact us directly using the details on page 5 of this booklet.
Please complete the Notice and return a copy of itto us with your completed Annual Return and the other requested information listed at page 8of this booklet by the due date.
Section 3
Timetable
What to do first?
1.Make sure you can meet the requested submission date
The requested submission date(due date) is on the first page of your letter in the paragraph headed "Requested submission date for audit."
If you are unable to meet the requested submission date please contact us immediately to arrange another date.The contact details are on page 5 of this booklet.
Please note that the Accounts and Audit Regulations 2015 require the Annual Return to be approved at a full council meeting by 30 June 2016 in any event, whatever requested submission date is agreed.
2.Complete and display the Annual Return, the Declaration and the Notice
A template Notice and Declaration are included in this pack. You do not have to use them, but if you do you will meet all the requirements that you are required to comply with under Section 15 (2) of the Accounts and Audit Regulations 2015.
3.Internal audit
Make sure you have arranged for your independent internal auditor to undertake an assessment of compliance with relevant procedures and controls operated during the financial year, as required under the Accounts and Audit Regulations 2015, and to complete the Annual internal audit report on page 5 of the Annual Return, in time for you to submit the Annual Return and other information we require by the submission date.
The internal auditor must be independent of the Authority and must not undertake any other work associated with the Annual Return.
The internal audit can be done either before or after 31 March 2016.
4.Approval of Annual Return
Make sure you have arranged for a full meeting of theAuthority to approve Sections 1 and 2 of the Annual Return in time to submit the Annual Return for audit by the submission date.
Section 1 of the Annual Return (the Annual Governance Statement) must be approved by the Smaller Authority before Section 2.
Section 2 of the Annual Return (the Accounting Statements)must be approved by the Smaller Authority before 30 June 2016.
Failure to approve Section 2 of the Annual Return by 30 June 2016 will result in a qualified audit report.
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Section 3 – Timetable - continued
5.Prepare the Annual Return and other requested information
Prepare the Annual Return and all the requested information at Section5 of this booklet. To help you we have provided explanations and suggested layouts for the information required at pages 8 to 14, which you may use if you wish.
6.Submit your Annual Return and other requested information
Submitthe Annual Return and other requested informationto the address below by the requested submission date (See page 1 of your accompanying letter).It is a good idea to keep a copy of everything you send to us.
County / Grant Thornton OfficeAvon (AVN) / Bristol
Cornwall (CWL) / Bristol
Devon (DVN) / Bristol
Gloucestershire (GLS) / Bristol
Herefordshire (HRF) / Bristol
Somerset (SOM) / Bristol
Wiltshire (WLT) / Bristol
Worcestershire (WRC) / Bristol
Derbyshire (DBY) / Liverpool
Leicestershire (LCS) / Liverpool
Lincolnshire (LIN) / Liverpool
Nottinghamshire (NOT) / Liverpool
Staffordshire (STF) / Liverpool
Warwickshire (WKS) / Liverpool
The contact details are below:
Administrative queries, including requesting a change of submission dateLIVERPOOL / BRISTOL
Name / Angela Ellison / Jo Farr
Address / Grant Thornton UK LLP
Royal Liver Building
LIVERPOOL
L3 1PS / Grant Thornton UK LLP
Hartwell House
55-61 Victoria Street
BRISTOL
BS1 6FT
Telephone Number / 0161 214 6390 / 0117 305 7879
E mail / /
Technical queries
Name / Liz Temple-Murray / Laura Hallez
Address / Grant Thornton UK LLP
Royal Liver Building
LIVERPOOLL3 1PS / Grant Thornton UK LLP
Hartwell House
55-61 Victoria Street
BRISTOLBS1 6FT
Telephone number / 07880 456171 / 02920 347 558
E mail / /
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Section 4
Fees
Audit fees
The scale of audit fees was set by the Audit Commission and published in "Audit of Small Bodies – Scale of fees 2012/13 to 2016/17". On the abolition of the Audit Commission on 31 March 2015, responsibility for fee setting was delegated to Public Sector Audit Appointments Limited. Your audit fee will be based on the greater of total income (Box 2 plus Box 3 on Section 2); and expenditure (Box 4 plus Box 5 plus Box 6 on Section2) in accordance with the scale of fees:
Audit fees 2012/13 to 2016/17Income / Expenditure Band (£) / Feeexcluding VAT (£)
0 to 10,000 / No fee payable
10,001 to 25,000 / 100
25,001 to 50,000 / 200
50,001 to 100,000 / 300
100,001 to 200,000 / 400
200,001 to 300,000 / 600
300,001 to 400,000 / 800
400,001 to 500,000 / 1,000
500,001 to 750,000 / 1,300
750,001 to 1,000,000 / 1,600
1,000,001 to 2,000,000 / 2,000
2,000,001 to 3,000,000 / 2,400
3,000,001 to 4,000,000 / 2,800
4,000,001 to 5,000,000 / 3,200
5,000,001 to 6,500,000 / 3,600
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Section 4
Fees - continued
Additional fees
Annual Returns that have to be returned to the Authority because they are not properly completed, or failure to send the requested information or the Annual Return to us by the due date may incur additional fees over and above the flat rate audit fees above.
Additional fees are charged at the following hourly rates:
Partner/Director / £325Senior manager/manager / £180
Senior auditor / £115
Junior auditor / £85
Administrative staff / £85
If you have incurred a fee for your audit you will be invoiced a few days after you receive your audited Annual Return. All fees will have VAT charged at the standard rate of 20%.
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Section 5
Information required for audit of Annual Return
If your Authority has had financial transactions in the year, please return the following:
A fully completed 2016 Annual Return (Sections 1,2 and the Annual internal audit report) and;
a)a copy of the Notice of the Date of Commencement of Public Rights as published on the Authority's website (or in a public place for Parish Meetings without a website), or other notification of the Date of Commencement of Public Rights;
b)your financial year-end bank reconciliation at 31 March 2016;
c)explanations for significant variations (greater than 15%) in the figures from last year to this year;
d)quantified explanations for any difference between Box 7 and Box 8 on Section2- The Accounting Statements (if applicable – i.e. the Annual Return is prepared on an income and expenditure basis and has debtors and/or creditors);
e)explanations for any statement in Section1- The Annual Governance Statement,to which the response is “no” and a note of the action the Authority intends to take to address any weaknesses;
f)full explanations for any “no” or “not covered” responses in the Annual Internal Audit Report on page 5 of the Annual Return;
g)details of any earmarked reserves held by the Authority at 31 March 2016;
h)Internal Drainage Boards only – a copy of your Section 48 certificate and a reconciliation to the figure in Box 3 on Section 2 - The Accounting Statements;
i)information required for the intermediate audit(see enclosed sheet).
Further guidance is given on pages 9 to 14 of this booklet, and on page 6 of the Annual Return.
Please do not send us any additional information that we have not asked for.
If we require further information we will contact you during the course of our audit.
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A soft copy of all the templates and tables set outbelow can be obtained by e-mailing the contacts for administrative queries in the table on page 5 of this booklet.
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Section 5
Information required for audit of the Annual Return - continued
a)Notice of the Date of Commencement of Period for the Exercise of Public Rights
Included with your Annual Return is a template you can use to prepare the statement that must be published,(including on the Authority's website), setting out the details for the exercise of public rights.
You do not have to use this template but if you do you will meet the requirements of Section 15 2(b) of the Accounts and Audit Regulations 2015.
The Responsible Financial Officer must, by law, inform us, the external auditor, of the Date of Commencement of the Period for the Exercise of Public Rights. This can be done either by sending us a copy of the Notice that has been published, or by contacting us by email to let us know. Please use the contact details for administrative queries on page 5 of this booklet.
b)Bank Reconciliation
What is a bank reconciliation?
A bank reconciliation is a control schedule prepared by the Authority that agrees the balance per the bank statement at the year end (31 March) to the bank balance per the Authority’s own records. It is good practice for bank reconciliations to be prepared regularly throughout the year and approved by the Authority.
More than one bank account?
The bank reconciliation(s) should cover all the Authority's bank accounts. If the Authority has more than one bank account it is helpful if you can provide a summary of the bank reconciliations that agrees to Box 8 on the Annual Return in addition to the detailed reconciliations prepared for each account.
It is helpful if the year-end bank reconciliation is set out and submitted to us based on the suggested format on page 10 of this booklet.
If there are no outstanding items at the year-endyou must still supply a bank reconciliation. A zero or “Nil” should be included in the relevant lines on the schedule or a clear statement should be made to that effect.
Section 5
BANK RECONCILIATION YEAR ENDED 31 MARCH 2016
LOCAL AUTHORITY NAME ………………………………………………………….
COUNTY ………………………………………………….…………………………
£A / Balance on the bank statement at 31 March 2016 (taken from bank statement)
Outstanding items
B / Less unpresented cheques (to agree with attached list)
C / Plus uncleared payments into bank (to agree with attached list)
D / Petty cash
Plus any petty cash balance held at 31 March 2016
E / Balance in the cash book (Authority’s own records) at 31 March 2016 (Calculated as A-B+C+D=E and agrees with Box 8 on the Annual Return )
Section 5
c)Explanations of significant varianceson the Accounting Statements
We require explanations for significant variances (increases or decreases) of more than 15% between 2015 and 2016 in Boxes 2,3,4,5,6 and 9. Variances of less than 15% or less than £250 need not be explained.
Your explanations must be quantified, i.e. state how much of the variance is covered by each specific explanation. Your explanations must ensure that the variances for each Box are explained and quantified to within 15%.
Guidance is available at paragraph 6 on the back of the 2016 Annual Return and in the Practitioners' Guide – available on line at the NALC website.
You can set out your explanations of variances in any way you wish, but they should be clear and complete and easy to follow.
Our suggested method of how to identify variances that require explanation, and suggested layout for providing explanations are set out below and on page 12.
Identifying which variances require explanation
Positive and negative variances must be explained
Box on Section2 / 2015 £ / 2016 £ / VarianceIncrease (+) or decrease (-)
(2016 less 2015)
£ / %(Variance divided by 2015 figure multiplied by 100) / Explanation required?
Less than £250? - NO
Less than 15% - NO
More than 15% - YES
Box2
Precept or Rates or Levies
Box3
Total other receipts
Box4
Staff costs
Box5
Loan interest/capital repayments
Box6
All other payments
Box9
Total fixed assets plus long term investments and assets
Section 5
c) Explanations of significant varianceson the Accounting Statements - continued
Suggested layout for explanations
One sheet to be prepared for each variance that requires explanation.
BOX NO ……………….. / £Figure in 2016 column
Figure in 2015 column
Variance (2016 figure less 2015 figure) A positive figure is an increase, a negative figure is a decrease
Reasons (as many as are applicable) / Amount
£
Reason 1
Reason 2
Reason 3
Reason 4
Unexplained
Confirm unexplained amount is less than 15% of 2015 figure
Council Tax Support Grant (Applies only to Parish Councils and Meetings)
The Council Tax Support Grant,if received, ispaid over at the same time as the Precept. Please note that only the Precept should be recorded in Box 2 (Precept or Rates and Levies )on the Annual Return.