As we wrap up the 2023/2024 auditing season, it’s time to reflect on the key challenges and potential pitfalls that have emerged during our financial compliance efforts. This season, my team and I have audited 250 councils, with only a handful remaining. It has been a rigorous but enlightening journey, and I want to share some crucial insights to help you prepare better for the future. 

Notice of Public Rights: Timing is Everything 

One of the most common issues we encountered this season was related to the Notice of Public Rights. It’s vital to allow a full 24 hours from the date of the announcement to the start of the 30-day period. Missing this can lead to significant compliance issues, particularly with BDO, who are very stringent on this requirement. Double-check your dates and ensure that you adhere to this timeline to avoid unnecessary complications. 

Governance and Accounting Statements: Order Matters 

When documenting your governance and accounting statements, always remember to minute the governance statement first before the accounting statements. This might seem like a minor detail, but auditors pay close attention to the order of these entries. Ensuring the correct sequence can save you from potential red flags during the audit. 

Declaration of Interests Form: A New Requirement 

BDO has introduced a new form that requires councillors and staff to declare if they know anyone working for BDO at Southampton. This measure, inspired by previous audit issues such as those seen with Carillion, aims to prevent conflicts of interest. It’s essential to fill out this form accurately and ensure it is properly minuted. This new step is crucial for maintaining transparency and trust in our auditing processes. 

Trust Funds: Clarity and Precision 

Last year, many councils struggled with the wording in the trust fund declarations due to confusing double negatives. Thankfully, this has been simplified for the current year. However, it remains important to fully understand these declarations and ensure they are filled out correctly. Clear and precise reporting here can prevent misunderstandings and errors. 

Transition to Income and Expenditure Accounting 

If your council’s total income or expenditure exceeds £200k for three consecutive years, you must switch from receipts and payments accounting to income and expenditure accounting. This transition involves restating the previous year’s accounts using the new method to ensure consistency. While this can be an intensive process, proper planning and execution can ease the transition and ensure compliance. 

Asset Register: Keep It Updated 

An accurate and up-to-date asset register is vital. Ensure that all assets, particularly high-value items like laptops, electrical & grounds equipment, are recorded with detailed information including serial numbers. This is not only essential for audit purposes but also crucial for insurance and asset management. Regular verification and updates to your asset register (incl. Disposals) can prevent discrepancies and ensure all assets are accounted for. Also, this can reduce the Council’s insurance premium, if any major disposals are made (eg. Play or Grounds equipment) & notified to the Insurance Company. 

Regular VAT Claims 

To improve cash flow and ensure timely reimbursement, it’s advisable to make VAT claims on a quarterly basis if possible. For small councils that cannot manage quarterly claims, at least make annual claims, ideally aligning with the financial year-end. This practice can significantly aid in maintaining a healthy cash flow. 

Encouraging New RFOs and Internal Auditors 

There is a notable shortage of qualified Responsible Financial Officers (RFOs) and Internal Auditors, & especially with many experienced Clerks/RFOs & Internal Auditors retiring over next few years. Training and encouraging new RFOs and Internal Auditors is essential to fill this gap. We are actively involved in promoting with AAT & CIPFA this need, by providing guidance to attract and train new personnel in these vital roles. Recently SLCC have established a new qualification for Clerks in Internal Auditing to assist.   

Reciprocal Internal Auditing 

To maintain independence and objectivity, reciprocal internal auditing is a beneficial practice. This means a Clerk from one council can audit another, preventing conflicts of interest and ensuring thorough and unbiased auditing processes. However, in order to maintain strict Transparency this must require at least 3 Clerks involvement, as it is not permitted for 2 Clerks to merely audit each other. 

Using Government Gateway for VAT Adjustments 

For councils needing to change their VAT period to align with the financial year, logging into the Government Gateway and requesting the change can simplify the process and ensure consistency with financial reporting. 

Insurance Coverage for Assets 

Having an accurate asset register with all necessary details, including serial numbers and locations, ensures proper insurance coverage. This is particularly important when filing claims or renewing policies. 

Final Thoughts 

The 2023/2024 auditing season has been challenging, but with careful attention to these key areas, we have navigated it successfully. Ensuring compliance with these guidelines not only facilitates a smoother audit process but also reinforces the financial integrity of our councils. 

As we look ahead, staying vigilant, keeping meticulous records, and seeking advice when uncertainties arise will be crucial. Here’s to a successful conclusion to this season and an even more efficient approach for the next. 

Best regards, 

Paul Reynolds 

Audit Director Fair Account 

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