Dealing with Public Money


Being nancially responsible for a public body can be daunting. The rules set by Government are designed to make sure that the council takes no unacceptable risks with public money.

The words risk management should be engraved upon every councillor’s mind. The good news is that the rules protect you and your council from possible disaster. Your council should establish a risk management scheme which highlights every known signi cant risk in terms of the council’s activities and makes clear how such risks will be managed. This includes ensuring that it has proper insurance to protect employees, buildings, cash and members of the public. For example, playgrounds and sports facilities must be subject to regular checks that are properly recorded. It’s not just about protecting assets; it’s about taking care of people.

As a councillor, you share collective responsibility for financial management of the council. The council will have made arrangements for its nances to be administered by an officer known, in law, as the responsible nancial o cer (RFO). Your role is to ensure that the RFO acts properly so that the council avoids the risk of loss, fraud or bad debt, whether through deliberate or careless actions. Robust nancial checks and oversight are of great importance. Your council may make electronic payments or pay by cheque, whatever arrangement is in place you should ensure that there is a system to reduce the risks of error or fraud, for example never sign a blank cheque.

As an aid, your council should have its own financial regulations (as part of standing orders) giving details of how the council must manage its nances.

The National Association of Local Councils publishes model financial regulations available from your county association. If your council has not adopted financial regulations then you leave yourselves open to considerable risk and your council must take action to correct this as a matter of urgency.

The council must operate an overall system of internal control appropriate to your council’s expenditure and activity. There is extensive guidance on risk and internal control in Governance and Accountability for Smaller Authorities in England — A Practitioners’ Guide to Proper Practices4 to be applied in the preparation of statutory annual accounts and governance statements – published jointly by NALC and the SLCC. As part of its system of internal control, the council arranges for an Internal Audit where someone, (other than the RFO and acting independently of the council), scrutinises the council’s nancial systems.

The findings of internal controls are reported to the council, so, together with regular feedback from the RFO on the accounts, all councillors should be aware of the council’s nancial position. This ensures everything is open and above board and you have what you need as a councillor accountable for the council’s nances.

The budget is an essential tool for controlling the council’s nances. It demonstrates that your council will have su cient income to carry out its activities and policies. By checking spending against budget plans on a regular basis at council meetings, the council controls its nances during the year so that it can con dently make progress towards what it wants to achieve.

Transparency and openness should be the fundamental principle behind everything your parish council does. Greater openness and transparency is part of a wider transformation process across local government and provides local people with the information they need to hold your council to account.

As part of this, a new plain English guide to openness and accountability 5 issued in 2014 sets out clear guidelines on what should be available to the public in relation to your council, including attending and reporting on meetings and accessing information.

In addition, a new Transparency Code for Smaller Authorities 6 came into e ect from 1 April 2015. It requires the online publication of key nancial, governance and meeting information from 1 July 2015. It applies to parish councils and certain other small bodies with an annual turnover not exceeding £25,000, and from 1 April 2017 replaces the need for external annual audit in most cases.

Whilst this Code only applies to parish councils with an annual turnover of £25k or less, it is considered best practice for all parish councils, whatever their turnover, to be meeting the transparency requirements set out in the code and this best practice is reinforced by National Association of Local Councils’ Award Scheme.

Parish councils with annual turnover exceeding £200,000 are expected to follow the Local Government Transparency Code for larger authorities.7

The Smaller Authorities Code requires Parish Councils to publish the following information:

  • all items of expenditure above £100
  • end of year accounts
  • annual governance statement
  • internal audit report
  • list of councillor or member responsibilities,
  • the details of public land and building assets,
  • minutes, agendas and meeting papers of formal meetingsSeparately, from 2015/16 all parish councils are required to publish their annual end of year accounts online.

    To help the smallest parish councils meet these new transparency requirements, DCLG is supporting NALC and its county associations to deliver funding of £4.7million over three years to enable those bodies without the capacity or resources currently to enable them to get online and comply with the code as soon as practicable. Details of how to apply for funding and what is covered is available on the NALC website.


The internal auditor is an independent and competent person appointed by the council to carry out checks on its system of internal control. The independent internal auditor cannot be involved in any business of the council and cannot, therefore, be a serving member of the council. Another clerk or an accountant could be suitable (but reciprocal arrangements between councils are not permitted). The internal auditor carries out tests focusing on areas of risk and after reporting to the council, signs

a report on the annual return (required by law for most councils) to con rm that the council’s system of controls is in place and operating.

The law requires another audit to be carried out so that local taxpayers can be assured that the risks to public money have been managed. Following the closure of the Audit Commission in March 2015, Public Sector Audit Appointments Ltd has been responsible for appointing external auditors to parish councils. From April 2017, Smaller Authorities’ Audit Appointments Ltd (SAAA)

will have the responsibility for doing so in regards to parish councils. Unless your council has decided to opt out and appoint its own external auditor, SAAA will appoint an external auditor to your parish council until 31 March 2022.

These auditors review the council’s annual return. The annual return is the principal means by which the council is accountable to its electorate. Councils must complete an annual return to con rm that everything is in order.

Your council may be able to declare itself as an exempt authority in regards to an external audit if it has an annual turnover of £25,000 or under. Your clerk should be able to provide further information on how to do this.

Signed statements con rm responsibility for governance arrangements during the year. In particular they show that:

  • the accounts have been properly prepared and approved
  • a system of internal control is in place – this includes the appointment of a competent and independent internal auditor – and the e ectiveness of both the system and the appointment has been reviewed
  • the council has taken reasonable steps to comply with the law
  • the accounts have been publicised for general inspection so that electors’ rights can be exercised
  • the council has assessed all possible risks to public money
  • there are no potentially damaging or hidden issues such as an impending claim against the council
  • signi cant di erences in the gures from the previous year have been explained
  • the council has properly managed any trust funds.

As a member of the council, you have responsibility for making sure that the annual return accurately presents the nancial management by the council. Your clerk will advise.

If you and your fellow councillors have acted properly leading up to the external audit then you will receive the external auditor’s certi cate and an unquali ed opinion on the annual return known as limited assurance. This means that nothing has come to the external auditor’s attention that gives cause for concern. The Transparency Code for Smaller Authorities and the Local Government Transparency Code 2015 also requires certain councils to publish a range of nancial information online.


It is essential that the council is seen to provide value for money. This means ensuring that public money is spent e ciently to provide an e ective service.

The aim is to get more council activity for the least possible expense without compromising quality.

It helps the council to assess ‘value for money’ if it regularly asks whether it is really necessary to spend the money or whether it can nd a way of doing it better. Perhaps another supplier can do the job with greater e ciency and e ectiveness. It is good practice to consult other councils and to engage with service users and the wider community to nd out what they think. It might even be possible to join with other councils to deliver a more economic service to the community.

The nancial rules and the variety of statutes and procedures protect the council. Most importantly the rules give your council the tools it needs to achieve its goals, protect community assets and make best use of public money.

Rules also guide a local council as it makes decisions in the proper manner.