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For town and parish councillors, the fast-approaching year end (31 March 2022) means AGAR (the Annual Governance and Accountability Return) will be the focus of attention.

Councillors will have to find time in their already busy schedules to ensure that their council has reviewed important policy documents in advance of the year-end.

Any member of a local parish or town council will be very familiar with the Annual Governance and Accountability Return (AGAR) that is completed each year.  Most councils will be required to publish the AGAR document and send it, together with supporting documentation, to their external auditor for a limited assurance review to be completed.

One of the key assertions within Section 1 of the AGAR statement relates to internal controls. Councillors of an authority (be it a local parish or town council) must be able to state that they “maintained an adequate system of internal control including measures designed to prevent and detect fraud and corruption and reviewed its effectiveness.”

To warrant a positive response to this assertion, the authority must be satisfied that it has made proper arrangements and accepted responsibility for safeguarding the public money and resources in its charge. 

This would include (but is not limited to) providing evidence on the following eight points:

1. Compliance with financial regulations 

The council must ensure it has complied with its financial regulations, which have been recently reviewed. If any updates were necessary, these must have been appropriately adopted at a full council meeting. 

2. Suitably qualified staff

The council must have suitably qualified staff. It is also important to ensure it provides ongoing training to support them in their role. This should enable compliance with proper practices set out by The Joint Panel on Accountability and Governance (JPAG).

3. Safeguards 

Councils must have safeguards in place to help identify fraud and corruption. This means demonstrating that they have designed processes in a way that reduces the risks to an acceptable level. This could include, for example, requiring two individuals to authorise payments. It might also mean dividing certain tasks or the following of a particular tender process for larger purchase of goods or services.

Part of the internal auditor’s job will be to ascertain whether the authority has made suitable safeguarding arrangements. Councils must keep detailed records to prove they have done this. Your internal auditor may need to rely on this evidence to corroborate your claims.

It is best practice to complete a full review of safeguarding at least annually. Should the date of this review change from year to year, there is a danger that the authority may not have complied with their responsibilities in a particular financial year. For example, with perhaps two safeguarding reviews falling into one financial year and perhaps none in the following year.

4. Preventing and managing conflicts of interest

Conflicts of interest should be prevented wherever possible.  Councillors should think carefully about how their actions might be perceived by their constituents. Where conflicts of interest are unavoidable, they should be mitigated to an acceptable level. Councillors must always declare any interest at meetings and ensure it is correctly minuted.

5. Following correct procedures

Councils need to demonstrate that councillors and staff correctly follow procedures that are in place to safeguard money and assets, people and other resources. This includes protecting the physical security of cash and fixed assets, but also having processes to support digital security, including secure passwords and measures to protect data and websites. 

6. Adequate insurance cover

Councils must ensure appropriate insurance is in place for each activity it undertakes. This includes protection for its employees, the general public and the assets it owns.

7. A risk register

The council needs to evidence that it holds a risk register. It should be a living document that will need to be regularly reviewed and updated.  Councillors should be skilled in identifying, assessing, addressing, reviewing and reporting all types of risk that the council may face.

8. A regular review of investments

A council should carry out regular reviews of investment policies. This is particularly important if the council keeps large investment portfolios.

All councillors should be aware of these important responsibilities and should not think that assertions detailed within the AGAR is something that can be delegated to another councillor or a sub-committee. It is important that any review or assessment is recorded at a full council meeting. 

Councils which review their internal control processes effectively should realise the benefits. AGAR is not merely a compliance exercise, it will also make their council safer, stronger and more robust for the future. 

Thomas Westcott acts for a number of local authorities, and has gained a wealth of knowledge and experience over the years in this specialist field of work. If you would like to know more about our internal audit services, please do not hesitate to contact me, based in our Axminster Office.