Our very own Head Accountant, Hannah Driver, talks through the basics of local council finance and how to streamline processes in the "Local Council Accounting - From Zero to Hero" webinar.

1. LOCAL COUNCIL
ACCOUNTS: FROM
ZERO TO HERO
HANNAH DRIVER

2. INTRODUCTION TO
LOCAL COUNCIL
ACCOUNTING

3. LOCAL COUNCIL ACCOUNTING
Elected body at the first level of local government. Makes decisions on
behalf of the parish and has a wide range of powers relating to local
matters.
Transparency
Efficient provision of services
Setting of Precept
Management of reserves
What is a parish (town) council?
Considerations:

4. LOCAL COUNCIL ACCOUNTING
Follow proper financial procedures
Have internal control/audit systems
Report to the council on spending and the current position
Complete the AGAR for the year 1st April - 31st March
Every local authority is required to appoint an officer to be responsible for the
administration of their council’s financial affairs (RFO) who should be a paid
employee of the council.
Responsibilities of the RFO:

5. WHICH ACCOUNTING
APPROACH?
Receipts & Payments
Receipts and Payments accounts is a simple form of accounts in that it records
the receipts and payments at the time at which they were received/paid.
Income & Expenditure
Income & Expenditure accounts considers the period to which the transactions
relate to, rather than simply when they occurred.

6. WHICH ACCOUNTING
APPROACH?
Smaller councils can opt to use I&E
If moving between approaches beware requirement to restate the prior
year
Councils less than £200k = Receipts & Payments accounts.
Councils £200k - £6.5million = Income & Expenditure accounts.

7. GOOD PROCEDURES
TO KEEP ON TOP OF
YOUR ACCOUNTS

8. THE CASHBOOK
Regularly record payments & receipts (split out VAT)
Full audit trail
Regular bank recs to confirm data is correct
Can you produce timely & useful information easily?
The cashbook is the most important accounting record for local councils.
Considerations when collating your accounts:
Is your accounting system fit for purpose? Do you need training on it? Does it
suit the needs of your council?

9. THE CASHBOOK
Base it on your council budget/precept breakdown
Allocate payments and receipts out to budget codes
Group codes together that require reporting on e.g. Village Hall
Consider adding additional codes to analyse the data further
Record more information to make it easier to refer to
How to structure your cashbook:
Could it be Improved upon?

10. SUMMARY
Set aside time regularly to keep the cashbook up to date and ensure it records
all the information you may need to analyse the data and produce your reports.
Complete regular bank reconciliations (ideally monthly) to limit scope for
errors.
Consider linking up with other Clerks for advice & support - The Clerks' Corner,
the Community Clerks' Network.

11. VAT

12. VAT
Will have additional regular sources of income besides the precept e.g.
running a car park
Must submit VAT Returns, normally quarterly but could be on a monthly
basis
Making Tax Digital requires submission of VAT returns directly to HMRC
using accounts software and is intended to increase accuracy
MTD is now mandatory for all VAT registered councils
VAT Registered Councils

13. VAT
Can claim back VAT using Form 126 on the HMRC website
No specific timing for claims, but must be for complete calendar months
If the claim is for less than £100 it must be a full year
Claims can be made going back 4 years - worth looking into if you have
inherited a position where VAT claims are not up to date.
We recommend claiming at least annually, ideally up to 31st March to keep
in line with Year End
Non VAT Registered Councils

14. VAT
The invoice shows the percentage or amount of VAT being charged
The VAT number of the supplier is clearly shown on the invoice
Ensure you record VAT separately in your cashbook.
Councils can only claim VAT back if:
If it is a long or onerous process to produce returns/claims this should be
addressed.
Take specialist advice if you have a complicated VAT position.

15. YEAR END & THE AGAR

16. OTHER IMPORTANT
FINANCIAL
INFORMATION

17. THE ASSET REGISTER
Supporting information for Box 9 on the Accounting Statements (AGAR)
Record of assets for insurance purposes
Facilitates management of assets - e.g. location, maintenance & renewals
Specific rules for councils - e.g. no depreciation
Record of the Council’s tangible assets.
Key Features:

18. THE ASSET REGISTER
Date of acquisition
Cost of acquisition
£1 for gifted or community assets
Location
Useful life
Key Information:
Keep updated for additions/disposals
Add missing or other useful information

19. RESERVES
Held to cover unexpected events/cashflow problems
Should be equivalent of between 3 and 12 months expenditure (12 months
for smaller councils, 3 months for larger)
Essential that councils have adequate reserves to cover both their day to day
financial obligations as well as future projects.
Reserves should be reviewed and justified at least annually.
General Reserves:

20. RESERVES
Held for specific purposes/projects
Held for capital purposes only (purchase/enhancement of fixed assets,
repayment of loans)
Proceeds of disposals of assets (over £10k)
Earmarked Reserves:
Capital Reserves:
No upper limit for Earmarked or Capital Reserves
Must be clearly defined - may need explaining at Year End

21. THE AGAR
Summarised conclusions from the internal audit report
Confirmation of Internal Controls
The numbers bit!
Internal Audit Report
Section 1: Annual Governance Statement
Section 2: Accounting Statements

22. THE AGAR: SECTION 2

23. THE AGAR
Take figures directly from the cashbook
Exclude VAT (will constitute a debtor or creditor)
Add adjustments - creditors & debtors
Consider materiality & regularity
Ensure last year’s adjustments are reversed
Receipts & Payments or Income & Expenditure?
Receipts & Payments
Income & Expenditure

24. THE AGAR
Ensure equal to Line 7 of previous year
Precept only for councils (rates/levies refers to drainage boards)
All other receipts. Do not include any bank transfers / movements of
money
Exclude VAT if working in I&E
Line 1: Balances Brought Forward
Line 2: Precept or Rates & Levies
Line 3: Total Other Receipts

25. THE AGAR
Be aware of guidance as to what can be included
Record separately from other payments
All payments excluding staff costs & loan repayments. Do not include any
bank transfers / movements of money
Exclude VAT if working in I&E
Line 4: Staff Costs
Line 5: Loan Interest / Capital Repayments
Line 6: All other payments

26. THE AGAR
Ensure this is equal to (Boxes 1 + 2 + 3) - (Boxes 4 + 5 + 6)
Total cash position to equal bank rec as at 31st March
Will be the same as Line 7 if working in R&P
Line 7: Balances carried forward
Line 8: Total value of cash and short term investments

27. THE AGAR
Update for new assets/disposal
Ensure consistency in reporting of total
Ensure supporting Asset Register holds all relevant information
Ignore depreciation
Update figure to amount owed at Year End
Usually loans from PWLB
Line 9: Fixed Assets plus Long Term Investments
Line 10: Borrowings

28. THE AGAR
As at 31st March (to agree to Line 8)
Summary of debtors & creditors
For variances over 15% or if Line 7 is more than twice Line 2
Full numerical explanations / breakdown of reserves
Bank Reconciliation
Reconciliation between Line 7 & 8 (I&E)
Explanation of Variances

29. FIND OUT MORE
If you would like more details about Scribe please visit our website:
https://www.scribeaccounts.com
You can request a free demo of our accounts package in action via:
https://www.scribeaccounts.com/demo-request
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