Too many Welsh community and town councils are still falling short on financial standards

13 Sep 2013 - 12:00am

Systemic weaknesses in financial management and governance remain, says Auditor General for Wales

Auditors are continuing to find common and fundamental issues of weak financial management and governance across a large number of Community and Town Councils in Wales.

A report by the Auditor General for Wales, published today, says local accounts are often not submitted for audit on time and many are of poor quality.

As a result, the Auditor General has decided to modify the way local councils are audited for the 2015-16 accounts and onwards. The new arrangements will build on the current model of audit but will have a stronger emphasis on governance and public reporting. This, he hopes, will encourage the sector to have a clearer focus on improving their governance and financial management arrangements.

Today's report shows that, overall in 2012, up to 40 per cent of community and town councils did not submit their accounts on time; almost one in seven did not submit for audit a completed annual return and one in ten of submitted accounts needed correction.

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Systemic weaknesses in financial management and governance remain, says Auditor General for Wales

Auditors are continuing to find common and fundamental issues of weak financial management and governance across a large number of Community and Town Councils in Wales.

A report by the Auditor General for Wales, published today, says local accounts are often not submitted for audit on time and many are of poor quality.

As a result, the Auditor General has decided to modify the way local councils are audited for the 2015-16 accounts and onwards. The new arrangements will build on the current model of audit but will have a stronger emphasis on governance and public reporting. This, he hopes, will encourage the sector to have a clearer focus on improving their governance and financial management arrangements.

Today's report shows that, overall in 2012, up to 40 per cent of community and town councils did not submit their accounts on time; almost one in seven did not submit for audit a completed annual return and one in ten of submitted accounts needed correction.

Auditors issued qualified audit opinions at 130 local councils (17 per cent). In other words, almost one in five of them failed to meet the required standards of governance.

Under the Auditor General's modified arrangements, announced today, local council audits will include a thematic review of governance arrangements. Community and town councils will be notified in advance of the specific areas that will form part of the thematic review each year. This arrangement will allow them to identity areas where they need to improve and to make any necessary improvements before the start of the financial year.

Auditor General for Wales, Huw Vaughan Thomas, said today:

'I am concerned about the persistent failure of community and town councils to publish an audited annual return on a timely basis. In my view, it is unacceptable that local councils, funded by public money, should fail to discharge their legal obligations and prepare statements of accounts for audit. The number of qualified opinions are also far too high. My new audit arrangements should help local councils focus more clearly on fulfilling their financial responsibilites to the standards I, and the people of Wales, expect."

Notes to Editors:

  •  This report summarises the results of auditors' work at local councils for the 2011-12 accounts.
  •  It shows insufficient improvement since the Auditor General's 2009 report - Community Councils: Good Governance - Good Practice - which highlighted common weaknesses in governance arrangements at town and community councils and identified four good practice lessons.
  •  In February 2012, the Auditor General's consultation document - Contracting Strategy and the Audit of Town and Community Councils - highlighted his concerns that although some progress had been made since 2009, it remained the case that the sector as a whole did not have adequate and effective governance arangements in place. Those concerns remain today.
  • There are over 730 local councils in Wales spending a combined total of over £40 million of public money each year. This expenditure is funded mainly through an annual charge, known as a precept, set by the local council and collected on its behalf as part of council tax.
  •  Town and community councils are elected bodies that represent their community and provide or contribute to a range of services - for example, parks and open spaces, cemetaries, allotments and bus shelters.
  •  The Public Audit (Wales) Act 2004 requires the Auditor General to appoint external auditors to audit the accounts of local councils. 
  •  The Auditor General and the auditors he appoints in local government are the independent statutory external auditors of most of the Welsh public sector. They are responsible for the annual audit of the majority of public money spent in Wales, including the £14 billion of funds that are voted to Wales annually by the Westminster Parliament. Elements of this funding are passed by the Welsh Government to the NHS in Wales (over £5 billion) and to local government (nearly £4 billion).
  •  The Wales Audit Office mission is to promote improvement, so that people in Wales benefit from accountable, well-managed public services that offer the best possible value for money. It is also committed to identify and spreading good practice across the Welsh public sector.