Financial management and governance of community and town councils needs further improvement

16 Mar 2016 - 4:21pm

While the timeliness of accounts preparation has improved, the number of qualified audit opinions has increased and failures in financial governance remain too high.

The number of community and town councils in Wales delivering timely end of year accounts has made a steady improvement since 2013-14. However, previous concerns around financial management and governance remain, according to a report released by the Auditor General.

The report Financial Management and Governance in Community and Town Councils 2014-15 identifies an improvement since 2013-14 in the timeliness of production of audited accounts with the number of completed audits having increased to 96 per cent by 30 September 2015. The improvement continues the steady progress made by the sector, increasing from 94 per cent for the 2013-14 accounts and 91 per cent for the 2012-13 accounts and is in line with moves from the Welsh Government to encourage greater transparency by public bodies to explain how they use public money.

The number of councils with qualified audit opinions has increased for 2014-15 reversing the trend of the previous three years, increasing from 85 councils in 2013-14 to 113 councils - an increase of three per cent. Of particular concern are the numbers of councils that receive a qualified opinion that have not previously received a qualification on their annual return. Audit qualifications are avoidable if individual councils have adequate and effective financial management and governance arrangements in place, and follow the simple steps required to prepare annual accounts and submit them for audit. The report found that sixty-two of the 113 councils qualified in 2014-15 had not received a qualified audit opinion between 2011-12 and 2013-14.

The report also found that an unacceptably high number of councils have received qualified audit opinions for two or more of the last four financial years. It remains a matter of concern that 95 Councils have received qualified audit opinions for two or more of the last four years as, in many cases, the audit opinions are qualified for the same reasons each year indicating that councils are not improving their financial management and governance.

The report also details changes set out the audit arrangements for town and community councils for the 2016-17 audit. The new arrangements will focus on helping councils to improve their financial management and governance and will include examining the councils’ arrangements for managing payroll and adopting a Code of Conduct to ensure effective governance.

Auditor General for Wales, Huw Vaughan Thomas said today:
“Given the progress made last year by community and town councils in submitting timely accounts this results for this year are met with much disappointment. A number of Councils who have previously submitted their accounts on time and to standard have failed to maintain their previous standards and it is unacceptable that so many Councils have allowed standards to fall. I would strongly encourage councils to make a commitment to addressing the common issues and weaknesses highlighted in today’s report and work closely with auditors to prepare future accounts to an acceptable standard.”