We’re now approaching the end of the financial year, March 31 2026, which is often a busy time for local councils as they embark on the audit process. Your Responsible Financial Officer will be starting to prepare the end of year accounts, and the council will be undergoing an internal audit and getting ready to approve the Annual Governance and Accountability Return.
The external auditor for Devon has remained PKF Littlejohn, who will contact councils in due course (often late March) with all the relevant documentation for this year including advice notes and proforma documents. If your contact details have changed since last year, or if you don’t hear from them, you may want to contact them to give them your new information.
While the RFO might prepare the accounts, all councillors share collective responsibility for the financial management of the council, and should have an up to date knowledge of the financial position of the council. The external audit process requires the council to sign the Annual Governance Statement, making a number of assertions about how the council has complied with financial best practice. To make those assertions, councillors need to have sound information and an understanding of the council’s finances.
We have a number of webinars available through The Parkinson Partnership including a course on Finance for Councillors to help councillors feel more confident in their role, and sessions on the Role of Internal Audit, and Internal Controls. Officers new to clerking can access New Clerk’s Finance – and get a second course FREE after they attend! Dates for end of year accounts training will be released shortly so why not sign up to New Clerk’s Finance and use your second course to learn about managing the audit process? Check out the full range of financial courses being offered here.
Parkinsons are also providing training on Year End and Audit for councils with a turnover above £25k on dates including 12 February, 10 March and 26 March.
For councils with a turnover below £25k, they offer Year-end and Transparency courses – with dates including 12 March and 17 March.
If you are new to the end of year accounts and audit process, or just not feeling very confident, then please don’t panic! There are various sources of support available to help. Of course, please do feel free to contact our Advice Service who will be delighted to assist and there’s plenty of guidance in our Knowledge Bank.
The Practitioners Guide 2025 is your best friend when it comes to audit – it is the definitive guide on proper practices and takes you through completing the Annual Governance and Accountability Return with all the information you need. It’s your handbook for going through the process so make sure you have access to the relevant version (2025 for the 2025/26 financial year). You may need to register with the NALC website if you haven’t already done so.
The internal audit is key to a successful process, and appointing an internal auditor is essential for the council. Read our guidance here on what to look for in an internal auditor. The Internal Audit Forum will also be able to help, especially their directory for finding an internal auditor for your council.
Given the high profile of Assertion 10 requirements for the 2025/26 audit, we couldn’t leave this page without further reference to its requirements. Assertion 10 was added to proper practices for smaller authorities in 2025 to bring digital and data management to the fore in an ever-changing digital world. Proper practices can be found in the Practitioners’ Guide and are mandatory for smaller authorities. In November 2025, NALC also created a hub to help parish and town councils navigate and comply with Assertion 10 of the Annual Governance Statement.
The components of Assertion 10 are;
Click here to access the Assertion 10 Hub on NALC’s website for more advice, information and access to FAQ’s on this prevailing topic.
We also have a Connect Event, “Demystify Assertion 10” scheduled for the 4th March 2026, 13.00-14.00.
The Smaller Authorities Proper Practices Panel (SAPPP), is responsible for issuing proper practices about the governance and accounts of smaller authorities. It works with its Technical Working Group and other stakeholders.
With specific regard to Assertion 10, the proposed changes were discussed extensively in partnership with the Parish Council Domain Helper Service and the Government Digital Service. The requirements of smaller authorities covered in Assertion 10 are not new; they were previously covered, in part, under Assertion 3. The panel agreed that in an increasingly digital environment, the digital components formerly included in Assertion 3 warranted separate and clearer emphasis. The panel recognise that the current guidance in Section 4 does not yet provide detailed instructions on the testing expected for Assertion 10. The Panel will be meeting in February and will consider adding guidance, via Section 4 of the 2026 Practitioners’ Guide, to assist internal auditors in assessing compliance with this assertion.
It is anticipated that testing should focus on the steps an authority has taken to assure itself that it is compliant and can therefore confidently record a “yes” on the AGS. Testing may include confirming that the authority has the necessary policies and documentation in place—such as, but not limited to, a data protection policy, privacy notice, publication scheme, and accessibility statement. The Panel does not expect internal auditors to review these documents in full, provide commentary on them, or check every individual disclosure or compliance requirement.
Rather, the role of the internal auditor is to ensure that the authority has taken reasonable and appropriate steps to satisfy itself regarding compliance and in this regard the panel does not anticipate that any significant additional time will be required by internal audit and certainly does not expect extensive substantive testing to be undertaken.
The National Audit Office has also provided its position on Assertion 10. They have confirmed that no mandated annual testing of Assertion 10 will be introduced in the Auditor Guidance Note for 2025–26. Instead, Assertion 10 will be incorporated into the existing cyclical testing arrangements for AGS assertions, which apply to bodies over £200k (and to a random 5% sample of those below this threshold). In the years when external auditors select Assertion 10 for review, authorities will be asked to provide evidence supporting their confirmation of compliance with the Practitioners’ Guide.
Once Assertion 10 is added to the AGS, it will be subject to the same potential scrutiny as any other assertion. Importantly, auditors will be assessing the adequacy of the evidence held by the council to support its confirmation within the AGS—they will not be conducting detailed assessments of areas or issues that fall within the remit of other regulatory bodies.
As external auditors to councils in Devon, PKF Littlejohn released some feedback from the 2024/25 on common issues they encountered, which may help you with the preparation of this year’s documents. We have also included a few comments from other national external auditors for your information and we have gathered all of these points below.
Guidelines on acceptable email address formats are in the Practitioners’ Guide, and councils now must have a generic email account hosted on an authority-owned domain, for example clerk@abcparishcouncil.org.uk or clerk@abcparishcouncil.gov.uk rather than abcparishclerk@gmail.com or abcparishclerk@outlook.com.
PKF Littlejohn have noted that while most councils do have a compliant email address, this is not always the one that is used for correspondence. They would like to remind clerks that it is advisable to always use an official email address for all council communications. Where they become aware that a council does not have a compliant email address, they will continue to raise this as an ‘except for’ matter in their report.
Please note: Parish Online are offering free gov.uk emails for clerks to aid compliance.
This remains one of the most common reason for queries being raised. Each year’s audit files stand alone, and the council needs to be able to demonstrate that it understands the reason for the year-on-year variance. The main issues tend to relate to Box 4 (staff costs) and Box 9 (fixed assets).
With Box 4, it is not enough to say that you paid more in wages and National Insurance, you need to explain why you paid more – did the number of hours worked increase and by how many? Was the rate of pay increased and by how much? Were there new members of staff and what were they paid.
With Box 9, you will want to consider whether new assets have been acquired and at what value? Were previously omitted items now included and if so, has the prior year figure also been restated to reflect this omission.
A full cashbook or payroll summary will not be accepted; there needs to be evidence of clear understanding as to why costs have changed.
The Practitioners’ Guide has some detail to help at 2.38: “Authorities need to understand the changes in income and expenditure from year to year and their significance. The RFO needs to produce explanatory figures with a written narrative on the amount and cause of significant variances in annual levels of income, expenditure and balances shown in Section 2 of the Annual Governance and Accountability Return that provides a sufficiently detailed and meaningful analysis and explanation of the reasons for the change.”
AGARs are processed and worked on in strict date order of receipt. If the AGAR has been approved and is ready to be submitted, this should be done as soon as possible to ensure that clerks can be contacted with any questions as early as possible. If a clerk is going to be on holiday or unavailable for a period of time, it would be useful to be notified of this with the submission, and an alternative contact provided if appropriate.
Please bear in mind that external auditors must remain independent so are unable to offer advice.
We would always recommend letting PKF Littlejohn know if you are unable to meet deadlines or require more time so they can work with you; please ensure they are aware of any changes in contact details and are able to contact you.
Intermediate testing applies to all smaller authorities that have income or expenditure over £200k but also an additional random sample of 5% of smaller authorities that would otherwise only be subject to a basic review.
The evidence requested changes each year, and PKF Littlejohn only need to receive the evidence requested for the assertion(s) they have selected to test. Only evidence which should already be being produced will be requested, it should not be being produced purely for the purpose of the limited assurance review.
Where any responses in the Internal Audit Report is ‘no’, ‘n/a’, or ‘not covered’, an explanation from the internal auditor must be provided. It is not sufficient for the clerk to provide an explanation, it must be communicated by the internal auditor via a note on the AGAR form, a separate note accompanying the submission, or by reference to the detailed internal audit report.
Where the internal auditor does not provide an explanation, an ‘other matter’ would need to be raised in the external auditor report.
Please note that any working from home allowance is a Box 6 expenditure item and should not be included in Box 4 as a staff cost. There is guidance in the Practitioners Guide at 2.16 about what counts as staff costs:
“This cell shows all the costs to the authority relating to the employment of its staff. Staff costs for the purpose of Line 4 include the gross salary of employees, employer’s national insurance contributions, employers pension contributions, gratuities for employees or former employees and severance or termination payments to employees. The following are not staff costs for the purpose of Line 4; mileage and other travelling and subsistence allowances, “Homeworking allowance” that is, an allowance paid to cover the extra costs of working from home, the provision of work-related training, the reimbursement of childcare or other carers costs, the reimbursement of a staff members subscription to the Society of Local Council Clerks, the provision of office supplies such as laptop, scanner or stationery and consultants and agency staff. The definition of “staff costs” for the purposes of Line 4 may differ from what is, or is not, treated as taxable earnings by HMRC. In as much as this is a change of reporting basis, corresponding figures from the preceding year must be restated in a similar basis.”
There have been instances where the ER period did not cover 30 working days, or more than 30 working days were given so not compliant with the Practitioner’s Guide / Accounts and Audit Regulations 2015.
Where the ER period is incorrect, assertion 4 on the following year’s AGAR should be ticked ‘No’. It appears that some clerks still get confused about the retrospective nature of the assertion being ticked as ‘No’.
Any prior year ‘other matters’ and ‘except for’ matters should be actioned as appropriate. If it requires a change to a figure reported that appears as a comparative on the current year AGAR, then this needs to be reflected. Similarly, if we have suggested that we are expecting a ‘no’ response to a certain Section 1 Assertion, please provide supporting evidence if this is not the case. Failure to acknowledge and action a prior year reporting matter may lead to a further reporting matter, usually an ‘except for’ matter, in the current year report.
There still seems to be some confusion about how to tick Boxes 11a and 11b on the AGAR where there are trust funds. The auditor would expect 11b to be ‘Yes’ if transactions are excluded, ‘No’ if there is no separate bank account (as the trust fund balances get ‘wrapped up’ in Section 2). There are some authorities where this has been left blank.
Incorrect use of section Use of s137 expenditure. Councils should make sure they have good knowledge of s137 and what other powers are available.
Budget issues and Reserves. For some councils, there is no evidence that they have considered their reserve levels or expected income as part of the budget setting process, or considered how it links to the precept. This can result in inflated reserves levels and/or possible inappropriately higher precepts.