Preparing for Your Internal Audit: A Clerk's Essential Checklist

By Eleanor Greene, Chief Accountant at Do the Numbers Limited

Following our recent webinar on internal audit preparation, I've prepared this comprehensive checklist to assist town and parish clerks in organizing their documentation and processes ahead of the year-end. Recognizing that our session covered substantial material in a limited timeframe, this structured guide aims to provide a methodical approach to audit preparation.

Introduction

The internal audit process serves as a vital governance mechanism to ensure financial controls are operating effectively within your council. Rather than being merely a compliance exercise, it provides assurance to both council members and the public that proper procedures are being followed. One of the primary objectives of effective internal audit is to mitigate organizational risk, particularly the significant challenge posed by staff transitions.

Document Organisation (Pre-Audit Preparation)

Physical Records

• Ensure all minutes are printed, signed, and pages initialed
• Confirm supporting documents are properly filed and initialed
• Store documents in secure ring binders (not loose folders)
• Organize with newest documents on top for easy reference
• Consider a system with minutes in one plastic wallet and agenda packs in another

Electronic Records

• Properly file all electronic documents
• If using Scribe, attach invoices to the ledger entries
• For Realtus users, consider creating linked PDF files of invoices
• Ensure backups are stored securely in a separate location from primary systems
• Test that you can access archived documents when needed

Financial Records Checklist

Essential Financial Documents

• Cumulative payroll reports showing total cost of employment
• Bank statements for ALL accounts (including deposit accounts)
• Screenshots of year-end balances for accounts without statements
• Sales and purchase ledger balances reconciled and reviewed
• Aged debtor report reviewed and small uncollectable amounts written off
• Utility bills and budget accounts reconciled

Precept and Loans

• Verify precept figure matches that on the DLUHC website
• Ensure Council Tax Support Grant is NOT included in Box 2 (precept only)
• For councils with PWLB loans, check balances match the DMO year-end dataset

Website Compliance

Website compliance is now a statutory requirement under the Freedom of Information Act, and external auditors are increasingly rigorous in their assessment of this area.

Transparency Requirements (enforced under FOI Act)

• Five years of full AGAR documents (all 6 pages, including signatures)
• Current agendas, minutes AND agenda packs (3 years minimum)
• Payment listings
• List of councillors with their Declarations of Pecuniary Interest (DPIs)
• List of staff and their roles
• Up-to-date policies that match approved versions
• ICO Model Publication Scheme (with links to relevant sections)
• Check and fix broken links

Comprehensive publication of council information serves not only as a statutory requirement but also as an effective mechanism for addressing potential concerns from electors, demonstrating transparency in governance.

Policies and Governance

Establishing appropriate policies before they become necessary is a fundamental aspect of risk management.

Policy Review

• Financial Regulations (adopt 2023 model if not done already)
• Standing Orders
• Risk Assessment
• Asset Register (updated for any additions/disposals)
• Employment policies
• Health and Safety policies

Governance Documentation

• Confirm you have a current engagement letter with your auditor
• Evidence that you've acted on previous audit recommendations
• Ensure you've reviewed the 2024 Practitioner's Guide

Internal Audit Preparation

Before the Audit

• Confirm audit date and time with your auditor
• Ask for their testing requirements or checklist if not provided
• Organize files for easy access during the audit
• Prepare to explain any unusual transactions or circumstances
• Have a plan for addressing previous recommendations

AGAR Approval Process

Document the AGAR approval in the correct sequence:

1. Receipt and agreement of action on internal audit report
2. Approval of governance statement (Section 1)
3. Approval of accounting statement (Section 2)
4. Agreement of public rights inspection dates

Proper documentation of this process provides evidence of compliance should questions arise subsequently.

Important Updates for 2025

• JPAG (Joint Panel on Accountability and Governance) is now SAPP (Smaller Authorities Proper Practices panel)
• "Should" is changing to "MUST" in many sections of the Practitioner's Guide
• Freedom of Information Act compliance replaces Transparency Code references
• Email addresses must be linked to the council for official communications

Helpful Resources

• Practitioner's Guide 2024 - Essential reference document
• Internal Auditors Forum - Professional association
• Internal Audit Directory - Database of qualified auditors
• National Audit Office Guide - Public rights information
• ICO Model Publication Scheme - Information publication requirements
• NALC Model Financial Regulations - Updated financial controls
• Broken Link Checker - Website maintenance tool
• VAT Notice 749 - VAT guidance for councils
• The Parkinson Partnership - Specialist VAT consultancy
• SLCC VAT Guide - Comprehensive VAT reference
• CCLA - Investment management for councils
• Precepts Data for England - Official precept figures
• Welsh Precepts Data - Data for Welsh councils
• Norfolk Parish Training - Regional training provider

Conclusion

For those new to the role or feeling uncertain about the audit process, I would strongly recommend engaging with your internal auditor well in advance of the formal audit. Most auditors are committed to supporting councils in achieving compliance and maintaining good governance.

Professional development is an essential aspect of performing effectively in the clerk role. If your council does not provide appropriate support for training, it may be worth considering whether this is the right environment for your professional development.

The most effective audits occur when there is open communication between clerks and auditors, with a shared commitment to transparency and proper governance. A systematic approach to document management can significantly streamline the audit process and demonstrate control over organisational systems.

For a more comprehensive understanding of the internal audit process, I encourage you to watch the full webinar recording below, where I discuss these topics in greater detail and address specific questions from fellow clerks and RFOs. The webinar provides additional context and practical examples that complement this checklist.

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I wish you success with your year-end preparations.

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Glossary of Acronyms

AGAR - Annual Governance and Accountability Return

ALCC - Association of Local Council Clerks

CALC - County Association of Local Councils

CCLA - Churches, Charities and Local Authorities (investment management company for public sector organizations)

DLUHC - Department for Levelling Up, Housing and Communities (formerly MHCLG)

DMO - Debt Management Office (manages PWLB loans)

DPI - Disclosable Pecuniary Interest (financial interests that councillors must declare)

EA - External Auditors

FOI - Freedom of Information Act

ICO - Information Commissioner's Office

NAO - National Audit Office

IPSO - Independent Press Standards Organisation

JPAG - Joint Panel on Accountability and Governance (now SAPPP)

SAPPP - Smaller Authorities Proper Practices Panel (new name for JPAG)

MHCLG - Ministry of Housing, Communities and Local Government (now DLUHC)

NALC - National Association of Local Councils

NHS - National Health Service

PWLB - Public Works Loan Board

SAAA - Smaller Authorities' Audit Appointments

RFO - Responsible Financial Officer

SLCC - Society of Local Council Clerks

VAT - Value Added Tax

Eleanor Greene is Chief Accountant at Do the Numbers Limited, Secretary to the Internal Audit Forum, and has been providing audit services since 1997. She currently serves as internal auditor for over 50 Town & Parish Councils, with particular expertise in local government financial regulations.

Contact: Email: EleanorGreene@dothenumbers.uk Website: https://www.dothenumbers.uk/

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