Last updated: February 2023

1. Introduction

The Local Government Act 1974, as amended by the Local Government & Housing Act 1989, contains powers enabling the Commission to be funded by the Department for Levelling Up, Housing and Communities (“the Department”).

2. The Commission

To conduct its business efficiently, the Commission needs to ensure that it has sound financial management policies in place and that they are strictly adhered to. Part of this process is the establishment of financial regulations that set out the high level financial policies of the Commission.

The Financial Regulations have been prepared with reference to the Framework Agreement agreed between the Department and the Commission. As a public body, the Commission also has to operate in accordance with government and Treasury guidance on accounting and financial control procedures, as set out in Managing Public Money.

The Financial Regulations are supported by Financial Instructions, procurement instructions and Human Resource policies which set out the day to day operation of activities.

3. Financial year

The financial year of the Commission will run from 1 April to 31 March.

4. Business Plan

The Commission will prepare a Business Plan annually.

5. Annual Budget

The Commission will set and agree its budget annually before the beginning of the next financial year. The budget will reflect the Business Plan objectives and enables their delivery.

The Annual Budget includes estimates of income, revenue expenditure, capital expenditure, and depreciation.

The Head of Finance will prepare annually the estimates of income and expenditure for the forthcoming year beginning 1 April. The estimates will be processed in accordance with the procedures set out in Financial Instructions.

5.1.Changes to Annual Budget

During the course of a financial year, some original budget estimates will need to be amended to reflect changes in circumstances. Changes must be authorised by the Chief Executive Officer (CEO) and documented in accordance with the Financial Instructions.

6. Budgetary control

The CEO will ensure there is a budgetary monitoring system and a scheme of financial delegation in place.

Employees may not incur expenditure on an activity which cannot be met from the amount allocated to that specific activity in the Annual Budget.

The inclusion of items in approved annual revenue or capital budgets will constitute authority to incur such expenditure, subject to the limits in the scheme of delegation, unless the Executive Team has placed a reservation on such items. In such circumstances, expenditure cannot be incurred until such a reservation is removed. In all cases expenditure must comply with procurement procedures.

Amounts provided for specific activities cannot be diverted to other purposes except as agreed by the Executive Team.

7. Audit

7.1.The Audit and Risk Assurance Committee

The Commission will set up an Audit and Risk Assurance Committee (ARAC); the members of the Committee are (at least) three independent members, one of whom will be appointed as the Chair. The Chair of the Commission may also attend Committee meetings, at the Committee’s invitation, as an observer and to help the Committee in its deliberations. The Commission’s Accounting Officer and the Head of Finance will attend as the principal advisers to the Committee. Other senior staff will attend as required.

ARAC’s role is to advise the Commission, and its Accounting Officer on matters of probity, regularity (including compliance and financial reporting), prudent and economical administration, efficiency and effectiveness as identified by internal and external audit and through the Commission’s system of internal control. The internal and external auditors will not be members of the Committee but will attend meetings as appropriate. The Committee will operate in accordance with terms of reference agreed by the Commission.

7.2.External Audit

An independent external audit service will be appointed to carry out an audit of the accounts of the Commission in accordance with the Framework Agreement.

The auditors will also certify whether the grant paid by the Department has been applied in accordance with the arrangements agreed in the Framework Agreement.

External auditors will be selected and appointed in accordance with the Framework Agreement and in compliance with the Commission’s procurement procedures. ARAC will be informed of any appointment.

The Comptroller and Auditor General will audit the Commission’s Annual Report and Accounts and will be given complete rights of access to do so.

7.3.Internal Audit

An independent internal audit service will be appointed to carry out an examination of accounting, financial and other operations of the Commission, on a regular cycle in accordance with standards set out in Treasury’s Public Sector Internal Audit Standards (PSIAS).

8. Financial Reporting

The Commission will receive regular summary reports on the finances of the organisation.

The Executive Team will regularly receive and review Management Accounts which measure actual results compared to Budget.

9. Annual Report and Accounts

Each year the Head of Finance will close and balance the accounts and will prepare a statement of final position (balance sheet) and a statement of comprehensive net expenditure for the year and notify the auditors that the Annual Report and Accounts are ready for examination.

A copy of the provisional Annual Report and Accounts, before audit, will be submitted to ARAC, together with a report by the CEO on the finances for the year. Before final approval, a copy of the pre-final Annual Report and Accounts will also be submitted to the Department. After the completion of the annual audit, the CEO will submit to ARAC and then to the Commission a copy of the audited Accounts, together with the Audit Certificate and Report.

The Commission will approve the Annual Report and Accounts and they will be signed by the Chief Executive (the Chief Executive is also the Accounting Officer for the Commission).

The Annual Report and Accounts should be laid before Parliament as soon as practically possible and no later than nine months after the end of the financial year, unless an extension is allowed by the Department. Copies will also be sent to the Department and to the Local Government Association.