Parish Council Finance

Information on Parish Council Finance is summarised below under 5 headings

Income

1. Council tax - Like most parish councils, Longhorsley normally receives most of its income by precepting. The precept is a request to the district council (in the case of Longhorsley, Castle Morpeth Borough Council) to raise money on behalf of the parish council by including an appropriate sum in the council tax bill. There are no controls on the amount which parish councils can precept, but council tax payers, as electors, can always vote out high spending council members at election time, and the auditor will not condone the building up of a substantial reserve in a parish council's bank account which is not earmarked for a specific project. Typically, the parish council's precept is only about 1% or 2% of the total council tax bill and so even if the parish council were to double its precept the effect on the total tax bill would be relatively small.
2. Other sources - Some parish councils receive no income other than through the precept. Others have investments or property, or are involved in activities which can produce an income; for example through entrance fees, a lottery or the sale of publications. Longhorsley has capital funds invested and receives income in the form of interest. This income can be added to the precept income, for general expenditure purposes. However, the capital funds cannot be used for general expenditure purposes - they must be used for capital projects, e.g. purchase of land, buildings or other assets.
3. Borrowing - For large projects and other instances where capital expenditure is incurred, the parish council may take out a loan or some other form of credit arrangement. Where this involves making repayments beyond the end of the financial year, the parish council needs the government's permission: a loan sanction. Approval is not required for the parish council to overdraw temporarily on its bank account. Having obtained approval, the parish council may borrow from whoever offers the best terms.

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                 Income statement as at 28th February 2010

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Expenditure

Parish councils may only spend money on those things which they are permitted to do by law. This includes expenditure on services and activities (e.g. playing fields, local amenities etc.). Generally, there are no maximum limits on expenditure.

All expenditure must be authorised by the full council. In all instances, cheques must be signed by at least two councillors.

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              Expenditure statement as at 28th February 2010

Longhorsley Parish council has adopted the NALC Financial Standing Orders.

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              Financial Standing Orders

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Budgeting and Accounting

Parish council accounts are balanced on a yearly basis (1st April - 31st March). Parish councils with a budgeted income of less than £100,000 p.a. must prepare an end of year summary of receipts and payments. Longhorsley normally falls into this category. Councils with a budgeted income of more than £100,000 p.a. must prepare an end of year summary on an accruals basis (income and expenditure) and a balance sheet. All councils must publish certain proscribed accompanying notes (listing assets, loans, pensions etc.) and statements of accounts and assurance. They must also have agreed financial procedures and an internal audit procedure in place. External auditing is carried out by a professional who is appointed by the Audit Commission. In most cases, this work is undertaken by private accountants on behalf of the government.

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              Finance summary as at 28th February 2010

The auditor gives adequate notice of audit and the council must advertise that the accounts are available for public inspection. At some stage after this, the council's financial officer will have to send the required documentation. Longhorsley Parish council's Clerk also acts as the financial officer. The Parish council is charged an audit fee which is calculated based on the annual income or expenditure.

Each year a budget is prepared showing the likely receipts and payments (or income and expenditure) for the next financial year. Unless a special project is planned for the future, the council should not normally accumulate wealth, but it is generally sensible to hold a contingency amount.

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              Budget position at 28th February 2010

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Taxation

Generally, Parish Councils are exempt from direct taxation and from certain indirect taxation as well. They do not pay income tax or corporation tax on their own income. Any VAT which they incur can normally be reclaimed from Customs and Excise.

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Responsibility

Although the day to day financial affairs are usually left to the Clerk, the Parish Council remains ultimately in charge of these matters. Decisions on expenditure, and reports on income received, take place at meetings of the council and are recorded in the minutes.

Budgeting is normally carried out in November but the Parish Council takes an overview of financial progress at each meeting throughout the financial year. After the end of the financial year the accounts are finalised, balanced and summarised for consideration and approval by the council.

Parish Councils have a duty to satisfy themselves that their financial systems are appropriate and that their decision making is lawful. In cases of unlawful expenditure by parish councils, the auditor can take action through the courts.

Longhorsley, like most Parish Councils, is insured against fraud. A risk assessment has been carried out and is regularly reviewed.

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              Risk assessment; last reviewed May 2009

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Copyright © 2004 Longhorsley Parish Council
Last modified: March 9th 2010