An authority can only declare itself exempt from a limited assurance review by the external auditor by resolution at a meeting of the authority after the conclusion of a financial year, providing the authority is able to certify that it meets the various qualifying criteria set out on the Certificate of Exemption, including that the higher of its total annual gross income and gross expenditure was £25,000 or less. The Certificate of Exemption can then be completed, signed and returned to the external auditor.
A Certificate of Exemption for completion is included as part of the Annual Governance and Accountability Return in the audit instructions, which is sent out by the external auditor to all authorities towards the end of the financial year.
A Certificate of Exemption must be sent to the appointed auditor otherwise they will presume the authority does not meet the qualifying criteria and is not exempt, and therefore will be expecting to receive an annual return for review. If the statutory date is missed and reminders are required, this will incur charges of £40 for each reminder.
The qualifying criteria for an authority to declare itself as exempt are as set out in Regulation 9 of the Local Audit (Smaller Authorities) Regulations 2015, namely:
- Its gross income and gross expenditure are both below £25k; and
- no public interest report/statutory recommendation/advisory notice/judicial review/application to court re unlawful item of account has been issued by its external auditor in the prior year; and
- the reporting year is not one of the authority’s first three years of existence.
If the authority is able to confirm that the above statements apply and that the authority neither received gross income nor incurred gross expenditure exceeding £25,000, then a Certificate of Exemption can be completed, signed and returned to the external auditor.
An exempt authority can still request a limited assurance review and decide to submit its annual return to the external auditor for a limited assurance review rather than declaring itself exempt.
It will need to complete and submit to the appointed auditor Part 3 of the Annual Governance and Accountability Return instead of a Certificate of Exemption.
A fee of £210 will be charged if the authority requests a limited assurance review.
Parish Meetings are included in the definition of smaller authorities and the audit legislation and regulations are applicable to them, therefore all Parish Meetings require an appointed auditor and still need to complete and submit a Certificate of Exemption (provided the qualifying criteria are met) every year even if they have no precept or financial transactions.