Ramifications of resolving precept *before* budget-setting

Question

Where a scheduled parish council meeting, that was due to determine the council's budget and precept, was convened and deferred consideration/resolution of the budget to give time for further considerations and clarifications, but a member proposed to resolve the level of precept (and Council went on to do so, despite the budget not yet being formally resolved) is the unusual chronology a problem in that the budget is expected to be agreed before the precept is calculated? Is there legislation requiring budget to be agreed before the precept is resolved?

Answer 1

The reason you need to do the budget before agreeing the precept is primarily because you need to demonstrate that the precept you have set results from an adequate budgetary process.  This is contained within Internal Control Objective D on the Annual Governance and Accounting Return.  Basically, its good business sense.   Whatever legislation says, the whole point of setting a budget is to calculate what precept you need so doing it the other way around is a nonsense.

Answer 2

Just basic competency really....

It is financially illiterate (although probably not uncommon) to set the precept prior to ratifying the budget.  The precept is the money that is required to satisfy the aspirations of the budget.  It's horse and cart.

(I'm an awkward **** by nature but....) If that was my PC (ie - I was a precept paying resident) I'd probably raise an external auditor objection to the credibility of the budget setting process - AGAR Section 1 box 1: "...We have put in place arrangements for effective financial management during the year, and for the preparation of accounting statements..."

Well you simply cannot have effective financial management if you set your precept before ratifying your budget.

Comments

I've seen this happen for the opposite reason on occasion, where a council makes a policy decision not to increase the precept by more than a couple of per cent to protect residents from higher bills, then limits its aspirations accordingly.  Bonkers!

---

I raised an EA challenge for a PC that consistently failed to properly budget prior to setting precept.
On one occasion the PC were presented 3 options by the clerk - 0%, 1.5% or 3% decide what precept increase you want - rather than work out how much money they need and then set the precept accordingly.  
Then the subsequent year the same PC "decided" on a 0% increase (due to covid) and so thought that if they submitted the same cash £s figure as the precept demand on the LA as the previous year that would be 0%.  Of course it wasn't because they fundamentally lacked the understanding to realise the issue with assuming a 0% precept simply equated to the same money as the previous year.
The council tax base had fundamentally changed since the preceding year what with Covid -  unusually high levels of payment defaulters and unusually high levels of 'discount' qualifying households which significantly denuded the tax base.
The LA DID inform PCs of this fact well in advance of budget setting and of the implications of it but this PC were too stupid to grasp it.  The November PC budget meeting resolved a 0% precept rise which was widely advertised by the PC as "look how good we are" and, of course, it was minuted.  But wait, what's this?  The January council tax summary letter from the LA to every household shows a 1.3% precept rise.  Well that can't be right....  It was resolved, minuted and published by the PC as being 0%.

What they didn't account for though, was that in order to achieve the same pounds shillings and pence from the LA as last year (with a significantly reduced available tax base) the actually precept rate would have to rise by 1.3%.

The EA insisted that  I raise this anomaly with the PC BEFORE they would take it on so I had to wait for the next PC meeting, offer to explain (which was refused) before I sent it back to EA.  EA then set about saying because it was outside of the public scrutiny period they wouldn't take it forward.  It was INSIDE the public scrutiny period when I brought it to their attention. I only went OUTSIDE the scrutiny period by virtue of what they had insisted I did.
- Town and parish councils might just as well do what ever they want because it is next door to IMPOSSIBLE to bring any accountability.