«ada Association of Drainage Authorities Acknowledgements This is the first edition of the Practitioners’ Guide for Internal Drainage Boards and is ...»
Governance and Accountability in
Internal Drainage Boards in England
A Practitioners’ Guide 2006
Revised November 2007
Association of Drainage
This is the first edition of the Practitioners’ Guide for Internal Drainage Boards
and is the result of work overseen by a project group with membership drawn
from key stakeholders. This Guide will need to be kept up to date with
developments relevant to Internal Drainage Boards. The Internal Drainage
Boards Joint Advisory Group (IDB JAG) was formed in April 2004 as a standing group with members drawn from key stakeholders, to help ensure that the guidance remains relevant to the needs of Internal Drainage Boards and is updated as appropriate.
The members of the Internal Drainage Boards Joint Advisory Group are:
Mike Barnes Audit Commission (Chair) David Noble Association of Drainage Authorities (until 31/12/2005) Jean Venables Association of Drainage Authorities (from 1/1 2006) Patrick Clackett CIPFA Martin Roberts Defra Sarah Steeds Defra Phil Winrow Environment Agency Graham Fletcher DCLG (formerly ODPM) Jon Tomlinson Upper Witham Internal Drainage Board Simon Edge Wales Audit Office Steve Warren Audit Commission David Aldous Audit Commission George Wisz Audit Commission (Secretary) The contributions of the members of the Group, and others who have helped in the preparation of this guide, are gratefully acknowledged. In particular, the authors of the first edition of the guidance from which this publication is derived - Governance and Accountability in Internal Drainage Boards in England and Wales – a Practitioners’ Guide – published jointly by the National Association of Local Councils (NALC) and the Society of Local Council Clerks (SLCC), drew on and updated CIPFA’s Accounting Guidance Notes for Internal Drainage Boards 1996 (“the purple book”) and we are grateful to CIPFA for allowing this.
1 Contents Page Preface 3 Introduction 4 Background 6 Part 1 The legal framework for Internal Drainage Boards in England 8 Part 2 The annual return and corporate governance 14 Part 3 Accounting guidance for Internal Drainage Boards 40 Part 4 Guidance for larger Internal Drainage Boards 86 Glossary of terms 119 Appendices 1 Internal Drainage Boards services and powers 2 Statement of Responsibilities of Audited bodies and their Auditors 3 The approach to the audit of Smaller Bodies in England 4 Extract from the Audit Commission’s Code of Audit Practice (new) 5 Guidance issued by the Audit Commission to External Auditors of local councils on the overall scope and approach to their audit work 6 Annual return for Internal Drainage Boards for the year ending 31 March 2006 7 Accounts and Audit Regulations 2003 as amended and Circular 03/2006 8 An executive checklist for a smooth year end and audit
Good governance, accountability and transparency are essential to Internal Drainage Boards and a cornerstone of the government’s approach to modernising public services.
Those who are responsible for the conduct of public business and for spending public money are accountable for ensuring both that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.
In discharging this accountability, public bodies and their management (both members and officers) are responsible for putting in place proper arrangements for the governance of their affairs and the stewardship of the resources at their disposal. They are also required to report on their arrangements in their annual published Statement on Internal Control.
As a safeguard to ensure the proper discharge of this accountability, external auditors in the public sector give an independent opinion on public bodies’ financial statements. They may also review, and report on, aspects of public bodies' arrangements to ensure the proper conduct of their financial affairs and to manage their performance and use of resources.
This publication has been prepared in response to the need for a clear statement on ‘proper practices’ for both day-to-day practitioners - users and trainers alike and auditors, internal and external. It is a guide to the accounting practices to be followed by Internal Drainage Boards and sets out the appropriate standard of financial reporting to be followed. It is intended to represent ‘proper practice’ as referred to in the Accounts and Audit Regulations.
We are committed towards making this guidance as useful, complete and ‘user friendly’ as possible, but there will always be scope to improve. As it is our intention to issue updated versions of this guidance from time to time, there is a continuing opportunity to keep it up to date, identify and share good practice and respond to the needs of Internal Drainage Boards. If you have comments or suggestions as to how to improve this guidance, please send these to ‘Practitioners’ Guide’ at The Association of Drainage Authorities, 12 Cranes Drive, Surbiton, Surrey, KT5 8AL or to the Flood Management Division (FM), Department for Environment, Food and Rural Affairs, 3B, Ergon House (LER), Horseferry Road, London SW1P 2AL.
2. From 1 April 2006, the public accountability and financial reporting requirements set by Defra for the majority of Internal Drainage Boards may be met by completing a single document. The Audit Commission and Defra have made this possible by designing a return that combines the statutory statements of accounts and internal controls with the statutory annual report. This innovation will significantly reduce the regulatory burden on Internal Drainage Boards but requires cooperation by Boards in bringing forward their financial year-end timetable.
3. The accountability and audit framework applies to all Internal Drainage Boards. There are, however, different formal reporting requirements for those with annual expenditure or annual income below and above a threshold set by law1. The majority of Internal Drainage Boards will complete an annual return. The largest Internal Drainage Boards will continue to prepare a statement of income and expenditure and a balance sheet as well as completing a separate annual report to Defra.
1 The value of the threshold amount may be found in the Accounts and Audit Regulations. At the time of writing the threshold stands at £1,000,000
This document is intended to be a working tool for Internal Drainage 5.
Boards. It is not a comprehensive guide to all aspects of the law applicable to Internal Drainage Boards. Nor can the guidance cover all queries about the application of the accountability and audit framework as this develops over time. Arrangements have, therefore, been put in place to provide a technical support network through the Association of Drainage Authorities (ADA) who are themselves supported by regular meetings of a Joint Advisory Group made up of practitioners and representatives from the Chartered Institute of Public Finance and Accountancy (CIPFA), the Audit Commission, the Department for Communities and Local Government (DCLG, formerly ODPM), the Department of the Environment, Food and Regional Affairs (Defra) and the audit suppliers. These arrangements are intended to provide sources of further support and guidance, and, from time to time, the guidance in this document will be updated and revised as appropriate.
6. This guidance is intended to cover the annual return for Internal Drainage Boards. The form and content of the annual report to Defra may change from year to year. Guidance on completing this section is not included here but will be issued to IDBs together with the annual return.
1. Since 2004, the Audit Commission working with the national representative body for Internal Drainage Boards, the Association of Drainage Authorities (ADA) and the sponsoring Government Department, Defra, has examined whether a limited assurance approach to the external audit, drawing on their experience of developing such arrangements for local councils, may be suitable for Internal Drainage Boards. The steering group referred to in the acknowledgements, carried out sufficient work to gain assurance for those responsible for determining the shape and scope of the formal accounting and audit approach for public bodies to approve the application of such an approach for the majority of IDBs.
2. This guidance states in a practical way, the current requirements of legislation and the responsibilities of the various parties involved. It explains the processes and decisions that need to be carried out to comply with statutory requirements, provides examples of how this may be achieved, and builds on the good practices currently being employed. It comes into effect for the audit of accounts for years ending on or after 31 March 2006.
3. This approach relies to a significant extent on self-certification by Boards that their internal arrangements are being maintained at a level consistent with good practice. This requires the active participation of elected and appointed members in the process of providing positive public assurance that their stewardship of the publicly owned assets with which they have been entrusted has been properly managed. Although Boards have always provided some assurance through approving the annual accounts, members need to provide a written statement of assurance. Board members, working as a corporate body, will need to be able to provide assurance with confidence, based on adequate information about the operation of internal controls within their Boards.
4. The accountability and audit framework is ‘risk-based’. It must be proportionate to risk, to the amounts of public money involved and to stakeholders’ need for assurance. Whilst the limited assurance external audit approach provides a lower level of assurance than that which preceded it, it remains responsive to the need to safeguard the proper conduct of public business. External audit remains an essential element in accounting for public money and makes an important contribution to the stewardship of public resources and to the corporate governance of public services. It also supports local democracy by helping to ensure that the members and officers are accountable to the communities they serve and by providing assurance that public money has been properly spent.
The legal framework for Internal Drainage Boards in England and Wales This part of the guidance describes the nature of Internal Drainage Boards and the legal framework within which they operate. It also covers the development of the new audit approach and the annual return approach to statutory reporting.
What are Internal Drainage Boards?
1.1 ‘Internal Drainage Boards are independent bodies created under land drainage statutes, which can trace their ancestry in some cases back to the 13th century. There are around 200 such Boards in England concentrated in the lowland areas of East Anglia, Somerset, Yorkshire and Lincolnshire where there are special drainage needs.
Many of the Boards operate as consortia of which there are 65. They have permissive powers to undertake flood defence works, other than on main rivers, in a defined geographical area. Each Board includes those elected by and representing the occupiers of land in the area and members nominated by the local authorities in that area. Internal drainage Boards secure income mainly from drainage levies on farmers and other occupiers and from special levies on local authorities. They must also pay levies to the [Environment] Agency to fund works on main rivers that protect internal drainage Board areas.’ (taken from ‘Inland Flood Defence’ - NAO HC299 15 March 2001)
1.2 The constitution of Internal Drainage Districts and membership of most Internal Drainage Boards is governed by Section 1 of the Land Drainage Act 1991 (the Act) which consolidated all previous enactments relating to such Boards and of local authorities in relation to land drainage.
1.3 Internal drainage authorities are of several kinds. The majority are Boards for internal drainage districts constituted by order of the Environment Agency or its predecessors. Others may be bodies that
existed before 1930 and were either:
a) Commissioners of Sewers constituted by Commission issued under Statute of Henry VIII or the Land Drainage Act 1861;
b) Elective drainage Boards constituted by Provisional Order under the Land Drainage Act 1861; or
1.4 The role of all these bodies is, however, similar and it is appropriate that a common accounting and audit framework applies to them all.
1.5 The abolition of domestic rates in 1990 necessitated changes in the basis of assessing non agricultural drainage rates and this was achieved through various Acts and Instruments. In summary, the expenses of non-agricultural land drainage are met by special levies issued in accordance with regulations made under s75 of the Act to billing authorities’ areas wholly or partly included in the Board’s district. In practice, the term ‘billing authorities’ refers to District, Borough, Metropolitan and Unitary councils in England.
1.6 Other changes brought about by the abolition of domestic rates, and of the distinction between owners and occupiers, required a new approach for assessing agricultural drainage rates. From 1993 an Internal Drainage Board may make a drainage rate in respect only of agricultural land and agricultural buildings which is levied on the occupiers of non-urban property (referred to as a hereditament) in the district. If the property is unoccupied, the owner shall be deemed to be the occupier.
1.7 The proportion of expenses raised by rates and special levies is regulated; the powers of, and conditions attached to, issuing and collecting special levies are set out in section 37 of the Act and governed by Section 75 of the Local Government Finance Act 1988 and the Internal Drainage Boards (Finance) Regulations 1992.