Parish Council Annual Governance Statement: Completing AGAR Section 1 Correctly

Section 1 of the AGAR is the annual governance statement — the document where your council formally affirms or denies compliance with ten governance assertions. Most clerks treat it as a formality: tick ten "yes" boxes, pass it to the chairman for signing, and move on to the accounting statements. That approach produces most of the common AGAR errors.

This guide covers what each assertion actually requires, the order of approval you must follow, and how to handle a "no" answer without causing more problems.

What Section 1 is

The annual governance statement is the council's own assessment of its governance arrangements for the financial year just ended. It is completed by the council — not by the external auditor — before the accounts are approved. The auditor's role is to check that the statement is consistent with the evidence, not to complete it for you.

The statement is signed by the chairman and the clerk (where the clerk is also the responsible financial officer, as in most small councils) at the meeting where it is approved.

The order of approval matters

Section 1 must be approved by the full council before Section 2 (the accounting statements). This is a statutory sequencing requirement under regulation 6 of the Accounts and Audit Regulations 2015, and it is one of the most common failures flagged by external auditors.

The reason: the governance statement is a separate piece of evidence about how the council has operated. It should not be dependent on having already approved the numbers. Approving Section 2 first effectively means the governance is certified after the finances — which inverts the proper process.

Both sections can be on the agenda at the same meeting, but Section 1 must be resolved first.

The ten assertions

The assertions below are taken from the Smaller Authorities' Proper Practices Panel (SAPPP) Practitioners' Guide 2026/27. The exact wording on the AGAR form is what counts — present the assertion to the council as it appears on the form, not as a paraphrase.

Assertion 1: Financial management

"We have put in place arrangements for effective financial management during the year, and for the preparation of the accounting statements."

This covers the financial regulations (adopted, followed, reviewed), segregation of duties (where possible — most parish councils are small, but dual authorisation for payments should be in place), and the council's process for authorising expenditure in minutes.

Assertion 2: Internal control

"We maintained an adequate system of internal control, including measures designed to prevent and detect fraud and corruption and reviewed its effectiveness."

This covers whether the council has standing orders and financial regulations, whether safe arrangements exist for handling money and making payments, and whether the effectiveness of those controls was reviewed during the year.

Assertion 3: Compliance with laws and proper practices

"We have assured ourselves that there are no matters of actual or potential non-compliance with laws, regulations and Proper Practices that could have a significant financial effect on the ability of this authority to conduct its business or manage its finances."

This is the broadest assertion and covers standing orders, financial regulations, code of conduct, and compliance with the legal framework generally. If the council knows of a compliance failure — an unlawful decision, a payment made without authority, a code of conduct complaint that was not handled correctly — this is where it surfaces.

Assertion 4: Exercise of public rights

"We provided proper opportunity during the year for the exercise of electors' rights in accordance with the requirements of the Accounts and Audit Regulations."

The public inspection period is 30 working days, and must include the first 10 working days of July (the statutory common inspection period runs from 1 July). This inspection window must be properly advertised on the council's website and noticeboard. The accounts and accounting records must be available for inspection by any local elector during this period. A common failure is advertising the inspection period but not making the records accessible on request.

To be clear: the 30-working-day inspection period and the 1–14 July common period are distinct. Every smaller authority must use a 30-working-day window; it must encompass the first 10 working days of July, but the 30-day period normally extends beyond 14 July.

Assertion 5: Risk management

"We carried out an assessment of the risks facing this smaller authority and took appropriate steps to manage those risks, including the introduction of internal controls and/or external insurance cover where required."

See our parish council risk assessment guide for what this requires in practice. The key word is "reviewed" — the risk assessment must have been reviewed in the year under report, not just carried forward from the year before.

Assertion 6: Internal audit

"We maintained throughout the year an adequate and effective system of internal audit of the accounting records and control systems."

This covers the appointment of an independent and competent internal auditor, providing that auditor with all relevant records, and acting on any findings. The internal auditor's Annual Internal Audit Report (AIAR) is the evidence — if it was not completed, this assertion is problematic.

Assertion 7: Reports from auditors

"We took appropriate action on all matters raised in reports from internal and external audit."

The council must have considered matters raised by both its internal auditor (in the AIAR) and the external auditor (in Section 3 of the AGAR, which is the external auditor's own report and certificate), and taken corrective action where needed.

Assertion 8: Significant events

"We considered whether any litigation, liabilities or commitments, events or transactions, occurring either during or after the year-end, have a financial impact on this smaller authority and, where appropriate have included them in the accounting statements."

This covers anything unusual — a legal dispute, a significant liability crystallising, an unexpected liability after the financial year ended — that has financial consequences the accounting statements should reflect.

Assertion 9: Trust funds (local councils only)

"(For local councils only) Trust funds including charitable. In our capacity as the sole managing trustee we discharged our accountability responsibilities for the fund(s)/assets, including financial reporting and, if required, independent examination or audit."

Only applicable where the council acts as sole managing trustee of a charitable trust or similar. Councils that are not sole managing trustees answer "N/A". Most smaller parish councils will answer "N/A" here.

Assertion 10: Digital and data compliance

"We have put in place arrangements for the effective IT and data management in accordance with proper practices during the year under review."

Added for the 2025–26 AGAR cycle, this assertion covers the council's compliance with digital requirements: a generic email address on an authority-owned domain, website accessibility to WCAG 2.2 AA standard, compliance with GDPR and the Data Protection Act 2018, and an adopted IT policy. For the full detail, see our Assertion 10 guide.

How to handle a "no" answer

A "no" answer is not automatically a crisis — councils that are honest about a compliance gap and explain what they are doing to fix it are treated more favourably than councils that answer "yes" when the evidence suggests otherwise.

The rules for a "no":

Write an explanation. The AGAR form has a section for explanations. "The council did not review its risk assessment in 2025–26 and will do so at the May 2026 annual meeting" is an acceptable explanation.
Keep it factual. Do not minimise or blame the previous clerk. Say what happened and what is being done.
Follow through. A "no" explanation that becomes the same explanation the following year suggests the council is not addressing its governance.

The external auditor cannot force a council to be compliant — they can only report what they find. But repeated failures on the same assertion, or a material failure (funds misappropriated, accounts not published) will generate a more formal qualified conclusion.

Signing the document

Both the chairman and the clerk must sign the completed Section 1 at the same meeting at which it is approved by resolution. The resolution should identify the AGAR financial year — for example, "Resolved: that the Annual Governance Statement for the year ended 31 March 2026 be approved."

The signatures confirm the statement is accurate. Neither the chairman nor the clerk can sign if they have a known, undisclosed conflict of interest in relation to the content.

Connecting Section 1 to the compliance picture

The annual governance statement is the formal endpoint of a year's worth of compliance work — standing orders reviewed, financial regulations followed, risk assessment updated, internal audit completed. Clerks who maintain the compliance checklist tool through the year find Section 1 straightforward, because the evidence is already assembled. Those who treat it as an annual paper exercise find it produces "no" answers they did not see coming.

The AGAR preparation guide covers the full AGAR cycle including the accounting statements and submission deadlines.

Sources

This article is for general guidance only. The definitive source for AGAR requirements is the SAPPP Practitioners' Guide, published annually by SAPPP through NALC and SLCC. Consult your county association of local councils for the current edition.