AGAR variance explanations that don't come back as a query

Every year the same thing happens. The Annual Governance and Accountability Return goes off to the external auditor, and a few weeks later a query comes back asking for a proper explanation of a variance the council thought it had already explained.

It is rarely because the figures are wrong. It is almost always because the explanation given describes what changed rather than why it changed, and the auditor cannot sign off on that.

What the auditor is actually asking for

Section 2 of the AGAR is the accounting statements: the boxes running from balances brought forward through to fixed assets and borrowings. The external auditor compares each box against the prior year and asks for an explanation of any significant movement, conventionally taken as a variance of more than 15% (subject to a de minimis so that trivial amounts on small figures are not chased).

The auditor is not auditing the council. This is a limited assurance review, and the reviewer has no visit, no ledger, and no local knowledge. All they have is two columns of figures and whatever the clerk has written in the explanation box. Their job is to satisfy themselves that the movement has an identifiable cause consistent with the rest of the return.

So the test to apply to your own wording is simple: could someone who has never heard of your council read this and understand what happened?

The three explanations that always get queried

1. Restating the number

This tells the reviewer nothing they cannot already see. The variance figure is the question, not the answer.

2. The unsupported abstraction

Which projects? How much each? An explanation that could apply to any council in England explains nothing about yours.

3. The partial explanation

Good start, but if the play equipment cost £9,000 and the variance is £14,200, the reviewer still has £5,200 unaccounted for. Explanations should add up to the movement, or come close enough that the remainder is obviously immaterial.

What a good explanation looks like

A satisfactory explanation names the cause, quantifies it, and reconciles to the variance. It usually takes one or two sentences.

Box 2 — Precept or rates and levies

Precept movements are the easiest to explain because there is always a minute recording the decision. Cite it.

Box 3 — Total other receipts

Box 3 is the most commonly queried line on the whole return, because it collects everything that is not the precept: grants, CIL, burial fees, allotment rents, VAT refunds, bank interest, insurance settlements. Explain it by listing the components that moved, not by describing the box.

Box 4 — Staff costs

Note that this is three causes making up one variance. Where several things moved, say so — a single-cause explanation for a multi-cause movement is what triggers the follow-up question.

Box 6 — All other payments

Box 9 — Total fixed assets

Box 9 catches councils out because the asset register is often the least-maintained document the council holds. If the figure has moved and you cannot say why, the register needs reconstructing before the return goes anywhere.

Box 7 must agree to Box 8

Balances carried forward (Box 7) should agree to the total of cash and short-term investments (Box 8), unless the council accounts on an income and expenditure basis and holds debtors or creditors — in which case the difference is those debtors and creditors, and you should be able to state it precisely.

If the two boxes disagree and you cannot immediately explain the difference, that is not a presentational problem. It means the bank reconciliation has not been completed properly, and it is the single fastest way to attract a detailed query. Reconcile before you certify, not after.

If a query has already arrived

Answer it in the same structure: cause, amount, evidence. Attach the supporting document — the minute, the invoice, the grant letter — rather than describing it. Reviewers close queries far faster when the evidence is in front of them, and a query that goes back and forth three times will start costing the council additional fees.

Do not be defensive about it. A query is not a criticism of the clerk; it is a reviewer doing what they are paid to do with the limited information the return gives them.

Getting ahead of it next year

The councils that never get queried tend to do one thing: they write the explanation at the point the transaction happens, not in June. A one-line note in the cashbook when the CIL money lands, or when the pay award takes effect, means the AGAR explanations write themselves, and nobody is reconstructing a year of events from bank statements the week before the deadline.

Always check the current year's Practitioners' Guide and your external auditor's own guidance notes, as thresholds and required wording are reviewed annually.