Course bookings and enrolment now open for students of CIPFA’s Professional Accountancy Qualification.
Selected course bookings available from next week.
Over the next two years local authority finance professionals will be entrusted with a number of major tasks during a continuing period of constrained resources. This includes adopting the accounting changes relating to the Highways Network Asset, financial instruments and revenue while continuing the improvement in how an authority tells its financial story. Finance professionals will also need to implement a local audit, including deciding whether and how to appoint an auditor and preparing for an accelerated closedown and sign-off timetable.
Improving the presentation of information in local authority financial statements has been a long-term project for both CIPFA and the CIPFA/LASAAC Local Authority Accounting Code Board (CIPFA/LASAAC). This under the umbrella heading of 'The Telling the Story' review. Feedback from various sources, including formal consultations on the Code of Practice on Local Authority Accounting in the United Kingdom (the Code – view the 2016/17 edition here), indicated that the financial statements did not clearly reflect traditional local authority performance, ie the movement on general fund and housing revenue account balances.
The changes to the 2016/17 Code have addressed this issue. The 'Telling the Story' review introduces a new note to the Code, the expenditure and funding analysis, which provides a direct and accessible reconciliation between the way local authorities are funded and prepare their budget and the comprehensive income and expenditure statement. Importantly the changes also allow local authorities to report on the same basis as they are organised by breaking the formal link between the Service Reporting Code of Practice (SeRCOP) and the comprehensive income and expenditure statement.
CIPFA/LASAAC is keen to ensure that the valuable Highways Network Asset (HNA) is reflected at the true economic value and operational cost of the substantial resource held and maintained by local authorities.
The changes introduced by the 2016/17 local authority accounting code will improve the effectiveness of local authority financial reporting and include the move to measuring local authority highways networks at depreciated replacement cost (DRC) instead of historical cost.
The Code of Practice on the Highways Network Asset has been updated to strengthen the links to the accounting code and has also been subject to consultation. The primary issues affecting local authorities as a result of the new changes include the main reporting requirements, considerations for the assurance process and new measurement requirements.
Two very substantial standards will be the subject of this year’s consultation on the local authority accounting code: IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers. Neither of these standards will apply until 2018/19. However, both will require significant preparation, including systems changes and judgements by local authority accounts preparers, and therefore will need to be included in the 2017/18 Code to allow local authorities time to effectively adopt the changes. There are also changes proposed for the narrative reporting requirements in the Code, and local authorities will need to be considering other future changes to financial reporting including the impact of the new leasing standard.
It’s been a little over a year since the Local Audit and Accountability Act 2014 came into force. There are new requirements for appointing local auditors set out in the 2014 Act and subsequent regulations and there are options available to local authorities. This means that there are a number of challenges facing local authorities when appointing their auditors, ie which route to take (whether auditor panel or sector-led body), overall management of the procurement process and ensuring independence.
The deadline for faster closing is coming swiftly over the horizon. There are many benefits of faster closing to local authorities; these include having reliable financial information available for earlier use by local authorities to support their financial management and forward planning, and having improved financial procedures and systems that free up staff resources earlier in the year to support the budgetary challenges their authorities face.
However, making significant change to systems and procedures will be more difficult in times of resource constraint, so CIPFA Finance Advisory Network (FAN) advisers will bring together their substantial knowledge of effective practice from local authorities that are already managing to close their accounts early.
Whole of Government Accounts (WGA) is the largest consolidation of public sector accounts in the world, and the local authority sector is an extremely important part of that process. Finance professionals will need to understand the future changes to the WGA, as financial reporting standards are changing, and the impact this will have on their WGA reporting requirements and returns.
It is clear then that finance professionals will need to keep up to date with numerous statutory provisions, new financial reporting and accounting requirements across all of the above areas. CIPFA, as the standard-setter in local government accounting, of course is in prime position to help and guide all finance professionals in the sector wherever possible. Aside from the links above, further help is found below.