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The closure of the accounts at year end is a project and successful projects need to have a sound project management methodology in place.
Another key element of a successful project is to challenge the existing timescales and processes. A good place to start is lessons learnt from the previous year, what went wrong and why? And consider the processes and practices that need to be put in place to ensure that it doesn’t happen again.
Good practice is also a good place to start and for this we may need to look at the private sector but we can also look closer to home in the 21 principal bodies that have managed to publish their accounts by 31 July since 2008/09, as heralded by the Audit Commission.
It is clear that these bodies are managing to close earlier by questioning the status quo and applying more efficient practices. These include ‘soft closing’ accounting periods for say the first six months of the year and then introducing ‘hard’ closes from period 7 onwards. This enables an external audit firm to conduct an interim audit prior to year end thereby spreading the work more evenly through the year.
In order to be able to close periods in year, good housekeeping is crucial. Exercising control over inputs and regular review of the out-turn to the budget will ensure that figures in the ledger make sense.
This will hopefully mean that when year-end comes around it is just one more month to close.
Effective quality assurance techniques are also key to ensure that you instil quality into the whole process of accounts preparation and working paper production.
As bodies continue to reduce their staffing resource, the use of accounting models can also help to ensure that the accounts closure process is both efficient and complies with the latest CIPFA Accounting Code of Practice.
CIPFA offer a range of accounting toolkits and in 2015 these have been refreshed to ensure they are fully up to date and as user friendly as ever. These consist of a proforma accounts toolkit and a cash flow toolkit. In addition to these, members of the CIPFA Finance Advisory Network (FAN) received two collection fund accounting models (for NDR and Council tax) as part of their 2015/2016 subscription, to assist with the timely close down of their collection fund.
And finally it is imperative that authorities have early dialogue with their external auditors so that they can agree on their planned approaches to support authorities in their new working methods.
So these are just a few of the possible approaches that authorities may wish to consider in order to be ready for the move to faster closing but as yet we haven’t discussed any of the benefits, of which there are many.
This change will ultimately reduce the burden of the closure process and enable finance staff to give more time to in-year financial management. The changes in processes in-year required to achieve early closure will serve to tighten up overall financial controls as issues will need to be dealt with during the year rather than at year end.
It can also have a positive impact on staff experience and motivation as people are freed up to focus on value added activities and accountants become business enablers and business partners, rather than bean counters.
In addition to all of this, early closure sends a positive message about the efficiency of local government as a whole, a message which we should all subscribe to and to which we should all be proud.