What are the accounting impacts of government announcements on COVID-19 support to date?

Expanded retail discount 2020/21

With regard to the retail discount and its increase to 100% relief and expansion of the qualifying rate payers, guidance has now been issued and updated to include the new businesses it covers following the announcements on 25 March and the information requirements. MHCLG have confirmed that this additional level of relief will be covered by S31 grant payments and a new burdens assessment of the additional costs, including software and rebilling costs, associated with this change will be captured alongside the additional costs arising from the increase to 50%. One payment will be made to cover both.

The additional data capture form on this discount and the business rates "holiday" for non-local authority child care providers along with local newspaper relief which has been extended until 2024-25. This issued by MHCLG to NDR return contacts on 24/03/2020 and was due for return by 09/04/2020 to enable S31 grant payments on account to be made. We expect these on-account payments to be made around mid-May but we don't know whether they will be paid upfront or in instalments.

We do know that 100% of the S31 grant will be paid to the billing authority in the first instance, rather than just their proportionate share, to give them the cash flow to make the NNDR1 2020/21 NDR Income payments to government and preceptors. At NNDR3 2020/21 a reconciliation will be carried out to ensure all authorities and central government end up with their share of the final S31 grant.

All of these additional reliefs will increase a deficit or reduce a surplus on the collection fund for 2020/21 to be offset by S31 grant in the general fund.

Deferral of Central Share

MHCLG have announced that billing authorities don't have to make the NNDR1 2020/21 central share payments for the first three months of 2020/21, usually scheduled evenly over the year, until later in the year. This is in an attempt to ease the cash flow burden on billing authorities. The payments relating to the first three months will instead be collected over the period October to March of 2020/21 and will be detailed in regulations due to be laid next week. Payments from billing authorities to major preceptors based on NNDR1 2020/21 still have to be made in accordance with the normal schedule of payments. Tariff payments also still have to be made. Please do not cancel your direct debit with MHCLG for the central share payments, as MHCLG will sort things out from their end.

Council Tax Hardship Scheme

The guidance and allocations for the Council Tax Hardship Scheme of £500m has been issued along with a Council Tax Information Letter 3/2020 covering FAQs on the technical implementation of the scheme. The scheme is being used to reduce council tax liability, using discretionary powers under S13A(1)(C) of the Local Government Finance Act 1992. In accounting terms this means that the amount of reduction to council tax liability awarded under S13A(1)(C) will have to be funded by the local authority General Fund, offset by the S31 grant from government.

Other FAQs

What is happening to IFRS 16?

IFRS 16 has been deferred for 12 months. Further guidance will be provided at a later date.

Will councils be able to borrow money if they have a shortfall?

It may be that some will need to borrow money they are already able to borrow for treasury management purposes. However, they cannot currently borrow to pay day to day running costs like salaries.

What plans are in place to ensure local authority business can still function?

The Coronavirus Bill has now been passed and allows for meeting to be conducted remotely. The bill includes the powers to issue regulations amending local government legislation around the conduct of meetings.

What types of remote meetings do the new regulations apply to?

The regulations apply to county councils, district councils, combined authorities, parish councils, joint committees constituted to be a local planning authority, joint waste authorities, fire and rescue authorities and national park authorities (among others). The regulations apply to meetings of a local authority, an executive of a local authority, a joint committee of two or more local authorities, and a committee or sub-committee of any of those bodies.

As a billing authority, should I continue to pay the preceptors?

It is important that money flows through the system while local authorities deal with the immediate impact of COVID-19. The Local Government Finance Act 1992 provides legislative backing. Where local authorities are experiencing a reduction in income due to recent policy it is essential that these additional cost can be identified. The LGA along with MHCLG are currently working on collecting information on expenditure and cost burdens.

Should the Annual Governance Statement (AGS) for 2019/20 be adjusted to reflect the impact of the pandemic?

The guidance on the AGS is included in Delivering Good Governance in Local Government. This includes guidance that the AGS should be up to date, with consideration of the impact of the pandemic on governance, at the time of publication. If significant issues have been caused by the pandemic, or if the impact has identified areas of weakness in governance, then these should be acknowledged in the AGS. The Narrative Report is also likely to identify any financial implications and risks arising from the pandemic so the two reports should be consistent.

How can internal auditors ensure that they maintain conformance with the Public Sector Internal Audit Standards during the pandemic?

CIPFA has been working with its fellow Relevant Internal Audit Standard Setters who mandate the UK Public Sector internal Audit Standards (PSIAS) to develop guidance for internal auditors.

There is also a free webinar available to watch, featuring the chair of the IASAB Simon Edge and Diana Melville to discuss the guidance and other resources to support internal auditors.

What will be the implications if internal audit teams are diverted to other duties and are not able to undertake internal audit work?

Under the Accounts and Audit Regulations 2015 local government bodies "must undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes, taking into account public sector internal auditing standards or guidance." It is therefore essential that internal audit is not compromised. The forthcoming guidance from the IASAB recognises that internal auditors may need to amend their approach, plans and priorities in order to protect their organisation and its ability to fulfil its public interest responsibilities.

Ensuring effective internal audit takes place is not just the responsibility of the head of internal audit. The leadership team and the audit committee also have the responsibility to ensure that the statutory requirement expressed by the regulations is met. These responsibilities are set out in the CIPFA statement on the role of the Head of internal audit. Accordingly the leadership team and audit committee should provide the support and resources necessary for internal audit to conform with the professional standards.

How will central government reimburse local government for the total amount of the business grant scheme?

These grants are estimated to be worth up to £12.3bn. In order to ensure local government suffer no impact on their cash flow position, central government have paid an allocation to each local authority in advance of payments being made to businesses. Government are conscious that the allocations are an estimate of the likely cost of the grant scheme for each authority and therefore the position will be monitored on a weekly basis, with additional funds made available if required. As the final amounts required will not be known until after all grants have been paid to businesses, it is the government's intention to carry out a reconciliation exercise at some point in the future to ensure that each authority has been allocated the correct amount of funding, with balancing payments being made to/from authorities as required.