‘Urgent consultation’ issued in response to continuing audit delays

CIPFA and the Local Authority Scotland Accounts Advisory Committee (LASAAC) have announced another “urgent consultation” to consider proposals to address the latest issue that has led to significant delays to the audits of 2020/21 local authority accounts.

The issue – involving the valuation of infrastructure assets – has meant that auditors have been asking for more detailed information from councils on their roads, bridges, street lighting and other infrastructure before they sign off the accounts. This has put an effective hold on 2020/21 accounts for upper-tier authorities, and, if not addressed, could also impact 2021/22 accounts.

A CIPFA/LASAAC “Task and Finish” group has suggested temporary proposals to update the code of practice that governs local authority accounting in the UK. These have now been issued as part of a four-week consultation that closes on 14 June 2022.

The proposed changes include:

• Confirming the accounting consequences of derecognition, for example, that the carrying amount is zero
• Temporarily adapting the code to remove the reporting requirements for gross historical cost and accumulated depreciation
• Providing extra guidance on how depreciation may be applied for infrastructure assets

Conrad Hall, chair of CIPFA/LASAAC and corporate director of resources at the London Borough of Newham, said that “necessary and pragmatic” steps had been taken to temporarily resolve the issue. “The proposals should not mean any significant losses in high-quality financial information,” he added.

CIPFA/LASAAC said that it will consult on a longer-term solution later in the year.

There is no doubt CIPFA does have a difficult balancing act meeting the demands of local authorities and the Financial Reporting Council. However, the issue really underlines the need to overhaul and simplify local authority financial statements.

Cost concerns for local authorities

Chris Tambini, president of the Society of County Treasurers (SCT), told Room 151 that the infrastructure assets issue was “frustrating for all concerned” and the changes, if agreed, would involve extra cost for local authorities.

“There is certainly no demand for this extra information from local residents, and it is difficult to really identify any benefit,” he said.

“There is no doubt CIPFA does have a difficult balancing act meeting the demands of local authorities and the Financial Reporting Council. However, the issue really underlines the need to overhaul and simplify local authority financial statements.”

Tambini, who is also director of corporate resources at Leicestershire County Council, said the SCT would study the proposals carefully and respond to the consultation.

This is the second urgent consultation issued in the past four months to address audit delays. In February 2022 CIPFA/LASAAC issued a four-week “emergency consultation” on changes to the code that led to an agreement to delay implementation of IFRS 16.

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