• Home
  • About
  • 151 IMPACT AWARDS
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

Impact Awards –>
  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

UK local authority accounting no risk to investors, say experts

0
  • by Colin Marrs
  • in Technical
  • — 1 Oct, 2015

AccountsExperts have played down fears raised this week by ratings agency Fitch that accounting rules governing UK local authorities could put off investors.

In a release this week, Fitch said that the presentation of UK council accounts varies, and may leave out certain detailed cash flow data, such as employee costs, fees for charges and services, and the costs of supplies and services.

This, it said, meant that the finances of UK councils cannot be easily compared with those of their international peers.

“We think that the UK is one of the countries in Western Europe where it is the most time-consuming to extract complete financial information from the public accounts of local authorities,” Fitch said.

“This can make it difficult to compare local and regional governments’ budgetary execution and performance and their fiscal flexibility across countries.”

It said that the issue may become more relevant to investors “as the UK pursues plans for greater devolution, and as local authority debt rises”.

However, Suresh Patel, public services audit director at accountancy firm Mazars, said: “In many ways UK public sector accounting is more advanced than their European counterparts having been one of the first countries to adopt International Financial Reporting Standards (IFRS) in 2009. Indeed some of Europe still does not adopt accruals based accounting.”

Stephen Sheen, managing partner of Ichabod’s Industries, a consultancy providing technical support to local government, said: “To an extent, it is a badge of honour for local government accounts that they are not so easy to compare with their European peers.

“The UK has moved a longer way from cash accounting than any other European country in its adoption of full accruals accounting and the use of current value measures for assets and liabilities.”

He added that although many authorities have chosen not to use the “direct method” for their cash flow statement, where categories of operating cash flows are disclosed, they have the option to do so.

“If they were aware that a significant user of the accounts would find this information valuable, then the accounts could be prepared accordingly,” he said.

Alison Scott, ‎assistant director of local government and governance at the Chartered Institute of Public Finance and Accountancy, said: “We would expect ratings agencies and informed investors to understand IFRS accounts.

“Our main concern and focus is how to make accounts more accessible to the council taxpayer – investors are already well equipped to do that and can request more information from authorities if they need it.”

And Paul Dossett, head of local government at accountancy firm Grant Thornton, said that, in any case, local authority cash flow statements are not necessarily the best way of assessing the financial viability of councils.

He said: “The key factors in assessing a local authority’s financial viability are the strength of its general fund and other usable revenue reserves and of course its long term track record of delivering a balanced budget.”

However, Patel said that as UK local authorities gain more control over funding and attract the attention of international investors, “there will be more onus on ‎initiatives such as streamlining the accounts and the push for greater convergence in European financial reporting frameworks”.

Elsewhere in its statement, Fitch noted that despite the complications it identified, “efforts to ensure accountability do support financial transparency” because they are prepared in line with CIPFA codes of practice and UK law, and are approved by internal and external auditors.

Councils in the UK also enjoy a “predictable and supportive institutional framework”, the ratings agency said.

However, it added that reconciling published local authority accounts with Whole of Government Accounts published by central government can be complex.

Photo (cropped): Ken Teegardin, Flickr.

Share

You may also like...

  • Settlement social care funding plan ‘woefully inadequate’ Settlement social care funding plan ‘woefully inadequate’ 15 Dec, 2016
  • Redditch issued with section 24 notice and told to save £1.5m Redditch issued with section 24 notice and told to save £1.5m 31 Jul, 2019
  • Graham Liddell: Mastering risk management and not box ticking Graham Liddell: Mastering risk management and not box ticking 30 Mar, 2017
  • Ministers reject creation of new Audit Commission-style watchdog Ministers reject creation of new Audit Commission-style watchdog 7 Nov, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 1 day ago

    Impact Awards: Cheltenham’s tech hub and Hackney’s recovery from cyber attack: The CCLA/Room151 Impact Awards spotlight  finance teams with a direct impact on their local communities and the environment. This week we explore Cheltenham Borough Council’s… dlvr.it/Rxg53h pic.twitter.com/iH8oGKOfSs

    Room151 2 days ago

    Collaboration the key to district recovery post-pandemic: Regeneration and economic growth will depend on districts’ ability to secure funding and work with public and private partners, argues Sanjiv Kohli. Covid hit us in March 2020 and immediately[...] dlvr.it/Rxb4VK pic.twitter.com/FiMynEQVPU

    Room151 7 days ago

    Impact Awards: Liverpool’s cafe culture and Warrington’s investment in homes: The CCLA/Room151 Impact Awards showcase  finance teams with a direct impact on their local communities and the environment. This week we spotlight Liverpool City Council’s… dlvr.it/RxJsKb pic.twitter.com/dEYpaz6HP0

    Room151 7 days ago

    Doing something in #localgov #finance for housing or regeneration? Check out the 'Place Shaping' category room151.co.uk/impact-awards/… sponsored by @31tenConsulting in the CCLA/Room151 Impact Awards. #timetoenter !! pic.twitter.com/dU99vE6Wws

    Room151 1 week ago

    Doing something in #localgov #finance for Adult Social Care & Health? Check out the ASC&H category room151.co.uk/impact-awards/… sponsored by Fundamentum Social Housing REIT in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    Doing something in #localgov #finance for the environment? Check out the 'carbon management' category room151.co.uk/impact-awards/… sponsored by @ACSLLP in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    So what are the seven categories for the CCLA/Room151 Impact Awards? Here they are room151.co.uk/impact-awards/… #localgov #finance #outcomes

    Room151 1 week ago

    Why should LGPS be concerned about rising inflation?: The impact of the coronavirus pandemic, lockdown and wider economic uncertainty created  deflationary pressures which raise important considerations for the Local Government Pension Scheme writes… dlvr.it/RxF7Fs pic.twitter.com/JlcjROBIpz

    Room151 1 week ago

    JOB ALERT: LPFA Finance Director vacancy: London Pensions Fund Authority Finance Director and s151 Officer Competitive salary and benefits The largest Local Government Pension (LGPS) provider in London with around £6.5 billion of assets and 135[...] dlvr.it/RxBdJP

    Room151 1 week ago

    Richard Harbord: Further signs that local government finance is failing: The crisis in Liverpool and a fix for education budgets are further indication that local government finance is in need of a root and branch review. Even for those students[...] dlvr.it/Rx9PSV pic.twitter.com/sAanC2gEyu

    Room151 2 weeks ago

    Impact Awards: Finance helps launch school meals company and support business during lockdown: The CCLA/Room151 Impact Awards will showcase the way finance teams have a direct impact on their local communities and the environment. This week we spotlight… dlvr.it/RwnlF4 pic.twitter.com/AJhne1MVG4

    Room151 2 weeks ago

    "This work has made a vital, practical contribution to ensuring people have been supported through the pandemic." #impact #151awards #covid #s151 room151.co.uk/treasury/impac… #impactcasestudies #councilfinancemakesadifference

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story News Roundup: Right to Buy receipts, Cambridgeshire’s accounts, LGPS framework, anti-fraud tender, devolution trap
  • Next story Group of 20 funds join search for pooling solution

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.