Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 2
2
Deferred
Paragraph: 26
Lack of shared purpose for local authority accounts hinders democratic accountability
Conclusion
There is currently no shared view of the purposes of local authority accounts and who should be using them. This has made it difficult to decide what the format and contents of the accounts, and their accompanying audit outputs, should be so that accounts fulfil their role in supporting local democracy and accountability.
Government Response Summary
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and finds the committee's proposals a helpful starting point. It accepts the merit of issuing a policy statement but defers this until after clearing the audit backlog and alignment with CIPFA's Accounting Code, committing to provide an update by the 2025-26 financial year.
Paragraph Reference:
26
Government Response
Deferred
HM Government
Deferred
We are grateful to the Committee’s recommendations on the purposes of local authority accounts and agree that it would be beneficial to clearly set these out in a single place. The purposes the Committee set out are a helpful starting point which will inform system partners’ work on long-term reform. Adopting the specific purposes, or a variation on them, that the Committee has proposed, would need to be done in conjunction with the Chartered Institute of Public and Financial Accounting (CIPFA) as the body responsible for the ‘Code of Practice on Local Authority Accounting’ (the Accounting Code) and with the Financial Reporting Council (FRC) as incoming shadow system leader for local audit in England. We believe CIPFA’s Accounting Code is the appropriate vehicle for articulating these purposes but we agree there is merit in the Committee’s recommendation for the Department to issue a policy statement clearly setting these purposes out. CIPFA consider changes to the Accounting Code a year ahead of the year any changes would be applied to allow for a period of transition. As such, CIPFA has now consulted on changes ahead of the next version of the Code and therefore will not consult on further long-term changes ahead of the next accounts production cycle. CIPFA will consider the Committee’s proposals as part of their work to develop future versions of the Accounting Code which will be consulted on and published ahead of the 2025–26 financial year. The content and format of local authority accounts are produced in accordance with the Accounting Code. The government agrees that the Accounting Code should, in practice, lead to accounts that meet the needs of the user and, following recommendation 1, reflect the stated purposes of the accounts. Our immediate priority is clearing the backlog and, reflecting the importance that any policy statement aligns with CIPFA’s Accounting Code, we need to ensure this work is sequenced appropriately. Once the purposes of the accounts are clearly articulated in the Code, and a Departmental policy statement, the Department will work with CIPFA and the FRC to ensure that the requirements and practices set out in the Accounting Code are aligned and consistent with the purposes set out. We will work with CIPFA to report back to the Committee on the progress of this work and, in line with CIPFA’s production cycle, will provide the Committee with an update ahead of the consultation process on the Code ahead of the 2025–26 financial year.