Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 9
9
Accepted in Part
Paragraph: 48
Coordinate with stakeholders to align local authority accounts with their agreed purposes.
Recommendation
The Government must also coordinate with key stakeholders in the sector, including the Chartered Institute for Public Finance and Accountancy and the local audit system leader, to ensure that the production, content and format of local authority accounts are aligned with the agreed purposes of local authority accounts; and it must report back to us at least annually on its progress in this area.
Government Response Summary
The government commits to working with CIPFA and FRC to align the Accounting Code's requirements with the agreed purposes of local authority accounts. They will report back to the Committee on this progress ahead of the 2025-26 financial year consultation process, though not annually as recommended.
Paragraph Reference:
48
Government Response
Accepted in Part
HM Government
Accepted in Part
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.