Source · Select Committees · Public Accounts Committee
Recommendation 24
24
Accepted
Local government accounts remain complex and impenetrable, hindering public accountability and understanding.
Conclusion
We have previously expressed our concern that local government accounts have become impenetrable to many and that unless local authority accounts are useful, relevant and understandable they will not aid accountability.78 CIPFA, one of the bodies responsible for setting the code of practice on local authority accounting, recognised in its evidence to us that local government accounts make it ‘difficult for council taxpayers and service users to understand how resources have been used.’79 Local audit provider Grant Thornton highlighted the particular complexities caused by the adjustments or ‘statutory overrides’ government applies to local government accounts to protect council taxpayers from the potential impact of accounting entries which are required under international accounting standards, but which do not have immediate day-to-day implications for how authorities need to manage their funds.80 Local auditor Mazars told us the number of these accounting adjustments continues to increase.81 CIPFA however told us the driver of complexity was the increasingly commercial nature of local government operations rather than the accounting standards themselves.82
Government Response Summary
The government agrees with the committee's observation and has initiated a review of the most complex areas of local authority accounting, focusing on non-investment assets, pensions, and associated auditing requirements, with a further update expected after the summer.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Recommendation implemented 6.2 On 17 July 2023, Minister Rowley, gave evidence to the Levelling Up, Housing and Communities Committee inquiry into local financial reporting and audit. This followed his letter to the Committee of 14 July 2023 which updated on early work to deliver reforms across the system, including reviewing the most complex areas of local authority accounting, with a particular focus on the valuation of non-investment assets and pensions and associated auditing requirements. 6.3 The Permanent Secretary has written to the Committee alongside the publication of this Treasury Minute to summarise this work. The Committee will be provided with a further update after the summer once this work has progressed further.