Source · Select Committees · Public Accounts Committee
Recommendation 25
25
Accepted
Complexity of property valuation arrangements creates disproportionate audit work for local authorities.
Conclusion
In 2021 we reported our particular concern that the complexity of valuation arrangements around property in particular generated levels of audit work disproportionate to the risks faced by authorities. Mazars described how these accounting values had limited importance to local authorities themselves, but highlighted the ‘consistent message’ from the FRC that auditors must nevertheless strengthen their work on challenging the valuation of property assets.83 The Department said that it had put in place arrangements in December 2022 allowing auditors more flexibility around work on these valuations.84 The Department also highlighted how CIPFA had deferred the implementation of a new accounting standard on the treatment of leases to support sector capacity in the short term, but it was bound by international accounting standards to introduce it at some point.85
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, specifically focusing on the valuation of non-investment assets and pensions, with further updates 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.