Local authority reporting could take a long overdue radical improvement under proposals in a draft accounting code, according to leading global accountancy body ACCA (the Association of Chartered Certified Accountants).
The changes are set out in the 2027/28 Code of Practice on Local Authority Financial reporting in the UK (the Code) published by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC).
Commenting on the revised code, Jessica Bingham, head of regional policy development, EMEA & UK, ACCA, said:
“For too long, local authority financial statements have tried to do two things at once in following IFRS whilst simultaneously reporting on a funding basis.”
Introducing an Accountability Report, containing information on a funding basis, alongside financial statements, more closely aligned with IFRS, would significantly improve the understandability of local authority accounts for primary users.
If the proposals are adopted ACCA says the Accountability Report should include a reconciliation from the local authority's income and expenditure on a funding basis to its income and expenditure on an IFRS basis.
This analysis would be useful to users to understand the differences between the two approaches used in local authority finances, analogous to the Statement of Outturn Against Parliamentary Supply in central government reporting.
Michael Surman, head of public sector, ACCA said:
“The proposed reforms are comprehensive in addressing the key financial reporting challenges that local authorities in the UK are facing. We support the focus on longer-term financial reporting reform and the work of the Better Reporting Group, recognising the importance of ensuring that the Code remains relevant to the evolving needs of users of local authority accounts.”
ACCA is encouraging CIPFA/LASAAC to take a strategic and joined-up approach to the development of new sustainability reporting requirements ensuring that they are proportionate and provide meaningful information.
