ICAS responds to consultation on local authority accounting in the UK

ICAS has responded to CIPFA LASAAC's consultation on the 2027/28 Code of Practice on Local Authority Accounting, calling for ambitious, long-term reform to improve the transparency, accountability and understandability of local authority reporting.

While supporting practical improvements in the short term, we believe that incremental change alone will not address the challenges facing local authority reporting. Reform should be guided by a clear long-term vision of what good reporting looks like, including a future move towards a combined annual report and accounts similar to reporting models used elsewhere across the public and private sectors.

We've also highlighted the need to review the legislative framework governing local authority accounts. In our view, aspects of the current framework are outdated and can limit opportunities to modernise and simplify reporting. Legislative reform should therefore form part of any long-term programme of change. 

We support cross-sector learning. The Department for Business, Innovation, Science and Trade's consultation on Modernising Corporate Reporting (MCR) provides a useful comparison, taking a holistic approach to reform by addressing complexity, inefficiency and outdated legislative requirements. This raises a question over how this can be addressed for local authorities. 

MCR recognises the importance of reducing compliance burdens while maintaining a proportionate reporting framework and taking a principles-based approach. As similar challenges exist in local authority reporting, we believe there is value in monitoring closely the review and its outcomes to inform future reform and the development of good practice. 

A key part of the consultation was identifying the primary users of local authority accounts. We strongly opposed proposals to identify elected members as the sole primary user group. Instead, we support a multiple-user model that recognises the public (including local residents, taxpayers, service users and beneficiaries), elected members (councillors) and other providers of finance as primary users. We believe this is more consistent with the IASB Conceptual Framework and better reflects the public accountability purpose of local authority reporting.

We note that legislation gives the public the right to access, inspect and object to local authority accounts. This direct relationship with the accounts provides a strong basis for recognising the public as primary users, alongside elected members. Identifying elected members alone risks weakening the visibility of the wider public accountability relationship that local authority reporting is intended to support. There is also a risk to perceived objectivity as members have a governance responsibility within a local authority as well as an external role as elected representatives. 

The consultation proposes a new accountability report to help users understand one of the most difficult areas of local authority accounts. We welcome efforts to make accounts easier to understand and use.

Local authority accounts currently serve two distinct purposes: reporting financial performance and position under IFRS Accounting Standards and demonstrating accountability within the statutory local government funding framework. This requires various statutory adjustments that can reduce transparency, drive divergence from IFRS and make accounts more difficult to understand. Presenting funding-based information separately through an accountability report could improve clarity by allowing IFRS-based financial performance reporting and statutory funding information to be communicated more clearly.

In the longer term, however, we believe that the legislative framework itself requires greater challenge if simplification and improved public understanding are to be achieved. 

We strongly support alignment with IFRS Accounting Standards and the IASB Conceptual Framework. In our view, departures from established accounting frameworks should occur only in exceptional circumstances where there is evidence that it’s necessary to meet the true and fair view requirement. 

This position also informed our response to proposals relating to pension reporting. The consultation sought views on whether presentation of local government pension schemes could be more proportionate and useful for decision-making. We did not support the proposal to diverge from IAS 19 to allow for defined benefit plans to be accounted for as if they were a defined contribution plan. This would represent a significant departure from IAS 19, and we were not persuaded that sufficient evidence had been presented to demonstrate benefits for users of local authority accounts. 

The response also addressed sustainability reporting. We recommend alignment with emerging UK Sustainability Reporting Standards and supports a phased approach, with voluntary implementation initially and mandatory reporting for larger authorities at a later stage. Independent assurance will also be important in maintaining public confidence in sustainability disclosures. 

Overall, we believe that reform of local authority reporting should be ambitious, transparent and firmly focused on the public interest. Achieving this will require a clear strategic vision and a long-term commitment to improving accountability, accessibility and public understanding.