Call to reduce complexity in local authority accounts
ICAS has published its response to the consultation on simplifying local authority accounts and made a series of recommendations to cut their complexity.
Local authority accounts have become too technical and too specialist. The pace of change should be accelerated and more radical reform is needed to make the step change necessary to reduce complexity in local authority accounts.
ICAS has responded to the CIPFA LASAAC consultation on simplifying local authority accounts called 'Telling the Story'.
The complexity of local authority accounting is significantly driven by the specialist adaptations and legislative drivers which are unique to that sector.
The needs of general accounts users need greater emphasis. To meet the needs of this larger group of general, rather than specialist, accounts users we need accounts which are far less specialised and far more comparable with other sectors.
Read ICAS' response in full
The focus of the standard setter in our view, should be on how local authorities apply IFRS as intended, rather than sustaining divergences which add complexity and obfuscation. Fundamental to this is action to update the legislative framework to reflect the purpose of financial statements today.
The root cause of much of the accounting specialisms is the particular wording of the Local Government Finance Act 1992 (Section 93) which combines the purpose of accounts with the council tax calculation (and housing rent setting). It has introduced a need for statutory adjustments to moderate the impact on the council tax calculation of certain entries which are part of proper accounting practice. This results in accounts which depart from IFRS.
We propose that this could be resolved by amending the legislation to separate the funding calculation from a local authority's financial statements.
We also propose further action to streamline the Income & Expenditure account to give greater visibility of what organisational expenditure is on. We suggest the focus should be on headings such as employee and operating costs. The Operating Segments note could provide further information on service level expenditure. It would also be helpful if supplementary detail such as Local Finance Returns (LFRs) was more visible. We suggest that these should be more accessible to the public and cross referenced from the financial statements.