One Yorkshire council has some novel approaches for implementing international reporting standards
The Audit Commission briefing of October 2010 paints a more positive picture of councils’ progress with International Financial Reporting Standards than the previous assessment. At East Riding of Yorkshire Council, we have developed in-house knowledge to implement the standards. So what progress have we made so far?
We have used a ‘critical path’ method to produce a task-by-task schedule for the restatement work. This forms part of an approach using Prince 2 Project Initiation Documents and Highlight Reports.
As with any project of this scale, there has been some shuffling of deadlines to deal with circumstances. Therefore, a few tasks are ahead of schedule, such as a drafted skeleton of accounts and a formulated segmental reporting approach. The majority of tasks are where we hoped they would be. For example, once we had got the 2009/10 audit out of the way, we posted our April 1, 2009 Balance Sheet restatement adjustments to the March 31, 2009 ledger for grants and employee benefits, after re-visiting them against the transitional guidance.
We submitted our draft accounting policies to the audit committee and ran many of the smaller issues past our auditors before the 2009/10 closedown began, although there might be changes further on.
Most of the restatement tasks for 2009/10 are under way. We built on our UK Generally Accepted Accounting Practice closedown approach and incorporated as much IFRS data as we could for the 2009/10 restatement at the same time – for example, identifying stock that will be distributed for nil or nominal charge.
We have an electronic leave recording system, rolled out earlier than expected to help IFRS implementation. The main challenge has been persuading schools to use it for their non-teaching staff. Equally challenging has been identifying leased assets and contracts for possible embedded leases – both corporately and with schools. This exercise has lived up to the espoused IFRS benefit of improved awareness of what we actually lease and what is going on outside of the corporate centre.
We managed to get schools’ support by using our schools finance update days to explain face to face what information we needed and why. The 100% response rate to the April 1 position and 99% so far as at March 31, 2010 was a big achievement.
We have had the backing of senior management for this project right from the start and have used that to involve our audit committee and other departments across the council in explaining their role and input.
Involving our valuers early on has made a huge impact in collating and assessing leases (in their thousands) and held-for-sale information. This was aided by drawing up a series of flowcharts to simplify these complex subjects.
The same approach has helped service managers and procurement officers to identify and assess embedded leases and derivatives, an approach now incorporated in the Contract Procedure Rules.
There have been challenges, such as getting to grips with component accounting. We are hoping that by investing time and effort on getting our materiality levels right and involving our quantity surveyors, valuers and asset strategy professionals from the start, the result will be a robust and pragmatic process that we can agree with our auditors.
The recognition of revenue and capital grants as soon as conditions have been met has been a more unexpected challenge. This has created a small industry in changing closedown processes and ledger codes to ensure control is not lost over grants recognised but not yet matched with expenditure.
What do we still need to do? We need to reconfigure our ledger reports to produce an IFRS chart of accounts, post our asset register transition transactions, progress our component accounting pilots and complete our 2009/10 restatement tasks, to name but a few. Progress is being made but we know there is still a long way to go and a lot of work to be done.
Caroline White is finance manager at East Riding of Yorkshire Council and is a member of CIPFA’s Local Authority Accounting Panel
