It may be the summer, but public sector accountants still have work to do in updating the code of practice governing local government accounting
While the children of the UK are busying themselves with the traditional pursuits of summer (scaling sand dunes, searching for fairy castles in the woods and hiding away in their rooms with a thundering Xbox), their accountant parents are deep in contemplation of the school buildings that they have left behind.
Across the nation, room is being found in suitcases and picnic hampers for copies of the proposed update to the code of practice on local authority accounting. One of the main features of this year’s consultation on the format and content of council accounts is the question of recognition of the land and buildings occupied by schools on the authority’s balance sheet.
The property used to provide education in schools in likely to be worth many billions of pounds. However, even after almost 20 years of capital accounting there have been wide divergences of views as to whether property owned by other organisations but used to provide education funded by the authority should be accounted for as assets of the authority.
For instance, to what extent do authorities have control of the buildings of voluntary controlled schools, where the property is likely to be owned by trusts but the authority is responsible for the admissions policy?
Considered in detail in the consultation are concepts such as the control and nature of service potential and their application to property for the different categories of school. The conclusions drawn on these issues following consultation might also have implications for the accounting treatment of the other assets in an authority’s property portfolio, as well as determining the financial reporting destination of the billions of pounds worth of schools assets.
The consultation draws preliminary conclusions on each category and proposes that these should be included as an interpretation in the 2011/12 code update. As part of the consultation process, CIPFA and the Local Authority (Scotland) Accounts Advisory Committee (Lasaac) will consult with the Treasury, the Department for Education and the Office of National Statistics to ensure that any changes are consistent with the requirements of the Whole of Government Accounts.
Also included in the consultation is the impact of the numerous changes brought about by statutory accounting and disclosure requirements. These include the new Accounts and Audit Regulations in England and the requirements for local authorities in Scotland to produce a remuneration report as a part of the statement of accounts
The consultation also features proposed amendments to the 2012/13 code addressing changing accounting standards and other financial reporting requirements. In particular, the International Accounting Standards Board has introduced a new practice statement on the management commentary.
We are also seeking views on the possible future adoption of the measurement requirements of CIPFA’s code of practice on transport infrastructure assets in the accounting code.
All interested parties are also being encouraged to respond to the consultation (which is open until 30 September) and contribute their views to these important issues.
Sarah Sheen is a CIPFA associate and is currently secretary to the CIPFA/Lasaac Local Authority Code Board
