Changes to the Code of Practice on Local Authority Accounting 2022-23
North Lanarkshire Council · 16 February 2023
Back to Audit and Scrutiny Panel — 16 February 2023 and its agenda
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North Lanarkshire Council Report Audit and Scrutiny Panel ☐approval ☒noting Ref EK Date 26/01/23 Changes to the Code of Practice on Local Authority Accounting 2022/23 From Elaine Kemp, Chief Officer for Finance Email KempE@northlan.gov.uk Telephone 1. Background 1.1 The Council prepares its Annual Accounts in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (The Code) which sets out proper accounting practices. The Code, which is updated annually, is developed by CIPFA/LASAAC and based on International Financial Reporting Standards (IFRS). Executive Summary The Council’s Financial Statements are compiled in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) which is based on International Financial Reporting Standards (IFRS) and also the requirements of accounting and statutory guidance of central government. Further, the Code requires Appointed Auditors to pay due attention to quarterly Bulletins published by Audit Scotland Professional support. The purpose of this report is to highlight any significant changes to the Code or guidance in the Technical Bulletins which may impact on the accounting requirements and presentation of the Council’s 2022/23 Annual Accounts. The 2022/23 Unaudited Annual Accounts are due to be submitted to External Audit by 30 June 2023. Recommendations It is recommended that the Audit and Scrutiny Panel: (1) Acknowledge the contents of the report; and (2) Recognise the actions being taken to ensure the Council submits a fully compliant set of Annual Accounts to External Audit The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
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1.2 Technical Bulletins are issued quarterly by Audit Scotland Professional Support which also provide guidance for Annual Accounts preparation. 2. Report 2.1 Review of the Code 2.1.1 Financial Solutions maintain an awareness of changes to accounting practices and assess the impact, if any, these changes may have on the Council’s procedures and reported financial position. 2.1.2 The process for review is carried out throughout the year and includes contributing to consultations on the development of future Codes of Practice; an assessment of the latest edition of the Code; review of the quarterly Audit Scotland Bulletins; and attending CIPFA run workshops to discuss and share best practice for the implementation of any changes adopted by the Code. This process will highlight where changes are required to our financial reporting. 2.1.3 Financial Solutions will work with all relevant parties within the Council to ensure that changes are fully assessed and ensure any necessary amendments to current working practices are implemented, in order to ensure the Council’s Financial Statements remain fully compliant with the Code. 2.1.4 As identified in the 2021/22 Annual Accounts, the 2022/23 code has introduced the following standards with an effective date of 1 April 2022 however there are no material changes expected from the introduction of these standards; • IFRS1 (First – time adoption) – amendments relates to foreign operations of acquired subsidiaries transforming to IFRS. • IAS 37 (Onerous contracts) – clarifies the intention of the standard • IAS 41 (Agriculture) expected to apply to local authorities in limited circumstances 2.2 Accounting Standards Issued but not Yet Adopted 2.2.1 Panel members may recall that the implementation of IFRS 16 (Leases) was originally expected to take effect from 1 April 2019 but for various reasons including the impact of COVID-19, the implementation date was initially deferred to financial year 2022/23. Following further consultation CIPFA/LASAAC have deferred mandatory adoption till 2023/24. 2.2.3 In preparation for the implementation of the standard in 2023/24, Financial Solutions continue to engage with all Services to progress a review of the current lease portfolio held, including operating and finances leases. This review will inform how those leases should be accounted for and identify any impact on the financial position. However, as previously advised the impact of adopting IFRS 16 Leases will be immaterial. 3. Land and Building Valuations 3.1 The accounting code contains an interpretation of IAS 16 which requires valuations of land and buildings to be in accordance with the Royal Institution of Chartered Surveyors (RICS) valuation standards. Valuations should be made at least every five years by a qualified valuer. However, these may be required more regularly if that frequency is unable to keep pace with changes in current value. This is extremely pertinent at present due to inflationary pressures within the Construction industry. The Council have
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appointed BNP Baribas to deliver its five-year rolling revaluation programme. In the 2021/22 Annual Accounts, Leisure Properties and Open Space were subject to a full valuation. In addition, appropriate indexation processes including the use of British Construction Information Service (BCIS) indices were undertaken to review the Council’s Housing and Education portfolios with subsequent revaluations incorporated in the 2021/22 Annual Accounts. 3.2 However, Audit Scotland’s Technical Bulletin 2022/3 (issued 20 September 2022), indicates that the use of indexation processes (including BCIS indices) does not constitute a valuation in accordance with the RICS standards and is not supported by the Accounting Code. However, they may provide a useful tool in demonstrating that the carrying amount of a category of asset in the Balance Sheet is materially different from its current value, and therefore identify that a formal valuation is necessary. 3.3 As a consequence, the Council has reviewed its five-year rolling valuation programme, and for the 2022/23 Annual Accounts, the Council’s Housing and Education estates will be subject to full valuations. This revised approach has been agreed with Audit Scotland. 3.4 The Council continues to liaise with BNP Paribas to ensure these valuations are carried out and the impact will be incorporated into the completion of the Council’s 2022/23 financial statements. 4. Measures of success The Council submits a fully compliant set of Annual Accounts to External Audit 5. Supporting documents No Supporting Documents Elaine Kemp, Chief Officer for Finance
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6. Impacts ( http://connect/report-template-guidance ) 6.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 6.2 Financial impact Does the report contain any financial impacts? Yes ☐ No ☒ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 6.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 6.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 6.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 6.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact?
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Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 6.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 6.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 6.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? 6.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☐ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.