2026/27 Code of Practice on Local Authority Accounting in the United Kingdom: LGA response

The LGA exists to strengthen local government so communities thrive.  This means championing and being the voice of local government, ensuring it has the resources, powers and support to deliver the best possible outcomes.

This response has been approved by the Local Government Resources Committee.

In our responses to consultations in previous years we have urged that progress needs to be made to simplify local authority financial reporting. The complexity of local authority accounts has contributed significantly to problems with local audit (although it is not the only cause). In addition, the reform of local audit will only be successful if financial reporting is simplified in order for the scale and size of audits to become more proportionate. 

We appreciate that CIPFA / LASAAC has to balance competing priorities and to satisfy a wide range of stakeholders, but we have been concerned at the slow pace with which proposals to simplify the accounts have been made. It is therefore positive that the new Better Reporting Group is now working on a number of projects and that the current consultation includes two significant proposed changes, that is, separating pension funds and removing the expenditure and funding analysis (EFA). Although a great deal is still to be done in terms of simplification of the accounts, this represents a step in the right direction and we note that CIPFA / LASACC is planning further reporting reforms to start from 2027/28.

We also note that questions 19 to 26 in the consultation all relate to changes that might have been imposed on local authorities due to changes to external accounting and other reporting standards that have been introduced for other sectors and particularly for company accounts. We agree with CIPFA / LASAAC that these should not impact on local authorities and think CIPFA / LASAAC has adopted the right approach to all of them by not making any changes associated with them. However, it is disappointing that CIPFA / LASAAC’s time has had to be spent assessing and dealing with such a large number of technical issues that add no value to local authority reporting. This is not a criticism of CIPFA / LASAAC, but it does highlight some of the wider system problems and constraints that have contributed to the current situation with local audit and reporting.

Question 1: Do you have any comments or further suggestions for longer-term financial reporting reforms? Please provide reasons for your comments and suggestions.  

In our responses to earlier consultations we have highlighted a number of areas where reform is needed. this includes areas that add burdens without adding value to the accounts, for example relating to valuations of pensions, property, plant and equipment, and other non-investment assets generally. In addition, the added complexity from the current approach to pension valuations makes the balance sheet harder to understand and makes comparison much more difficult, both between councils and between years. Current approaches mean that fluctuations in pension valuations, which have little to do with the underlying finances of a council, can greatly distort the accounts and make the financial position misleading to readers of accounts. We note that several of these areas are in the workplan for the Better Reporting Group, but very little appears to be planned on pensions beyond the separation of pension fund accounts included in the current consultation.  The separation does not appear to address the issue of valuations.

Question 2: Do you agree that CIPFA/LASAAC’s seven objectives for the Code are correct? If not, why not? Please set out the reasons for your response?

Question 3: Do you have any comments on the structure and format of the Code in relation to accessibility? Please set out the reasons for your response.

Question 4: Do you prefer proposal one or proposal two as a new structure for the Code? Please set out the reasons for your response.

Question 5: Are there any other issues relating to the structure and format of the Code? Please set out the reasons for your response. 

Questions 2 to 5 all relate to the structure and format of the code. In term of usability and format, CIPFA / LASAAC should take account of the views of practitioners who have to use the code regularly. In our view, the main problem that needs to be addressed is that the code is currently behind a paywall which has a significant negative impact on its accessibility. We have made this point with some force several times in the past. We are therefore pleased that in the strategy for reform of local audit the Government has committed to explore options to ensure free availability to the public.

Question 6: Do you agree that the EFA in its current form should be removed from local authority financial statements? If not, why not?

We agree with this proposal. This will simplify the production of the accounts and the amount of audit work to be done. The EFA currently does not add value to the understanding of the accounts by the general user and instead it adds an additional level of complexity, despite best intentions when it was originally introduced.

Question 7: Do you think that the EFA should be replaced with an alternative statement? Please explain your reasoning and provide details of any alternatives you would suggest.

Adding in an alternative statement would negate the benefit of removing the EFA. 

Question 8: Would you support removal of the EFA in the 2026/27 financial year, even if it is not immediately replaced with an alternative statement?

Yes. For the future, the EFA should only be replaced by a new statement if such a statement can be shown to add to the simplicity and transparency of the accounts without adding to the work of councils and auditors.

Question 9: Given the scope of IFRS 8 is for entities whose debt or equity instruments are traded in a public market, do you foresee any issues regarding compliance with IFRS if the EFA was to be removed? If so, please provide reasons for your view

We suggest that CIPFA / LASAAC identifies whether there are any local authorities that do have debt or equity instruments traded in a public market. It is likely that there are very few such local authorities, if there are any at all. If there are any, a separate assessment should be made as to whether the removal of the EFA actually does cause problems for them, and if so, can specific arrangements be made for them. If possible, this should not be a reason for not removing the EFA.

Question 10: Do you agree that LGPS pension fund accounts should be removed from administering authorities accounts and published separately? If not, why not? Please provide reasons for your view.

We support this. For a long time we have endorsed the call by the Local Government Pension Scheme Advisory Board for the separation of pension fund annual accounts in England from the administering authorities’ own accounts; this is already the case for the Local Government Pension Scheme (LGPS) in Scotland and Wales. The problems with local audit have had an impact on the timely publication of finalised audited pension fund accounts and this has caused problems for the accounts of employers in the LGPS, as it means that they do have audited pension figures to include in their accounts. There are over 18,000 separate employers in the scheme, far more than those that have been directly affected by the local audit problems. So long as pension fund accounts remain part of the main local authority accounts, problems unrelated to the issuing of audit opinions on the pension fund itself will continue to impact on pension fund accounts.

Question 11: Do you agree that LGPS pension fund accounts should have a separately prepared annual governance statement? If not, why not? Please provide reasons for your view.

We agree that this is the right approach under current arrangements. However, this may need to reviewed if and when the governance proposals in the LGPS Fit For the Future consultation are implemented.

Question 12: If a separate annual governance statement is required, do you agree that the head of paid service and leader of the council at the administering authority should sign the statement? If not, who should sign the statement? Please provide reasons for your view.

This would appear to be the right approach under current arrangements. However, this may need to reviewed if and when the governance proposals in the LGPS Fit For the Future consultation are implemented.  

Question 13: Do you agree that LGPS pension fund accounts should have a separately prepared statement of responsibilities? If not, why not? Please provide reasons for your view.

This would appear to be the right approach.

Question 14: If a separate statement of responsibilities is required, do you agree that the section 151 officer at the administering authority should sign the statement? If not, who should sign the statement? Please provide reasons for your view.

We agree that the section 151 officer from the administering authority should do this under current arrangements. However, this may need to reviewed if and when the governance proposals in the LGPS Fit For the Future consultation are implemented.

Question 15: Should the audit committee of the administering authority approve the pension fund accounts? If not, who should approve the accounts? Please provide reasons for your view.

We agree with this proposal under current arrangements. However, this may need to reviewed if and when the governance proposals in the LGPS Fit For the Future consultation are implemented.

Question 16: Do you have any other comments or suggestions on the application of other aspects of the local audit and accounting regime (such as the value for money assessment, inspection and objection rights and public interest reporting) once pension fund accounts have been separated to ensure they operate in a proportionate and effective way?

We would refer you to any comments and suggestions on this from the Local Government Pension Scheme Advisory Board.

Question 17: Do you agree that the audited pension fund accounts should be published before the local authority’s audited statement of accounts deadline (option one above)? If not, why not? Please provide reasons for your views

Question 18: Do you agree that the pensions fund accounts should be published as part of the pension fund annual report before the local authority’s audited statement of accounts deadline (option two above)? If not, why not? Please provide reasons for your view.

Question 17 and 18 are mutually exclusive. We would refer you to the answers to these questions from local authorities.

Question 19: Do you agree with CIPFA/LASAAC’s view that amendments to the classification and measurement of financial instruments (amendments to IFRS 9 and 7) should be implemented in the Code as outlined above? If not, why not? What alternatives do you suggest?

Question 20: Do you agree with CIPFA/LASAAC’s view that amendments to contracts referencing nature-dependent electricity (amendments to IFRS 9 and 7) should be implemented in the Code as outlined above? If not, why not? What alternatives do you suggest?

Question 21: Has your authority entered into, or is it considering entering into, a power purchase agreement (PPA) or virtual power purchase agreement (VPPA)?  

Question 22: Annual improvements to IFRS accounting standards – Volume 11. Do you agree with the proposals for implementation of these amendments to standards as outlined above? If not, why not? What alternatives do you suggest?

Question 23: Do you agree with CIPFA/LASAAC’s view that amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (amendments to heritage assets) do not require amendments to the Code? If not, why not? What alternatives do you suggest? 

Question 24: Do you agree with CIPFA/LASAAC’s approach to the adaptation of IFRS 15 and IAS 20 in the Code? If not, why not? What alternatives do you suggest?

Question 25: Do you agree with CIPFA/LASAAC’s approach to the implementation of IPSAS 49 Retirement Benefit Plans in the Code? If not, why not? What alternatives do you suggest?

Question 26: Do you have views on the impact of the new IFRS on the specifications of the Code? Please set out the reasons for your response.

Questions 19 to 26 cover a range of potential issues that have arisen through changes to non-local government accounting standards. We referred to this in our introduction above and we support the approach taken by CIPFA / LASAAC which is that these do not affect local authorities and so none of these should result in a change to the local authority accounting code.

Question 27: Do you have views on the impact of the new IPSAS on the specifications of the Code as they augment the interpretations of the local government context? Please set out the reasons for your response

We note that CIPFA / LASAAC intends to review this for the 2027/28 accounting code. We hope that the CIPFA / LASAAC will take the same approach next year as in the current consultation and that changes should only be made if necessary and if they improve local authority accounts. On the face of it many of the changes relate to mineral exploration and are therefore unlikely to be at all relevant to local government; however, the amendments relating to leases may require further consideration.

Question 28: Are there any areas of accounting for local government reorganisation where additional guidance or improvements to existing guidance would be helpful? Please support your answer by providing details and reasons for your suggestions.

A number of councils have gone through local government reorganisation in the past few years and had to prepare their annual accounts using the current guidance in the code. We suggest that CIPFA / LASAAC should seek views from those councils on whether the exercise could have been made easier with different guidance.

Question 29: What do you consider is the best approach to the introduction of sustainability reporting in local government? For instance, which standards should be followed, guidance required and timing, eg a phased approach. Please set out the reasons for your response.

We appreciate that there is a general move to improve sustainability reporting across all sectors. However, the current priority for local government reporting must be to simplify local authority accounts. Therefore, we would not support a move to mandate further sustainability reporting at present. However, there should be sufficient flexibility to allow additional voluntary reporting by any local authorities that wish to do so.

Question 30: Do you agree with implementing sustainability reporting from 2027/28? If not, why not? Please provide reasons for your view.

As outlined in the answer to question 29, the priority for local government financial reporting must be to simplify local authority accounts in order to resolve the problems with local audit. It is unlikely that the local audit market will have stabilised by 2027/28. Therefore, we do not support a move to mandate further sustainability reporting in 2027/28 either.

Question 31: Where do you consider your authority is in terms of readiness for sustainability reporting?

This is a question for individual local authorities.

Question 32: Are there any areas in the Code where additional guidance or improvements would be helpful? Please support your answer by giving details of the amendments you would suggest

See comments made in the introduction and in answer to question 1.

Bevis Ingram, Senior Adviser Finance

Email: [email protected]