Local government bodies continue to face challenges in producing and improving timely annual accounts

9 Mar 2017 - 9:00am

While the quality of accounts preparation has improved on last year, organisations continue to face challenges in producing accurate accounts earlier and managing budget constraints

Wales’ local government bodies improved the quality of their pre-audit annual accounts for 2015-16, but still face challenges in the medium term to improve and produce their accounts to meet earlier statutory deadlines. This is according to a report released today by the Auditor General for Wales.

The report, Local Government Financial statements 2015-16, identifies an improvement since 2014-15 in the quality of local government bodies’ annual accounts. However, challenges including the phased introduction of earlier reporting deadlines, continued austerity and changing models of service delivery will all have an impact on the quality and management of accounting arrangements across the sector.

Financial pressures and changes to service delivery models are leading to an increased emphasis on collaboration. The report highlights some of the difficulties associated with accounting for collaboration and the impact this has on producing good quality accounts. Continued austerity measures may also lead to a reduction in the capacity of finance teams, adding to the pressures of preparing accurate and timely annual accounts.

In response to reductions in central government funding expenditure across the sector, expenditure on services has reduced but at the same time levels of financial reserves have continued to increase. Local government bodies need to critically appraise their holding and use of reserves and ensure that they are factored into financial and service delivery plans in a manner that allows them to live within their future financial means.

The changing timetable of account deadlines between now and 2020-21 will present challenges for both local government bodies and their auditors. Both parties will need to work closely together to achieve the earlier deadlines. However the report states that earlier closure of financial statements could produce a number of benefits, including more timely Whole of Government Accounts, earlier assurance on the previous year’s position before major financial decisions are made, and freeing up resource to address increasing financial pressures.

Auditor General, Huw Vaughan-Thomas said today:

"It’s good to see that local authorities are getting better at producing their financial statements – and on time. But, there are still issues that need addressing and I hope that this report will encourage further improvement, particularly at a time when services and reporting deadlines are becoming more demanding.”