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LGA response : Non-investment Asset Valuation for Financial Reporting Purposes. Exposure Draft

The LGA's response to the Government's consultation on Non-investment Asset Valuation for Financial Reporting Purposes - Exposure Draft

About the Local Government Association

The LGA is the National Voice of Local Government. We’re on the side of councils: promoting their work, supporting them to improve and helping them make a difference to people, places, and the planet. As the national membership body for local authorities, we provide the bridge between central and local government and we help councils deliver the best services to their local communities.

This response has been cleared by the lead members of the LGA’s Economy and Resources Board.

General points

1.  As we noted in May 2023, in our response to the Thematic Review of Non-Investment Asset Valuation for Financial Reporting Purposes, this is an important area for local government. We stated then “The valuation of non-investment assets for financial reporting purposes has been a contributory factor to the current crisis in local audit and how the valuation of such assets is audited is an area that needs to be addressed if the crisis is to be solved”

2. This remains true today. Currently more than 700 local audit opinions are outstanding (in September 2023 it was 918). The Government has recently published proposals to deal with the backlog. This will mean “backstop” arrangements will be in place at least until 2028. 

3. The “backstop” will address the backlog and reset the local audit system. However, there is no value in resetting the local audit system unless at the same time it is reformed and put on a sustainable footing that ensures such backlogs do not arise again. A significant part of that reform has to be to address the issues with volume of unnecessary work that has been generated by problems with the auditing of the valuations of some non-investment assets. 

4. It is therefore crucial that the methodology for valuation of non-investment assets used in local government does not create problems that will either prolong or re-ignite the crisis in local audit. The special circumstance of local government must be taken into account in any decisions affecting the requirements placed on local authorities. In the response to the thematic review referred to above, we made a number of suggestions as to how valuations for local authorities should be approached – particularly regarding the current asset class of “networked assets” (“infrastructure assets” in local government).

4. We therefore welcome the statement in the current consultation that although the Exposure Draft covers the whole of the public sector, it will be for “the Relevant Authority for each jurisdiction within that boundary (ie Whole of Government Accounts) will have their own due process for proposing and approving changes to their accounting regime.” Also that “This consultation does not supplant those processes.”

5. We therefore propose to respond more fully to consultations (which presumably will come from CIPFA / LASAAC) that are specifically aimed at local government, and we will limit our comments this time to pointing to our earlier our response to the Thematic Review and re-iterating that it is vital that the special circumstances of local government are given due regard when valuation processes and accounting regime are set. 

Further information

Open consultation on Non-investment Asset Valuation - Exposure Draft 23


Bevis Ingram
Senior Adviser Finance
Email: [email protected]