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Councils rise to the challenge of accounting standards change

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Only one council has received a qualified opinion on their accounts this year - a reduction from the three authorities in 2010.

However, there has been a “significant increase” in the number of authorities needing to correct material misstatements during the audit process, according to the Audit Commission’s annual round-up.

The financial watchdog has blamed the rise - 79% of authorities audited in 2010-11, up from less than half the year before - on the requirement to use International Financial Reporting Standards when compiling the 2010-11 accounts.

“It is likely the increase in the number of bodies and the value of material misstatements is due primarily to the technical issues faced by bodies in preparing their first set of IFRS-compliant accounts,” the report said.

Ryedale DC was the only authority to receive a qualified opinion on its accounts.

Ryedale corporate director Paul Cresswell said the council had had difficulty in restating figures from its 2009-10 annual report under IFRS for the 2010-11 accounts.

“I can confirm that the council committed the heinous crime of making ‘a material unreconciled difference in the 2009/10 comparatives that have been restated for the IFRS transition’,” he said. “Thankfully the leader of the council, a qualified accountant, quickly grasped the lack of enormity of this issue and the total confusion this would cause the vast number of readers of our now unintelligible (not just thanks to IFRS) financial statements.”

Audit Commission chief executive Eugene Sullivan said: “The vast majority of local government bodies have maintained their standard of performance on financial reporting for 2010-11. This is notable given the challenge of preparing accounts in accordance with IFRS.

“In particular, it is commendable that there have been no IFRS-related qualified opinions. Meeting the new requirements was, as expected, a significant challenge and there is still much to do.”

The commission has warned councils there are likely to be significant challenges in compiling the accounts for 2011-12, due to it being only the second year of IFRS, continued financial constraints and the expected change of auditor as the Audit Commission’s responsibilities are outsourced. There will also be uncertainties around the review of local government finance.

The Audit Commission warned in November that one council in 10 was at risk of not balancing the books in 2011-12 because of tough economic conditions and poor financial management.

Their survey of district auditors found that 12% of single- and upper-tier councils and 8% of districts were not well placed to deliver their budgets for 2011-12.

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