The time is right to modernise the framework of financial reporting and accountability in local government, says an Audit Commission report.
A new framework of financial reporting and accountability in local government: issues for stakeholders, is aimed at stimulating a debate on modernisation. The introduction of the best value performance plan has changed the structure of external reporting in local government and some councils have already recognised the need to improve the communication of financial and performance information to stakeholders.
There are excellent examples of innovative best value performance plans and some councils publish their financial statements within timescales comparable to the best in the private sector.
But this level of performance is achieved within a framework of reporting and accountability that does not encourage most councils to achieve the standards set by the best. In addition, the introduction of the performance plans was not accompanied by a review.
The commission considers the existing framework of external reporting too complex and the absence of a statutory basis for the preparation of annual reports allows councils to opt out of this key element. The time allowed for councils to publish their accounts was considered excessive.
A further weakness is the fact the reports on financial performance do not make the link between spending intentions, expenditure and the actual performance of a council in meeting its performance standards and targets.
The commission proposes councils should produce a summarised annual plan in March of each year. This would be a forward-looking document detailing the council's financial plans and performance targets for the forthcoming year.
This would be supplemented by the publication of an annual report in September. This would contain financial statements and reports on actual performance against performance indicators in the previous financial year.
The commission's report is intended
to promote debate on the changes needed to make the accountability framework more relevant to the needs of stakeholders. Comments on the proposals are welcomed until 30 September 2001.
-Copies of A new framework of financial reporting and accountability in local government are available free on 0207 396 1494 or www.audit-commission.gov.uk
Head of technical development, Audit Commission.