Review of Accounting Policies 2018-19
The Principal Accountant (General Fund) sought endorsement of the Accounting Policies to be used in formulating the Financial Statements for the authority for the financial year 2018-19.
The Principal Accountant (General Fund) stated that the Code for 2018-19 had been published and a review of the Council’s accounting policies had been conducted to ensure that they were in line with the requirements of The Code.
There were two main changes to the Code that were identified as being of influence to the council’s accounting policies for 2018-19, principally from new International Financial Reporting Standards (IFRSs). They concern the adoption of IFRS9 - Financial Instruments, and IFRS 15 - Revenue from Contracts with Customers. Other accounting policies remained in line with those used to prepare the 2018-19 Statement of Accounts. A summary of the changes to IFRS15 and IFRS9 could be found on paragraph 2.2, page 38 of the report.
The Principal Accountant (General Fund) informed Members that the accounting policies had been shared with the external auditors and may therefore be subject to any comments / feedback from the Council’s external auditors. Any material changes to the accounting policies subsequently found to be necessary will be accompanied by an explanation of the impact of the change in policy within the financial statements.
The External Auditor, Grant Thornton, clarified that she was happy with the Accounting Policies 2018-19 as they were set out following the standard CIPFA guidance. A briefing paper will be written up, in conjunction with Gravesham officers, on the two changes (IFRS9 and IFRS15) as they are management judgements that will be used in making decisions to produce the accounts. The briefing paper will be used to help audit the accounts as it will advise what has been carried out and the explanations for those decisions. It will be shared with the auditors to provide them with assurance that the Council have properly considered the new CIPFA Code requirements and are compliant with them.
Concern was again raised by the Committee that the report had too much technical jargon; they asked that in future the reports be written up in terms that the whole Committee could understand so that Members could make informed decisions.
The Assistant Director (Corporate Services) advised that there will be a training session on the Statement of Accounts in July 2019 that will take Members through the accounts in a manner that is intended to be both understandable and meaningful to them.
Regarding IFRS9 – Financial Instruments, the Assistant Director (Corporate Services) fielded questions explaining that:
- The IFRS9 changes do not affect commercial property that the Council purchases and the Standard doesn’t capture anything through the Property Acquisition Strategy. It seeks to reclassify the investments the Council has made and make an assessment of risk associated with different financial instruments. The financial instruments captured by the IFRS9 that will result in the most significant accounting changes will be the multi asset funds and property funds. The Government introduced a five-year statutory override for local authorities so it won’t affect the ‘bottom line’ of the General Fund in any way for five years but the council will be required to follow the accounting requirements of the Standard and if the override was removed after five years as currently proposed, the council would need to review its investment in these types of financial instrument.
- The Funding Managers have their own financial regulations and auditing requirements that they have to follow to ensure the information they have produced is accurate
- It would be unlikely that the Council would disagree with the final valuation as monthly statements are received monthly and the information is constantly monitored for any irregularities. Those statements provide the Council with a degree of narrative during the specified time period on what has happened with the investments. If there was anything that the Council did not agree with, then the opportunity to discuss it with the Funding Managers would be after the monthly statements. But ultimately, GBC rely on their checks and balances to ensure that they are valuing the Council’s assets appropriately. However, Members were assured that the Council was seeking to improve their own monitoring arrangements for the property funds, multi-assets funds and the property portfolio as a whole due to the increased exposure than in previous years
- Members were able to seek out information on the Council’s investments from the quarterly Budget Monitoring Reports that are brought to the Finance & Audit Committee; the information provided in those reports could be openly challenged and scrutinised by Members at each Committee meeting. During those discussions, the Committee would be able to consider if the investments were still providing adequate financial security for the Council and raise any concerns.
Comment was made by a Member over the investment strategy and the opportunity to increase Member involvement; he suggested that the Chairman receive more frequent updates about how the investments were faring. In turn, the funds would be monitored more closely and the Chairman could call emergency Finance & Audit Committee meetings as the investment funds change frequently in small periods of time and could require readjusting.
Resolved that Members endorsed the use of the Accounting Policies as outlined at Appendix Two to the report, subject to comments from the Council’s external auditor.
- 1. F&A Covering Report - Review of Accounting Policies 2018-19, item 103. PDF 83 KB
- Accounting Policies 2018-19, item 103. PDF 137 KB