The end of May is a busy time for local authority accountants, with most authorities aiming to have draft accounts ready by the end of this month. Arlingclose has nearly two decades of experience in helping local authorities with this process. We are also one of a large group of users of these accounts: we often read them, analyse them and comb through them for the information we need. So to help you on your way this year here are some common, yet usually simple to fix, problems that we see:
Presentation
At the risk of sounding like your school teacher, presentation is important. First impressions matter. Your accounts may be factually brilliant and well explained, but if they aren’t professionally laid out they will look like they cannot be trusted. The accounts should be neat and make good use of tables, pictures, borders and colours.
Pages should have page numbers and there should be a contents page at the start of the accounts that directs users to where they need to go. Automatic links where you can click on an item and go straight to it are helpful (and should actually work rather than initiating an error message). Sections and subsections should be clearly laid out and numbered or lettered consecutively.
Whilst tables are very useful for showing large amounts of information if there are only one or two figures to talk about this is usually best done in a sentence. Show your units – things should be labelled as in ‘£’ or ‘£’000’ or ‘£m’. Percentages should be labelled as such.
Consistency
Ok this one tends to relate to presentation, but it’s such a commonly seen error I believe it’s entitled to a section of its own. Don’t have two sections of your accounts in different fonts. Don’t use ‘trade payables’ in one section of your accounts and ‘trade creditors’ in another. If you are going to capitalise ‘the Council’ do this throughout the document. Choose how many decimal places, significant figures or thousands you are going to round figures to and stick to it – don’t say something is ‘£6m’ in one part of the accounts, but that another thing is ‘£11,532,412.89’ in another.
Show negative numbers with a ‘-’, or a ‘()’ or in red, but be consistent (and if you are showing them in ‘()’ or in red it is probably worth explaining this to readers at the start).
Only Include What Needs to Be Included
Something is material if its mis-statement or omission could lead to the accounts not showing a true and fair view of the authority, or to users of the accounts forming a different view of the organisation. Avoid saying what you don’t do, or talking about risks that aren’t applicable. Don’t say a figure is immaterial but then tell users of the accounts what the figure is. Round figures appropriately.
If a whole row or column of information is zeros it should probably be taken out. As well as making things neater and more succinct this may help avoid any unnecessary questioning by journalists or anyone else who has been inspired by a defunct row of information. Avoid long lists that go into too much detail and obscure the main message – for example the total balance of your PWLB loans is probably more appropriate than a list of each loan individually.
Figures Not Reconciling … or Adding Up
If two figures in your accounts should be the same then they should be the same. For example the short term creditors in your balance sheet should reconcile with the total short term creditors in the note to the balance sheet. If the figures aren’t the same then at least one of them is wrong. Rounding errors should be identified and dealt with to make sure figures that should match do. This also goes for figures quoted in a written commentary matching what is shown in a table. If you’ve said a figure has increased since last year it should actually have increased since last year.
Accounting 101 is a list of figures that don’t add up to the total shown so please avoid this happening in your published accounts. Again, rounding errors may be the culprit for small discrepancies but these need to be managed.
The best way to avoid these problems is to set up working papers in the most efficient way possible. When preparing working papers avoid hard coding in figures wherever you can: instead link figures presented to their original source. By linking everything to the source document this should prevent the same figure being shown differently in two different places. This has the added bonus of showing your workings so an auditor can easily see where a figure is from.
Another way to avoid this common problem is to make good use of technology wherever possible. Text commentary can be linked directly to figures in tables in both Excel and Word, so if a figure gets updated in a table it will automatically be reflected in the text. The use of the Excel ROUND function can assist with rounding problems. You can use formulas such as the SUM function in a Word as well as an Excel document. Word allows you to insert an easily updatable contents page, use headings and sub heading and embed links which automatically update when things change.
Use of Last Year’s Template Without Proper Scrutiny
‘Why did the accountant cross the road? … because that’s what we did last year.’. As accountants we love to just be able to copy over what we did last year and use it again. Whilst this can sometimes work well and be an efficient use of time, unfortunately sometimes things will also have changed since last year and this needs to be reflected. Do read through your accounts carefully to check they are still relevant. If you are still saying that interest rates are at historical lows this is clearly not the case in 2024.
Accounting standards and presentational requirements can also change from year to year. For Arlingclose clients checking your financial instruments note against Arlingclose’s template is a good way to make sure you are up to date with all the current requirements.
Use of Jargon
Whilst it’s expected that language will be formal and make use of some technical terms – it is after all a Statement of Accounts not a glossy magazine – bear in mind that users of these accounts include the general public. Do not use jargon that nobody outside of local government will understand. Never use an acronym without having the full version included somewhere in the accounts – preferably in a glossary but otherwise in parentheses the first time it is used. If you are using a glossary make sure it is up to date and includes the necessary terms in the accounts (but not terms that aren’t in the accounts).
If you require any further assistance with your year end accounts please contact us at info@arlingclose.com or at 08448 808 200.
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