The government should not time-limit a proposed statutory override for accounting changes to their pooled investments introduced by IFRS9, according to seven in every ten local government council treasurers.
In July, the government launched a consultation on introducing a temporary override to the accounting standard, which requires council treasurers to book some investments at fair value through profit and loss rather than “other comprehensive income”.
This year’s Room151 Treasury Investment Survey found overwhelming support for the proposed override, with 80.4% of those surveyed supporting the principle.
But 69.2% of respondents said that the move should not be limited to three years as proposed in the Ministry of Housing, Communities and Local Government consultation.
David Green, strategic director at treasury adviser Arlingclose said: “I am pleased see overwhelming support from local authorities for a statutory override applying to all pooled funds, and for one that is not limited to just three years.
“It would be strange for the government to require local authorities to set council tax and make spending decisions based on a snapshot of the financial markets on 31 March each year, and that won’t be any different when setting the 2021/22 budget in just over two years’ time.”
Green pointed out that there is already a permanent statutory override so that fair value changes in pooled funds held by local authority pension funds don’t immediately impact upon council tax.
“The survey suggests that local authorities feel the same should apply to their treasury management investments too,” Green said.
The survey also found that 63.6% of senior finance managers believe that local authorities should be required to disclose the net profit or loss reversed out of the general fund to mitigate the impact of the introduction of IFRS 9 as a separate line in the unusable reserves note.
Michael Quicke, chief executive of fund manager CCLA, which sponsored the survey, said: “The results clearly show very strong support for a statutory override across all pooled investment funds that is not time limited, but also support for transparency in accounting notes on any gains or losses incurred.
“I think that it is probably rare in local government surveys to see a strong consistent response across such a diverse group of authorities.”
Quicke said he would be interested to see whether the government’s consultation reflects a similar strength of opinion as Room151’s survey.
“If it does, it will send a clear message to the government on this issue, which will help to inform the Minister’s decision,” he said.
Speaking at Room151’s Local Authority Treasury Investment Forum this week, Gareth Caller, head of the local government finance unit at the Ministry of Housing, Communities and Local Government (MHCLG), urged councils to submit responses to its consultation on the issue, which closes next week.
Room151’s annual Treasury Investment Survey covers a wide range of issues affecting senior finance professionals in local government. The 2018 survey was completed by 143 council treasurers or section 151 officers from separate councils.
