service reporting code of practice · 2020. 12. 3. · cipfa, the chartered institute of public...

service reportingcode of practice

For Local Authorities 2015/16

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service reportingcode of practice

For Local Authorities 2015/16

SERVICE REPORTING CODE OF PRACTICE \ FOR LOCAL AUTHORITIES 2015/16

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Published by:

CIPFA \ THE CHARTERED INSTITUTE OF PUBLIC FINANCE AND ACCOUNTANCY

3 Robert Street, London WC2N 6RL

From 1 January 2015, CIPFA will be moving to 77 Mansell Street, London E1 8AN

020 7543 5600 \ [email protected] \ www.cipfa.org

© December 2014 CIPFA

ISBN 978 1 84508 427 1

Edited by Sarah Williams ([email protected])

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Schedule of Changes

This schedule details the changes that have been made to the 2015/16 Service Reporting Code of Practice.

THE DEFINITION OF TOTAL COSTThe definition of total cost in Section 2 of SeRCOP has been updated to include the requirements of the five new or amended standards introduced by the IASB in May 2011, ie IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Ventures, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (as amended in 2011) and IAS 28 Investments in Associates and Joint Ventures (as amended in 2011), as introduced by the 2014/15 Code.

SERVICE EXPENDITURE ANALYSIS – ENGLAND AND WALES

Adult Social Care (England)A new mandatory line has been added: Social Support – Social Isolation.

There have also been various updates to the guidance notes, as necessary.

Central ServicesThe guidance on Local Welfare Assistance Schemes has been updated.

Cultural Services and Related ServicesAdditional guidance is provided on the discretionary line Heritage.

Highways and Transport ServicesA new discretionary line has been added: Traffic management – bus lane enforcement.


Housing ServicesTwo discretionary lines have been altered: Social Homebuy includes shared ownership and affordable rents and Public Houses is renamed Commercial Properties.


Public Health (England)Two new discretionary lines have been added under the mandatory line Miscellaneous Public Health Services to cover children’s 0–5 public health duties that will transfer to local


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authorities from October 2015: Mandated 0–5 children’s services and All 0–5 children’s services.


Police ServicesThere have been some minor changes to the headings for the divisions and subdivisions of services.

SERVICE EXPENDITURE ANALYSIS – SCOTLANDThere are no structural changes to the Scotland Service Expenditure Analysis. Reference to the Scottish Government’s Guidance on the Operation of Local Authority Housing Revenue Accounts (HRAs) in Scotland has been added to the Housing SEA guidance.

SERVICE EXPENDITURE ANALYSIS – NORTHERN IRELANDLocal government reform in Northern Ireland will result in the transfer of powers for certain functions from central to local government, and the creation of a new Community Planning function within local government. These have necessitated structural changes to the Northern Ireland Service Expenditure Analysis. There have also been various other updates to subdivisions of service and the guidance notes to reflect current practice.

Leisure and Recreation Services There have been updates to subdivisions within Culture and Heritage, Recreation and Sport and Tourism to reflect the transfer of powers from central government to local government in these areas. A subdivision within Community Services has been moved to the new service Planning and Development.

Environmental ServicesThere has been an update to a subdivision within Environment Health to reflect the new powers transferred to district councils in housing standards.

Planning and Development ServicesThis service has been created to reflect local authorities’ new powers in Community Planning and Economic Development, including the promotion of entrepreneurship, the delivery of elements of EU Rural Development Programme, Urban Regeneration and Community Development, local development planning, Development Control and Environmental Initiatives. New mandatory divisions have been created to reflect the functions transferred from central government.

Previous Service Expenditure Analysis divisions and subdivisions relating to Community Services, Building Control and Economic Development have been moved to Planning and Development Services to align expenditure analysis.

SCHEDULE OF CHANGES

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Highways and Transport Services The Highways and Transport services has been created to reflect the transfer of powers to local government regarding off-street parking.

Corporate and Democratic CoreThere has been an update to the service to reflect Assembly Ombudsman for NI and NI Commissioner of complaints expenditure. Descriptions of previous costs have been amended to reflect the new legislation on local government reform.

Other Services There has been an update to the Central Services to the Public division to reflect the power of competence and local government reform legislation.

RECOMMENDED STANDARD SUBJECTIVE ANALYSISGroup 1 – Employee Costs includes a new line for employee expenses in relation to voluntary aided and foundation schools. This reflects the consolidation requirements specified in Appendix E of the 2014/15 Code.


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Contents

BACKGROUND TO THE DEVELOPMENT OF THE SERVICE REPORTING CODE OF PRACTICE FOR LOCAL AUTHORITIES (SeRCOP) ...........................................................................................................................................xv

SECTION 1: INTRODUCTION ..................................................................................................................................... 1STATUS ..........................................................................................................................................................1STRUCTURE OF THE SERVICE REPORTING CODE OF PRACTICE FOR LOCAL AUTHORITIES ...........2CIPFA STATEMENT ......................................................................................................................................3APPLICABLE DATE ......................................................................................................................................3RELATIONSHIP WITH THE STATEMENT OF ACCOUNTS .........................................................................3ACCOUNTING PRACTICES ..........................................................................................................................4

SECTION 2: THE DEFINITION OF TOTAL COST ....................................................................................................... 5THE PURPOSE OF TOTAL COST ..................................................................................................................5GROSS AND NET TOTAL COST ...................................................................................................................6GROSS TOTAL COST ....................................................................................................................................6NET TOTAL COST .......................................................................................................................................34NET TOTAL COST EXCLUDING SPECIFIC GRANTS ................................................................................35RELATIONSHIP TO THE COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT ...................35 JOINT ARRANGEMENTS ..........................................................................................................................35TRADING ACCOUNTS AND TRADING OPERATIONS .............................................................................36RELATIONSHIP WITH THE TREATMENT IN THE COMPREHENSIVE INCOME AND

EXPENDITURE STATEMENT IN THE ANNUAL STATEMENT OF ACCOUNTS ...........................43COSTS EXCLUDED FROM GROSS AND NET TOTAL COST .....................................................................47DEFINITION OF TOTAL COST FOR GROUP ACCOUNTS ........................................................................57

SECTION 3: SERVICE EXPENDITURE ANALYSIS FOR ENGLAND AND WALES ..................................................59INTRODUCTION .........................................................................................................................................59THE SUBJECTIVE ANALYSIS ....................................................................................................................59FORMAT OF THE SERVICE EXPENDITURE ANALYSIS...........................................................................59THE PRINCIPLE OF TOTAL COST .............................................................................................................61STATUS OF THE SERVICE EXPENDITURE ANALYSIS ............................................................................61THE SERVICE EXPENDITURE ANALYSIS ................................................................................................61

ADULT SOCIAL CARE (ENGLAND) ...............................................................................................................63PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ADULT SOCIAL CARE ............................................65

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR ADULT SOCIAL CARE .............................................................................................................................................69INTRODUCTION .........................................................................................................................................69WHAT TO INCLUDE IN THE SERVICE EXPENDITURE ANALYSIS ........................................................69OVERHEAD APPORTIONMENT .................................................................................................................70JOINT ARRANGEMENTS AND POOLED BUDGETS .................................................................................70SUPPORTING PEOPLE – ANCILLARY EXPENDITURE ...........................................................................70STATUS AND IMPLEMENTATION .............................................................................................................71


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UPDATING THE GUIDANCE ......................................................................................................................71

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE .........................72

ADULT SOCIAL CARE (WALES) .....................................................................................................................83PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ADULT SOCIAL CARE ............................................85PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR ADULT

SOCIAL CARE .............................................................................................................................................87INTRODUCTION .........................................................................................................................................87WHAT TO INCLUDE IN THE SERVICE EXPENDITURE ANALYSIS ........................................................87OVERHEAD APPORTIONMENT .................................................................................................................88JOINT ARRANGEMENTS AND POOLED BUDGETS .................................................................................88SUPPORTING PEOPLE – ANCILLARY EXPENDITURE ...........................................................................89STATUS AND IMPLEMENTATION .............................................................................................................89UPDATING THE GUIDANCE ......................................................................................................................89

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE.........................90

CENTRAL SERVICES .....................................................................................................................................101PART ONE: SERVICE EXPENDITURE ANALYSIS FOR CENTRAL SERVICES ........................................... 103

INTRODUCTION ...................................................................................................................................... 103STATUS AND IMPLEMENTATION .......................................................................................................... 103UPDATING THE GUIDANCE ................................................................................................................... 103

PART TWO: THE CORPORATE AND DEMOCRATIC CORE (CDC) .............................................................. 104INTRODUCTION ...................................................................................................................................... 104GUIDANCE ON WHAT TO INCLUDE IN CDC COSTS ........................................................................... 106CONTRIBUTIONS TO CORPORATE AND DEMOCRATIC CORE COSTS .............................................. 107

PART THREE: NON DISTRIBUTED COSTS (NDC) ...................................................................................... 109INTRODUCTION ...................................................................................................................................... 109GUIDANCE ON WHAT TO INCLUDE IN NON DISTRIBUTED COSTS ................................................. 109CONTRIBUTIONS TO NON DISTRIBUTED COSTS ............................................................................... 110

PART FOUR: CENTRAL SERVICES TO THE PUBLIC .................................................................................. 111INTRODUCTION ...................................................................................................................................... 111GUIDANCE ON WHAT TO INCLUDE IN CENTRAL SERVICES ............................................................ 112

CHILDREN’S AND EDUCATION SERVICES .................................................................................................115PART ONE: SERVICE EXPENDITURE ANALYSIS FOR CHILDREN’S AND EDUCATION

SERVICES – EDUCATION SERVICES .................................................................................................... 116

PART TWO: SERVICE EXPENDITURE ANALYSIS FOR CHILDREN’S AND EDUCATION SERVICES – CHILDREN’S SOCIAL CARE ............................................................................................. 117

PART THREE: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR CHILDREN’S AND EDUCATION SERVICES .......................................................................................... 119INTRODUCTION ...................................................................................................................................... 119STRUCTURE OF THE SERVICE EXPENDITURE ANALYSIS FOR CHILDREN’S AND

EDUCATION SERVICES ............................................................................................................... 119SUPPORT SERVICE AND MANAGEMENT COSTS ................................................................................ 120CLASSIFYING DIFFERENT TYPES OF SCHOOL ................................................................................... 120JOINT ARRANGEMENTS AND POOLED BUDGETS .............................................................................. 120SUPPORTING PEOPLE – ANCILLARY EXPENDITURE ........................................................................ 121STATUS AND IMPLEMENTATION .......................................................................................................... 121UPDATING THE GUIDANCE ................................................................................................................... 121

CONTENTS

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PART FOUR: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE – EDUCATION SERVICES .......................................................................................................................... 122INTRODUCTION ...................................................................................................................................... 122SCHOOLS .................................................................................................................................................. 126EDUCATION MANAGEMENT AND SUPPORT SERVICES .................................................................... 127

PART FIVE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE – CHILDREN’S SOCIAL CARE ................................................................................................................... 128

CULTURAL AND RELATED SERVICES .........................................................................................................137PART ONE: SERVICE EXPENDITURE ANALYSIS FOR CULTURAL AND RELATED SERVICES .............. 139PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

CULTURAL AND RELATED SERVICES ................................................................................................... 140INTRODUCTION ...................................................................................................................................... 140STATUS AND IMPLEMENTATION .......................................................................................................... 140UPDATING THE GUIDANCE ................................................................................................................... 140

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN CULTURAL AND RELATED SERVICES ........ 141INTRODUCTION ...................................................................................................................................... 141

ENVIRONMENTAL AND REGULATORY SERVICES .....................................................................................147PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ENVIRONMENTAL AND REGULATORY

SERVICES ................................................................................................................................................. 149

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR ENVIRONMENTAL AND REGULATORY SERVICES .............................................................................. 151INTRODUCTION ...................................................................................................................................... 151STATUS AND IMPLEMENTATION .......................................................................................................... 151UPDATING THE GUIDANCE ................................................................................................................... 151

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN ENVIRONMENTAL AND REGULATORY SERVICES ................................................................................................................................................. 152

FIRE AND RESCUE SERVICES .....................................................................................................................161PART ONE: SERVICE EXPENDITURE ANALYSIS FOR FIRE AND RESCUE SERVICES ........................... 163PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

FIRE AND RESCUE SERVICES ............................................................................................................... 164INTRODUCTION ...................................................................................................................................... 164APPLICABILITY OF THE CORPORATE AND DEMOCRATIC CORE ..................................................... 164CHANGES TO THE TREATMENT OF PENSIONS COST ......................................................................... 164STATUS AND IMPLEMENTATION .......................................................................................................... 165UPDATING THE GUIDANCE ................................................................................................................... 165

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ...................... 166

HIGHWAYS AND TRANSPORT SERVICES ..................................................................................................169PART ONE: SERVICE EXPENDITURE ANALYSIS FOR HIGHWAYS AND TRANSPORT SERVICES ........ 171PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

HIGHWAYS AND TRANSPORT SERVICES ............................................................................................ 173INTRODUCTION ...................................................................................................................................... 173STATUS AND IMPLEMENTATION .......................................................................................................... 173UPDATING THE GUIDANCE ................................................................................................................... 173NOTE ON HIGHWAYS DIVISIONS OF SERVICE ................................................................................... 173HOW TO TREAT ‘OTHER’ WORKS .......................................................................................................... 174

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE...................... 175


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HOUSING SERVICES ....................................................................................................................................187PART ONE: HOUSING GENERAL FUND (ENGLAND)/HOUSING COUNCIL FUND (WALES)

SERVICE EXPENDITURE ANALYSIS ..................................................................................................... 189

PART TWO: HRA FORMAT (ENGLAND) ...................................................................................................... 191

PART THREE: HRA FORMAT (WALES) ........................................................................................................ 195

PART FOUR: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR HOUSING SERVICES ............................................................................................................................... 198INTRODUCTION ...................................................................................................................................... 198HOUSING REVENUE ACCOUNT GUIDANCE ......................................................................................... 198GUIDANCE ON WHAT TO INCLUDE IN THE GENERAL FUND/COUNCIL FUND ............................... 202ADVICE ON INCONSISTENT ACCOUNTING PRACTICES ................................................................... 209STATUS, IMPLEMENTATION AND UPDATING THE GUIDANCE ........................................................ 210

NATIONAL PARKS ........................................................................................................................................211PART ONE: SERVICE EXPENDITURE ANALYSIS FOR NATIONAL PARKS .............................................. 213

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR NATIONAL PARKS ................................................................................................................................... 215INTRODUCTION ...................................................................................................................................... 215STATUS AND IMPLEMENTATION .......................................................................................................... 215UPDATING THE GUIDANCE ................................................................................................................... 215

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN THE NET COST OF NATIONAL PARKS ........ 216

PLANNING SERVICES ..................................................................................................................................223PART ONE: SERVICE EXPENDITURE ANALYSIS FOR PLANNING SERVICES ........................................ 225

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR PLANNING SERVICES ............................................................................................................................ 226INTRODUCTION ...................................................................................................................................... 226STATUS AND IMPLEMENTATION .......................................................................................................... 226UPDATING THE GUIDANCE ................................................................................................................... 226

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN PLANNING SERVICES .................................. 227

POLICE SERVICES ........................................................................................................................................235PART ONE: SERVICE EXPENDITURE ANALYSIS FOR POLICE SERVICES .............................................. 237

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR POLICE SERVICES .................................................................................................................................. 238INTRODUCTION AND BACKGROUND .................................................................................................. 238THE REVISED POLICE SERVICE EXPENDITURE ANALYSIS .............................................................. 238APPLICABILITY OF THE CORPORATE AND DEMOCRATIC CORE ..................................................... 239APPLICABILITY OF NON DISTRIBUTED COSTS ................................................................................. 239ITEMS BELOW THE COST OF SERVICE LINE ....................................................................................... 239STATUS AND IMPLEMENTATION .......................................................................................................... 239THE RECOMMENDED STANDARD SUBJECTIVE ANALYSIS ............................................................... 239UPDATING THE GUIDANCE ................................................................................................................... 239

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN THE NET COST OF POLICE SERVICES ........ 240

PART FOUR: GUIDANCE NOTE: ITEMS INCLUDED IN THE NET COST OF SERVICE DIVISIONS BELOW THE NET COST OF SERVICES LINE ......................................................................................... 243

CONTENTS

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PUBLIC HEALTH (ENGLAND) .......................................................................................................................245PART ONE: SERVICE EXPENDITURE ANALYSIS FOR PUBLIC HEALTH ................................................. 247PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

PUBLIC HEALTH ...................................................................................................................................... 249INTRODUCTION ...................................................................................................................................... 249WHAT TO INCLUDE IN THE SERVICE EXPENDITURE ANALYSIS ..................................................... 249OVERHEAD APPORTIONMENT .............................................................................................................. 249JOINT ARRANGEMENTS AND POOLED BUDGETS .............................................................................. 250STATUS AND IMPLEMENTATION .......................................................................................................... 250UPDATING THE GUIDANCE ................................................................................................................... 250

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE...................... 251

SECTION 3: SERVICE EXPENDITURE ANALYSIS FOR SCOTLAND ....................................................................257INTRODUCTION ...................................................................................................................................... 257FORMAT OF THE SERVICE EXPENDITURE ANALYSIS........................................................................ 257THE PRINCIPLE OF TOTAL COST .......................................................................................................... 258STATUS OF THE SERVICE EXPENDITURE ANALYSIS ......................................................................... 258THE SERVICE EXPENDITURE ANALYSIS ............................................................................................. 259UPDATING THE SERVICE REPORTING CODE OF PRACTICE FOR LOCAL AUTHORITIES .............. 259

EDUCATION SERVICES ................................................................................................................................261PART ONE: SERVICE EXPENDITURE ANALYSIS FOR EDUCATION SERVICES ...................................... 263

PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR EDUCATION SERVICES .......................................................................................................................... 265INTRODUCTION ...................................................................................................................................... 265STRUCTURE OF THE SERVICE EXPENDITURE ANALYSIS FOR EDUCATION SERVICES ................ 265EDUCATION MANAGEMENT AND SUPPORT SERVICES .................................................................... 265CLASSIFYING DIFFERENT TYPES OF SCHOOL ................................................................................... 266UPDATING THE GUIDANCE ................................................................................................................... 266

PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE...................... 267INDIVIDUAL SCHOOL BUDGETS .......................................................................................................... 267EA CENTRALLY HELD SCHOOL BUDGETS ............................................................................................ 267NON-SCHOOL FUNDING ........................................................................................................................ 271OPTIONAL HOLDING ACCOUNTS ......................................................................................................... 273

HOUSING SERVICES ....................................................................................................................................275PART ONE: SERVICE EXPENDITURE ANALYSIS FOR HOUSING SERVICES (GENERAL FUND) ........... 277

PART TWO: SERVICE EXPENDITURE ANALYSIS FOR THE HOUSING REVENUE ACCOUNT (HRA) ..................................................................................................................................... 278

PART THREE: GUIDANCE NOTE: COMPLETING THE HOUSING SERVICE EXPENDITURE ANALYSIS ...................................................................................................................... 280WHAT TO INCLUDE IN HOUSING SERVICES (GENERAL FUND) ....................................................... 280WHAT TO INCLUDE IN THE HOUSING REVENUE ACCOUNT ............................................................. 286

CULTURAL AND RELATED SERVICES .........................................................................................................291PART ONE: SERVICE EXPENDITURE ANALYSIS FOR CULTURAL AND RELATED SERVICES .............. 292PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

CULTURAL AND RELATED SERVICES ................................................................................................... 293INTRODUCTION ...................................................................................................................................... 293UPDATING THE GUIDANCE ................................................................................................................... 293


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PART THREE: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ...................... 294

ENVIRONMENTAL SERVICES ......................................................................................................................299PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ENVIRONMENTAL SERVICES ............................ 301

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ......................... 303

ROADS AND TRANSPORT SERVICES .........................................................................................................309PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ROADS AND TRANSPORT SERVICES ............... 311

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ......................... 312ROADS ...................................................................................................................................................... 312NETWORK AND TRAFFIC MANAGEMENT ........................................................................................... 315PARKING SERVICES ............................................................................................................................... 316PUBLIC TRANSPORT .............................................................................................................................. 317MANAGEMENT AND SUPPORT SERVICES .......................................................................................... 318

TRADING SERVICES ....................................................................................................................................321PART ONE: SERVICE EXPENDITURE ANALYSIS FOR TRADING SERVICES .......................................... 323PART TWO: GUIDANCE NOTE: COMPLETING THE SERVICE EXPENDITURE ANALYSIS FOR

TRADING SERVICES ............................................................................................................................... 324INTRODUCTION ...................................................................................................................................... 324UPDATING THE GUIDANCE ................................................................................................................... 324

PLANNING AND DEVELOPMENT SERVICES ..............................................................................................325PART ONE: SERVICE EXPENDITURE ANALYSIS FOR PLANNING AND

DEVELOPMENT SERVICES ..................................................................................................................... 327

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ......................... 328

SOCIAL WORK ..............................................................................................................................................339PART ONE: SERVICE EXPENDITURE ANALYSIS FOR SOCIAL WORK .................................................... 341PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN EACH DIVISION OF SERVICE ......................... 344

INTRODUCTION ...................................................................................................................................... 344SERVICE STRATEGY ............................................................................................................................... 346REPORTER TO THE CHILDREN’S PANEL .............................................................................................. 348CHILDREN AND FAMILIES .................................................................................................................... 348OLDER PEOPLE ....................................................................................................................................... 353PEOPLE WITH PHYSICAL OR SENSORY DISABILITIES ..................................................................... 356PEOPLE WITH LEARNING DISABILITIES ............................................................................................ 357PEOPLE WITH MENTAL HEALTH NEEDS .............................................................................................. 358PEOPLE WITH ADDICTIONS/SUBSTANCE MISUSE ............................................................................ 358PEOPLE WITH AIDS/HIV ........................................................................................................................ 359VULNERABLE HOMELESS PEOPLE ....................................................................................................... 359SERVICES TO ASYLUM SEEKERS AND REFUGEES ............................................................................. 359CRIMINAL JUSTICE SOCIAL WORK SERVICES .................................................................................. 360SUPPORT SERVICE AND MANAGEMENT COSTS (OPTIONAL HOLDING ACCOUNTS) ................... 361

CENTRAL SERVICES .....................................................................................................................................363PART ONE: SERVICE EXPENDITURE ANALYSIS FOR CENTRAL SERVICES ........................................... 365

INTRODUCTION ...................................................................................................................................... 365STATUS OF THE SERVICE EXPENDITURE ANALYSIS ......................................................................... 365UPDATING THE GUIDANCE ................................................................................................................... 365

PART TWO: THE CORPORATE AND DEMOCRATIC CORE ......................................................................... 366INTRODUCTION ...................................................................................................................................... 366

CONTENTS

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GUIDANCE ON WHAT TO INCLUDE IN CDC COSTS ........................................................................... 368CONTRIBUTIONS TO CORPORATE AND DEMOCRATIC CORE ........................................................... 370

PART THREE: NON DISTRIBUTED COSTS ................................................................................................. 371INTRODUCTION ...................................................................................................................................... 371GUIDANCE ON WHAT TO INCLUDE IN NON DISTRIBUTED COSTS ................................................. 371CONTRIBUTIONS TO NON DISTRIBUTED COSTS ............................................................................... 372

PART FOUR: CENTRAL SERVICES TO THE PUBLIC .................................................................................. 373INTRODUCTION ...................................................................................................................................... 373GUIDANCE ON WHAT TO INCLUDE IN CENTRAL SERVICES TO THE PUBLIC ................................ 374

PART FIVE: ITEMS EXCLUDED FROM THE COST OF SERVICES ............................................................. 377INTRODUCTION ...................................................................................................................................... 377GUIDANCE ON WHAT TO INCLUDE ...................................................................................................... 377

SECTION 3: SERVICE EXPENDITURE ANALYSIS FOR NORTHERN IRELAND ..................................................379INTRODUCTION ...................................................................................................................................... 379FORMAT OF THE REVISED SERVICE EXPENDITURE ANALYSIS ....................................................... 379THE PRINCIPLE OF TOTAL COST .......................................................................................................... 380STATUS OF THE SERVICE EXPENDITURE ANALYSIS ......................................................................... 381UPDATING THE SERVICE REPORTING CODE OF PRACTICE FOR LOCAL AUTHORITIES .............. 382

LEISURE AND RECREATION SERVICES .....................................................................................................383PART ONE: SERVICE EXPENDITURE ANALYSIS FOR LEISURE AND RECREATION SERVICES ........... 385

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN LEISURE AND RECREATION SERVICES ........ 386INTRODUCTION ...................................................................................................................................... 386UPDATING THE GUIDANCE ................................................................................................................... 386LEISURE AND RECREATION SERVICES ............................................................................................... 386

ENVIRONMENTAL SERVICES ......................................................................................................................391PART ONE: SERVICE EXPENDITURE ANALYSIS FOR ENVIRONMENTAL SERVICES ............................ 393PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN ENVIRONMENTAL SERVICES ......................... 395

INTRODUCTION ...................................................................................................................................... 395UPDATING THE GUIDANCE ................................................................................................................... 395ENVIRONMENTAL SERVICES ................................................................................................................ 395

PLANNING AND DEVELOPMENT SERVICES ..............................................................................................401PART ONE: SERVICE EXPENDITURE ANALYSIS FOR PLANNING AND DEVELOPMENT

SERVICES ................................................................................................................................................. 403

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN PLANNING AND DEVELOPMENT SERVICES ................................................................................................................................................. 404

HIGHWAYS AND TRANSPORT SERVICES ..................................................................................................409PART ONE: SERVICE EXPENDITURE ANALYSIS FOR HIGHWAYS AND

TRANSPORT SERVICES .......................................................................................................................... 411

PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN HIGHWAYS AND TRANSPORT SERVICES .......................................................................................................................... 412INTRODUCTION ...................................................................................................................................... 412UPDATING THE GUIDANCE ................................................................................................................... 412HIGHWAYS AND TRANSPORT SERVICES ............................................................................................ 412

CORPORATE AND DEMOCRATIC CORE ......................................................................................................413PART ONE: SERVICE EXPENDITURE ANALYSIS FOR THE CORPORATE AND

DEMOCRATIC CORE ............................................................................................................................... 415


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PART TWO: GUIDANCE NOTE: WHAT TO INCLUDE IN THE CORPORATE AND DEMOCRATIC CORE ............................................................................................................................... 416INTRODUCTION ...................................................................................................................................... 416UPDATING THE GUIDANCE ................................................................................................................... 416CORPORATE AND DEMOCRATIC CORE COSTS ................................................................................... 417

OTHER SERVICES .........................................................................................................................................419PART ONE: SERVICE EXPENDITURE ANALYSIS FOR OTHER SERVICES ............................................... 421

INTRODUCTION ...................................................................................................................................... 421UPDATING THE GUIDANCE ................................................................................................................... 421

PART TWO: TRADING SERVICES ................................................................................................................ 422GUIDANCE NOTE: WHAT TO INCLUDE IN TRADING SERVICES ....................................................... 422

PART THREE: NON DISTRIBUTED COSTS ................................................................................................. 423INTRODUCTION ...................................................................................................................................... 423GUIDANCE NOTE: WHAT TO INCLUDE IN NON DISTRIBUTED COSTS ............................................ 423CONTRIBUTIONS TO NON DISTRIBUTED COSTS ............................................................................... 424

PART FOUR: CENTRAL SERVICES TO THE PUBLIC .................................................................................. 425INTRODUCTION ...................................................................................................................................... 425GUIDANCE NOTE: WHAT TO INCLUDE IN CENTRAL SERVICES ....................................................... 425

PART FIVE: GUIDANCE ON OTHER OPERATING INCOME AND EXPENDITURE AND SERVICE MANAGEMENT AND SUPPORT SERVICES .......................................................................................... 427INTRODUCTION ...................................................................................................................................... 427GUIDANCE NOTE: WHAT TO INCLUDE IN OTHER OPERATING INCOME AND

EXPENDITURE ............................................................................................................................. 427GUIDANCE NOTE: WHAT TO INCLUDE IN SERVICE MANAGEMENT AND

SUPPORT SERVICES ................................................................................................................... 429

SECTION 4: RECOMMENDED STANDARD SUBJECTIVE ANALYSIS ..................................................................431INTRODUCTION ...................................................................................................................................... 431STRUCTURE OF THE SUBJECTIVE ANALYSIS ..................................................................................... 431STATUS AND IMPLEMENTATION .......................................................................................................... 432UPDATING THE GUIDANCE ................................................................................................................... 432GROUP 1 – EMPLOYEES ......................................................................................................................... 432GROUP 2 – PREMISES-RELATED EXPENDITURE ............................................................................... 433GROUP 3 – TRANSPORT-RELATED EXPENDITURE ............................................................................ 434GROUP 4 – SUPPLIES AND SERVICES................................................................................................. 434GROUP 5 – THIRD PARTY PAYMENTS ................................................................................................. 435GROUP 6 – TRANSFER PAYMENTS ...................................................................................................... 436GROUP 7 – SUPPORT SERVICES .......................................................................................................... 437GROUP 8 – DEPRECIATION AND IMPAIRMENT LOSSES .................................................................. 438GROUP 9 – INCOME ............................................................................................................................... 439GROUP 10 – CAPITAL FINANCING COSTS (NOT INCLUDED IN THE NET COST

OF SERVICES) .............................................................................................................................. 440

SECTION 5: OTHER RELEVANT GUIDANCE .........................................................................................................441ANALYSING COSTS ON AN INTERNAL CROSS-CUTTING BASIS ...................................................... 441

GLOSSARY OF TERMS ............................................................................................................................................453

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Background to the Development of the Service

Reporting Code of Practice for Local Authorities (SeRCOP)

i In February 1998, CIPFA’s Local Government Committee asked its Local Authority Accounting Panel to review:

the standard CIPFA objective classification

the CIPFA statement on accounting for overheads

the need for advice on methods of apportionment.

ii In March 1998, the DETR published the Green Paper Modernising Local Government – Improving Local Services through Best Value, followed in July 1998 by the White Paper Modernising Local Government – In Touch with the People. The Welsh Office published parallel papers in Wales. The papers expressed the need to develop and recommend finance and accounting arrangements that represent best practice when accounting for Best Value.

iii In June 1998, the DETR wrote to the Local Government Association (LGA) stating that:

Ministers hope that it would be possible to put in place finance and accounting arrangements in local authorities; perhaps by way of statutory guidance issued by the Secretary of State, that:

(a) Represent best practice

(b) Would facilitate accurate comparison between both services and authorities

(c) Would strengthen the current arrangements for recharging all support service costs which may reasonably be charged to front-line services so that efficiency pressures on support services are comparable, and complementary to the pressures on front-line services.

iv The LGA established a steering group, including representatives from CIPFA, the DETR and the Audit Commission, to review existing local authority practice. The steering group invited CIPFA, through its Local Authority Accounting Panel, to conduct the review and to recommend to the group a best practice approach. There was extensive consultation during the development of the Best Value Accounting Code of Practice (BVACOP) with a wide range of local authority practitioners, in addition to the formal members of the Steering Group. The development of subsequent editions of BVACOP continued on the basis of extensive research and consultation with relevant stakeholder groups and practitioners.


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v The Best Value framework, as it applies to England and Wales, is included in the Local Government Act 1999. In Scotland, the requirement to ensure Best Value is contained within the Local Government in Scotland Act 2003. In Northern Ireland, the requirement is contained within the Local Government Act (Northern Ireland) 1972 and the Department of the Environment’s Accounts Direction.

vi The development of the local authority accounting framework for Best Value has been undertaken in consultation with all relevant parties either through the steering groups and/or review and the advisory groups, so that regional differences have been and continue to be accommodated.

vii In Scotland, LASAAC approved BVACOP from 1 April 2000. However, it was agreed that further work was required on the Scottish Service Expenditure Analysis which had a staggered application from 1 April 2001 for the majority of services (with the exception of Education and Social Work) and from 1 April 2002 applies to all services.

viii In Northern Ireland, the duty of Best Value applies to local authorities from 1 April 2002. The Technical Accounting Support Service (TASS) Steering Group for Northern Ireland, which includes representatives from CIPFA Northern Ireland, the Department of the Environment, the Local Government Audit Office and the Association of Local Government Finance Officers, approved BVACOP for application to local authorities in Northern Ireland.

ix Government ministers in England and Wales formally endorsed the 2000 edition of BVACOP.

x On publication of 2001 BVACOP in March of that year, Local Government Minister Beverly Hughes endorsed BVACOP for the second year and said:

I congratulate CIPFA and all contributing partners for their work on updating the Best Value Accounting Code of Practice. As the recognised standard for all local authorities, it is instrumental in encouraging the transparency, comparability and financial discipline that underpins the success of Best Value. With commitment to the Code, shared by central government, local councils and CIPFA alike, I am convinced that it will continue as a source of best practice and keep up the drive for Best Value.

xi For 2002 BVACOP, Local Government Minister Dr Alan Whitehead said:

CIPFA is to be congratulated on its continued commitment to review the Code which continues to play an essential role in promoting financial accountability and transparency critical to delivering best value.

xii In 2003, regulations were issued under the Local Government Act 2003 that formally defined BVACOP as representing statutory proper accounting practices to be followed by authorities in England and Wales.

xiii To take account of its extended coverage and to meet the needs for more transparent service reporting, BVACOP was renamed Service Reporting Code of Practice for Local Authorities (SeRCOP) in 2011/12.

SECTION 1

Introduction

1.1 The Best Value Accounting Code of Practice (BVACOP), which was renamed the Service Reporting Code of Practice (SeRCOP) in 2011/12, was established to modernise the system of local authority accounting and reporting and ensure that it met the changed and changing needs of modern local government; particularly the duty to secure and demonstrate Best Value in the provision of services to the community. In 2015/16, SeRCOP has been revised and updated to keep pace with the new IFRS-based Code of Practice on Local Authority Accounting in the United Kingdom (the Code) and to reflect the requirements of the differential legislative frameworks in each UK administration.

1.2 SeRCOP provides guidance on financial reporting to stakeholders but does not provide guidance on the Statement of Accounts. The Code provides the definitive guidance on the production and content of the Statement of Accounts. The relationship of SeRCOP with the Statement of Accounts is discussed below.

1.3 The overall framework adopted by SeRCOP will support the objective to establish the widest range of financial reporting requirements, in order that data consistency and comparability are achieved. SeRCOP particularly aims to meet the demands of both the Best Value and the Transparency initiatives and its various stakeholders.

1.4 It is recognised that the overall framework will need to be responsive to change and that the guidance provided will need to be dynamic in nature. CIPFA is therefore committed to reviewing SeRCOP on at least an annual basis.

1.5 SeRCOP continues to be developed from the key principles established in the statement of principles published in September 1999 (see the LAAP pages on the CIPFA website – click on Policy & Guidance > Technical Panels and Boards > Local Authority Accounting Panel). The principles are based on the issues identified in the consultation paper A Modernised Framework for Local Authority Accounting – Accounting for Best Value (published in January 1999) and the responses received to it.

1.6 This edition of SeRCOP is the sixth to be prepared under International Financial Reporting Standards (IFRS). The revisions to SeRCOP in this edition have emanated from the consultation issued on the CIPFA website in 2014. These related to updates arising from the IFRS-based Code for 2014/15 and a review of the subjective analysis and the Service Expenditure Analyses (SEAs) of all services in SeRCOP.

STATUS 1.7 SeRCOP (BVACOP) established ‘proper practice’ with regard to consistent financial reporting

below the Statement of Accounts level. This was given statutory force in England and Wales by regulations made under the Local Government Act 2003: SI 2003 No 3146 and SI 2003 No 3239 (W319) respectively.


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1.8 Sections 2 and 3 of SeRCOP present the mandatory requirements for all local authorities. Section 2 requires all local authorities to adopt the definition of total cost when presenting cost-based performance indicators (PIs) in any published format, unless a different specific definition for a national PI is provided. For example, a number of PI definitions have excluded specific grants from the net cost calculation. Section 2 also contains best practice guidance as a commentary to the mandatory requirements. This guidance is in purple type in Section 2. Section 3, the Service Expenditure Analysis, requires all local authorities to calculate total cost at division of service level or at a lower level if required by a published PI.

1.9 In England and Wales, statutory guidance previously made specific reference to BVACOP in relation to the preparation of performance plans and improvement plans. As the requirements for summary financial information in plans have been relaxed, the specific references have been removed from the guidance material. However, as there remains an overarching requirement for performance information to be consistent and comparable, the guidance implicitly supports the application of SeRCOP.

1.10 In Scotland, BVACOP received its status from the approval by the Local Authority (Scotland) Accounts Advisory Committee – LASAAC – the accounting standard setting body for Scottish local authorities. The Local Government in Scotland Act 2003 introduced the statutory duty of Best Value to Scottish local authorities from 1 April 2003. Specifically, this Act has repealed the sections of the 1980 and 1988 Acts relating to CCT and removed the requirement to keep an account in relation to all work which falls within the defined activities outlined in the respective Acts.

1.11 In Northern Ireland, primary legislation has given statutory effect to a Best Value framework.

STRUCTURE OF THE SERVICE REPORTING CODE OF PRACTICE FOR LOCAL AUTHORITIES1.12 The structure of SeRCOP is as follows.

Section 1 – Introduction 1.13 Section 1 does not have formal status. It gives an overview of SeRCOP’s framework, status

and its application dates. It sets SeRCOP’s development in the context of Best Value developments and legislation.

Section 2 – The Definition of Total Cost1.14 Section 2 is the first of the sections specifying the mandatory requirements of SeRCOP. It

defines total cost. Total cost should apply to all Best Value reporting requirements indicated in SeRCOP and in previous editions of BVACOP.

1.15 Best practice guidance is included within Section 2, providing a commentary on the mandatory requirements of SeRCOP.

Section 3 – Service Expenditure Analysis1.16 Since the 2002 BVACOP, there have been three separate SEAs: one for English and Welsh

authorities, one for Scottish authorities, and one for Northern Irish authorities. Section

SECTION 1 \ INTRODUCTION

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3 provides the service classification, listed in paragraphs 3.9 (England and Wales), 3.10 (Scotland) and 3.9 (Northern Ireland). It also defines the mandatory divisions of service at which total cost must be aggregated.

Section 4 – Recommended Standard Subjective Analysis1.17 Section 4 provides a recommended standard subjective analysis. This analysis is consistent

with the subjective analysis required by government returns such as the Whole of Government Accounts.

1.18 This analysis is consistent with the subjective analysis required by Whole of Government Accounts.

CIPFA STATEMENT1.19 The Institute Council has determined that the principles and detailed proposals set out

in the Service Reporting Code of Practice for Local Authorities be adopted by all local authorities in the United Kingdom. It is expected that members of CIPFA will comply with all the requirements of SeRCOP as it defines best professional practice in terms of financial reporting.

APPLICABLE DATE1.20 The requirements set out in this 2015/16 edition of SeRCOP apply to all Best Value reporting

requirements in the UK. 2015/16 SeRCOP applies to all accounting periods beginning on or after 1 April 2015.

1.21 This means that the requirements of the 2015/16 Service Reporting Code of Practice for Local Authorities apply to:

2015/16 Budget Information

2015/16 Statements of Accounts

2015/16 Performance Indicators.

RELATIONSHIP WITH THE STATEMENT OF ACCOUNTS1.22 As noted in paragraph 1.2, SeRCOP does not prescribe guidance on the Statement of

Accounts. This is provided by the Code. However, the Code notes the importance of using the SEA defined by the individual services in Section 3 of SeRCOP to provide the service analysis on the costs of local authorities’ services.

1.23 The Central Services SEA also provides an objective format for the ‘cost of services’ of the authority that complies with the format of the Comprehensive Income and Expenditure Statement specified by the Code.

1.24 Whilst SeRCOP does not prescribe guidance for the production of the Statement of Accounts, it does seek to clarify where the recommendations of the two codes interact.


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ACCOUNTING PRACTICES1.25 SeRCOP aims to provide a consistent basis for all statutory financial disclosures in relation to

Best Value. These include:

the Statement of Accounts

all formally reported local PIs and nationally based performance indicators: BVPIs, Audit Commission PIs and Welsh Government PIs.

1.26 One of the principles that underpin the development of SeRCOP referred to in paragraph 1.5 above is that ‘the definition of total cost will be consistent with the financial accounting framework established by the Code’. In order to ensure this consistency, it is important that authorities generally follow the requirements of the Code when compiling information for these statutory disclosures.

1.27 However, a substantial potential point of departure was introduced in 2006 BVACOP following the abolition of capital financing charges in the 2006 Statement of Recommended Practice. Although the charges were removed from the definition of total cost applicable to service outturns in the then I+E Account, there will still be circumstances where they are either required or desirable as part of the costing framework. These circumstances are discussed in Section 2 (paragraphs 2.4 and 2.5).

1.28 The overall aim of SeRCOP is to assist practitioners in the preparation of financial reports for Best Value and Transparency purposes and the preparation of the financial statements. It does not form part of the Code, nor has it been reviewed by the Financial Reporting Advisory Board. It attempts to explain and illustrate what is required by the Code, but does not carry the authority of the Code.

SECTION 2

The Definition of Total Cost

THE PURPOSE OF TOTAL COST2.1 The definition of total cost will provide the consistent basis for all formal external financial

reporting and statutory financial disclosures.

2.2 Specifically, financial information requirements for formal financial reports of performance, for performance indicators and for statistical returns will be harmonised around the definition of total cost. Total cost must also be used for reporting the cost of services in the Comprehensive Income and Expenditure Statement.

2.3 The use of total cost for less formal purposes, such as unpublished local performance indicators and cost benchmarking at lower levels of detail than required by Section 3, will also enhance the reliability and comparability of such information.

2.4 However, total cost may not be appropriate for management accounting and decision-making purposes. Costing for decision-making purposes will often require the use of different techniques; it will also require that all relevant costs, and only relevant costs, are taken into account, whether they form part of total cost or not. For example, there are strong arguments for reflecting the costs of early retirement in management accounts so that service managers can see the cost as well as the benefit of such decisions, and as a way of ensuring management discipline. Such costs are not within the total cost of individual services for consistency reasons, and so parallel accounting systems may be required, using total cost for external reporting and comparisons and other accounts for internal management purposes. Authorities will also need to decide whether a cost of capital element (to reflect the full cost of using fixed assets in the provision of a service) should be included in any costing for decision-making purposes.

2.4.1 Notional interest is a fundamental part of the full cost of service provision and is a concept widely applied across the public services. However, notional interest does not form part of total cost, and is not reported in the Comprehensive Income and Expenditure Statement.

2.4.2 There remain a number of circumstances where it may be appropriate to include notional interest in the definition of ‘cost’:

statutory reporting where the basis on which the calculation is to be performed is specified to include notional interest

fees and charges

recharges to the Housing Revenue Account and Pension Fund

pricing for competitive tender

cost comparisons and efficiency assessments


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trading accounts

asset management.

2.4.3 In considering whether it is appropriate to include notional interest in the definition of ‘cost’, local authorities will need to ensure that they are using costing techniques that are appropriate to the circumstances. This may require the use of different techniques rather than simply incorporating notional interest into the SeRCOP definition of total cost.

2.5 In particular, local authorities will need to ensure when putting any service(s) out to competition that all their own relevant costs are taken into account, whether these are defined as being within total cost or not.

2.6 It is important also to distinguish between costs that are within total cost to support the aim for as much consistency as possible between authorities and those costs over which service managers exercise control. The latter depend on local management and delegation arrangements and there is no intention to restrict local authorities’ discretion over such matters.

2.7 The total cost of a service or activity includes all costs, as defined below, which relate to the provision of the service (directly or bought in) or to the undertaking of the activity.

2.8 The total cost of a service or activity must reflect all the costs associated with that service/activity, wherever in the management structure they arise. It is acknowledged that the accounting structure, as defined by the service expenditure headings, is unlikely to match the management structure in any authority.

2.9 The accounting structure has been and will be further developed to allow flexibility in combining the elements within the Service Expenditure Analysis (SEA) to match management structures and review requirements.

GROSS AND NET TOTAL COST2.10 Total cost exists in both gross and net terms. No categories of income are considered to be

abatements of expenditure, and movements to and from reserves must be excluded from total cost definitions. Relevant movements can easily be taken into account in local comparisons, if required.

GROSS TOTAL COST2.11 Gross total cost includes all expenditure attributable to the service/activity, including

employee costs, expenditure relating to premises and transport, supplies and services, third party payments, transfer payments, support services and depreciation.

Expenditure in Total Cost2.11.1 The definition of total cost includes:

exceptional or ‘lumpy’ costs, ie those costs exceptional by their size or incidence, such as the costs of internal audit investigations, legal expenses or charges for the impairment of fixed assets

SECTION 2 \ THE DEFINITION OF TOTAL COST

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expenditure that is dependent on matching income that is expected to net to zero, such as the cost of projects that would not take place without 100% grant funding and services provided on the basis of full reimbursement of costs

any contributions, either cash or in kind, towards the work of others (joint arrangements) – see paragraphs 2.24 and 2.26 of Section 2 of SeRCOP.

2.11.2 Exceptional expenditure is included within the definition of gross total cost. It is a real cost to the authority.

2.11.3 The Code of Practice on Local Authority Accounting in the United Kingdom (the Code) requires exceptional items to be included in the total cost of services to which they relate or on the face of the Comprehensive Income and Expenditure Statement if that degree of prominence is necessary to give a fair representation of the accounts. Although exceptional service expenditure might be disclosed separately from the service outturn in the Comprehensive Income and Expenditure Statement, it should not be excluded from the total cost of the service for other external reporting requirements such as performance indicators.

2.11.4 An adequate description of each exceptional item should be disclosed for all external reporting requirements, the Statement of Accounts, formal financial reports of performances or in any external report that includes the publication of related performance indicators. It would seem reasonable for the financial statement in a formal financial report of performance to note this exceptional spend as a part of comparative outturn information provided.

2.11.5 Expenditure that is dependent on matching income is also included in the calculation of total cost. Although such expenditure will not normally impact on the tax payer, and may vary considerably between otherwise comparable authorities, it is considered that leaving it unreported would give rise to a number of potential problems, including:

If funding ceases for work done through the employment of a member of staff, it will usually not be possible to cease the expenditure at the same time. It is more informative for this to be shown as under-recovered income than as over-expenditure.

This expenditure may vary between authorities for management reasons and, in any event, the associated costs may not be distinguishable. For example, where meals are offered to staff in a client facility, the cost should properly include a share of the fixed costs as well as the variable costs involved. It is not practicable to identify and thus exclude this element of expenditure, which would mean that the contribution made would be the only indication of what expenditure should be excluded.

2.11.6 Expenditure on work carried out by the authority under formal agency agreements, where the authority is not in substance accountable for the partnership arrangement (or any aspect of it), should not be included within the definition of total cost. Such expenditure is clearly definable and is excluded from the Comprehensive Income and Expenditure Statement, except by way of disclosure, in the notes to the accounts, within the terms of the Code. Agency agreements are also subject to notice clauses that minimise the risk which, in other third party funding arrangements, might fall on the authority.


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2.11.7 The move to the IFRS-based Code means that employee costs included in total cost will need to comply with IAS 19 Employee Benefits. For example, any accruals of holiday pay should be included in total cost.

2.12 Specifically, it includes depreciation calculated in accordance with the Code and with existing capital accounting guidance.

2.12.1 The consistent treatment of depreciation within the reported total costs of services involves:

Following the definition of capital expenditure as laid down in the Code.

Following the requirements and principles laid down in the Code for the valuation and revaluation of assets.

Using the principles and requirements prescribed by the Code for the depreciation of assets. The detail of local asset management policies will determine local policies on depreciation and asset lives.

Allowing the impact of any resulting differences in depreciation to reflect the effectiveness of such policies.

2.12.2 Applying the above principles will assist depreciation, and thus total cost, in being consistent and comparable between authorities by specifying a basis of calculation that is consistent enough to eliminate technical differences, such as whether otherwise identical accommodation occupied is rented or was bought on the open market, but which leaves real differences as requiring explanation and/or investigation.

2.12.3 The Code provides the requirements for the recognition and measurement of tangible assets. The incorporation of IAS 16 Property, Plant and Equipment into the Code ensures that assets are accounted for on a consistent basis and where revaluations are required that these are kept up to date. Additional guidance on the accounting treatment of tangible fixed assets and the calculation of depreciation is contained in the CIPFA publication Code of Practice on Local Authority Accounting in the United Kingdom – Guidance Notes for Practitioners.

2.12.4 There are, however, management issues arising from the specification of depreciation as the charging basis for the use of assets; for example, using asset rents within budget holders’ controllable budgets as an incentive to make the most effective use of property. Such arrangements are an acknowledged exercise of management discretion. They cannot, and should not, be standardised or otherwise constrained by financial accounting regulations and it is possible, therefore, that authorities may adopt an internal management treatment that differs from the external accounting treatment.

2.12.5 It is considered that comparability is best served by adhering to the principles and requirements contained in the Code when calculating asset lives and choosing depreciation policies, rather than by having standardised asset lives and depreciation policies. This gives an opportunity for authorities to be rewarded or penalised for their asset management policies. Since such policies can affect the real costs incurred, it is sensible for their impact on total cost to be shown through, for example, an extended (or shortened) useful life. In other words, consistency requires clear principles to be


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set out. Detailed policies should be determined locally, to allow real differences to be manifest, but in accordance with the principles and requirements laid down in the Code.

2.12.6 The Code explicitly recognises that local authorities may have intangible assets, particularly in relation to computer software. Balances of intangible assets will be subject to a comparable treatment to tangible assets as regards charges to service revenue accounts based on impairment (if any) and amortisation.

2.13 Total cost also includes any related impairment loss or revaluation loss that is charged to Surplus or Deficit on the Provision of Services. Impairment losses or revaluation losses should be recognised in Other Comprehensive Income and Expenditure and therefore not in the total cost of a service, unless there is no accumulated gain attributable to the relevant asset in the Revaluation Reserve to absorb the losses. A revaluation gain should be credited to a service revenue account where it represents the reversal of a loss previously recognised. An impairment loss that has previously been charged to a service revenue account may only be reversed where there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Impairment of an asset under construction and impairment or revaluation losses in relation to surplus assets (not classified as held for sale) should be charged to Non Distributed Costs. Where the asset under construction is an investment property, the impairment (or any movement in fair value in relation to an investment property under construction that is carried at fair value) will be shown in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, and will therefore not form part of total cost.

2.13.1 Assets held at fair value are revalued periodically. In addition, assets are assessed for impairment when there are indications that impairment may have occurred.

2.13.2 The Code provides the following examples of events and changes in circumstances that indicate that impairment may have occurred:

a significant decline (ie more than expected as a result of the passage of time or normal use) in an asset’s market value during the period (a smaller decline will be a revaluation loss)

evidence of obsolescence or physical damage of an asset

a commitment by the authority to undertake a significant reorganisation

a significant adverse change in the statutory or other regulatory environment in which the authority operates.

2.13.3 All impairments and revaluation losses should be recognised in the Revaluation Reserve and not in total cost, unless there are insufficient accumulated gains in the reserve for the relevant assets to absorb the losses. In the latter case, the excess of the impairment or revaluation loss over the accumulated gains will also be chargeable as part of total cost, either in the service revenue account or, for assets under construction and surplus assets (not classified as held for sale), in Non Distributed Costs. The process for reversing losses previously charged to a service revenue account depends on whether the loss was an impairment or a revaluation loss. Where a gain reverses a previous impairment loss that was recognised as part of total cost in a prior period, this gain may exceptionally be taken to the service revenue account (Non Distributed Costs for assets under construction and surplus assets (not classified as held for sale))


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if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. However, any revaluation gain that reverses a revaluation loss previously recognised as part of total cost in a prior period may be taken to the service revenue account (Non Distributed Costs for assets under construction and surplus assets (not classified as held for sale)).

2.13.4 Costs associated with abortive capital schemes are not classed as impairment of assets under construction; these costs are a proper charge to the Surplus or Deficit on the Provision of Services and should be charged to the relevant service revenue account(s). Where a decision as to which service would have used the asset had not been taken (for example, where additional office accommodation was being provided but no decision as to the occupying service(s) had been taken), the costs should be apportioned between the possible users of the asset. Exceptionally, if the asset was to have been an investment property and therefore not related to the delivery of any service, the costs should be charged to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Costs should be included in the relevant subjective group. For example, staff costs relating to architectural plans would be included in Group 1 – Employees, but payments to external consultants for those plans would be included in Group 4 – Supplies and Services. Where an abortive scheme was to be funded by a capital grant or contribution, and the terms of the grant or contribution permit its use to fund the expenditure even if the scheme does not proceed, that part of the grant or contribution that relates to the abortive scheme should be recognised as a revenue grant or contribution. Where the terms of the grant or contribution do not permit its use to fund the expenditure if the scheme does not proceed, the costs of the abortive scheme will need to be met out of revenue resources (unless a direction allowing the expenditure to be capitalised has been given under section 16 of the Local Government Act 2003 (England and Wales) or permission to borrow has been given by the Scottish Government).

2.13.5 Additional guidance on the accounting treatment of impairment and revaluation losses can also be found in CIPFA’s publication Code of Practice on Local Authority Accounting in the United Kingdom – Guidance Notes for Practitioners.

2.14 Where legislation allows expenditure that does not result in an asset being carried on the Balance Sheet to be counted as capital for funding purposes, the Code requires such expenditure to be charged to Surplus or Deficit on the Provision of Services in accordance with the general provisions of the Code. Funding the expenditure from capital resources is achieved by adjusting the General Fund Balance and the Capital Adjustment Account. Except in exceptional circumstances, revenue expenditure funded from capital under statute will be included in the total cost calculation for individual (or a combination of) services in the year that they are incurred. An example of an exceptional circumstance would be where a direction has been given to capitalise redundancy cost for reorganisation and the services to which the redundancy cost relates no longer exist.

2.14.1 The Code defines revenue expenditure funded from capital under statute as expenditure that legislation allows to be ‘classified as capital for funding purposes when it does not result in the expenditure being carried on the Balance Sheet as a fixed asset’. The Code requires revenue expenditure funded from capital under statute to be charged to the


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Comprehensive Income

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