Streamlining Local Authority Accounting: New Regulations Explained

The UK government is introducing a change to simplify the financial reporting process for four newly established Combined County Authorities (C(C)As) in England. The Local Audit (Modification of Financial Reporting Requirements) Regulations 2025, officially known as 2025 No. 652, aims to ease the administrative burden on these authorities during their initial phase of operation.

What’s Changing?

The new regulation affects the Devon and Torbay, Greater Lincolnshire, Hull and East Yorkshire, and Lancashire Combined County Authorities. These authorities were officially formed on February 5, 2025, and are now required to modify their financial reporting timelines.

Under the existing Local Audit and Accountability Act 2014 and the Accounts and Audit Regulations 2015, local authorities must prepare and publish both unaudited and audited statements of accounts for each financial year. This includes deadlines for publishing these accounts, with the next deadlines being February 27, 2026, for the 2024/25 year and January 31, 2027, for the 2025/26 year.

However, since the C(C)As were only recently established, their operational activities and financial transactions for the 2024/25 period are minimal. The new regulation allows these authorities to bypass producing separate accounts for the interim period from their establishment until the end of the 2024/25 financial year. Instead, they will consolidate this period with the 2025/26 financial year, simplifying their reporting process.

Why This Change?

The rationale is straightforward: to reduce the administrative burden on the new authorities during their initial setup phase. Creating separate accounts for a short period imposes unnecessary work on both the authorities and their auditors, who would otherwise have to audit an additional set of accounts. The change aligns with previous modifications made for other combined authorities, like those in Greater Manchester and North Yorkshire, which also benefited from extended accounting periods.

Impact and Consultation

The impact of this change is minimal. Since the modification pertains solely to local authority financial reporting, it does not affect businesses, charities, or voluntary bodies. Consequently, a formal consultation was deemed unnecessary, although the affected authorities were informed.

Monitoring and Compliance

The Ministry of Housing, Communities and Local Government will oversee the implementation of this regulation, ensuring it meets its objectives without the need for statutory review clauses, as it doesn't regulate private or voluntary sectors.

Conclusion

By streamlining the accounting process for newly formed local authorities, the government is fostering a more efficient transition period, allowing these bodies to focus on establishing their governance structures without the added pressure of immediate and redundant financial reporting. This proactive measure demonstrates a commitment to practical governance and efficient use of resources.