Local Authority Investments

March 4th, 2019 by James Goudie KC

The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2019, S.I. 2019/396, make amendments to the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (S.I. 2003/3146) (“the 2003 Regulations”). The technical amendments define the investments that shall not be treated as capital expenditure within local authority accounts. They also amend the categories of local authority investments in relation to which fluctuations in fair value are subject to specific accounting treatment.

Under the 2003 Regulations, local authorities must follow CIPFA’s Code of Practice on Local Authority Accounting in the United Kingdom, as amended or reissued in every financial year. The Government can modify local authorities’ duties to follow the proper practices set out in the Code on Local Authority Accounting, by including specific provisions in the 2003 Regulations. It also has a specific power to provide through regulations which expenditure of local authorities is, or is not, accounted for as capital expenditure. The 2003 Regulations make provision for capital finance and accounts under Part 1 of the Local Government Act 2003 (“the 2003 Act”). Regulation 25 of the 2003 Regulations provide for expenditure which is, and which is not, to be treated as capital expenditure for the purposes of Chapter 1 of Part 1 of the 2003 Act. Since 2004, Regulation 25 has excluded local authority investments in money market funds from treatment as capital expenditure in local authority accounts. Regulation 30K of the 2003 Regulations provides for specific accounting treatment for fair value gains and losses of local authority investments in pooled investment funds, including money market funds.


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