2021-22 local financial returns (LFRs) - guidance notes

1. General Notes

The following points should be applied throughout the return:

• Figures representing expenditure (debit amounts) should be entered as positive values and figures representing income (credit amounts) should be entered as negative values. For example, a surplus on the Income and Expenditure Account will be a negative value, whereas a deficit will be recorded as a positive value. All useable reserves balances (opening and closing) will be negative values.
• All figures should be entered in £ thousands, unless otherwise specified, and rounded to the nearest whole number.
• Figures should be based on authorities' audited accounts.
• The additional information sections of individual returns should be completed on a funding basis unless otherwise stated.

This return is closely aligned with SeRCOP - Recommended Standard Subjective Analysis and the Code of Practice on Local Authority Accounting. To avoid duplication, this guidance often refers directly to the SeRCOP guidance. Local authorities should refer to both sets of guidance when completing the return to ensure that the returns are completed consistently, so that valid and reliable figures for Scotland can be obtained.

1.1 Completing the Return

All of the LFRs, with the exception of LFR 24, are completed in a single workbook. The forms are linked together allowing easy navigation between forms that ask for related information. The front page collects contact details for each LFR and the certification from the Director of Finance.

As in past years, not all LFRs are required from all authorities. Once you select your local authority from the drop-down list on the front page, the tabs you are required to fill in are then highlighted. To ensure the LFR figures reconcile to the local authorities' accounts, authorities are advised to complete LFR A0 first, followed by LFR 23. LFR 00 should also be completed before service-level LFRs to ensure control totals have been populated.

Cell H3 in each return is a drop-down box allowing respondents to mark individual returns as complete. This can be used to aid authorities when LFRs are being completed by a number of different staff members. Their use is entirely optional.

Completed returns should be emailed to the LGF Stats Mailbox by no later than Wednesday the 12^th October 2022. Where possible, copies of local authorities' audited annual accounts will be sourced from local authorities' websites. However, you may be required to provide a copy of your accounts where it has not been possible for a copy to be downloaded.

Should you have any queries on the LFRs, please email the LGF Stats Mailbox.

1.2 Colour Coding and Automatic Validation Checks

The following colour coding has been applied to the return:

Plain white cells: data is to be entered

Light grey cells: data has been automatically populated, either from another cell in the return or from prior years' data. If the cause of an error is not clear, it may be because a different part of the return needs to be completed first.

Light blue cells: subtotals

Dark blue cells: totals

Red cells: an automatic validation check has been flagged. Details of the broad types of validation checks are noted below.

Types of validation checks:

1. Control Totals compare totals in service-level LFRs against corresponding cells in LFRs A0, CR and 00. These checks are flagged when a figure does not match its control total, i.e. the difference column does not equal zero.

2. Pass / Fail validation checks test the figure entered against a specific set of validation criteria, for example ensuring figures sum to the appropriate total or the correct signage has been used.

3. Comparison to prior years' data are applied to gross expenditure and income on a funding basis, and net revenue expenditure in Rows 28 to 31 of the service-level LFRs. Significant changes (those over £500k and 10%) will be flagged red and explanations for these changes should be provided in the relevant comments box.

A 'Failed Validation Check' count is shown in Cell E3 of each LFR, and in Column F on the 'Front Page' tab, to assist tracking of checks across the workbook. The count reflects the total number of validation checks of Type 1 and 2, as above, that have failed within each LFR. Please ensure that all relevant data has been entered before attempting to address an error. Return containing failed validation checks will not be accepted and will be returned to the local authority for review.

This return also contains cell specific validation to ensure figures are entered as whole numbers and with the correct signage.

1.3 General Subjective Analysis Guidance

The Subjective Analysis used throughout the LFRs is based upon CIPFA's SeRCOP – Recommended Standard Subjective Analysis. This document only provides guidance where the LFRs deviate from SeRCOP. Local authorities should refer to CIPFA's SeRCOP Service Expenditure Analysis for Scotland for more detailed guidance on the service expenditure analysis required in the LFRs.

Revenue Contributions to Capital (RCC): RCC reflects capital expenditure on capital assets which was met directly from the service revenue within the current year. It equates to capital funded from current revenue. Include any capital expenditure charged to revenue for PPP / PFI schemes.

RCC is no longer included in the LFR gross expenditure calculation, but is accounted for in the statutory adjustments in LFR A0. However, RCC is still used in some measures of gross expenditure, such as for the Local Government Benchmarking Framework (LGBF). Therefore, RCC is still required at service level (Row 77 of LFR 00) and for specified subservices (Row 36 of LFRs 01, 02, 03, 05, 06 and 07).

Third Party Capital Projects funded from Capital Grant: Subject to the conditions set out in any capital grant, a local authority may be able to fund third party capital expenditure, either through direct expenditure or the provision of a grant. Third party capital expenditure includes that of other local authorities.

The amount paid out to fund third party capital projects should be treated as service expenditure and recorded in LFR 00, Row 32.

The amount of capital grant received in year that was used to fund third party capital projects should be treated as service income and recorded in LFR 00, Rows 49 & 50 as appropriate.

Any capital grant unapplied from prior years that has been used to fund third party capital projects in the current year should be treated as a statutory adjustment and recorded in LFR A0, Row 114.

Further guidance on the accounting treatment of capital grants and contributions can be found in Local Government Finance Circular 3/2018.

1.4 Scottish Welfare Fund

There are two types of grants in the Scottish Welfare Fund (SWF):

• Crisis Grants: provide a safety net when someone experiences a disaster or emergency situation, such as a fire or flood and there is an immediate threat to health and safety.
• Community Care Grants (CCG): to enable people to live independently or continue to live independently, preventing the need for institutional care. A CCG may also be able to help a family facing exceptional pressure.

Grants should be recorded against the service area that best describes its purpose according to SeRCOP guidelines. LAAP Bulletin 98 in 2013-14 (paragraph 53 onwards) provided additional guidance and recommended the following initial treatment of SWF grants:

• Crisis grants should be recorded in LFR 07 under economic development;
• CCGs should be recorded in LFR 03 against the relevant client group and community-based service.

As the SWF grant can be used for a wide range of services, authorities are free to record grants under other service headings if they believe that it better fits the purpose of the grant.

1.5 COVID-19 Expenditure and Income

Expenditure incurred in relation to COVID-19 should be recorded against the relevant subservice that incurred it. Where there is no appropriate existing subservice, for example, for activities relating to supporting individuals to shield or to Test & Protect, expenditure should be recorded against Central Services: Other (LFR CR, Row 168 for capital expenditure and LFR 09, Column T for revenue expenditure) and a note of activities and net values included provided in the relevant comments box.

Figures for additional gross revenue expenditure incurred as a direct result of COVID-19 by service should also be provided in LFR 00, Row 108 – further guidance on what should be included in this figure is provided on page 31.

COVID-19 related income should be recorded in line with the approach taken for LFR 2020-21, which was based on the LASAAC Guidance on Accounting for Coronavirus Grants. That is:

• Amounts paid via GRG are recorded as GRG income in LFR A0, Row 48, with no element of GRG to be recorded as service income.
• Service specific COVID-19 grants should be recorded as service income against the relevant subservice, or against Central Services: Other where there is no appropriate existing subservice, in line with the treatment for the associated expenditure. A list of service specific COVID-19 grants is provided in Annex B for reference.
• COVID-19 grants to be treated as agency grants, and the associated expenditure, should not be reflected anywhere in the return. A list of grants considered to be agency grants is provided in Annex C for reference.

1.6 Financial Flexibilities

Loans Fund Repayment Holiday: The Local Authority (Capital Finance and Accounting) (Scotland) (Coronavirus) Amendment Regulations 2021 gives local authorities the flexibility to reduce the amount of statutory repayments they make to the Loans Fund. Please note that this flexibility can only be utilised in one of the financial years between 2020-21 and 2022-23. Guidance on how use of this flexibility is to be recorded within the LFR is provided on page 9.

Use of Capital Receipts to fund the financial impact of Covid-19: Use of this flexibility should be reflected in LFR A0, Row 134 in line with the guidance on accounting practices for this flexibility set out in Finance Circular 2/2021. Please note that this flexibility was only applicable in 2020-21 and 2021-22. Lines capturing COVID-19 capital receipts held in the Capital Grants & Receipts Unapplied Account in LFR 23 have therefore been removed as these must be zero by 31 March 2022.

Service Concession Arrangement: Whilst this flexibility cannot be applied until 2022-23, minor changes have been made to this LFR to allow the capture of key figures on service concessions explicitly prior to the flexibility being utilised.