This paper analyses financial performance adjustment in English local governments and the specific accruals used to achieve it. Based on statistical approaches used in previous literature, our results indicate the use of abnormal accruals in English local governments in order to report surpluses/deficits close to zero as well as to avoid reporting big deficits. We find that depreciation and impairment expense of fixed assets is the item most significantly related to abnormal accruals. Consistent with the conservatism theory, local governments with higher leverage use more income‐decreasing accounting policies.