FINANCIAL TRAINING FOR ELECTED MEMBERS

THE ROLE OF FINANCE

Section 151 Officer

Section 151 of the Local Government Act 1972 requires that every local authority in England and Wales should “... make arrangements for the proper administration of their financial affairs and shall secure that one of their officers has responsibility for the administration of those affairs”

Section 114unlawful expenditure or unbalanced budget

Requires a report to all the local authority’s members to be made by that officer, in consultation with the Monitoring Officer and Head of Paid Service, if there is or is likely to be unlawful expenditure or an unbalanced budget.

The Local Government Act

the full council meeting has a statutory role to set the authority’s policy framework as well as approving the budget and setting the council tax.

local authorities will need to ensure that the S151 Officer and the Monitoring Officer have access as necessary to meetings and papers and that members must consult with him/her regularly.

Financial Services

Assists managers to manage their budgets; Provides technical advice on accounting law; Provides budget monitoring information to

Committees & Management Board; Prepares the Statutory Accounts; Treasury Management activity; Financial systems, creditors and debtors; Cashiering, insurance, housing benefits subsidy,

asset management,and financial support.

Internal Audit (South West Audit Partnership)

Role:

Independent appraisal of risk and internal control systems.

Reports on adequacy of systems of financial, managerial and operational control.

Ad hoc reviews.

Internal Audit

Will report on:– relevance of policies, plans and procedures;

– extent of compliance;

– extent of risk exposure;

– adequacy of guidance;

– extent that assets and interests are safeguarded;

– reliability and integrity of financial and management systems (incl. computer systems);

– actions taken to remedy identified weaknesses.

FINANCING LOCAL SERVICES

The Legal Position

Full Council must approve the budget.

Delegation of responsibility for monitoring to the Executive.

Policy changes should be reflected in budgets.

Scrutiny can call in reports.

Setting the Budget

A Medium Term Financial Strategy and a five year Plan.

Annual balanced budget now an ongoing exercise to look for budget savings.

Efficiency agenda Assess income due and compare to planned

expenditure. Assess funds available for new capital

schemes through capital strategy.

Potential Budgets

R e v e n u e B u d g e t

O n -g o in g

r e n t

g a s /e le c t r ic i t y

e m p lo y e e s

C a p i t a l B u d g e t

I T

n e w b u i l d i n g s

O n c e O f f

p r o j e c t s

Use of Revenue and Capital Resources

Revenue funds can finance both revenue and capital.

Capital resources can only be used for capital schemes. De-minimus £10,000 (£500 for capital grants)

Funding Revenue Budgets

Where Does Our Funding Come From?

Government Grants10% Council Tax

11%

Fees & charges18%

Benefit Subsidy60%

Return on Investments1%

Fees and Charges

Planning fees

Car parking

Licencing

Trading

– Octagon

– Markets

– Property

Borrowing and Investments

Prudential Code Approximately £42million investments including

cash flow “Debt free” Investments will raise £0.8 million in interest in

2011/12

Council Tax

Local control but …… gearing

Banding system

Community consultation/referendum

Council tax freeze grant

Gearing

Current

Budget £10 million

Council Tax £ 1 million

Plan

Budget £11 million

(+ 10%)

Council Tax £ 2 million

(increase of 100%)

Council Tax Billing

Council tax bands set by central government.

Council tax rates set by local councils.

Discounts, exemptions and reductions set by central government but with some local discretion.

2nd homes and empty property rates

Where my Council Tax Goes

How does SSDC spend it's £17.3 million budget?

Place and Performance

3%

Finance and Corporate Services

6%

Legal and Corporate Services

11%

Communities11%

Strategic Management

4%

Environment41%

Customer Services3%

Economy8%

Health and Wellbeing13%

Council Tax Collection

Billing authorities are Metropolitans, Unitaries, and Districts.

Bills delivered before 1st April. Legislation prescribes collection process – some

local discretion. All funds collected go into Collection Fund and

redistributed to precepting authorities. Collection rate 2010/11 98%.

Assets and Capital

SSDC asset holdings

Levels of investment (past, current, future)

Capital Strategy

Asset Management Plans

Government Grant

Assessment of need through 4 block model Formula Grant = RSG + NNDR Damping “Spending Power” £1.4 million cut in 2011/12 £0.9 million cut for 2012/13

MANAGING FINANCES EFFECTIVELY

Balancing the Revenue Budget

Income Due

Fees and Charges Council taxes Formula grant Use of balances Other grants

Planned Expenditure

Start with this year’s budget Add inflation/pay increases Inescapable commitments Corporate Plan bids Identify savings

2011/12 Budgets

Revenue Budget

£17.3 million net.

£81.9 million gross.

Capital Programme

£5.3 million.

The Capital Programme

Capital Strategy.

Existing schemes reviewed to ensure funding remains accurate.

Priority given to essential schemes e.g.maintenance of existing facilities and assets.

Capital Appraisal procedures and project management process

All bids assessed through a scoring methodology.

Approving the Budget

In February and should include:

council tax increase and amounts for each band;

totals delegated to Assistant Directors/Managers;

levels of balances and reserves;

statement of robustness of budget and adequacy of reserves.

Criteria for Good Financial Standing

Consistency year on year.

Appropriate general fund balance based on financial risks.

Specific reserves.

Clear annual audit opinion.

Good Financial Management

Clear officer delegation. Regular monitoring by Management Board. Regular monitoring by Executive. Clear virement rules.

Financial Management Guidance and Law

Financial Procedure Rules

Procurement Procedure Rules

CIPFA Code of Practice

Local Government Acts

Understanding the Committee Budget Reports

Reports show movements from the original budget approved at the beginning of the year

Levels of balances and reserve

Areas of risk

Partnerships

Virements requiring approval and noting

Projecting figures for the year end

Under Financial Procedure Rules, managers cannot overspend

Predictions for variations

Managers should manage fluctuations within resources

… cont’d

Reserves and Balances

Types– Working balances– Provision for specific purposes– Delegated to Committees

Level– Strategy– Risks

Balanced budget (MTFP)

TREASURY MANAGEMENT

Treasury and Cash Management

Short term cashflow management.

Long term borrowing strategy.

Long term investment strategy.

Aims of Treasury Management Strategy

Sets limits for borrowing. Prudential Indicators. Minimise interest payable and maximise

interest receivable.(Note - protection of the capital sum is paramount).

Control and management of the risks.

Managing the Risk

Members approve the Treasury Management Policy and Strategy Statement annually.

Senior officer responsible for processes and procedures.

Adequate officer time input into the activity. Regular reports to Audit Committee and full

Council. Effective performance management and

comparison.

Managing Funds

In-house management

Borrowing

External consultants

Types of Investment

Term Deposits Gilts Eurobonds Floating Rate Notes Money Market Funds Reserve Accounts Cash DMADF

Importance of Treasury Management to SSDC

On average, £40+ million invested.

Supports Revenue Account - budgeted income £0.8 million.

An increase of 3% in interest rates would double our income.

Currently 5% of net budget.