Transcript Managing Finances Effectively

FINANCIAL TRAINING FOR
ELECTED MEMBERS
THE ROLE OF FINANCE
Section 151 Officer
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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 114
unlawful expenditure or unbalanced budget
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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
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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
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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:
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Independent appraisal of risk and internal
control systems.
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Reports on adequacy of systems of
financial, managerial and operational
control.
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Ad hoc reviews.
Internal Audit
Will report on:
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relevance of policies, plans and procedures;
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extent of compliance;
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extent of risk exposure;
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adequacy of guidance;
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extent that assets and interests are safeguarded;
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reliability and integrity of financial and management
systems (incl. computer systems);
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actions taken to remedy identified weaknesses.
FINANCING LOCAL SERVICES
The Legal Position
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Full Council must approve the budget.
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Delegation of responsibility for monitoring to the
Executive.
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Policy changes should be reflected in budgets.
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Scrutiny can call in reports.
Setting the Budget
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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 ve n u e B u d g e t
e m p lo ye e s
C a p ita l B u d g e t
IT
g a s /e le c tric ity
n e w b u ild in g s
re n t
p ro je c ts
Use of Revenue and Capital Resources
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Revenue funds can finance both revenue
and capital.
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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?
Return on Investments
1%
Benefit Subsidy
60%
Government Grants
10%
Council Tax
11%
Fees & charges
18%
Fees and Charges
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Planning fees
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Car parking
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Licencing
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Trading
–
Octagon
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Markets
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Property
Borrowing and Investments
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Prudential Code
Approximately £42million investments including
cash flow
“Debt free”
Investments will raise £0.8 million in interest in
2011/12
Council Tax
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Local control but …… gearing
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Banding system
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Community consultation/referendum
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Council tax freeze grant
Gearing
Current
Budget
Plan
£10 million
Council Tax £ 1 million
Budget
£11 million
(+ 10%)
Council Tax £ 2 million
(increase of 100%)
Council Tax Billing
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Council tax bands set by central government.
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Council tax rates set by local councils.
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Discounts, exemptions and reductions set by
central government but with some local
discretion.
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2nd homes and empty property rates
Where my Council Tax Goes
How does SSDC spend it's £17.3 million budget?
Health and Wellbeing
13%
Environment
41%
Economy
8%
Customer Services
3%
Communities
11%
Strategic
Management
4%
Place and
Performance
3%
Legal and Corporate
Services
11%
Finance and
Corporate Services
6%
Council Tax Collection
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Billing authorities are Metropolitans, Unitaries,
and Districts.
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Bills delivered before 1st April.
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Legislation prescribes collection process – some
local discretion.
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All funds collected go into Collection Fund and
redistributed to precepting authorities.
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Collection rate 2010/11 98%.
Assets and Capital
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SSDC asset holdings
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Levels of investment (past, current, future)
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Capital Strategy
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Asset Management Plans
Government Grant
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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
Planned Expenditure
Start with this year’s budget
 Add inflation/pay increases
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Formula grant
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Inescapable commitments
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Use of balances
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Corporate Plan bids
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Other grants
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Identify savings
2011/12 Budgets
Revenue Budget
£17.3 million net.
£81.9 million gross.
Capital Programme
£5.3 million.
The Capital Programme
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Capital Strategy.
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Existing schemes reviewed to ensure funding remains
accurate.
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Priority given to essential schemes e.g.maintenance of
existing facilities and assets.
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Capital Appraisal procedures and project management
process
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All bids assessed through a scoring methodology.
Approving the Budget
In February and should include:
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council tax increase and amounts for each band;
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totals delegated to Assistant Directors/Managers;
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levels of balances and reserves;
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statement of robustness of budget and adequacy of
reserves.
Criteria for Good Financial Standing
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Consistency year on year.
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Appropriate general fund balance based on
financial risks.
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Specific reserves.
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Clear annual audit opinion.
Good Financial Management
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Clear officer delegation.
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Regular monitoring by Management Board.
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Regular monitoring by Executive.
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Clear virement rules.
Financial Management Guidance and Law
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Financial Procedure Rules
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Procurement Procedure Rules
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CIPFA Code of Practice
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Local Government Acts
Understanding the Committee Budget
Reports
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Reports show movements from the original
budget approved at the beginning of the year
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Levels of balances and reserve
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Areas of risk
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Partnerships
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Virements requiring approval and noting
… cont’d
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Projecting figures for the year end
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Under Financial Procedure Rules, managers
cannot overspend
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Predictions for variations
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Managers should manage fluctuations within
resources
Reserves and Balances
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Types
– Working balances
– Provision for specific purposes
– Delegated to Committees
Level
– Strategy
– Risks
Balanced budget (MTFP)
TREASURY MANAGEMENT
Treasury and Cash Management
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Short term cashflow management.
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Long term borrowing strategy.
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Long term investment strategy.
Aims of Treasury Management Strategy
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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
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Members approve the Treasury Management
Policy and Strategy Statement annually.
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Senior officer responsible for processes and
procedures.
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Adequate officer time input into the activity.
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Regular reports to Audit Committee and full
Council.
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Effective performance management and
comparison.
Managing Funds
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In-house management
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Borrowing
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External consultants
Types of Investment
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Term Deposits
Gilts
Eurobonds
Floating Rate Notes
Money Market Funds
Reserve Accounts
Cash
DMADF
Importance of Treasury Management to
SSDC
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On average, £40+ million invested.
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Supports Revenue Account - budgeted income
£0.8 million.
An increase of 3% in interest rates would
double our income.
Currently 5% of net budget.
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