Scrutiny Select Committees

Introduction to local government finance

Agenda

• The Council budget – Why budget?

– The balancing act – Key dates and activities – Budget variances • Revenue vs capital – Expenditure – Funding • Retention of business rates • Recommended reading

Why do we need to budget?

• Planning • Monitoring • Controlling • Measuring performance

The balancing act

RSG Grants Business rates Council tax Rents Fees and charges

Income Expenditure

Employees Premises Transport Supplies and services

Key budget dates and activities

Apr May Jun Jul Aug Sep Oct Nov Dec Jan previous year

closure of accounts audit of accounts

Feb Mar current year

budget monitoring & control budget updates more detailed forecasts

next year

provisional settlement final settlement public consultation detailed estimates savings/growth cabinet and SMG proposal to council

Monitoring budgets

Variances can occur due to:

• Delays in processing payments/income • Uneven spending patterns • Incorrect profiling of budgets • Mis-codings • Centrally managed budgets e.g. repairs and maintenance • Activity/demand changes • Incorrect budget assumptions • Poor management of resources

Revenue vs capital, expenditure

• Revenue expenditure relates to the day-to-day running of the Council • Capital expenditure relates to the acquisition or improvement of a fixed asset such as land, buildings, vehicles or roads

Revenue vs capital, funding

• Revenue funded by: • Council tax • Central government grants • Redistributed business rates • Fees and charges • Capital funded by: • Capital receipts • Grants • Borrowing • Contributions from the revenue budget

New developments: business rates

• Position up to 2012/13 – Collect NNDR as an agent for the government – Rates set centrally – NNDR redistributed by govt according to perceived need – Redistribution NOT connected to amount collected – SCC net gainer • From 2013/14 – 50% retention by collecting authorities – System of tariffs/levies to ensure fairness – Rates still set centrally – Authority will keep any incremental increases in rates collected

Recommended reading

On the finance library intranet page at http://intranet.salford.gov.uk/customer/finance/finance accountancy/finance-links.htm

• A brief guide to local government finance for councillors (CIPFA) • A comprehensive guide to local government finance (CIPFA) • Finance for members (link to mini-site)