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Change is in the air. The General Election may still be some months away, but the sense of a new regime being anticipated is unavoidable.
Steve Bundred is stepping down as chief executive of the Audit Commission after six years in charge. Whether it is coincidental that the former Labour councillor will cease leading the Audit Commission at almost the exact moment that a change of government is expected, only he can say.
Change is likely at the Audit Commission, whoever takes over as chief executive – and the organisation could become much smaller. The Conservatives say that if they win the election, the Commission will focus more on spending and complaints handling and that the Comprehensive Area Assessment programme will be closed down.
The Local Government Association (LGA) has turned its sights on quangos – no doubt hoping that councils will avoid the worst of the cuts, if quangos are hit hard. The LGA is talking the same language as the Conservative Party, which is suggesting a 'bonfire of the quangos'.
Meanwhile, we should remember that it was the rescue of a banking system on the edge of collapse that altered the context for public sector delivery and the nation's public finances. It is at least reassuring that for all the pain that followed, the National Audit Office says that the Treasury had no choice but to step in and rescue not only the banks, but also the nation's citizens. 
CIPFA statement on the role of the chief financial officer in local government
This summer CIPFA launched its Statement on the Role of The Chief Financial Officer in Public Services. Following the launch of this overarching statement, we have now updated our 2003 Statement on the Role of the Finance Director in Local Government. Our approach has been to follow closely the format and principles of the overarching statement, adding in as necessary new content relating to the unique statutory position of the role in local government.
We are currently seeking views on the draft statement. Comments are requested by 5 February 2010
(please note that the closing date has been extended)
Download PDF [168KB]
Application note to delivering good governance in local government: framework
The Application Note advises on the application of the Statement on the Role of the Chief Financial Officer in Local Government under the CIPFA/SOLACE Framework Delivering Good Governance in Local Government. It illustrates:
- How the governance requirements to support the principles in the CFO statement build on the governance requirements that need to be reflected in an authority’s local code as set out in the CIPFA/SOLACE Framework and guidance note
- How the annual governance statement can reflect compliance with the CFO statement for reporting purposes.
Please download the consultation by clicking here.
Comments are requested by 5 February 2010
(please note that the closing date has been extended).
The global financial crisis and resulting economic downturn have made reductions in UK public spending inevitable. Leaders of all the major political parties have acknowledged that cuts are unavoidable and as a consequence it is clear that the forthcoming General Election will be fought in large part on the question of how reductions should be achieved and where they should fall.
The Pre-Budget report 2009 and Prime Minister's Putting the Frontline First plan for more efficient public services have added to the already considerable debate about public spending and reform.
Against this backdrop, CIPFA and SOLACE have published a discussion paper that explores the impact of public sector funding cuts on public services, and the strategies and actions that Government and public bodies might adopt to manage them.
After the downturn - managing significant and sustained adjustment in public sector funding is intended to be helpful to Government, Parliamentarians, the political parties, and public sector leaders, national and local, all of whom have critical roles to play in helping to make and implement the right decisions in response to the daunting challenges in prospect. It is based on the premise that Government must tackle these issues with real urgency immediately following the General Election irrespective of its result.
The publication is available here.
Treasury management codes
CIPFA has published the first three revised public finance publications redrafted to reflect the experience of the Icelandic banking crisis. The first publications deal with the Treasury Management Code, the Prudential Code and the Treasury Management Code guidance notes for local authorities.
CIPFA has strengthened the Treasury Management Code, including regarding the scrutiny role for those charged with governance, minimum reporting requirements and member training. The Prudential Code refocuses on capital planning and asset management and includes changes required following the move to International Financial Reporting Standards.
The publications follow the successful launch in October of the new treasury management qualification developed jointly with the Association of Corporate Treasurers. The qualification takes six months to complete and is aimed at treasury management staff in public bodies.
Alison Scott, assistant director, local government finance, at CIPFA said: ‘The revised codes have been strengthened and the qualification introduced to deliver a more confident and better trained treasury function with enhanced scrutiny by elected members.’
See
www.cipfa.org.uk/panels/
treasury_management/
publications.cfm
CIPFA has published the first accounting codes of practice for local authorities to be based on International Financial Reporting Standards (IFRS).
The 2010/11 Code of Practice on Local Authority Accounting in the United Kingdom and the Best Value Accounting Code of Practice set out the accounting requirements for local authorities. The codes are based on IFRS and signal the final phase of local authorities’ move to IFRS which began in 2007/08. From 2010/11, central government, local government and the health service will for the first time be accounting on a consistent basis.
Paul Mason, Technical Manager at CIPFA said:
‘These codes provide the definitive guidance local authorities need to implement IFRS. Local authorities are making progress with the changes required, and the publication of theses codes will help them to complete the transition to IFRS as smoothly as possible.’
CIPFA has also published its 2009/10 Guidance Notes on the Code of Practice on Local Authority Accounting: Statement of Recommended Practice. The 2009 SORP included significant changes to accounting for PFI schemes as part of the phased introduction of IFRS, and the guidance notes provide detailed, practical advice to assist practitioners in implementing the new requirements in this complex and sensitive area.
View the codes on the CIPFA shop
Councils repaid Icelandic cash
Councils have been repaid tens of millions of pounds invested in the failed Icelandic banks, according to figures from the Local Government Association (LGA). Administrators for the banks have repaid almost £70m to local authorities across the UK, with at least £30m more expected to be repaid in the near future.
The LGA reports that councils have been involved in negotiations to recover deposits in four Icelandic banks and expect to get most of their money back when the complex process of unwinding the banks' affairs is completed. Initial payments were made by administrators for Heritable and Kaupthing Singer and Friedlander, which were registered in Britain. Councils are confident that Iceland-registered Glitnir and Landsbanki will have funds to repay local authorities who had deposits with the banks, but are awaiting the conclusion of the winding-up process by the Icelandic authorities.
www.lga.gov.uk/lga/core/page.do?pageId=4449361
4% rise in local government grant
English councils are to receive a 4% funding increase for next year. The Government expects the average Band D council tax increase in 2010/11 to be the lowest for at least 16 years, but it says it is willing to cap ‘excessive increases’. Local authorities will receive government grants of £76.3bn in 2010/11. Total formula grant will rise by 2.6% to £29bn.
Full details of the Local Government Finance settlement can be found at: www.local.communities.gov.uk/finance/1011/grant.htm.
The LGA’s response is published at www.lga.gov.uk/lga/core/page.do?pageId=6022166.
Business rate bills to fall
Most business rate bills will fall next year as a result of revaluation and total collected revenue from business rates will not rise, the Government has announced. Some 60% of businesses will receive lower bills in 2010 than in 2009. For those whose bills rise, support will be made available through a £2bn transitional relief scheme. One million business properties will see an average decrease of £770 in 2010/11.
See www.communities.gov.uk/news/corporate/1384890
Spending rises
Local authorities’ total net current expenditure increased in 2008/9 by 4% over the previous year, to £113.1bn. Some 54% of revenue expenditure was funded by government grants; 25% by council tax; and 21% by redistributed non-domestic rates. Some 37% of net current expenditure was on education; 17% on social care; 13% on housing benefits; and 10% on police.
See www.communities.gov.uk/publications/corporate/statistics/revenue200809finaloutturn
£1bn on offer for carbon reduction
Local authorities could access investment funds of nearly £1bn from 2020 if they have realistic plans to reduce carbon emission through local renewable energy schemes, communities secretary John Denham has suggested. He added that the Government expects councils to be fully engaged in the new cap and trade scheme being introduced in April.
Under the Carbon Reduction Commitment the most efficient authorities that use the initiative to save electricity will reduce emissions, save money, and reap rewards that they will be able to invest back into local services.
The Government also intends to work with councils on new ways to deliver ambitious carbon reductions to help deliver the Government's Low Carbon Transition Plan, support the creation of green jobs and enable authorities to drive innovation. Local authorities will be expected to work in greater partnership with energy suppliers in the delivery of and investment in energy efficiency measures and renewable energy provision.
Councils are also to have a stronger role in planning for climate change and in supporting renewable energy. A £10m capacity building programme will be made available for pilot schemes. Councils will be expected to be more active in moving to lower carbon methods of operation.
New standards for carbon emissions for all homes have also been announced and are scheduled to be in place for 2016.
www.communities.gov.uk/news/corporate/1394658 and
www.communities.gov.uk/news/corporate/1391989
Recycling rates improve
The English household recycling and composting rate has risen to 37.6% in 2008/9 from 34.5% in 2007/8. But the LGA says that despite the improvement, the risk is growing of financial penalties being imposed on councils for failing to meet EU targets for cutting waste going to landfill by 2013.
The LGA also reported that the cost of waste collection and disposal is predicted to rise by £1.1bn by 2013, from £3.1bn in 2009 to £4.2bn in 2013. The extra costs reflect increases in landfill tax. Changes to the categorization of different types of waste are also raising costs.
The LGA has called for investment funding to improve waste management through increased application of new technologies.
See www.lga.gov.uk/lga/core/page.do?pageId=5369767
and www.lga.gov.uk/lga/core/page.do?pageId=4686690
Change to capital charges
Notional rates for capital charges that are prescribed by CIPFA have been published for 2010/11. There has not been a requirement to use a capital financing charge since 2006/7 in local government, but some authorities continue to use this for internal management accounting purposes, while others may need to use it for specific purposes in the management of costs. For assets carried at current value, the capital charge interest rate is to be 3.5%, while for those carried at historical cost it will be 4.2%.
See www.cipfa.org.uk/pt/download/laap83.pdf
LGPS responses published
Responses to a consultation on changes to the local government pension scheme have been published.
See
www.communities.gov.uk/documents/localgovernment/pdf/1400465.pdf
Economic powers strengthened
Councils have been given stronger economic development powers, after the passing of the Local Democracy, Economic Development and Construction Act. Local authorities are now required to work closely with local people and regional partners to deliver growth. The Act increases the regional planning and economic development powers of regional development agencies – which the Conservative Party intends to scrap if it wins the General Election.
The Act also gives councils the power to establish mutual insurance companies to make efficiency savings – reversing the legal judgement in the London Authorities Mutual Limited case.
www.communities.gov.uk/news/corporate/1382694 and www.communities.gov.uk/news/corporate/1355540
Ofsted's improvement agenda
Ofsted should be the calm, measured voice that helps to make child protection services work better rather than feeding people’s fears, said the Local Government Association (LGA) in a call for the inspectorate to sign up to its own improvement plan to win back the confidence of the public, central government and councils.
The LGA believes Ofsted has become too concerned about protecting its own reputation and places a disproportionate emphasis on publicly highlighting weaknesses in child protection without adequately reflecting the huge amount of good work being done by councils across the country. It blames Ofsted for a sharp increase in care referrals.
The number of care applications for the three months to September 2009 rose more than 47% compared to the same period last year and the number of children taken into state care in the last year rose by 9%. These increases are putting the systems which protect children under extra pressure and making it harder to identify the children at the greatest risk of harm, says the LGA.
The Association of Directors of Children’s Services also issued a statement criticising Ofsted.
www.lga.gov.uk/lga/core/page.do?pageId=5928498 and www.adcs.org.uk/PressReleases/ADCS-PR-Challenging-the-challengers.pdf
LGA criticises asset sale
The LGA has criticised government plans for a sale of £16bn of public assets, complaining that local authorities – owners of many of the assets earmarked for sale - were not consulted. Assets available for sale may be identified as part of the Total Place programme, which is seeking to rationalise local service provision and encourage the shared use of local public buildings.
www.lga.gov.uk/lga/core/page.do?pageId=4657453
New ombudsman
Dr Jane Martin has been named as the preferred candidate for appointment as the next Local Government Ombudsman following a public competition. Her appointment is subject to confirmation by the Communities and local government select committee.
www.communities.gov.uk/news/corporate/1353440
Scottish cuts
Scotland’s public sector must get ready to choose between public spending priorities, a report from Audit Scotland stresses. The report, Scotland’s public finances: preparing for the future, describes the growing financial pressures caused by a smaller budget at the same time as an ageing population, the rising costs of free public services, the backlog of maintenance and repair of buildings, roads and other assets, and the extra pressures on public services as unemployment rises during the recession.
The Auditor General, Robert Black, said. ‘The first ten years of devolution was a period of significant growth for the Scottish public sector. That picture is changing fast. There are serious financial pressures ahead and the whole of the public sector must quickly find ways of making informed decisions about competing priorities.’
By 2013/14, the gap between planned Scottish Government spending and the money available could be between £1.2bn and £2.9bn, says the report, compared to the Scottish Government’s budget for 2009/10 of around £30bn. The report doubts whether the gap can be filled by the Scottish Government’s efficiency programme, which is planned to deliver 2% annual cash savings by the end of 2010/11.
The report says that the Scottish public sector needs much better information to link its spending with actual service delivery, costs and performance.
See www.audit-scotland.gov.uk/media/article.php?id=119
Council grant increases
Scottish councils are to receive a 2.9% rise in grant funding, to £308m. The settlement will allow councils to freeze council taxes for a third successive year. The business rate poundage for 2010/11 remains in line with that in England, at 40.7 pence. Scottish finance minister John Swinney said: ‘The funding increase for councils next year would have been £174m higher had it not been for the £500m cut in the Scottish budget from Westminster.’ He added that a joint review with the Convention of Scottish Local Authorities (COSLA) and representatives of Scottish councils concluded that the local government funding distribution mechanism currently being used ‘had identified no genuine anomalies that needed to be addressed in the medium term’.
See www.scotland.gov.uk/News/Releases/2009/11/26102014
Efficiencies claimed
The Scottish government has claimed that it has saved over £830 million through efficiencies last year. The efficiency savings represent 3.1% of 2008/9 expenditure, an improvement on the 2% target. Projected savings will rise to 4% in 2009/10 and 6% in 2010/11.
See www.scotland.gov.uk/News/Releases/2009/11/24100209
Best Value ‘has worked’
The Best Value programme in Scotland has driven improved value for money outcomes for all its 32 councils, while improving internal performance management and accountability, concludes Scotland’s Accounts Commission.
Caroline Gardner, Controller of Audit, Audit Scotland, said: ‘We welcome the progress made so far. There is now a much clearer understanding of important issues and how to drive improvement. But, as most councils realise, they still have much to do to ensure they are operating as effectively and efficiently as possible.’
The Accounts Commission and Audit Scotland have begun the second phase of their Best Value audit, focusing on specific issues within each council. They will look more closely at what happens as a result of councils’ actions and will give clear judgements on whether or not councils are improving and how well they are placed for delivering future improvement.
See www.audit-scotland.gov.uk/media/article.php?id=118
Procurement reforms
Further reforms have been announced in Scotland’s public procurement systems to assist SMEs to win contracts.
See www.scotland.gov.uk/News/Releases/2009/12/02101017
Budget finalised
Wales’ final Budget includes an extra £20m to tackle youth unemployment and £4m to support additional research and development work in collaboration with business. The Assembly Government remains committed to protecting public services that the public rely on.
See http://wales.gov.uk/news/latest/091208budget/?lang=en
Audit Office peer review
An international Peer Review of the Wales Audit Office has helped to establish a clear agenda for the organisation to develop, says the Auditor General for Wales. He said that his office will build on existing efficiency savings, modify its audit and inspection work to respond to the challenges facing the public sector in Wales and introduce improvements to the way the Wales Audit Office is directed.
See www.wao.gov.uk/news/pressreleases_2887.asp
Councils improve
Council performance in Wales is continuing to improve, but has not yet achieved the desired level of consistency, says local government minister Dr Brian Gibbons. He was responding to publication of data on local authority service provision in 2008/9. Improvements include school attendance rates; reduction in unnecessary hospital stays; reductions in home improvements for people with disabilities; and increases in waste recycling.
http://wales.gov.uk/news/topic/localgovernment/2009/091001localgovernmentdata/?lang=en
Audit review
Northern Ireland’s Chief Local Government Auditor has published his annual review of the exercise by local government auditors of their functions. The report comments on aspects of the Financial Management Arrangements; on Corporate Governance Arrangements; on a new Data Matching Exercise being developed as part of a National Fraud Initiative for Northern Ireland, and highlights issues that local government auditors have raised with councils in the course of the audit of the councils’ statement of accounts for the year to 31 March 2008.
See www.niauditoffice.gov.uk/pubs/onepress.asp?arc=False&id=223&dm=0&dy=0
Surcharge abolished
Local government auditors are to lose their power to surcharge councillors in Northern Ireland, under proposals put forward by environment minister Edwin Poots. The Head of the Northern Ireland Audit Office requested their removal on the ground that they no longer serve a useful purpose in Northern Ireland and had been abolished previously in England. It is intended the surcharge will be abolished by the time of district council reorganisation in Northern Ireland, which is scheduled to take place in May 2011.
See
www.northernireland.gov.uk/news/news-doe/news-doe-november-2009/news-091109-accountable-local-government.htm
Audit fees go down - and up
The Audit Commission is cutting audit fee scales for health organisations by 2% and probation boards by 1% for 2010/11, reflecting the lower burden of audit following the completion of the implementation of IFRS.
Audit fees for local authorities, the police and fire and rescue bodies are to increase by 6%, reflecting the cost of moving to IFRS in the new financial year. Inspection fee scales for local authorities will be kept at 2009/10 levels.
There is to be no increase in the hourly rate applied for audit or inspection.
See www.audit-commission.gov.uk/fees2010.
NFI goes ahead for 2010/11
The Audit Commission has announced arrangements for its operation of the National Fraud Initiative for 2010/11, using its data matching powers under Part 2A of the Audit Commission Act 1998. NFI has been run every two years since 1996 to identify fraud and overpayments totalling nearly £550m. It is intended that the fees charged for data checking will be held at current levels.
For further information go to
www.audit-commission.gov.uk/SiteCollectionDocuments/MethodologyAndTools/
Guidance/nfi201011proposedworkprogrammescaleoffees.pdf
Annual fraud survey to begin
The Audit Commission has launched a survey to examine the extent of detected fraud and corruption in England’s councils, police, fire and rescue and probation services. It is asking 500 organisations for data, in an effort to chart losses caused by fraud.
The study is the first of what is intended to be annual fraud surveys. Results will be published in the 2010 ‘Protecting the Public Purse’ report.
For further information go to
www.audit-commission.gov.uk/pressoffice/pressreleases/Pages/20091030lgfraudsurvey.aspx
Sharing services across boundaries
There is a widespread expectation amongst public bodies that back office services will in future be provided through shared service arrangements, according to a CIPFA survey. Nearly half of the public service organisations (46%) expect to be developing partnerships with other public bodies or actively sharing services in 2010, the survey found.
Public bodies are more likely to seek spending cuts through service efficiencies than by reducing front line services – an option planned by only 16% of survey respondents. Some 70% of respondents saw very or quite significant cost savings arising from future shared service arrangements; 55% of respondents believed that pressures to cut costs would impact on their own organization; 83% believed the quality of frontline services across the public sector would be reduced.
Change management (62%) and gaining political agreement (45%) were cited by respondents as the two major challenges in delivering successful shared services
A major guidance report on shared services - 'Sharing the Gain: Collaborating for Cost Effectiveness' - is published by CIPFA on 20 January 2010.
See www.cipfa.org.uk/press/press_show.cfm?news_id=60690
Joining-up data
The Audit Commission has published a discussion paper on the use of data by public bodies. It says that services cannot be 'joined up' if organisations distrust each other's data.
The Commission's discussion paper ‘Nothing but the truth’ suggests three options for assessing data, including spot checks on the indicators used to track service performance. Better information, it says, could improve efficiency and value for money. It also proposes that inspectors should give independent assurance of the credibility of information in addition to auditors' examination of accounts.
Audit Commission chief executive Steve Bundred said: ‘Many recent failures to protect the vulnerable - Victoria Climbié and Baby Peter in Haringey, the high death rate in Mid-Staffordshire NHS Foundation Trust - have raised questions about the quality of information used by professionals and how well they share it.’
For further information go to
www.audit-commission.gov.uk/nationalstudies/localgov/Pages/nothingbutthetruth.aspx
Sustainable finances
The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has published a consultation paper, 'Reporting on the Long-Term Fiscal Sustainability of Public Finances'.It seeks views on how information on the long-term sustainability of government programs may complement information available in traditional financial statements, thereby increasing transparency and enhancing accountability and decision making.
‘The need for understandable information on the long-term sustainability of all governmental programs has become increasingly apparent from the work that the IPSASB has carried out in developing its own public sector conceptual framework and on accounting for social benefits,’ says Mike Hathorn, chair of the IPSASB. ‘There is a growing awareness that such information can be crucial in allowing citizens to evaluate the scale of the fiscal challenges facing governments, so that the impact on future generations can be better understood.’
www.ifac.org/Guidance/EXD-Outstanding.php.
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