CIPFA’s Prudential Code paves the way for improved local authority asset management

CIPFA welcomes the announcement that the prudential framework will commence in England from 1 April 2004.

Under the new arrangements local authorities will determine their own programmes for capital investment in fixed assets that are central to the delivery of quality local public services.

Steve Freer, CIPFA’s Chief Executive, said:

“The current legislation that controls capital investment by local government has long been recognised as getting in the way of good asset management. The new framework will have a real and beneficial impact on service delivery by supporting strategic planning for capital investment at the local level. We are proud that CIPFA has been able to play an important part in the introduction of the new framework through the development of the Prudential Code.”

CIPFA has developed the Prudential Code for Capital Finance in Local Authorities as a professional code of practice to support local authorities in taking these decisions. Key objectives of the Prudential Code are to ensure, within a clear framework, that the capital investment plans of local authorities are affordable, prudent and sustainable; that treasury management decisions are taken in accordance with good professional practice; and that local strategic planning, asset management planning and proper option appraisal are supported.

Provided that the Government does not use its long stop powers to control future capital investment, local government will in future be able to chose between revenue intensive and capital intensive options for service delivery, undertake ‘spend to save’ capital schemes and undertake additional self-funded capital investment where they can afford to do so.

The full potential of the new system for service delivery will however only be realised if, in addition to the changes now announced, other key elements of the system move forward. For example if government support for capital investment continues to be linked to particular forms of investment it will skew decision-making. CIPFA looks forward to working further with the central and local government community to take forward these issues.

ENDS

Notes to Editors:

1 The CIPFA Prudential Code for Capital Finance in Local Authorities was approved by the Institute Council on 11 September 2003. It will be available from CIPFA Publications early in October. More information about the Prudential Code can be found on the CIPFA website at www.cipfa.org.uk/pt/prudential_framework.cfm

2 CIPFA will also shortly be publishing guidance on the application of the Prudential Code and the experience of road testing the Code with local authorities.

3 A comprehensive package of training materials is being developed for use within the new framework and will be available in the near future.

4 The Chartered Institute of Public Finance and Accountancy (CIPFA) is one of the leading professional accountancy bodies in the UK and the only one which specialises in the public services. It is responsible for the education and training of professional accountants and for their regulation through the setting and monitoring of professional standards. Uniquely among the professional accountancy bodies in the UK, CIPFA has responsibility for setting accounting standards for a significant part of the economy, namely local government. CIPFA’s members work (often at the most senior level) in the public service bodies, in the national audit agencies and major accountancy firms. They are respected throughout for their high technical and ethical standards and professional integrity. CIPFA also provides a range of high quality advisory, information and training and consultancy services to public service organisations. As such, CIPFA is the leading independent commentator on managing and accounting for public money.

5 The Institute of Public Finance (IPF), as CIPFA’s commercial division is able to provide support to local authorities in the implementation of the Prudential Code in a variety of ways. Up to date briefings will be provided to all authority members of IPF’s various networks and forums, with the aim of assisting both finance and property professionals and all local authority managers, to understand and react to the Code effectively. IPF Training and IPF Consulting are also able to provide full in-house support for authorities on the Prudential Code. CIPFA Statistical Service, CIPFA Benchmarking and the Technical Information Service are all in the process of updating their information services to be Prudential Code compliant.