CIPFA's Comments on Business Improvement Districts in Scotland
1. OVERVIEW
CIPFA is pleased to comment on the consultation document on business Improvement Districts in Scotland. At the outset, it should be noted that CIPFA declines to comment on the policy intention of the Scottish Executive. Comments are however offered on the basis that BID's will in fact be introduced in Scotland and rather than rehearse political debate, CIPFA's comments focus upon the following practical challenges to be faced by the Scottish Executive, local authorities and BID partner organisations
CIPFA then goes on, in the spirit of resolution, to identify a practical framework of solutions for consideration by the Scottish Executive. As the leading professional accountancy body for the public services and the leading independent commentator on public money, inevitably CIPFA and its members possess the financial and governance skills which will be critical to ensure the future success of BID's. CIPFA anticipate working directly with the Scottish Executive to discuss and develop the identified solutions.
2. DETAILED COMMENTS CORPORATE GOVERNANCE
The proposal to set up a Board is noted. Clearly this would introduce a formal and different relationship between the local authority and the Board and indeed the other parties and the Board. It is at that point that all parties will require to be clear on the corporate governance arrangements to put in place. CIPFA in association with SOLACE developed a Corporate Governance in Local Government A Keystone for Community Governance Framework and an associated Guidance Note. The Guidance Note has proved to be a useful tool in assisting local authorities to implement the principles of corporate governance. The unique and innovative nature of BID's may require a clear focus from local authorities on the governance arrangements required to satisfactorily administer, govern and account for BIDS. The existing Framework could be used as a base model to develop a practical governance template for the relationship between local authorities and business improvement district partners. Against the background of potential risk, the arrangements between the respective partners should incorporate strong managerial, financial and operational controls, the key elements of which are:
These controls can be further categorised: Preventative - for example, segregation of duties, authorisation procedures, physical custody, access limitations; Detective controls - arithmetical and accounting checks, consistency checks, continuity checks; and Directive controls - written policies and procedures, reporting lines, supervision and management and training. Recommendation: A practical governance template which aids risk assessment and incorporates the installation of the above managerial, financial and operational controls should be developed. CIPFA would be pleased to assist the Scottish Executive in addressing this matter. The CIPFA publication Building Effective Partnerships incorporates practical guidance on creating and managing partnerships. This publication sets the following base feasibility criteria which could be applied to the practical development of BID's:
The publication then provides a practical checklist which builds upon these set criteria and identifies how each may be addressed. Recommendation: The CIPFA publication Building Effective Partnerships should be utilised as a practical tool. A practical governance template for local authorities should be developed. CIPFA would be pleased to assist the Scottish Executive in addressing this matter.
FINANCIAL MANAGEMENT
The funding of a BID may require some form of scrutiny to provide assurance that the proposed levy is 'fair' and that all additional sources of funding have been identified.
Recommendation: CIPFA would recommend that accountability of BIDS be demonstrated by independent examination of proposals prior to commencement and supported throughout the life of the project by the preparation of an internal annual statement of income and expenditure which is independently certified by the Board. The arrangements for external reporting are considered below. The financial management arrangements will require to be supported by a specific protocol which enables the respective partners to delegate financial management to a specific body, chief financial officer or employee. This could be achieved by the development of a model scheme of delegation which could be applied to all BID's in Scotland.
Recommendation: A model scheme of delegation should be developed to assist the respective partners in managing the practical risks and financial arrangements. Assistance and guidance will properly be provided for the ongoing governance and financial management of BID's. The general basis for the guidance will be the ongoing nature of the project. Inevitably however there may be occasions when, for a number of reasons, BID's do not achieve the desired outcomes. Practical advice and guidance will be required therefore to set out to provide support partners in the event of the potential failure or breakdown of the BID arrangements.
Recommendation: Practical guidance which sets out exit strategy development should be incorporated within the governance template recommended above.
The nature of a BID is that there will be a stated outcome upon which the success criteria can be readily identified. To enable ongoing monitoring and effective accountability, any stated levy should be linked clearly with that stated outcome. The solution may be the requirement for the production of financial information and key performance criteria which clearly demonstrates that the anticipated outcomes have been achieved.
Recommendation: Accountability should be a clear feature for ratepayers with the production of financial information and set key performance measures which demonstrate that the anticipated outcomes have been, or are, being achieved by the Board.
FINANCIAL REPORTING
The BID may be the subject of high profile within a particular area. The direct consequence may be an appetite for demonstrable accountability which satisfies both public and private sector partners and the general public. The arrangements for periodic financial reporting will require to be addressed. It may be that the duties placed upon a local authority under Section 13 of the Local Government in Scotland Act 2003 is the appropriate vehicle to ensure the level of accountability required.
Section 13 presently states that "It is the duty of a local authority to make arrangements for the reporting to the public of the outcome of the performance of its functions."
Recommendation: The Scottish Executive is presently consulting formally on statutory guidance for local authorities under Section 13 of the Local Government in Scotland Act 2003. The guidance could be amended prior to finalisation to require the inclusion of summary financial information relating to BID's.
OTHER CONSIDERATIONS
There would appear prima facie, to be the potential for the content and partners within BID's to be similar to the arrangements anticipated under the requirements of Community Planning as contained within the Local Government in Scotland Act 2003.
Recommendation: Clear practical guidance from the Scottish Executive is required to provide clarification where the role of BID's interacts with the duty of Community Planning.