Select Committee on Environment, Transport and Regional Affairs Memoranda

Memorandum by the Society of County Treasurers (LAG 28)

  The Society of County Treasurers (SCT) welcomes the opportunity to submit evidence to the Environment Sub-Committee.

  The Society includes and represents the Chief Finance Officer of each Shire County Council.

  Sound financial governance must be at the heart of the new political arrangements which local authorities are introducing. It should be part of the culture and ethos of each and every authority.

  Within this, the role, position and influence of the Chief Finance Officer is a key consideration. The SCT strongly endorses the point made previously by CIPFA that it is up to each local authority to satisfy itself that its management arrangements are consistent with the law. In doing so, each authority should satisfy themselves that their arrangements are consistent with good corporate governance and that the authority and corporate management team have sufficient access to financial information and expertise.

  This principle is paramount. The SCT recognises that throughout the country there are a variety of different approaches being followed by authorities, which are now modernising their political and decision making structures. These approaches are all in different stages of development. As a consequence, there is no common model for the role of Chief Finance Officer and how financial governance is embossed in the culture and organisation of an authority. What is vital, however, and should be common is that the Chief Finance Officer enjoys sufficient status in the organisation and is afforded the current statutory protection.

  The SCT would argue that as a matter of principle the individual circumstances of each local authority need to be taken into account in such deliberations and that any attempt to move towards rigid prescription would be a mistake. However, the SCT is concerned that the importance of the Chief Finance Officer and financial governance should not be overlooked in the changing pattern of local authority development that is now taking place.

  CIPFA is reviewing guidance, which they previously issued in February 1999, on the Role of the Chief Finance Officer in Local Government. The SCT has provided evidence to CIPFA to assist in this key updating of principles. The SCT strongly supports the work that CIPFA is now undertaking.

  The separation of Executive and Scrutiny functions, is a key part of the new arrangements. This could be a difficult area for the Chief Finance Officer and financial governance if key principles are not followed. Whereas it is most important that the ability of the Scrutiny function to undertake independent reviews of decisions must be respected, the need for sound and impartial financial advice is common to Executive and Scrutiny functions. The Society feels strongly that the Chief Finance Officer should have equal access to both. With decision making moving into portfolio holders, and the decision making process being revitalised, practical areas emerge around ensuring that members who are not immediately involved in this process are adequately supplied with financial information. This could include members of an opposition party if the authority has single party Executive. In the latter circumstances, accountability and financial governance mean that there should be adequate scrutiny of all such recommendations before they move to the Council for decision making.

  Implementing the modernisation agenda brings with it a need to consider at some stage officer delegation levels. A balance must be struck between decisions which should rightfully be made by portfolio holders and those which might previously have been made by members but which do not have the importance, statutory or otherwise to justify a continuation of those previous arrangements. Sound financial governance should be an important consideration in any revision of delegation levels. This is another illustration of the importance of understanding financial governance to the day-to-day working of the local authority.

  The Society is concerned about the potential implications for the position of Chief Finance Officer and financial governance if modernisation is undertaken without regard to a framework of financial stewardship. The role of the Responsible Finance Officer is defined by Section 151 of the Local Government Act 1972 and there are specific responsibilities included in Section 114 of the 1988 Act along with particular responsibilities which are included in the Accounts and Audit regulations.

  CIPFA are separately submitting evidence to the Select Committee. The SCT strongly urges the government to ensure that the pillar stones that have successfully underpinned financial administration and governance in local authorities should, continue to be applied to the new political structures. Whilst the decision making process is being revitalised, financial management and governance principles should be common to both old and new approaches.

January 2001

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