Clauses 26 and 27: Budget calculations:
report on robustness of estimates etc and budget monitoring
24. Clauses 26 and 27 introduce new duties on Chief
Financial Officers with respect to reporting on financial matters.
We received no evidence that these clauses will make any difference
to the decisions made by an authority that wishes to act imprudently.
In relation to Clause 26 (which sets a duty on Chief Financial
Officers to report on the robustness of estimates when the annual
budget is being set), Mr Soare of CIPFA said,
"I suppose we view that what is intended
by Clause 26—we would say going
back to the general picture— is already happening
in the vast majority of local authorities. In terms of a local
authority treasurer giving advice on the robustness of estimates
and the reserves position, there is legislation already around
balanced budgets, there are also, if you like, interventionist
type powers which local authority treasurers can exercise under
Section 114 of the 1988 Local Government Finance Act. We feel
that those already statutory powers, plus the guidance that we
are developing for local authority treasurers should be sufficient."
He added,
"Not being party in detail to any of the
authorities which have found themselves in this position, again
it is difficult to say. Having something on the Statute Book potentially
would not have altered the set of circumstances which took place
on the ground in those small minority of authorities."[31]
Mr Raynsford said that having Clause 26 in place
would not stop a council from ignoring the advice of its Chief
Financial Officer.[32]
25. Clause 27 requires authorities to monitor income
and expenditure against budget. Mr Soare told us,
"In the sense of it being a professional
requirement on the local authority treasurer, that is already
there. In terms of best professional practice, invariably—and
again if you look at Audit Commission work in this area—you
do not find the vast majority of local authorities being unaware
of the in-year budget position. Indeed, there is a regular cycle
of reporting, as is commonly known. We are developing our guidance
into a professional practice standard for those treasurers who
are CIPFA members, that is coming out later this year. We would
say in the vast majority of authorities that in-year budget monitoring
is part and parcel of the professional round and it is acknowledged
that it is an essential element of financial management."[33]
We recommend that Clauses 26 and 27 be removed.
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