Agenda item

This report summarises two recent publications on financial sustainability and good governance in local authorities. It analyses Surrey County Council’s performance and highlights some areas for improvement.

Declarations of Interest:

 None.

Officers:

Nick Carroll, Finance Manager

Sheila Little, Chief Finance Officer

Key Points Raised During the Discussion:

1.    The Finance Manager introduced the two recent publications by the National Audit Office (NAO) and the Council’s external auditors Grant Thornton.

2.    The Finance Manager explained that the NAO report highlighted the possibility of some financial failures in local authorities.  In the past, failure within local government was due to a failure of corporate governance.  Financial failure has not been tested.  The report highlights the importance of Councils holding reserves.  Decisions on the council tax base have also been taken to ensure financial sustainability. 

3.    The Finance Manager explained that the Grant Thornton report questioned whether local authorities were reaching a point where they cannot deliver services.

4.    Members questioned whether central government would allow local authorities to fail.  Officers suggested that while the DCLG was aware of the impact of its decisions on local authorities, other departments were not so aware of the impact when making grant funding available.  The Chief Finance Officer agreed that it was unprecedented for a local authority to financially fail.  Discussions with DCLG around what would happen if the budget could not be agreed suggests that central government would send in its own people in these circumstances.

5.    The Finance Manager suggested that those most reliant on government grants were more at risk of financial failure than local authorities such as Surrey County Council who were more reliant on council tax. 

6.    Members queried how certain it was that the county council would receive the funding it is owed from the implementation of council tax support localisation.  The Finance Manager explained that District and Borough authorities have changed their local scheme and will, in part, use council tax flexibilities to reduce the impact.  It was noted that Surrey collection rates are higher than the national average.

7.    In response to a query about the proportion of planned savings which are scored as red risks, the Chief Finance Officer informed the Committee that of £68m of planned savings in 2013/14, £32m is scored as red risks.  Finance was working with the Corporate Leadership Team to ensure robust monitoring takes place.  Select Committees are also expected to monitor savings.  However, it was important to note that being scored as red does not mean that the savings will not be achieved.  It rather highlights the extent of the challenge to achieve the savings within the timescales.  Some savings have not yet been allocated for 2014/15 onwards, partly because of uncertainty around the impact of funding changes relating to localisation of council tax and retention of business rates.

8.    Members suggested that increasing business rates which are set by central government may bring about the “tipping point” for local authorities and that that message needed to be passed up to central government.

9.    The Chief Finance Officer offered to provide the Committee with an assessment of whether the Council meets each of the best practice points listed on page 159 of the report.

Actions/Further Information to be Provided:

The Chief Finance Officer to provide the Committee with an assessment of whether the Council meets each of the best practice points listed on page 159 of the report. (Recommendations tracker ref: A10/13).

Resolved:

The Committee

a.    noted the recent publications by NAO and Grant Thornton;

b.    considered the assessment of Surrey County Council’s performance; and

c.    will consider progress on the areas for improvement in due course.

Next Steps:

To consider progress on the areas for improvement in due course (Recommendations tracker ref: A11/13).