Agenda item

The purpose of this report is to inform the Committee of the results of the external auditors review of the Council’s arrangements for securing financial resilience. 

Declarations of Interest:

None.

Witnesses:

Guy Clifton, National VfM – Advisory Lead (Grant Thornton)

Sue Lewry-Jones, Chief Internal Auditor

Sheila Little, Chief Finance Officer

Key Points Raised During the Discussion:

1.    The National VfM – Advisory Lead introduced the report.  He informed the Committee that the findings were very positive, with only two categories not rated as green.  The ‘Adequacy of Planning Assumptions’ was rated as amber due to the scale of the challenge facing the Council in terms of the capital programme on schools and the required efficiency savings.  This was a situation which was not unique to Surrey.  The category ‘Understanding the Financial Environment’ was also rated as amber because of the ongoing cultural shift from financial responsibilities being seen as the role of finance to all managers having clear ownership of their financial responsibilities.  This requires further embedding.

2.    It was suggested by a Member that use of cash flows would help managers to understand their financial responsibilities.  The National VfM – Advisory Lead agreed that it was useful to apply ratios to Local Government finances.  Applying indicators was a step forward.  It can be used to provide context to managers to understand their own budgets and responsibilities but there should not be a need for budget holders to undertake their own cash flow forecasts.  The Chief Finance Officer informed the Committee that a cash flow tool is used centrally to monitor how much cash the Council has.  The Treasury Management Strategy sets out what to do if cash levels fall below certain levels.  It was challenging to communicate that while the organisation may have a large cash balance, these balances are not surplus and are not available for managers.  The National VfM – Advisory Lead expressed that all stakeholders had been positive about the Chief Finance Officer’s ability to communicate about the financial environment.

3.    In response to a query about prediction of future financial resilience, the National VfM – Advisory Lead explained that the Financial Resilience Report used the Audit Commission’s criteria for “foreseeable future” which is 12 months from the time of the report. 

4.    Members expressed surprise about budget holders being given financial responsibility as they had thought that budget holders had always had responsibility for their budgets.  The National VfM – Advisory Lead clarified that this point related to a cultural shift so that there is a clear understanding of budget responsibility and training on new financial tools.  Managers may have job descriptions that state that they have financial responsibility but that doesn’t mean that they are currently fulfilling that responsibility fully in all cases.  The Chief Finance Officer agreed that this was a subtle change.  While all budget holders have responsibility for their budgets, some are less keen to take that on board and the Finance Team is having to provide support.  Budget holders are being encouraged to do more for themselves and part of that is to ensure that they have the right tools, eg the Finance Dashboard.

5.    In response to a query about the financial picture looking ahead, the National VfM – Advisory Lead informed the Committee that over the past few years, a worsening financial picture for local authorities had been expected.  However, Grant Thornton’s first two national reports on local government financial resilience had seen broad improvements in ratings apart from some relating to financial planning.  The ‘Tipping Point’ is a real concern for local authorities, but this point is pushed back as local authorities continue to deliver their budgets.  Local Government has proven to be very resilient.  Therefore, it is difficult to forecast when the tipping point will arise for authorities, but 2015/16 appears to be a critical year for the sector.

6.    A Member asked whether the Council had undertaken any long term financial planning past 2020.  The Chief Finance Officer informed the Committee that she had contacted other local authorities and found that no one was planning beyond the medium term of 2015/16. 

Actions/Further Information to be Provided:

None

Resolved:

      i.        That the Financial Resilience Report be noted.

     ii.        That the officer response to the next steps identified by the external auditor be AGREED.

Next Steps:

None.