Surrey Heath Borough Council must develop a financially sustainable medium-term budget that can be flexed to accommodate the council’s regeneration ambitions.
That’s according to the findings of a Local Government Association (LGA) Corporate Peer Challenge, which was conducted in July, with the results published on 20 October.
In September, the authority said it faced “effective bankruptcy” in the next two to three years as a result of costly commercial investments, which have left the authority in “huge debt”.
According to the LGA review, Surrey Heath needs to “scenario plan” by identifying financial risks and opportunities that can be modelled.
Even though there are “significant” earmarked reserves, the fact that there are potentially three years left in general fund unallocated reserves means “difficult conversations” are needed “about what can realistically be delivered within the budget available”, according to the LGA review.
The quality of services may have to be scaled back from ‘gold’ standard to ‘bronze’, while the council “urgently needs to build a skilled finance team that is front and centre of the financial issues facing the council”.
The review also noted that attitudes to finance must change at the authority, with all staff and members needing to understand that good financial management “is everyone’s responsibility, not just the finance team’s”. A general mindset that “reserves will cover it” must also be challenged.
Budget monitoring is “patchy” and “some services are better than others”, the LGA review peer team were told. Additionally, engagement in the budget process beyond the finance team was previously limited, “meaning managers were not aware of their service or staffing costs”.
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Implementing finance business partners and monthly budget monitoring meetings with managers has “started to bring about a cultural change to the council’s approach to finance”, the review noted, which “needs embedding further” along with “continued finance and budget monitoring training for staff”.
Additionally, the council “needs to invest in developing the finance skills of budget managers, nonfinancial officers as well as members on the executive, scrutiny and audit committees, particularly those new to local government finance. This is essential, not just so that the organisation understands the current resource allocation but so that budget monitoring is consistently good across the council,” the review stated.
Procurement needs to be robust and embedded across the council, while more work is needed to embed the importance of risk management across the organisation, the review found.
The council’s statements of accounts is also outstanding, a situation the LGA team said was not dissimilar to many other councils. Surrey Heath’s accounts have gone unaudited for the last three years. “This is impacting on Surrey Heath’s reputation and the perception of the financial resilience of the council,” the review stated. “The council is in the process of switching external auditors – it is important this is resolved as quickly as possible.”
Finally, while the council is giving “careful consideration” to its future asset development, the review noted the importance of reviewing and actively managing the council’s current assets. “The organisation would benefit from developing a full-scale asset list and reviewing their current and future purpose,” the review stated. “The peer team was informed that a full asset register is being prepared by the council. The council is holding onto property assets until the market changes and value increases. Opportunities to use existing assets for income regeneration should also be considered.”
Commenting on the results of the LGA review, Surrey Heath Borough Council leader Shaun Macdonald said: “The Local Government Association peer team were invited as an important part of our commitment to continuous improvement. The process was very comprehensive with a team of peers speaking to over 75 staff, partners and councillors.
“I’m very pleased the report recognises the many successes achieved so far on our journey, and the extremely positive culture, leadership and commitment and pride of staff.
“I’m also glad that the LGA recognised the importance of the council working towards delivering a balanced budget.
“We are already working on the areas of recommendation and will publish an action plan by December.”
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