CIPFA has called for councils’ chief financial officers to be accorded the importance they deserve.
In its response to feedback on its proposals for a financial resilience index for English councils it said: “With regard to the role of the section 151 officer, CIPFA is growing increasingly concerned that the position and consequent authority of the CFO is slipping further away from the top table”.
CIPFA highlights that a local authority’s CFO is not always a board member – a practice which is “out of kilter with all other major organisations in the public and private sector”.
One aim of its resilience index is to help CFOs by giving their views the back-up of the concerns of an independent body.
CIPFA hopes in time to make it a requirement to refer to the indicators in Section 25 statements, which cover the robustness of budget estimates and the adequacy of financial reserves.
The original proposal, made in July, was for an index made up of a set of six tests leading to a ‘traffic-light’ rating.
The two most heavily weighted items within the six criteria related to reserves: the total level of reserves, excluding schools and public health as a proportion of net revenue expenditure; and the percentage change in reserves, excluding schools and public health, over the past three years.
These were each weighted 0.25 in the overall score.
The other criteria were the ratio of government grants to net expenditure (0.1), the proportion of net revenue expenditure accounted for by children’s social care, adult social care and debt interest payments (0.15), Ofsted’s overall rating for children’s social care (0.15), and the auditor’s value-for-money judgement (0.1).
CIPFA’s consultation ran from July to the end of August and stirred up huge interest with it receiving 189 responses.
The overall idea received broad support. “There was little dissent over the fact that CIPFA is doing the right thing in drawing attention to a matter of high national concern,”
The replies showed a general belief that the single composite figure would be unhelpful however, and few respondents agreed with choice of the original indicators and their weightings.
One particular concern was that a publicly available index of resilience would be used: “ … to stigmatise less resilient authorities and generally put too much emphasis on financial considerations at the expense of local context and broader governance considerations”.
The other criticism was over the subjectivity in the weightings of the components, undermining the relevance of the overall score as a tool for comparison.
CIPFA has in response ditched its plan for an overall score and has added a new indicator – the reserves depletion period – which will show how long a councils’ reserves would last if reserves are depleted at the same as over the past three years.
In the first year the tool will be provided to councils and their auditors before being made available publicly next year.
