Agenda item

To consider a report submitted by the Director of Finanace which presents information which highlights the Council’s compliance with the Financial Management Code issued by the Chartered Institute of Public Finance and Accountancy.

The Committee considered and discussed a report submitted by the Director of Finance which presented information highlighting the Council’s compliance with the Financial Management Code issued by the Chartered Institute of Public Finance and Accountancy.

In response to the financial challenges being faced by a number of Local Authorities, towards the end of 2019 the Chartered Institute of Public Finance and Accountancy (CIPFA) issued the CIPFA Financial Management Code (FM Code) which is designed to support good practice in financial management and to assist Councils in demonstrating financial sustainability. However, it was not until mid-2020 that the Guidance Notes to support this document were issued which provided a more comprehensive description of the requirements and how these could be demonstrated. Due to the timing of the issue of the documentation, the financial year 2020/21 was deemed a shadow year to allow time for Authorities to demonstrate how they were working towards full implementation of the Code. The first full year of compliance with the FM Code was therefore 2021/22 and, in this regard, Members of the Audit Committee received a report outlining the Council’s compliance with the FM Code at the meeting of 17 January 2022.

The FM Code applies a principles-based approach. It does not prescribe the financial management arrangements that Local Authorities should adopt. Instead, it requires that a Local Authority ensures, and is able to demonstrate, that it satisfies the principles of good financial management for an authority of its size, responsibilities and circumstances.

The Code has six underlying principles designed to focus on robust financial management as a way of achieving both short-term financial resilience and long-term financial sustainability.

CIPFA issued a further publication in May 2022, The Implementation of the Financial Management Code – Approaches and Lessons Learned. This draws on the experience of Authorities in working towards compliance with the FM Code and has been used to inform the Council’s approach to applying its working practices to comply with the requirements of the FM Code.

Since the reporting in January 2022 of the original work to demonstrate compliance, the Finance Team has continued to review the Code and the Council’s compliance (including having regard to the information contained in the May 2022 publication). The commentary on compliance with the FM Code included within the report presented to the Committee uses the report of January 2022 as a starting point.

As outlined in the report, the up-to-date detailed position statement (at Appendix 1) shows the Council continues to be well placed with generally good Code compliance. The report sets out the requirements of the seven sections of the Code and its seventeen standards, and highlights where there is compliance and where some revisions and/or changes to practice are required in order to address the Code in full.

From a financial management perspective, there are three key issues about which Members may wish to have regard:

a) the Draft Audit Completion Report for the 2021/22 Statement of Accounts issued on 23 March 2023 upon which the Audit Committee has been fully updated. This gives Members of the Committee assurance about the high standard of accounting practice and a commentary on the approach to Value for Money (VFM) work. It advised that in relation to the three VFM criteria examined, financial sustainability, governance and improving economy, efficiency and effectiveness, that no risk of significant weaknesses in arrangements had been identified and that there were no actual weaknesses in arrangements identified;

b) The Audit Completion Reports and VFM commentaries on the accounts for previous financial years which are equally as good; and

c) Where areas of development were identified in the last review of compliance with the FM Code, some progress has been made to demonstrate improvement. Also, where issues have been identified in the update report presented to the Committee, plans are in place and work is already being taken forward to address them, where deemed appropriate.

The Director of Finance informed Members that in summary, as is evidenced by Appendix 1 and the above commentary, FM Code compliance is generally good and there are no areas of significant concern. All key elements have full compliance and there is some latitude as to the adoption of the requirements based on local experience and practice.

In response to a question as to how the Council would know that it is not compliant in certain areas, the Director of Finance informed the Committee that the report sets out all the requirements of the Code and highlights the areas where the Council is compliant with the Code at this particular point in time. This therefore aims to be  transparent in terms of the evidence to support the compliance. In this regard  information is given to Members, both at this Committee, other Scrutiny Committees, Cabinet and Council which present key financial information and this is highlighted as evidence of compliance.  There is also some element of professional judgement. The compliance is considered to be generally good and there are no key areas of significant  concern. All key elements have full compliance, although the report does indicate  the financial challenges that the Council is facing.

Resolved: that

(i) the Committee notes the level of compliance with the

CIPFA Financial Management Code and the issues that require further development; and

(ii) the Committee receives a presentation of a further update

on compliance with the Financial Management Code before 31 March 2025.