Finance

Financial management policy

Overall purpose: seek to ensure a high standard in the management of public finances in the best interests of the people of Hampshire.

Key policies designed to achieve this are to maintain and seek continuous improvement in both Financial Planning and the provision of Financial Services. In doing so, the Council aims to maintain its maximum score of four for the financial aspects of the Comprehensive Performance Assessment.

A   Financial planning

Policy

Overall financial planning and budget strategy

  • Budget strategy related to corporate priorities, as reflected in corporate strategy, local public service agreement, improvement plan and four member priorities
  • Growth and saving plans to be submitted to the appropriate executive member, identifying planned outcomes and performance improvements for budget growth and mechanisms for achieving any significant savings
  • Ensure that the long-term level of revenue commitments does not exceed long-term funding likely to be available including reasonable expected levels of future grant settlement and council tax
  • Ensure integration of medium term financial and service planning
  • Maintain three-year budget projections based where necessary on alternative scenarios to reflect uncertainty of spending and resource assumptions in order to set the likely context for making final resource allocation decisions on an annual basis
  • Minimise levels of non-earmarked reserves, with a target of 0.6% of net expenditure, subject to risk assessment, in order to maximise use of available funds on service provision
  • Review the rationale and adequacy of earmarked reserves on at least an annual basis
  • Build up an earmarked reserve in recognition of the transitional costs of implementing Pay and Benefits proposals
  • Seek to minimise the degree of instability in the employers’ contribution to the Hampshire Pension fund, subject to objective of securing 100% funding in the long-term
  • Continue policy of increasing budgets for Schools and Social Services in line with increases in the County Council’s related Formula Spending shares - providing that to do so does not have an unacceptable impact on the quality of other services or the level of the council tax
  • Manage the application of the grant equalisation reserve in order to protect services and limit the council tax impact of the loss of transitional Education funding and, if confirmed, the loss in 2005/06 of the additional Government Grant of £7.5m announced in December
  • In order to allow services to operate within firm cash limits, allocate provision for inflation to services at the start of the financial year and require excess inflation to be absorbed
  • Services expected to contain spending within the approved cash limit, with no supplementary allocations being available other than in exceptional circumstances unless a specific contingency provision made within the budget
  • Services expected to carry forward 100% of any overspending against the overall service cash limit, but are allowed to retain up to 100% of any planned underspendings identified prior to the approval of the following year’s budget. 50% of any unplanned underspendings can automatically be carried forward
  • Require the continuing identification of efficiencies by expecting services to absorb any net cost arising from the annual cost of salary increments
  • Encourage service chief officers to submit applications for specific grants/partnership funding designed to maximise the resources available to the County Council, by allowing capital and revenue cash limits to be adjusted to reflect changes in grant levels
  • Require services to review the level of fees and charges at least annually and set budget limits on the assumption that the level of charges will be increased in line with assumed inflation on gross expenditure
  • Seek best value in spending, bearing in mind that considerations of quality, risk, sustainability, environmental impact, local economic development and equalities may all be relevant in addition to price
  • Seek to retain relatively low council taxes in Hampshire, with the aim of setting a tax in the lowest quartile of County Council council taxes

Capital programming

  • Review capital strategy on an annual basis and prepare four year capital programme in accordance with the strategy
  • Seek to maintain the level of the locally-resourced capital programme by continued recycling of surplus assets to generate capital receipts
  • Allow services to retain at least 25% of the value of their capital receipts and where necessary to finance investment in replacement assets, up to 100%
  • Adopt a Public Private Partnership (PPP) approach, including the use of the Private Finance Initiative (PFI), where this provides best value for the Council
  • Make full use of Government supported borrowing
  • Seek to maximise capital resources by developing capital schemes in conjunction with external partners where appropriate
  • Approve the use of unsupported borrowing within the framework of the County Council’s prudential code
  • business unit investment where the financing costs will be funded by charges made to customers
  • ‘invest to save’ projects generating savings which will enable the financing costs to be funded, capital receipts which will enable borrowing to be repaid, or alternative costs to be avoided

B   Provision of Financial Services

Effective management of budgets

  • devolution of financial management to service departments combined with appropriate financial training, provision of appropriate systems to generate management information and a framework of sound internal controls including Financial Regulations and procedures
  • rigorous annual budgeting and budget monitoring processes
  • maintain integrated accounting and budgeting systems and set a consistent overall financial framework across the authority, including for schools.

Ensuring good practice and probity

  • recognise the statutory and corporate finance roles of the County Treasurer in ensuring lawful and financially prudent decision-making through his membership of the Corporate Management Team
  • report internal audit’s strategy to the Standards Committee
  • provide annual internal audit assessments for each department
  • develop IT systems designed to enhance the provision of financial management information to users
  • maintain Head of Profession arrangements whereby the head of each devolved finance unit has defined responsibilities for ensuring that both corporate and departmental needs are met
  • maintain and work with Chief Officers to apply Financial Regulations and associated financial procedures in support of good practice in financial administration and corporate governance
  • maintain an effective and efficient internal audit function which works co-operatively with the Council’s external auditor
  • comply with the CIPFA Code of Practice for treasury management
  • comply with accounting and audit standards contained in the relevant Codes of Practice and CIPFA guidance.

Efficient and accessible processing of transactions

  • best practice in relationships with local contractors and suppliers, including payment of bills in line with government prompt payment targets
  • an emphasis on continuous improvement driven by a customer focus as the best way to deliver good financial services
  • all services to be available electronically in line with government timescales, including moves towards employee self service
  • obtain the Charter Mark for services dealing directly with the public, and seek to apply a similar approach to internal customers
  • keep transaction costs within the lowest 25% of costs among county councils.