Finance

B - Financial planning

1

Performance plans

1.1

Each local authority has a statutory responsibility to publish various performance plans, including best value performance plans, and local strategic partnership plans. The purpose of performance plans is to explain overall priorities and objectives for current performance, and proposals for further improvement. The County Council is required to publish annually a best value performance plan (BVPP) that summarises its performance an position in relation to best value. The BVPP is a key element in the County Council’s programme of engaging with the public. External audit is required to report on whether the County Council has complied with statutory requirements in respect of the preparation and publication of the BVPP.

Responsibilities of the County Treasurer

1.2

To advise and supply the financial information that needs to be included in performance plans in accordance with statutory requirements and agreed timetables.

Responsibilities of chief officers

1.3

To contribute to the development of corporate and service targets and objectives and performance information.

1.4

To ensure that systems are in place to measure activity and collect accurate information for use as performance indicators.

1.5

To ensure that performance information is monitored often enough to allow corrective action if targets are likely to be missed.

Responsibilities of financial managers

1.6

To contribute to the development of performance plans in line with statutory requirements.

1.7

To contribute to the development of corporate and service targets and objectives and performance information.

back to performance plans

2

Medium-term planning and forecasting

2.1

Medium-term financial planning helps to ensure that there is a financial context against which the implications of future service plans can be judged.

2.2

Medium-term forecasts covering a period of up to three years, limited to the period covered by the Government’s spending plans, are a key element in medium-term financial planning. They ensure that the County Council is as well prepared as possible for the medium-term financial implications of supporting current policies and commitments and of developing new policies within the context of Government spending plans

Responsibilities of the County Treasurer

2.3

To prepare and submit reports on budget prospects for the Cabinet, including resource constraints set by the Government. Reports should take account of medium-term prospects, where appropriate.

2.4

To prepare and submit reports to the Cabinet on the aggregate spending plans of departments and on the resources available to fund them, identifying, where appropriate, the implications for the level of council tax.

2.5

To determine the form in which medium-term budget forecasts are prepared.

2.6

To advise on the medium-term implications of spending decisions.

2.7

To encourage best use of resources and value for money by working with chief officers to identify opportunities to improve economy, efficiency and effectiveness, and by encouraging good practice in conducting financial appraisals of development or savings options, and in developing financial aspect of service planning.

2.8

To advise the full Council on executive proposals in accordance with his responsibilities under Section 151 of the Local Government Act 1972.

Responsibilities of chief officers

2.9

To integrate financial and budget plans into service planning, so that the budget plans can be supported by financial and non-financial performance measures.

2.10

To estimate the effect of maintaining current policies and commitments over a period of up to three years to enable medium-term budget forecasts to be prepared.

Back to Medium-term planning and forecasting

3

Budgeting

The budget format

3.1

The County Council is a complex organisation responsible for delivering a wide variety of services. It needs to plan effectively and to develop systems to enable scarce resources to be allocated in accordance with carefully weighed priorities. The budget is the financial expression of the County Council’s plans and policies.

3.2

The revenue budget must be constructed so as to ensure that resource allocation properly reflects the service plans and priorities of the Council. Budgets (spending plans) are needed so that the County Council can plan, authorise, monitor and control the way money is allocated and spent. It is illegal for the County Council to budget for a deficit.

3.3

The general format of the budget and budget guidelines will be approved by the full Council and proposed by the Cabinet on the advice of the County Treasurer. The draft budget should include details of the allocation of resources over services and projects, proposed taxation levels and contingency funds.

3.4

The format of the budget determines the level of detail at which financial control and management will be exercised. The format shapes how the rules around virement operate and the operation of cash limits, and sets the level at which funds may be reallocated within budgets.

Responsibilities of the County Treasurer

3.5

To advise the Cabinet on the format of the budget that is approved by the full Council.

Responsibilities of financial managers

3.6 To comply with the County Treasurer’s accounting guidance.

Back to the budget format

Revenue budget preparation

Link to Funding additional revenue activities

3.7

The County Treasurer is responsible for ensuring that a revenue budget is prepared each year for Cabinet consideration, before submission to the full Council. The full Council may amend the budget or ask the Cabinet to reconsider it before approving it.

3.8

The Cabinet, in consulting the County Treasurer, is responsible for issuing guidance on the general content of the budget as soon as possible following approval by the full Council.

3.9

Chief officers are responsible for ensuring that budget estimates reflecting agreed service plans are submitted to the Cabinet and that these estimates are prepared in line with Cabinet guidance.

3.10

Budget management ensures that once the budget has been approved by full Council, resources allocated are used for their intended purposes and that these resources are properly accounted for. Budgetary control is a continuous process enabling the County Council to review and adjust its budget targets during the financial year. It also provides the mechanism that calls to account managers responsible for defined elements of the budget.

3.11

By continuously identifying and explaining variances against budgetary targets, the County Council can identify changes in trends and resource requirements at the earliest opportunity. The County Council itself operates within an annual cash limit approved when setting the overall budget. To ensure that the County Council in total does not overspend, each service is required to manage its own expenditure within the cash-limited budget allocated to it.

3.12

For the purposes of budgetary control by managers, a budget will normally be the planned income and expenditure for a service area or ‘cost’ centre. However, budgetary control may take place at a more detailed level if this is required by the chief officers’ scheme of delegation.

Responsibilities of the County Treasurer

3.13

To determine the detailed form of revenue estimate and the methods for their preparation, consistent with the budget approved by the full Council, and after consultation with the Cabinet and chief officers.

3.14

To establish an appropriate framework of budgetary management and control which ensures that:

a) budget management is exercised within annual cash limits unless the full Council agrees otherwise

b) each financial manager has available timely information on receipts and payments for each budget that is sufficiently detailed to enable managers to fulfil their budgetary responsibilities

c) expenditure is committed only against an approved budget head

d) all officers responsible for committing expenditure comply with relevant guidance, and with financial regulations

e) each cost centre has a single named manager, determined by the relevant chief officer. As a general principle, budget responsibility should be aligned as closely as possible to the decision-making processes that commit expenditure

f) significant variances from approved budgets are regularly investigated and reported on by budget managers.

3.15

To administer the County Council’s scheme of virement.

3.16

To submit reports to the Executive member, Cabinet and to full Council, in consultation with the relevant chief officer, where a chief officer is unable to balance expenditure and resources within existing approved budgets under his or her control.

3.17

To prepare and submit regular reports on the County Council’s projected income and expenditure compared with the budget.

Responsibilities of chief officers

3.18

To prepare estimates of income and expenditure, in consultation with the County Treasurer, to be submitted to the Executive member.

3.19

To prepare budgets that are consistent with any relevant cash limits, with the County Council’s annual budget cycle and with guidelines issued by the County Council. The format should be prescribed by the County Treasurer in accordance with the full Council’s general directions.

3.20

To integrate financial and budget plans into service planning, so that budget plans can be supported by financial and non-financial performance measures.

3.21

In consultation with the County Treasurer and in accordance with the laid-down guidance and timetable, to prepare detailed draft revenue and capital budgets for consideration by the Executive member.

3.22

To have regard to:

a) spending patterns and pressures revealed through the budget monitoring process

b) legal requirements

c) policy requirements as defined by the full Council in the approved policy framework

d) initiatives already under way when drawing up draft budget requirements.

3.23

To maintain budgetary control within their department, in adherence to the principles in paragraph 3.14 and to ensure that all income and expenditure is properly recorded and accounted for.

3.24

To ensure that an accountable budget manager is identified for each item of income and expenditure (grouped in a series of cost centres) under the chief officer’s control . As a general principle, budget responsibility should be aligned as closely as possible to the decision-making that commits expenditure.

3.25

To ensure that spending remains within the service’s overall cash limit, and that individual budget heads are not overspent, by monitoring the budget and taking appropriate corrective action where significant variations from the approved budget are forecast.

3.26

To ensure that a monitoring process is in place to review performance levels/levels of service in conjunction with the budget and is operating effectively.

3.27

To prepare and submit to the Executive member reports on the service’s projected expenditure compared with its budget, in consultation with the County Treasurer.

3.28

To obtain approval by the Executive member or Cabinet (as appropriate) for new proposals, of whatever amount, which:

a) create additional financial commitments in future years; or

b) change existing policies, create new policies or end existing policies; or

c) materially extend or reduce the County Council’s services; or

d) do not operate within existing policies, service plans, budget and budget headings; or

e) require new funding; or

f) require a virement from within an existing budget

3.29

To ensure compliance with the scheme of virement.

3.30

To agree with the relevant chief officer where it appears that a budget proposal, including a virement proposal, may materially affect another service area or chief officer’s level of service activity.

Responsibilities of financial managers

3.31

To accept accountability for their budgets and the level of service to be delivered and to understand their financial responsibilities.

3.32

To follow an approved certification process for all expenditure.

3.33

To ensure all income and expenditure is properly recorded and accounted for.

Back to revenue budget preparation

Responsibilities of chief officers

Capital programmes

Link to Financial delegation – capital, Funding additional capital activities, How to include projects in the capital programme, Major projects and Major project report types.

3.34

Capital expenditure involves acquiring, replacing or enhancing fixed assets with a long-term value to the County Council, such as land, buildings, and major items of plant and equipment or vehicles. Capital assets shape the way services are delivered for the long term and create financial commitments for the future in the form of financing costs and revenue running costs.

3.35

The County Council has developed a capital strategy that provides the framework for making decisions about investment priorities.

3.36

The programme of capital expenditure requires approval by the full Council.

Responsibilities of the County Treasurer

3.37

To prepare capital estimates jointly with chief officers and report them to the Cabinet for approval. The Cabinet will make recommendations to the full Council on the capital estimates and any associated financing requirements. Policy and Resources Executive member approval is required if a chief officer proposes to bid for or exercise additional borrowing approval not anticipated in the capital programme. This is because the extra borrowing may create future commitments to financing costs

3.38

To prepare and submit reports to the Cabinet on the projected income and expenditure and resources compared with the approved estimates.

3.39

To issue guidance concerning capital schemes and controls, for example on project appraisal techniques and the reporting of cost variations. The definition of ‘capital’ will be determined by the County Treasurer, having regard to Government regulations and accounting requirements.

Responsibilities of chief officers

3.40

To comply with guidance concerning capital schemes and controls issued by the County Treasurer.

3.41

Before a major project can be committed, to ensure that:

a) it has undergone a project appraisal in accordance with guidance issued by the County Treasurer.  Schemes estimated to cost £250,000  or less can be committed by the Chief Officer with Executive Member in loop.

b) if the scheme is estimated to cost more than £250,000 including fees, the design report has been approved by the Executive member and sent to the Leader for information.

c) If the scheme is estimated to cost more than £1,000,000 including fees, a full business case has been approved by the Leader with Executive Member in loop and a design report submitted to Executive Member for approval.

d) if the scheme costs £250,000  or less, that it is included in the capital programme either as a named scheme or as part of a lump sum provision (for  example, minor works). If the scheme has not been included in the capital programme, but continues within agreed policies and budget it can be approved by the Chief Officer.  If it does not agree with policies and budget and requires new funds, Executive Member approval is required.  If it requires a virement from an existing budget for less than £500,000, Executive Member approval is required.  If the requirement is over £500,000, Cabinet approval is required.

e) if the scheme costs £250,000:

  • the scheme is included in the capital programme approved by the County Council. If the scheme has been advanced from a later year in the capital programme, the approval of the Policy and Resources Executive member is required. If the scheme was not previously in the capital programme and is below £500,000 or 25% of the budget whichever is lower, the approval of Executive Member is required.  If the amount is above £500,000 or 25% of the budget whichever is lower, the approval of Cabinet is required

  • a tender or quotation has been received that does not exceed the amount included in the programme by more than 10% after allowing for inflation calculated using the agreed Department of Communities and Local Government  index rate of increases until the contract is let and , in the case of fluctuating price contracts, thereafter. If this tolerance is exceeded, the relevant Executive member’s approval  is required

f) there is provision in the cash limit set by the Cabinet for the total cost of the scheme including tender tolerances. If it is necessary to delete or defer a scheme costing more than £250,000 for any reason ,the County Council’s approval is required via the Policy and Resources Executive.

g) All statutory approvals have been received and the tender and quotation are within any Government cost limits and tolerances

3.42

To prepare regular reports reviewing the capital programme provisions for their services. Cost variations on schemes started in previous years are also chargeable against the current year’s cash limit.

3.43

To ensure that adequate records are maintained in respect of all capital contracts.

3.44

To prepare and submit performance management: project outcome reports, jointly with the County Treasurer, to the Executive member on completed schemes, comparing actual and approved costs.

3.45

To ensure that credit arrangements, such as leasing agreements, are not entered into without the County Treasurer’s prior approval and, if applicable, approval of the scheme through the capital programme.

3.46

To consult the County Treasurer and to seek Executive member approval if the chief officer proposes to bid for supplementary credit approvals or capital grants to be issued by Government departments to support expenditure that has not been included in the current year’s capital programme.  Any variation to the capital programme arising from the allocation of additional grants or supplementary credit approvals including the addition of new schemes, requires the approval of the Policy and Resources Executive member, except coast protection schemes supported in full by supplementary credit approvals which can be added to the capital programme by the Environment Executive member.  Variations approved by the Policy and Resources Executive member shall be reported to the County Council.

Back to capital programmes

Maintenance of balances and reserves

4.1

The County Treasurer is responsible for advising the Cabinet and/or full Council on prudent levels of balances and reserves for the County Council

4.2

4.2 The County Council must decide the level of general reserves it wishes to maintain before it can decide the level of council tax. Reserves are maintained as a matter of prudence. They enable the County Council to provide for unexpected events and thereby protect it from overspending should such events occur. Reserves may also be maintained for specific purposes, such as the purchase or renewal of capital items.