CIPFA to consult on index to help test councils’ financial resilience

28 Jun 18

Local authorities could be rated on their financial resilience to help them with financial management under proposals from CIPFA.

The institute is due to release a consultation on its plans for a financial resilience index imminently. 

Its aim is to offer reassurance to councils that are financially stable as well as noting where some authorities can improve their financial resilience.

CIPFA is proposing to use a range of indicators to come to its conclusions, including the rate at which a council is depleting resources, its level of resources generally and of borrowing.

Demographic pressures such as older populations contributing to increased social care spending will also be considered.

The index would be published annually and available in the public domain.

CIPFA is hoping to produce the first ratings in the early autumn this year, pending the consultation period over the summer.

The institute believes that this is a proposal will be useful for professionals in the sector given the growing financial pressures on councils.

Rob Whiteman, chief executive of CIPFA, said: “The resilience index is a not a performance table of service outcomes or quality, and is not a comment on the quality of leadership in councils.

“It is, however, an authoritative measure of councils’ financial resilience, drawn from publicly available information, intended to provide challenge where it is needed so that action can be taken at a local level.”

CIPFA is working closely with the sector to decide how the index should work and what criteria should be included in the ratings.

Carol Culley, city treasurer at Manchester City Council and chair of CIPFA local government faculty board, added: “This isn’t about generating the next set of headlines, but about providing an early warning system to enable timely action to be taken – better than emergency unplanned action, which cannot be in the interest of anyone.”

CIPFA will also begin development of a new Financial Management Code to accompany the existing Prudential and Treasury Management Codes.

This new code will allow elected members “to understand what good looks like in terms of financial management,” according to Culley.

The code will be developed with help from treasurers’ societies and relevant bodies from the National Audit Office, Local Government Association and Ministry of Housing, Communities and Local Government.

Whiteman said: “CIPFA believes that good governance best occurs when unwelcome analysis is nonetheless heard and discussed; and we believe it is in all councils’ and taxpayers’ interests that a comparative resilience index is produced from which local government and its external auditors can draw.”

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