Part 10 - Financial Procedure Rules - Appendix B

2.01

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

2.02

The key controls for performance plans are to:

• ensure that all relevant plans are produced and that they are consistent with each other;
• produce plans in accordance with statutory requirements;
• meet the timetables set;
• ensure that all performance information is accurate, complete and up to date; and
• provide improvement targets which are meaningful, realistic and challenging.

2.03

To propose the BVPP to the executive for consideration before its submission to full council for approval.

2.04

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

2.05

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

2.06

To ensure that performance information is monitored sufficiently frequently to allow corrective action to be taken if targets are not likely to be met.

2.07

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

2.08

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

2.09

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

2.10

The format of the budget determines the level of detail to 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 re-allocated within budgets.

2.11

The key controls The key controls for the budget format are:

• complies with all legal requirements;
• complies with CIPFA's Best Value Accounting Code of Practice; and
• reflects the accountabilities of service delivery.

2.12

To advise the executive on the format of the budget that is approved by the full council.

2.13

To comply with accounting guidance provided by the chief finance officer.

2.14

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 authority 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.

2.15

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

2.16

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.

2.17

The key controls for managing and controlling the revenue budget are:·

• budget managers should be responsible only for income and expenditure which they can influence;
• there is a nominated budget manager for each cost centre heading;
• budget managers accept accountability for their budgets and the level of service to be delivered and understand their financial responsibilities;
• budget managers follow an approved certification process for all expenditure;
• income and expenditure is properly recorded and accounted for;
• performance levels/levels of service are monitored in conjunction with the budget and necessary action is taken to align service outputs and budget; and
• all officers responsible for committing expenditure comply with relevant guidance and the financial regulations.

2.18

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

• budget management is exercised within annual cash limits unless the full council agrees otherwise;
• each officer has available timely information on receipts and payments on each budget that is sufficiently detailed to enable managers to fulfil their budgetary responsibilities;
• expenditure is committed only against an approved budget head; and
• significant variances from approved budgets are investigated and reported quarterly.

2.19

To administer the authority's scheme of virement.

2.20

To submit reports to the executive and to full council, in consultation with the relevant service unit head, where an officer is unable to balance expenditure and resources within existing approved budgets under his/her control.

2.21

To prepare and submit reports on the authority's projected income and expenditure compared with the budget on a regular basis.

2.22

To maintain budgetary control within their unit, in adherence to the principles in 2.17 and to ensure that all income and expenditure is properly recorded and accounted for.

2.23

To ensure that an accountable budget manager is identified for each item of income and expenditure under the control of the service unit head. As a general principle, budget responsibility should be aligned as closely as possible to the decision-making which commits expenditure.

2.24

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.

2.25

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

2.26

To ensure compliance with the scheme of virement.

2.27

In consultation with the chief finance officer, to ensure prior approval by the full council or executive (as appropriate) for new proposals(1) of whatever amount, which:

• create financial commitments in future years;
• change existing policies, initiate new policies or cease existing policies; or
• materially extend or reduce the authority's services.

2.28

To agree with the relevant service unit head where it appears that a budget proposal, including a virement proposal, may impact materially on another service unit heads level of service activity.

1. A report on new proposals should explain the full financial implications, after consultation with the chief finance officer. Unless the full council or executive has agreed otherwise, chief officers must plan to contain the financial implications of such proposals within their cash limit.

2.29

The authority 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 authority's plans and policies.

2.30

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 authority can plan, authorise, monitor and control the way money is allocated and spent. It is illegal for an authority to budget for a deficit.

2.31

Medium term planning involves a planning cycle in which managers develop their own plans. As each year passes, another future year will be added to the medium term plan. This ensures that the authority is always preparing for events in advance.

2.32

The key controls are:

• specific budget approval for all expenditure;
• budget managers are consulted in the preparation of the budgets for which they will be held responsible and accept accountability within delegations set by the executive for their budgets and the level of service to be delivered; and
• a monitoring process is in place to review regularly the effectiveness and operation of budget preparation and to ensure that any corrective action is taken.

2.33

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

2.34

To determine the detailed form of revenue estimates and the methods for their preparation, consistent with the budget approved by the full council, and after consultation with the executive, management team and service unit heads.

2.35

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

2.36

To advise on the medium term implications of spending decisions.

2.37

To encourage best use of resources and value for money by working with the management team and service unit heads 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 aspects of service planning.

2.38

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

2.39

To prepare estimates of income and expenditure, in consultation with the chief finance officer, to be submitted to the executive.

2.40

In consultation with the chief finance officer and in accordance with the laid down procedures and timetable to prepare detailed draft revenue and capital budgets for consideration.

2.41

To prepare budgets that are consistent with any relevant cash limits, with the authority's annual budget cycle and with guidelines issued by the executive. The format should be prescribed by the chief finance officer in accordance with the full council's general directions.

2.42

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

2.43

To have regard to:

• spending patterns and pressures revealed through the budget monitoring process;
• legal requirements;
• policy requirements as defined by the full council in the approved policy framework; and
• initiatives already underwaywhen drawing up draft budget requirements.

2.44

A mismatch often exists between available resources and required resources. A common scenario is that available resources are not adequate to fulfil needs/desires. It is therefore imperative that needs/desires are carefully prioritised and that resources are fairly allocated, in order to fulfil all legal responsibilities. Resources may include staff, money, equipment, goods and materials.

2.45

The key controls for resource allocation are that resources are:

• acquired in accordance with the law and using an approved authorisation process;
• used only for the purpose intended, to achieve the approved policies and objectives, and are properly accounted for;
• securely held for use when required; and
• used with the minimum level of waste, inefficiency or loss for other reasons.

2.46

To advise on methods available for the funding of resources, such as grants from central government and borrowing requirements.

2.47

To assist in the allocation of resources to budget managers.

2.48

To work within budget limits and to utilise resources allocated and further allocate resources in the most efficient, effective and economic way.

2.49

To identify opportunities to minimise or eliminate resource requirement or consumption without a detrimental effect on service delivery.

2.50

Capital expenditure involves acquiring or enhancing fixed assets with a long-term value to the authority, 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.

2.51

The Government places strict controls on the financing capacity of the authority. This means that capital expenditure should form part of an investment strategy and should be carefully prioritised in order to maximise the benefit of scarce resources.

2.52

The key controls for capital programmes are:

• specific approval by the full council of the programme for capital expenditure;
• a scheme and estimate, including project initiation document, progress targets and associated revenue expenditure are prepared for each capital project, for approval by the executive via the Project Steering Group;
• approval by the executive where capital schemes are to be financed from the revenue budget, up to a specified amount, and subject to the approval of full council where the expenditure exceeds this amount;
• proposals for improvements and alterations to buildings must be approved by the head of legal and property services and management team
• schedules for individual schemes within the overall budget approved by full council must be submitted to the executive for approval (for example, minor works), or under other arrangements approved by the full council;
• the development and implementation of the asset management plan;
• accountability for each proposal is accepted by a named manager; and
• monitoring of progress in conjunction with expenditure and comparison with approved budget.

2.53

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

2.54

To issue guidance concerning capital schemes and controls. The definition of 'capital' will be determined by the chief finance officer, having regard to Government regulations and accounting requirements.

2.55

To obtain authorisation from the executive for individual schemes where the estimated expenditure exceeds the capital programme provision by more than a specified amount.

2.56

To comply with guidance concerning capital schemes and controls issued by the chief finance officer.

2.57

To ensure that all capital proposals have undergone a project appraisal.

2.58

To prepare regular reports reviewing the capital programme provisions for their services. They should also prepare a quarterly return of the estimated final cost of schemes in the approved capital programme in conjunction with Financial Services staff.

2.59

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

2.60

To proceed with projects only when there is adequate provision in the capital programme.

2.61

To prepare and submit reports, jointly with the chief finance officer, to the executive, of any variation in contract costs greater than the approved limits. The executive may meet cost increases of up to 5% by virement from savings elsewhere within their capital programme.

2.62

To prepare and submit reports, jointly with the chief finance officer, to the executive, on completion of all contracts where the final expenditure exceeds the approved contract sum by more than 5% or £25,000 whichever is the lesser.

2.63

The local authority 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 authority to provide for unexpected events and thereby protect it from overspending should such events occur. Reserves for specific purposes may also be maintained, such as the purchase or renewal of capital items.

2.64

To maintain reserves in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC) and agreed accounting policies.

2.65

For each reserve established, the purpose usage and the basis of transactions should be clearly identified.

2.66

To advise the executive and/or full council on prudent levels of reserves for the authority, and to take account of advice from the external auditor in this matter.