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CIPFA has responded to a new report from the Audit Commission which focuses on local authority reserves. The report, Striking a Balance, provides a useful basis for an informed discussion around reserves.
CIPFA is keen to highlight a number of key points that are worth emphasising in the current, highly distinctive context of austerity and disappointing economic performance:
Additionally, CIPFA feels it is important to stress the risks which arise when councils decide to draw down reserves to help fund their budgets. The nature of most council services is that they require recurring funding to meet staff and other running costs year after year. Reserves are a one-off, finite source of funding. They can cover a shortfall in recurring funding for a specific period but, after reserves are exhausted, the underlying shortfall will still be there. Ultimately services will need to be reduced to a level which is affordable within the envelope of recurring funding available.
Steve Freer, CIPFA's Chief Executive, commented,
“We have to be extremely careful about using one-off reserves to fund shortfalls in recurring funding. Reserves are not a long term solution. At best they buy time to enable service changes to be planned and implemented in an orderly way. In these circumstances it is important that councils explain clearly to the public the actions and implications for services which are expected to follow in the medium and longer term.”
Contact: Tim Windle
CIPFA Press Office
t 0207 543 5600
Notes to Editors:
CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications are the foundation for a career in public finance. They include the benchmark professional qualification for public sector accountants as well as a postgraduate diploma for people already working in leadership positions. They are taught by our in-house CIPFA Education and Training Centre as well as other places of learning around the world. We also champion high performance in public services, translating our experience and insight into clear advice and practical services. They include information and guidance, courses and conferences, property and asset management solutions, consultancy and interim people for a range of public sector clients. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. We work with donors, partner governments, accountancy bodies and the public sector around the world to advance public finance and support better public services. This includes the development of local professional qualifications in African countries like Lesotho and Nigeria and in Europe in post conflict states in the Balkans.