The Chartered Institute for Public Finance and Accountancy (CIPFA) is calling on councils to watch for five warning signs of financial stress and to build resilience into all aspects of planning and operations, with the launch of its new report Building Financial Resilience.
Whether the June General Election result heralds a softening of austerity as we know it, local government financial pressures are mounting, and CIPFA’s snapshot survey of English local authority chief financial officer confidence to deliver public services revealed serious spending pressures.
Through its work with council financial teams, CIPFA has identified five key symptoms of financial stress:
· A rapid decline in reserves – using reserves to avoid cuts will only provide temporary relief
Sean Nolan, Director for Local Government at CIPFA, said: “In the face of growing demand, tightening funding and an increasingly complex and unpredictable financial environment, councils must be financially resilient; meaning they must remain viable, stable and effective in the medium to long term.
“Austerity has battered the sector for close to a decade, while increased demand and cost pressures have left some councils at the brink.
“Other, more positive changes, such as a trend towards greater self-sufficiency and local leadership has allowed some areas to flourish, while others have struggled to reap the benefits of these reforms.
“What we are seeking to do now is to help councils spot the warning signs of financial stress and take the right steps towards resilience.”
CIPFA’s new report on local government financial resilience, Building Financial Resilience, not only identifies the warning signs, but outlines the steps towards building better financial resilience.
Financial resilience is about a council planning appropriately for the future and protecting itself against unexpected shocks. CIPFA is working with councils to ensure they have four of essential ingredients to resilience in place: