In June 2016 the National Audit Office (NAO) published its report to the Department for Communities and Local Government (DCLG) into the financial sustainability of local authorities: capital financing and resourcing. Since the demise of the Audit Commission this is the first report providing a national perspective on the state of the financial health of local authorities and given the significant reduction in funding its couldn’t be more timely. Previous reports have identified a 25% fall in real terms revenue income from 2010-11 to 2015-16.
The report also looks at the role of DCLG in overseeing the systems in place to ensure sustainability and overall concludes that ‘assurance’ can be taken from the capital framework based upon CIPFA’s Prudential Code. However, there are areas where DCLG can improve performance particularly around identifying issues and trends in the sector.
Concerns are raised that with the inevitable focus on short-term revenue pressures some decisions such as changing MRP policies and reducing maintenance programmes may not prove to be prudent decisions in the longer term.
In order to help the sector and DCLG, CIPFA re-launched its National Treasury Risk Study on 30 September 2016. Aimed at all local authorities the Risk Study provides objective quantification of an authority’s treasury position set against the best practice CIPFA treasury risk framework. The analysis is carried out based on portfolio positioning, the latest balance sheet position and projected spending plans.
The results are provided to each authority free of charge and will set individual positions and risk strategies against participating peers. The universe of results will also be shared with DCLG to aide with their identification of long term trends within the sector. CIPFA is encouraging all authorities to participate to enhance their own decision making and benefit all stakeholders in the sector.