Statement from Rob Whiteman, CEO, CIPFA to Chief Financial Officers on Section 114 notices

September 2023

CIPFA recognises the pressures placed on chief finance officers (CFOs). Together with your fellow statutory officers, the decisions that you are required to make as part of your statutory duty have far-reaching implications for public sector services, staff and the public.

Looking ahead, these decisions will undoubtedly become harder as uncertainty increases, risk becomes tougher to manage and choices become more contentious.

In line with their fiduciary duty and the high expectations of the profession,  CFOs must make these decisions  according to the principles within Chartered Institute of Public Finance and Accountancy (CIPFA) Codes and in line with proper accounting practice.

That said there will always be an element of any decision making that relies on the professional judgement of the individual, based on their experience, individual integrity and contextual understanding.

Of all decisions made by a CFO, the issuing of a Section 114 Notice will be the most critical of their profession. While the legislation in the Local Government Act 1988 is short, the effects and resulting outcomes will resonate for years.

For this reason, CIPFA recommends that when any discussion regarding a Section 114 Notice is raised, that the Section 151 officer not only follows the statutory requirement to consult with both the monitoring office and the head of paid service but also consults with the Department for Levelling Up, Housing and Communities (DLUHC).  The Institute reiterates the guidance in  the Financial Management Code which clearly states that “the issuing of a section 114 Notice should be seen as a last resort”.

This is consistent with advice  provided during the pandemic and allows for a confidential discussion to take place to consider the severity of the situation. It is critical that there is a full and frank understanding of the impact of issuing a Section 114 notice across the organisation.

This does not change the statutory responsibilities of a Section 151 officer under the current legislation.

To provide further support to members and assurance to the sector, CIPFA will be updating the Section 114 guidance statement to reflect the current context. Additionally CIPFA’s practice oversight panel will issue guidance on Section 114 notices, ensuring that there is a clear understanding of the process and possible consequences of this action.

CIPFA will continue to call on Government to establish a fairer  longer-term funding system that better reflects the needs of the sector and increase our work with organisations  to help them improve their financial resilience.