Finance
Financial resilience in local authorities Rob Whiteman, CIPFA CEO, discusses the CIPFA Financial Resilience Index and why it is important for local authorities to employ good management of their limited resources Councils are facing a staggering array of competing challenges and priorities that are placing pressure on their finances. Short-term cash injections, the recent Budget, and the Chancellor’s determination to end austerity may go some way towards alleviating some immediate pressures. But, just as a plaster will not heal a substantial wound, short-term measures are not enough to offset the ramifications of a decade of austerity. With money scarce and demand rising, it is important for local authorities to employ good management of their limited resources, ensure that financial stressors are understood and contained and that vital services are delivered to residents up and down the country. While local authorities are generally pretty good at this, in the current climate, good public financial management is no easy task. It requires robust data and the appropriate expertise to interpret and understand the evidence. The Financial Resilience Index This is why CIPFA created the Financial Resilience Index. Understanding an organisation’s ability to remain stable, or not, in the event of financial shock is key to good decision making. The Index
and large, maintain a solid financial is designed with Chief Financial Officers position despite the challenges that in mind, allowing them to develop a they’ve faced over the last ten years. clearer understanding of possible areas However there are some authorities of financial risk that could impact upon where, for one reason or another, there their authority’s financial resilience. are signs of potential financial risk. The Index brings together a series of nine indicators (eight for those without social Providing local narrative care responsibility) drawn from publicly The word ‘potential’ is important here. available, but separate, data sources. It is vital to note that the Resilience Indicators range from the explicitly Index is not a predictive model. Think of financial, such as levels of reserves it like WebMD. While WebMD may be a and amount of external debt, to more useful resource detailing symptoms and qualitative measures. For example, the their possible severity, it contains a vital Index includes the authority’s children’s disclaimer that it is not a substitute for social care judgement from Ofsted. professional diagnosis or treatment. Just The potential financial risk being that as one should not self-diagnose illness authorities requiring improvement without the intervention of a healthcare will likely have higher imminent professional, the experts in diagnosing costs in this area than those that are the risks highlighted by the Index are delivering a service rated as good. those working within local authorities. Together, these measures are intended to Data requires interpretation, and only provide a rounded picture of an authority’s individual councils are able to resilience and to ensure the sector is provide the local narrative and held to collective and robust context to understand what standards of governance and the raw figures mean financial management. Trust in for their area. In short, For the most part, the the public while CIPFA can picture is positive. The s list the symptoms evidence supports an all-t ector is at ime low of potential our belief that local i s , and not hel financial risk, E authorities, by p
ed by t notion t h a t our pu he institut blic ion from le s are hiding giti scrutin mate y
Issue 27.2 | GOVERNMENT BUSINESS MAGAZINE
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