Agenda item

Concluding part of the review.

6.1  Southwark’s Finance Director, Duncan Whitfield, provided a presentation on the budget framework, outlining its statutory, regulatory and local context; the format details of revenue budgets; the role of Council Assembly and scrutiny, and the use of reserves (see Appendix B). Members responded with questions and comments. Key points raised included as follows:

6.2  The 10 year-old SAP system was put in place for the council as an organisation that was very different at the time and it is now difficult to adapt to urgent and precise information needs.  This is influenced, for example, by the fact that the remit of some Executive portfolio holders spans as many as five departments.

6.3  Considering the rapid turn around of information in the weeks leading up to the February budget, it is difficult to submit to scrutiny all the information that officers would like to share. The budget is also unlikely to be completely finalised until 10 days before the budget Council Assembly.

6.4  There is no requirement to take the capital programme to Council Assembly. It is understood that some local authorities do this, but this is a minority. In view of the council’s 10 year capital programme, however, it may be appropriate to submit to Council Assembly a revised version of the programme every three or four years, as there is more clarity on the status of disposal assets and the progress of the regeneration programme.  This could also be timed to fit with the four-year political cycle.

6.5  The annual statement of accounts, which presents all reserve funds, balances and provisions, leaves itself open to Audit and Governance Committee scrutiny. Maybe a scrutiny committee would like some view on these accounts as well? The ‘capital contingency’ reserve with a threshold of £5 million, may be of interest for example: It provides for the Director of Finance and Executive members for resources to jointly sign off the draw down of reserves up to this value.

6.6  There are issues that the council is involved in from time to time that could cause reputational damage if reported more widely. These include legal and or insurance issues, for instance, and in such circumstances the Director of Finance has a level of discretion to be the sole signatory to permit the draw down of reserve funds. If this discretion were lost, he is unsure that it would strengthen any process.

6.7  The chair commented that the way in which budget estimates were recently presented to Council Assembly was quite confusing for members. He acknowledged that due to the difficulties with SAP, and the span of Executive portfolios across council departments, that it would not be feasible to present budget estimates according to the Executive remits by February 2010. He suggested, however, that the sub-committee encourage the Executive to move in that direction. He also asked whether it would be feasible to present for the February Council Assembly broad brush budgets with service estimates and non-service estimates, for example. The Director for Resources committed to attempting to achieve a departmental breakdown, but emphasised that this would be subject to early decisions on the budget and the time and technology issues.

6.1  The Director of Finance outlined the three budget reports that he sees as particularly key for scrutiny: 1) The scene setting report that was submitted annually to the former Regeneration and Resources scrutiny sub-committee. He suggested that this again become a standing annual submission to scrutiny and that other members be invited to attend. 2) A second major report could be submitted in late November or early December, following the government grant settlement announcements. This paper may be one that OSC would want to add to its work programme. 3) The Executive report recommending the budget to Council assembly, -  the timing of which to scrutiny, however, would involve some complexity.

6.2  The chair referred to the regulations regarding Council Assembly’s role in approving a local authority’s capital programme (see para. 7, Appendix C), and members discussed the interpretation of specific phrases with a legal officer. The chair commented, that taken in a common sensical way, the regulations would require a broad brush capital programme to be approved by Council Assembly and suggested that OSC be invited to give further consideration to this.

6.3  The chair commented that the draw downs of reserves, if not properly defined, could cause a subversion of the revenue budget. He added that it was not appropriate to look at this issue in detail during the current meeting, but suggested that the Executive be encouraged to look carefully at the definition and conditions under which draw downs are permitted. He also suggested that OSC may alternatively recommend that some of these issues are considered by the Audit and Governance Committee. Members referred to the recent reserves draw down required for the Southwark Circle and commented, for example, that the timing of this decision within a couple of months of the February budget, was worrying.

6.4  Members discussed the powers of the Director of Finance to make a sole officer decision regarding the draw down of financial risk reserves. Members asked, for example, how such decisions would become known and/or later reported back to members. The Director of Finance confirmed that such draw downs would be clear in the statement of accounts. The legal officer also clarified that any interested party would be permitted to see any invoice related to the authority’s accounts, and that such requests would not be subject  to section 43 of the Freedom of Information Act.

  RESOLVED:

  That the following recommendations be submitted to OSC and the Executive, as appropriate:

  Budget recommendation formatting

i.  That the budget presentation to Council Assembly should include a subjective breakdown of expenditure headings at high level.

ii.  In light of the impossibility at present of providing up front budgets for each executive portfolio, the Executive is invited to clarify the responsibility for monitoring financial performance under each executive portfolio.

iii.  We would encourage the Executive to move, as soon as practicable, towards including in the recommendation to Council Assembly a break down of budgetary allocations for each executive member’s portfolio

  Scene setting report

iv.  We invite OSC to arrange a budgetary scene setting meeting shortly after the 24 October Executive meeting, providing an opportunity for back bench members to be involved so that at that stage there is wide understanding of  the budgetary process and financial situation facing the council.

v.  We invite OSC to consider the merits of an informal OSC at a later stage of the budget setting process.

  Approval of the capital programme

vi.  We invite the Executive to take further advice on the construction of the following wording in the Local Authorities (Functions and Responsibilities) (England) Regulations 2000, regarding the provision that full council carries out the “adoption or approval of the budget and any plan or strategy for the control of the local authority’s borrowing or capital expenditure (the capital plan)” [italics added].

vii.  We invite the Executive to submit to Council Assembly at least once every four years, and as necessary in the event of a significant change in circumstances, a programme for capital expenditure.

  Use of reserves

viii.  We invite the Executive to address issues around definition, build up, and in particular draw down from the Council’s various reserves, and an improved system for the monitoring of such matters.

ix.  We invite the Executive to consider whether an upper limit should be put on the sole authority of the finance director to authorise draw downs from reserves.

x.  We invite the Executive to consider the merits of referring any of these matters to the Audit and Governance Committee.

  That the draft wording of the above recommendations be circulated to all sub-committee members, inviting comments and amendments.