Constitution Part 4 - Financial procedure rules

3.1 Overview

3.1.1 This section sets out those arrangements that the Council needs to make to ensure that it makes proper plans to achieve its objectives. It covers the setting of revenue and capital expenditure plans, the monitoring of those plans through to how the Council plans to manage risks and its treasury functions.  It is predominantly concerned with how the Council works at a strategic level and from a financial perspective what it needs to consider and decide. 

3.2 Revenue Financial Plans

3.2.1 Each year the Council must set an annual budget for the coming year. This budget needs to be considered as part of a wider Medium Term Financial Strategy covering the following two/three years that considers the level of resources available to the Council, the expenditure needs of the Council and the level of Council Tax.  The Council’s corporate objectives need to be addressed in the consideration of the expenditure needs of the Council in the Medium Term Financial Strategy.

3.2.2 Director of Finance, IT and Digital’s responsibilities:

• i) Preparation of multi year forecasts of resources and expenditure for the consideration of the Finance and Corporate Affairs Committee;
• ii) Identification of risks inherent in the forecasts;
• iii) Development of a medium term financial strategy;
• iv) Development, in conjunction with the Finance and Corporate Affairs Committee, of an appropriate annual budget within the Medium Term Strategy compliant with all relevant legislation for submission to Council.

3.2.3 Responsibilities of Directors and Chief Officers:

• i) Provision of information to the Director of Finance, IT and Digital in relation to expenditure changes outside of their control within their services for the life of the forecast;
• ii) Preparation of detailed budgets within the resources allocated by the Medium Term Financial Strategy to nominated budget holders;
• iii) Responsibility for subsequent expenditure from those detailed budgets to meet the objectives of the service.

3.3 Monitoring of Revenue Income and Expenditure

3.3.1 Having determined budgets that set out how the Council intends to achieve its objectives it is important to monitor the performance of actual income and expenditure against those budgets. This is a continuous process to ensure that resources are used to their best effect. In relation to income it is important to ensure that all income is accounted for and in relation to expenditure that differences are explained and understood. The analysis of differences should enable budget holders to ensure that appropriate action to bring budgets back on track is taken. Often at the detail level this may not be possible within the financial year and the relevant Director will need to consider transfers from other budgets within their control.

3.3.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To ensure that monitoring reports are available to budget holders;
• ii) To ensure that corporate level budgets are monitored;
• iii) To determine the format of monitoring reports for the Finance and Corporate Affairs Committee and individual Policy Committees;
• iv) To report on major differences or trends that have a significant impact on the overall finances of the Council;
• v) To operate and maintain an effective Financial Management system;
• vi) To provide Directors and Chief Officers with appropriate advice and guidance.

3.3.3 Responsibilities of Directors and Chief Officers:

• i) To ensure that adequate budget provision exists for all expenditure prior to it being incurred;
• ii) To ensure that each detailed budget has a nominated budget holder and to provide the Director of Finance, IT and Digital with a schedule of nominated budget holders;
• iii) To monitor budgets within their service areas;
• iv) To ensure that where the approved budget for a service area under a single Director’s control is anticipated to be insufficient to meet forecast commitments, to transfer resources between service areas in accordance with the budget transfer rules detailed in section 4.5 and where appropriate to seek approval of transfers within the quarterly monitoring reports submitted to the Finance and Corporate Affairs Committee to ensure transparency.  
• v) To inform the Director of Finance, IT and Digital of any major differences of actual from planned income or expenditure.

3.4 Capital Financial Planning

3.4.1 Capital Financial Planning involves the acquiring or enhancing of an asset with a long-term value to the Council or the Town. The planning of capital expenditure is essential for a number of reasons:

• i) Being major items of expenditure they are a key means for the Council to directly achieve its objectives in shaping service delivery; 
• ii) They create long term financial commitments in both financing and running costs;
• iii) Varied funding sources are often available, each with differing requirements;
• iv) Strict controls are imposed upon the Council’s ability to incur capital expenditure;
• v) The Council’s ability to attract external funding is often dependent upon its proven track record of delivering projects on time and budget.

3.4.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To prepare a detailed annual statement of likely commitments and resources for both revenue and capital within a three-year medium term framework for consideration by the Finance and Corporate Affairs Committee;
• ii) To submit details of potential schemes to the Council or relevant Policy Committee for inclusion in the Capital Programme for the year;
• iii) To determine the format of project appraisals for inclusion within the Capital Programme in conjunction with Directors.

3.4.3 Responsibilities of Directors and Chief Officers:

i) With the Director of Neighbourhoods and Regulatory Services, or his/her representative, to prepare and maintain an Asset Management Plan to assist in the planning of capital schemes;

ii) To consider proposals and with the appropriate officer/s prepare costings for future project appraisals for submission to the Council or relevant Policy Committee for consideration;

iii) To ensure that no contracts are entered into for which budget provision within the Capital Programme has not been made;

iv) To prepare bid submissions to appropriate funding bodies. 

3.5 Monitoring of Capital Income and Expenditure

3.5.1 Having set a Capital Programme to achieve its Capital Strategy it is important to monitor the performance of actual physical progress, income and expenditure against the Programme. This is a continuous process to ensure that resources are used to their best effect and not lost, as some external funding is limited to specific financial years. In relation to Capital income, which can take the form of grants or other contributions, it is important to ensure that all income is received and accounted for within the right financial year. Physical progress should be monitored, as this is a leading indicator of real expenditure on schemes. The analysis of differences between expected spends and actual should enable budget holders to ensure that appropriate action to bring budgets back on track is taken. If this is not possible then the relevant Director will need to consider transfers to or from other budgets within their control. If this is not possible then the Director of Finance, IT and Digital should be informed to enable the programme to be rebalanced. 

3.5.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To ensure that monitoring reports are available to budget holders;
• ii) To report on major differences or trends that have a significant impact on the overall finances of the Council;
• iii) To ensure so far as possible the overall Programme is balanced and that the Council suffers no loss of resources;
• iv) To provide Directors and Chief Officers with appropriate advice and guidance.

3.5.3 Responsibilities of Directors and Chief Officers:

• i) To ensure that adequate budget provision exists for all expenditure prior to it being incurred;
• ii) To ensure that each detailed budget has a nominated budget holder;
• iii) To monitor projects and their budgets within their service areas;
• iv) To ensure that where the approved budget for a specific scheme is anticipated to be insufficient to meet forecast commitments, to transfer resources in accordance with the budget transfer rules detailed in section 4.5 and where appropriate to seek approval of transfers within the quarterly monitoring reports submitted to the Finance and Corporate Affairs Committee and individual Policy Committees to ensure transparency.
• v) To inform the Director of Finance, IT and Digital of any major differences of actual from planned income or expenditure.

3.5.4 Responsibilities of Director of Neighbourhoods and Regulatory Services:

• i) To manage the contracting process for building works;
• ii) To monitor projects physical and financial performance and take action as necessary; 
• iii) To manage the disposal of surplus land and buildings in accordance with the Capital Strategy and any target set in the Medium Term Financial Strategy.

3.6 Treasury Management

3.6.1 The Council is responsible for very significant cash flows arising from its capital and revenue activity. These require investments and borrowings totalling in excess of £100m. The Council must therefore adopt the highest standards in the management of these sums and flows.  The Chartered Institute of Public Finance and Accountancy (CIPFA) maintains a Code of Practice, which meets these requirements and is adopted by the Council.

3.6.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To ensure that the CIPFA Code of Practice is adopted and maintained;
• ii) To propose to the Finance and Corporate Affairs Committee, Audit and Governance Committee and Full Council a Treasury Management Strategy within the Code of Practice;
• iii) To implement the Treasury Management Strategy;
• iv) To make administrative decisions within the Treasury Management Strategy;
• v) To administer all leasing arrangements for goods. Financial Risk Management and Insurance

3.7.1 All organisations face risk to people, property and continued service delivery, which can result in injury, damage and loss. Where the Council is culpable this can result in a financial claim. The Council also has Health and Safety duties, which need to be considered. This requires a Risk Management Strategy to be developed.

3.7.2 Insurance historically has been the main way of protecting against loss. With the advent of significant excesses the level of risk transferred is no longer as great and the Council is faced with a greater certainty of loss. An effective insurance strategy is therefore required which protects the Council.

3.7.3 Responsibilities of the Director of Finance, IT and Digital:

• i) To develop and submit to the Finance and Corporate Affairs Committee a Financial Risk Management Strategy for consideration;
• ii) To monitor the Financial Risk Management Strategy; 
• iii) To develop and submit to the Finance and Corporate Affairs Committee an Insurance Strategy for consideration;
• iv) To implement the Insurance Strategy and make administrative decisions within the Strategy.

3.7.4 Responsibilities of Directors and Chief Officers:

• i) To assist, develop and submit a Financial Risk Management Strategy;
• ii) To identify and take action to minimise financial risks within their service areas;
• iii) To inform the Director of Finance, IT and Digital of new financial risks;
• iv) To investigate incidents that arise;
• v) To deal with any claims that arise with the Director of Finance, IT and Digital speedily and effectively.