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Member Induction Introduction to Finance

Member Induction Introduction to Finance. Martin Donovan Chief Finance Officer 15 th June 2009. Content. 1. Introducing Frequently Asked Questions 2. Local Government Finance: The National Context 3. Wiltshire Council Context 4. Financial Planning and Management

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Member Induction Introduction to Finance

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  1. Member InductionIntroduction to Finance Martin Donovan Chief Finance Officer 15th June 2009

  2. Content • 1. Introducing Frequently Asked Questions • 2. Local Government Finance: The National Context • 3. Wiltshire Council Context • 4. Financial Planning and Management • 5. Role of Members

  3. Local Government Finance: The National Context UK plc estimated expenditure 2009 – 10 £’billion £’billion Total Public Sector 650 Total Local Authority 170 pay 77 goods and services 36 subsidies/grants 21 capital expenditure 36 170

  4. Funding UK Local Government • Aggregate External Funding (AEF) Revenue Support Grant (RSG) – unhypothecated National Non-Domestic Rates (NNDR) – pooled/redistributed Specific Grants e.g. Dedicated Schools Grant-hypothecated • Non Aggregate External Finance (Non-AEF) • Support for Capital Programmes • Local Authority Self Financed Expenditure

  5. Funding UK Local Government £’billion Revenue Support Grant 38 Non-Domestic Rate Payments 1 Dedicated Schools Grant 33 Other Specific and Special Grants 18 Total AEF 84 Non-AEF Grants 33 Capital Support 15 Locally Financed 32 Grand Total 170

  6. Wiltshire Council Context • Revenue Budget 2009-10 • Gross £833 million • Net £332 million • Overall budget set within resources available • Options over level of council tax • Allocated across services based on priorities and service delivery • Handout of 2009-10 budget

  7. Revenue Budget 2009-10 Gross £832.761 m Net £332.222 m Council tax £1194.68 – Band D Increase 3.5% average Council tax £211.591m General Gov grant £120.103 m Grant per head £259.58 Population 462,690 238 schools 60,135 pupils 3 year Capital Programme £304.133 m Loan debt £186 m Average rate 4.288% Matures over 58 years Pension fund Liabilities £1,335m Assets £1,131m Deficit £204 m (31.3.2007) Wiltshire CouncilOverview

  8. Sources of Income for Revenue - Net General Government Grant – no restrictions on use • Formula Grant - £100.778 million • Revenue Support Grant (RSG) • National Non Domestic Rates (NNDR) • Area Based Grant - £19.325 million Council Tax - £211.591 million • Per Band D property - £1194.68 average Collection Fund Adjustment - £0.538 million surplus

  9. Sources of Income - Gross • Net income sources plus Specific Government Grants - £419.543 million • Some have restrictions on use – e.g. DSG • Handout shows list of grants received Fees and Charges Other Income

  10. Government Grant & Business Rates - £540m Fees & Charges - £55m Council Tax - £212m Other Income - £26m BUDGET 2009-10 £833m Benefit payments - £96m • Other services - £473m: • buses • child protection • collecting and disposing of waste • planning • libraries • social services • community safety • environmental health • housing • economic development • arts, museums and History Centre • leisure, sports and recreation Construction and maintenance of buildings and roads - £20m (financing costs) Schools - £244m

  11. Wiltshire Council Capital Programme • £304 million over next three years • Allocated on a project by project basis across the council – Handout provides detail • Restrictions on what can be capital

  12. Sources of Income - Capital • Government grant • Sale of assets (Capital Receipts) • Borrowing • supported • unsupported • Other – e.g. contributions form developers

  13. APPENDIX 1 Borrowing £84m * Government Grant £150m Sale of Assets £65m Other – including developer contributions £4m Three Year Capital Budget 2009-2012 Maintenance and construction of roads £79m Schools £163m Maintenance of buildings £35m Housing £8m IT £4m Vehicles £6m Other £8m * Unlike some Councils, Wiltshire receives virtually no government support for this cost. The costs of borrowing are financed from the Council Tax

  14. Financial Planning and Management • World Class Financial Management (Audit Commission) • Regular Budget Monitoring • Management Accountability and Responsibility • New SAP Finance System • Commitment Accounting • Budget Managers • Total transparency

  15. Financial Planning • Medium Term Financial Strategy • 5 Year Forecasting Model • Chancellor’s Budget • Service Pressures / Priorities • Procurement and Benefits Realisation

  16. The Role for Members Financial management is central to every organisation’s decision-making process. It is an essential part of the overall performance management of every organisation. The financial management arrangements within local authorities provide information that is used to: • direct the activities of the organisation • control the activities of the organisation • report and discharge accountability • utilise resources efficiently and effectively

  17. The Role for Members • Financial Management is at the heart of decisions: - • Demand full Financial Implications • Ensure options appraisal is undertaken • Sustainable financial solutions • Setting the budget gives the opportunity to direct resources to your priorities

  18. The Role of Members • Setting the Budget • Cabinet • Scrutiny • Full Council • Monitoring in year spend • Monthly reports to Cabinet • Scrutiny • All decisions – finanicial implications paragraph – how funded, is it a priority (using resources which could apply elsewhere), is it one-off or on-going, risks

  19. Officer Support – s151 • Section 151 of the Local Government Act 1972 requires that every local authority in England and Wales should “... make arrangements for the proper administration of their financial affairs and shall secure that one of their officers has responsibility for the administration of those affairs”. • the appointment of the section 151 officer is the responsibility of the council (or one of its committees) and not the executive. The appointment cannot be delegated to the head of paid service or his or her nominee.

  20. Section 114 • section 114 of the 1988 Act which requires a report to all the local authority’s members to be made by the responsible financial officer, in consultation with the monitoring officer and head of paid service, if there is or is likely to be unlawful expenditure or an unbalanced budget

  21. What can you expect? • Independent, professional financial advice • Clear and effective processes & procedures • A focus on material and risk areas • A challenge to proposals & decisions • Maintenance of the public interest role • Effective & operational IT Systems

  22. Expectations cont.... • Budgets linked to objectives & priorities • Finance & performance management information routinely – monthly • Reports with Financial Implications clearly set out • Reports in layman's terms – hopefully • Business cases with clear options appraisals – focusing on costs

  23. Finance Department • Implementing New Finance Structure • Strategic Finance / Departmental Finance • Shared Services • Revenues and Benefits • Newly implemented SAP

  24. Any Further Questions?

  25. Financial Management • We all do it every day • For WCC it’s a bit bigger – more £’000s • More projects and issues • A little more complex • Subject to review

  26. Financial Management • We all do it every day • For WC it’s a bit bigger – more £’000s • More projects and issues • A little more complex • Subject to review

  27. Salary Overtime / 2nd job Living expenses Direct debits House Mortgage or rent Overdraft Holiday Savings Private pension Govt grant Council Tax & fees Revenue account Salaries, utilities Capital budget Debt, leases, PFI Daily cash-flow Planning for future Reserves & provisions Employee’s pensions CompareAt Home At WC

  28. Change employer Effort & reward Shop elsewhere Do we review them? Housing ladder Fixed / variable rates Can’t exceed it Save up for Investments Top-up - AVC’s No alternative Public VFM view Alternative suppliers Gershon savings Maintain minimum Lowest cost options £millions daily Invest to save Financial Strategy High employer’s rate ContrastAt Home At WC

  29. Similarities • Have standards & objectives • We prioritise within available resources • We watch our finances closely • Communicate spending plans with stakeholders • Try to save money on things we buy • But balance cost & quality

  30. But different because WC must • Set & declare a budget • Prepare Statement of Accounts annually • Manages through delegated authority to staff • Legislative requirements – services & finances • Accountability – to Auditor & public

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