- This report is
intended as a preface to the officer reports on Agenda Items 5, 6 and
7. Although each report covers a discrete part of the Council’s operations,
there are recurrent themes that need to be drawn together and there
are lessons to be learned from issues arising from each report.
Robson
Rhodes report on Financial Management
- We welcome the
Robson Rhodes report on the Council’s Financial Management. We accept
that it has measured our position against a high standard and one that
has only just been launched. We also accept that the Council has further
work to do to meet that high standard and we welcome the challenge of
helping it do so quickly and fully.
- The way forward
is now clear:
(a) For
a decade or more, members promoted a culture that sought to maximise
the resources that go to "front line services" and, by default, pared
down the resources for the corporate centre and back-office functions.
This imbalance had unacceptable consequences. We have taken a number
of steps to correct this situation and the report makes it clear that
further strengthening of corporate capacity in financial and audit functions
is required.
(b) Strong
corporate leadership in the finance function is vital to put in place
a new financial management system that is fit for purpose in a changing
and challenging financial scenario. Action is already being taken here.
(c) The
internal audit function needs to secure the respect and attention of
senior management and of members and it needs to escalate issues of
concern. It also needs to be better resourced. External audit has similarly
not always alerted members to the seriousness of concerns in many areas
of financial management.
- The Robson Rhodes
report provides a clear list of priority areas that need urgent attention.
The next stage is to devise an implementation plan and to ensure it
is delivered in a timely and effective manner. It is a challenging role
for our new Head of Finance but one that we know she will relish. Member
support and engagement is equally essential to ensure it is delivered.
This is a substantial role for all members and particularly for those
on the Best Value and Audit Committee.
Future
Development of the SAP Management Information System
- The IBM report
tells us that the system we selected back in June 2001 is a good one
but that we need to do more to exploit it to its full potential and
that we need to invest more to derive greater benefits. It also tells
us that we need to review our systems and procedures throughout, applying
Business Process Re-engineering techniques.
- Although we have
to invest significant additional sums in improving the implementation
of the SAP system, we should reap significant financial savings as a
result.
Revenue
Budget and Capital Programme 2005/06 – 2007/08
- The report makes
familiar reading. While pressures are unremitting, there is clear evidence
of a tightening of the financial position as the result of reducing
central government funding.
- Our Medium Term
Financial Plan assumes three key variables for 2005/06:
(a) a
Council tax increase of 6%;
(b) a
Contingency to Spend of £9 million; and
(c) planned
efficiency savings of £5 million: failure to generate these has a direct
impact on the Contingency to Spend, reducing it pound for pound for
non-achieved savings.
- The government’s
school funding guarantee pre-empts half of our Contingency to Spend
and other claims include rising pension costs (£1.1), replacing balances
(£1.5m) as a result of Social and Health Care finance write-offs and
the additional investment in the SAP Management Information system (£2m).
These claims wipe out our Contingency to Spend and leave us with a shortfall
of £800k..
- Further analysis
of the government’s Comprehensive Spending Review indicates a likely
loss of government grant of some £2.6m.
- The Executive
is determined that none of these pressures should be solved by a higher
level of Council Tax than the Medium Term projection of 6%. This has
to be seen as a maximum. We therefore see ourselves as squeezed by central
government reducing grant on the one hand and by significant spending
pressures arising both from service needs and from the need to strengthen
the corporate centre on the other.
The way
forward
- Against this background,
we see some clear points emerging.
Priorities
- Given the pressures
we face, the Executive must be clear about its priorities and strict
about not trying to do more than is feasible or affordable. Priorities
must be backed by resources.
Leadership
and Accountability
- Given the complexity
of modern local government and of some of the projects facing the Council,
we need to ensure there is clarity about leadership and accountability.
Project
Management
- Managing complex
projects – particularly where they cross directorate boundaries – requires
good project management skills. Executive members, directors and managers
have a responsibility to ensure that training is available for individuals
who need to strengthen their project management skills. These are not
an add-on; they are fundamental to delivering on time and on budget.
Performance
Management
- Implicit in all
is the assumption that sound management will establish targets and accountabilities
and that individuals will accept responsibility for their part in the
project and will be accountable for delivery.