CIPFA consults on first-ever financial management code
CIPFA is consulting on a proposed new financial management code (FM code), which aims to drive improvement in financial management for all local authorities in the UK, marking the first time many areas of local government financial management have been codified
22 Mar 2019
The CIPFA FM Code has been designed to support good practice in financial management and help local authorities demonstrate financial sustainability. It builds upon the underlying principles of leadership, accountability, transparency, professional standards, assurance, and sustainability, and is the product of extensive engagement with senior leaders in public finance from across the UK over the last nine months.
Don Peebles, CIPFA head of policy and technical, said: ‘Following our substantial road testing with the public finance community on the CIPFA FM Code, we’re keen to hear from all interested parties on what will become the new professional standard for local government financial management.’
The draft FM Code is based on a series of principles supported by specific standards and statements of practice. They are considered necessary to provide the strong foundation within local authorities to enable them to financially manage the short-, medium- and long-term finances; manage financial resilience to meet foreseen demands on services; and financially manage unexpected shocks in their financial circumstances.
The draft FM Code is consistent with other CIPFA codes and statements in that it is based on principles rather than prescription. Each local authority (and those bodies designated to apply the FM Code) must demonstrate that the requirements of the FM Code are being satisfied.
Demonstrating this compliance with the CIPFA FM Code is the collective responsibility of elected members, the chief finance officer and their professional colleagues in the leadership team.
CIPFA says the FM Code builds on the success of the CIPFA Prudential Code, which requires local authorities to demonstrate the long-term financial sustainability of their capital expenditure and associated borrowing. With this came new financial freedoms to make local decisions on matters that had hitherto been subject to central government control.
The draft FM Code is not expected to be considered in isolation, and accompanying tools will form part of the collective suite of evidence to demonstrate sound decision making.
To date, the draft FM Code has been developed with a specified governance process which includes practitioners, auditors and representatives of governments across the UK. It was then ‘road tested’ by a range of local authorities to provide early evidence of both practicality and fitness for purpose.
Carol Culley, deputy chief executive and city treasurer, Manchester City Council, said: ‘The Local Government Faculty Board welcomes this development and believes the CIPFA FM Code will support chief financial officers, section 95 officers and section 151 officers in managing the increasingly complex issues of public finance.’
Margaret Lee, executive director of corporate and customer services, Essex County Council, said: ‘Local government has faced funding reduction since 2010 and growing pressures on public services, both of which are challenging the financial sustainability of local authorities.
‘Stronger financial management is essential within the sector, particularly where budgets show a consistent use of unplanned reserves, a growth in overspending, and a lack of medium- and long-term planning.’
All responses must be provided by email to FMcode@cipfa.org by 30 April.
Report by Pat Sweet