CIPFA plans index to measure local authority ‘financial resilience’

CIPFA is consulting on plans to launch an index to provide a meaningful measure of local authority financial resilience to reassure to councils who are financially stable and prompt challenge where it may be needed

The index, based on publicly available information, will provide an assessment of the relative financial health of each English council.

It will use a range of indicators, including the rate of depletion of resources, level of resources generally, demographic and social services pressures and level of borrowing.

CIPFA is now consulting on the plans and is working closely with the sector to decide how the index should work and what criteria should be included in the ratings.

Rob Whiteman, chief executive of CIPFA, said the decision to create the index was a response to the ‘unprecedented’ financial challenges facing local councils in recent years that are likely to remain well into the next decade.

‘Despite the financial strain, councils have been able to deliver core services and manage their balance sheets more actively than other parts of the public sector. But, unfortunately, financial management capabilities and sharing good practice have at times been hollowed out by the repeated need to cut budgets.

‘CIPFA believes there is a need for appropriate and robust independent challenge and support of some councils on financial strategy and trajectories through this new resilience index which is intended to provide challenge where needed so that appropriate action can be taken at a local level,’ Whiteman said.

CIPFA has also begin development of a new financial management code to accompany the existing prudential and treasury management codes.

The code will be developed with help from treasurers’ societies and relevant bodies including the National Audit Office, audit firms, Local Government Association (LGA) and Ministry of Housing, Communities and Local Government (MHCLG). 

The consultation on the resilience index closes on 24 August. CIPFA expects to produce the first edition in the early autumn this year.

CIPFA resilience index consultation

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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