This second S114 notice from Northamptonshire is unprecedented. It demonstrates the reality of the dire financial difficulty the county council is currently in and drives home the urgency for action to support the sector’s financial challenges more widely.
Between now and the full council meeting, the authority is prohibited by law from entering into any new agreements involving spending. While this will help stabilise finances so that consideration is given to what is most needed, it is unlikely that sufficient action can be taken prior to abolition of the county council and the formation of two new unitary councils, to correct the cumulative effects of mismanagement over recent years.
These events show that the government was right to appoint commissioners, and that intervention is vital to ensure that the two new councils are not held back by the county council’s failure to remain solvent.
CIPFA has warned Northamptonshire for several years that urgent action was already overdue, but we are shocked to see the scale of Northamptonshire’s financial mismanagement as it has now has emerged.
It is a warning that while many councils have the requisite capabilities, not all councils have the necessary leadership skills, effective robust governance and culture to effectively manage budgets under pressure.
Service users and staff at the county have been let down by the collective failure of leadership that for several years led to denial of the scale of the problem and ultimately financial collapse.
The lessons for councils and the sector as a whole must be to act now to protect the public from the risk of financial mismanagement of this scale occurring elsewhere.
Rob Whiteman, CIPFA Chief Executive, said: “The NAO’s most recent financial sustainability report points out that 10% of upper-tier authorities are similarly vulnerable to financial failure. That could be more than twenty councils at risk along with the essential services for several million citizens. Understanding and acknowledging the scale of pressures, and responding early, to financial stress is essential to avoid seeing more councils fail.”
“CIPFA is encouraging the government to use the forthcoming spending review to find money for adult and children’s social care pressures while using rate retention and fair funding to provide additional resources to the sector. We also believe there is a case to accelerate and broaden reorganisation to reduce overheads. However, given the deteriorating fiscal position and wafer thin control of Parliament, our advice to councils is that medium-term planning cannot be founded on any assumptions of material government support.”
ENDS
Notes to editors:
CIPFA is taking a number of steps to help councils improve their financial planning and management.
These steps include:
- a new financial management code of practice
- a financial resilience index to advise of risks based on the levels of resources against demographic and social services pressures, and the level of borrowing and reserves
- improved support to model future finances
- additional professional requirements for CFOs to address risks
- training for leadership teams on financial planning
Rob Whiteman added: “Most of all, chief financial officers must be supported and empowered to challenge organisational risks and advise elected members and chief executives where they have concerns. Difficult advice must be welcomed and heard at the top table at all times."
“We must all face up to the scale of failure at Northamptonshire being an issue for the whole sector; and CIPFA challenges any complacency that suggests changes are not needed to ensure such failures are not repeated elsewhere."
“Finally, CIPFA is campaigning for local public audit to be strengthened by governance widening the scope of auditors’ public interest reporting and NAO having the role to conduct procurement and appoint auditors to better protect their independence and quality.”
About CIPFA
CIPFA is the professional body for people in public finance. It represents approximately 14,000 members who are public finance leaders and officials in the United Kingdom and overseas, specialising in high quality public financial management and governance for organisations in, and providing support to, government and public services. Its members work throughout the public sector, in national audit agencies, in major accountancy firms, and in other public and private sector bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications is the foundation for a career in public finance. It also champions high performance in public services, translating its experience and insight into clear advice and practical services. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance.
The Institute’s aim is to offer reassurance to councils who are financially stable as well noting where some authorities can improve their financial resilience.