Responding to COVID-19: insight, support and guidance
CIPFA today has released two consultations to strengthen the Prudential and Treasury Management Codes. The consultations follow previous reviews of the codes' provisions, amid ongoing concerns over local authority commercial investments.
The Prudential Code is a professional code that ensures that capital finance decisions are prudent and sustainable. The Treasury Management Code, which sits alongside the Prudential Code, provides a framework for effective, risk-managed treasury management in public sector organisations.
The consultations also strengthen measures for defining proportionate commercial investment in the context of local authority regeneration. Separate guidance is available as an annex to the code, which details CIPFA's policy stance on why borrowing for investment return, or debt for yield, is considered an imprudent activity that puts public money at undue risk.
Richard Lloyd-Bithell, Senior Technical Manager at CIPFA, said: "The key changes being brought forward in these consultations, especially those in the Prudential Code, clarify and update CIPFA's position on local authority commercial investment. The revised code will emphasise that any borrowing made solely for the purpose of financial return constitutes imprudent activity, while also taking into account the realities that accompany regeneration activities.
"Over 100 participants responded to the Prudential Code consultation earlier this year to offer feedback on revisions to the codes, and it is vital that the sector engages to the same degree with these consultations."
The proposed revisions will also strengthen both codes with a greater focus on climate and ESG risks when making financial decisions. Alongside the consultations, CIPFA is also releasing free liability benchmark guidance and a new reporting toolkit. The Liability Benchmark Implementation Service is designed to enable local authorities to create their own free liability benchmark; a new indicator included in the proposed updates to the two codes.
Notes to editor
CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. CIPFA shows the way in public finance globally, standing up for sound public financial management and good governance around the world as the leading commentator on managing and accounting for public money.