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COMMISSION URGES STRICT REGIME FOR TRADING UNITS

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Councils must make sure core financial disciplines are maintained for their trading units under best value, the Aud...
Councils must make sure core financial disciplines are maintained for their trading units under best value, the Audit Commission has said.

The Commission warns that the removal of CCT's statutory accounting and reporting provisions could mean a weakening of financial discipline in council trading units.

In a report, Getting the groundwork right, it says reliable and timely in-year accounting and performance data should be at the core of financial arrangements for all services.

Commission controller Andrew Foster said: 'With so much change in local government it is essential that core financial disciplines are maintained for trading units. An active effort will be needed to ensure that reliable financial and performance information is produced.'

The report highlights the problems experienced by some councils in the final years of CCT, when several experienced 'severe difficulties' with their direct labour and service organisations.

In 1997-98, one in eight of the organisations in England failed in its statutory duty to break even. In Wales one in six failed to do so.

Report project manager John Stanford said: 'There were a very small minority of councils which did have financial problems. The main point we're trying to make is that the financial implications of those problems take a long time to surface.'

The report recommends that all significant trading units should have annual business plans, which should be approved at member level. The plans can add value, the commission argues, by addressing resource requirements and activity levels as well as providing key performance criteria and budgets.

The commission says that finance directors should not allow themselves to become distanced from the financial management of trading units and insists financial reports should be clear and simple.

Getting the groundwork right is published by the Audit Commission. To obtain a copy tel: 0800 502030

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