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Surrey likely to struggle to meet £94m budget gap

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Surrey CC currently lacks sufficient reserves to meet an expected budget gap in 2019-20 and must not put off difficult decisions, according to a new report from the Chartered Institute of Public Finance & Accountancy (Cipfa).

In its financial resilience report, commissioned by chief executive Joanna Killian after she started in March, Cipfa officers said the council “no longer has the option of putting off change”.

Surrey is facing a funding gap of £36m in 2018-19 rising to £86m by the end of 2019-20. This rises to £94m the following year.

Cipfa’s report, due to go before cabinet on 25 September, said: “Surrey County Council is in a difficult financial position. Despite repeated cost reductions, the expected increase in service pressures means that, as things stand, the council will not have sufficient reserves to meet its expected budget gap in 2019-20 unless it acts now.”

Surrey CC leader David Hodge (Con) responded to the report, saying: “It’s well known that local government budgets across the country are under severe pressure. However we have a duty to ensure the council remains as financially sound as possible in these unprecedented times and that’s why we asked Cipfa to do this review.

“While we have achieved a balanced budget or small underspend in the past eight years we actively wanted our financial situation to be independently challenged. We know there is much more to do to make our finances sustainable and able to withstand the huge pressures in adult and children’s services that we’ll continue to face into the future.

“But with a new senior team leading the council, including an interim director of finance, we’re taking all the right steps to achieve this.”

Cipfa’s report criticised the council’s financial team in particular for a “lack of dynamism” and for being “top heavy”, and added more delegation is needed to junior staff. The report also recommended greater integration of back office services in order to generate “economies of scale”.

The report said: “The existing multi-tasking across the senior leaders in finance means that the finance business partnering is less effective and there is insufficient focus on raising performance standards.

“The current focus of the team is focused too much on day-to-day tasks – ‘what needs to get done’ rather than strategic priorities - ‘what’s important to the organisation and to the residents of Surrey’.”

The council appointed Leigh Whitehouse as interim director of finance, starting on 3 September, following a warning from auditor Grant Thornton that the council’s medium term financial health poses a “significant risk”.

Surrey’s former finance director Sheila Little left the council in July, having previously warned about the need to use “an unprecedented level” of reserves to balance the council’s 2018-19 budget. Cipfa said Ms Little had “developed a strong team bond within the finance function” but added: “Drawing on the interviews we conducted, however, the team lacks sufficient drive and initiative to tackle the issues above.”

There are also issues with the data Surrey’s officers have access to.

“The finance team is currently relying too much on ‘workarounds’, proxy measures and broad assumptions due to the lack of reliable performance data,” the report said.

Cipfa was also critical of Surrey’s partnership with East Sussex CC and Brighton & Hove City Council called Orbis which provides finance, HR and procurement services.

The report said: “In comparison with shared services elsewhere, Cipfa considered the extent of integration in Orbis to be relatively immature. There are pockets of modernisation across Orbis but, given that the partnership is now in its third year, we had expected a more advanced operating environment than what currently exists.”

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