A quarter of English authorities are keeping statutory finance officers at arm’s length from key decisions, potentially contravening official guidelines, exclusive LGC research reveals.
The finding comes as the Chartered Institute of Public Finance & Accountancy prepared to toughen up on financial leadership.
The official with a legal duty to oversee the administration of a council’s financial affairs is the Section 151 officer.
However, an LGC investigation using the Freedom of Information Act has found that, in 25% of 227 councils surveyed, s151 officers did not report directly to their chief executive. In 12%, they did not sit on their authority’s top management board.
Yet CIPFA guidance, set out in A Statement on the Role of the Finance Director in Local Government guidance, says: “The finance director needs to be at the heart of the decision-making process and play a key role in the organisation.
“The finance director should be a member of the authority’s corporate management team to ensure that financial and funding implications are factored into discussions from the outset.”
LGC has learnt that CIPFA’s new guidance, which it will consult on in the coming weeks, will introduce a ‘comply or explain’ policy, whereby councils that contravene recommended governance models will have to explain their rationale.
CIPFA director, policy and technical, Ian Carruthers said: “What we are saying is that you have to have someone at board level to make sure finance issues are addressed.
“We recommend that the s151 officer is that person. Exceptionally, and it is exceptionally, the s151 officer can be below board level but the council would need to explain why this was the case.”
CIPFA insisted that it would be up to individual councils to set up their own governance structures, adding that there might be a case to have a more senior finance official on the board such as a director of resources.
But Hampshire CC county treasurer Jon Pittam, a CIPFA council member, said he anticipated the Audit Commission would consider whether councils were compliant with the guidance when carrying out future reviews.
LGC’s findings have sparked debate among local government finance professionals, with some claiming s151 officers were being undervalued by the sector when they were needed most.
One district council s151 officer told LGC: “Central government departments have taken steps to ensure that there is a qualified financial director on their boards and I think councils should follow suit.
“It does not make sense that two statutory officers, the s151 officer and the monitoring officer, don’t have to be on the senior management board.”
Society of County Treasurers’ president Brian Roberts said he agreed that the s151 officer should be a central figure in any council.
“It is a positive that so many councils do have a direct reporting line between their chief executive and their s151 officers. The relationship between the finance officer and the chief executive is a key one in an authority,” he said.
Cases where s151 officers did not report directly to a chief executive occurred in a range of councils from different tiers, including district, county, unitary and metropolitan councils.
County councils such as Buckinghamshire, Essex and Surrey; districts such as Boston and Stratford; and metropolitans such as Doncaster, Salford and Trafford all operate with a s151 officer who does not report directly to the chief executive.