council s Budget and Financial Planning Framework

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1 Basildon District Council Financial Planning Framework 1. Introduction The Financial Planning Framework underpins the Council s Medium Term Financial Strategy and sets out the financial planning processes used to support the development and review of policy and the allocations of resources to services. The overall objective of the framework is to maintain and continue to develop sound financial management to support the Council s strategic aims and objectives. to the particular objectives are: to identify the Council s budget requirement aligned to key service objectives and core service provision needs to review the Council s financial capacity in light of changing circumstances and external pressures to deliver future plans and to maintain services to ensure effective financial planning and risk management is in place to re-prioritise expenditure to meet new and changing demands to ensure regular budget monitoring and financial performance reporting is in place to respond to legislative changes to maintain effective systems of internal control. 2. Links to Council Objectives and Strategies The Financial Planning Framework is linked to, but does not supersede, other key strategy and financial control policies. In this regard the relevant strategies and documents linked to and underpinning the overall Financial Planning Framework are: The Council s Constitution (The Way we Work) Article 4 of the Constitution sets out the Council s overall responsibilities with regard to budget setting and Part 4 details the Council s Budget and Policy Framework procedure rules. Financial Regulations The Council s Financial Regulations are also set out in Part 4 of the Constitution. They provide the overall key control framework to enable the organisation to exercise effective financial management and control of its resources and assets. Statutory and Accounting Regulations The financial business of the Council is conducted in accordance with relevant financial and other legislative arrangements including those set out in S.151 of the Local Government Act 1972, S.114 of the Local Government Act 1988, the Accounts and Audit Regulations, the Capital Finance and Accounting Regulations, various Accounting and Treasury Management Codes of Practice and Guidance, and Statements of Professional Practice, including the CIPFA Guidance on the Role of the Finance Director.

2 Capital Strategy The Council s Capital Strategy provides clear, strategic guidance about the Council s capital objectives, priorities and spending plans. It shows how the Council will maximise the capital resources available for its plans and programmes and demonstrates how they will contribute to achievement of the priorities set out in the Council s Strategic Improvement Plan and its wider objectives. Risk Management Strategy The Council acknowledges that robust and proactive Risk Management arrangements are an essential component of effective overall management and governance. The Council has an approved Risk Management Policy Statement and Strategy, which is supported by a detailed management toolkit and is reviewed and updated annually in order to reflect best practice. In addition, the corporate Risk Management process is embedded within all corporate strategies, policies and frameworks. Asset Management Plan The main purpose of the Asset Management Plan is to ensure that the Council s land and property assets make the most effective contribution to the Council s Strategic Improvement Plan. It outlines the Council s property related requirements and management arrangements together with relevant key performance indicators. Treasury Management Strategy Treasury Management is the management of the Council s cash flows, borrowing, investments and money market transactions and the effective control of associated risks. The Council has approved a Treasury Management Policy Statement and approves annually a strategy plan of treasury management activity and a separate investment strategy. 3. Key Principles of the Financial Planning Framework The framework is based on the following set of key principles: Resources follow priorities Budgets express the Council s key aims and objectives in financial terms. Flexibility on the allocation of resources is limited, due to legislative changes and other external factors, together with increased demand and inflationary pressures. It is essential that appropriate mechanisms and review are in place to ensure that resources are directed toward the Council s key service aims and objectives. Changes in resource allocations to services are therefore based on the Council s policy priorities. Budget Preparation and Forward Financial Forecast The Council has an established practice of preparing annually detailed three year Forward Financial Forecasts for both revenue and capital. The forecasts are based on existing service levels with allowances for inflation, demographic growth, and planned use of earmarked and general reserves. Assumptions are made as to the level of external Government support and tax base changes to predict future years Council Tax levels. Similar considerations apply to the Housing Revenue Account budget. The longer term forecast

3 introduces assumptions as to the likely impact in future years of decisions made since approval of the detailed budget, and the potential influence of external factors on the Council s financial position e.g. Interest rate changes, employer s pension fund deficit contributions and changes in statutory obligations. Capital and Revenue Budgets are integrated and the revenue consequences of capital investment are identified based on realistic future assumptions and risk assessments of material items. Fees and Charges for services Fees and Charges for services are reviewed annually according to inflationary and other factors considered appropriate in respect of service demand and to reflect the Council s key aims and objectives. Reserves In accordance with the formal Reserves Policy and Strategy, the level of reserves is based on a risk assessment by the Executive Director (Section 151 Officer) based on appropriate guidance. The level of general reserves is viewed over the longer term financial forecast. There is an established policy of earmarking reserves to meet specific items of expenditure, including an Insurance Pool reserve which is actuarially assessed for adequacy biennially. The levels of reserves are reviewed annually as part of the budget setting process. Consideration is given in light of best practice guidance. Council Tax levels Reviews of each service area are undertaken as part of the budget setting process through relevant scrutiny committees and working groups to ensure that Council Tax increases are in line with the Council s stated objectives, subject to the impact of external factors beyond the Council s control. In addition, the Overview and Scrutiny Commission meets towards the end of the annual budget process to review the process itself, to seek clarifications on the budget report to Cabinet and to make comments to be taken into consideration by Cabinet and subsequently the Leader and full Council when setting the budget and forward forecast and the Council Tax for the ensuing year. Budget Monitoring Robust budgetary control mechanisms are in place at Head of Service and Director level. Quarterly budget performance reports are made to relevant Scrutiny Committees as part of wider performance monitoring arrangements and similar reports are prepared monthly for Cabinet Members covering their areas of responsibility. Appropriate corrective action is implemented at the earliest possible opportunity. Capital Programmes Capital expenditure plans, setting out the Council s intended level of investment in its assets, are prepared based on the approved Capital Strategy, which in turn is linked to the Council s key aims and objectives. Capital expenditure is classified according to government regulations and resources are forecast taking account of any support from government and other partners for capital expenditure and likely levels of useable capital receipts and other income.

4 Whilst government controls on borrowing have been relaxed, the Council will only borrow to fund capital expenditure where it is considered to be prudent, affordable and sustainable. This is monitored against published prudential indicators. Where such borrowing is agreed the revenue effect is included in the revenue budget and forward financial forecasts. Legislative changes Service delivery requirements having a financial impact can arise as a result of changing legislation or technical changes to statutory accounting arrangements or regulations. All such changes, with an assessment of the potential financial impact, are reported to Members at the appropriate time and considered as part of the longer term strategic budget forecast. Member Reporting and Decisions All reports, CMDR s and ODL s to Members are required to include an assessment of the financial implications and the risks associated with any decisions or course of action. Internal Control As part of its overall governance arrangements the Council maintains a system of internal control. The effectiveness of the system is constantly monitored and developed and is reported on annually by the Chief Executive and Leader of the Council (Annual Governance Statement). In support of these arrangements, the Council maintains an appropriately resourced and effective internal audit function. The Council s arrangements in this regard are reviewed annually and reported on by the appointed External Auditor. Housing Rents Rents of the Council s housing stock are set in accordance with the government s formula approach, having regard to relative property values, relative earnings and numbers of bedrooms, in order to align rent levels with those of other social landlords. External Funding & Partnership Arrangements External Funding opportunities are explored, principally through the work of the Basildon Renaissance Partnership, and aligned to the Council s core aims and objectives. The Council works in partnership with other public agencies, community groups and voluntary organisations to attract funding and bring together the contributions of the various stakeholders. This activity maximises funding opportunities to meet priorities but must also operate within the Council s approved budgetary framework and control arrangements. 4. Cabinet Member for Resources One of the Members of Cabinet has special responsibility for Resources, which includes Finance, Council Tax and Business Rates, Property (including Asset Management), Revenues and Benefits, Corporate Procurement, Human Resources (including Organisational Development), Legal Services, Performance and Business Planning. An Assistant Cabinet Member has been nominated to assist with this portfolio.

5 The Cabinet Member has decision-making powers in related matters and works closely with the Section 151 Officer and the Head of Resources. 5. Financial Strategy Development and Reporting The Council has an approved medium term Financial Strategy. Cabinet receives a strategic financial update part way through each year, which also sets the scene for the upcoming budget process. Other strategic financial and service reports are also presented as necessary, together with relevant performance monitoring information, during the course of the year. Working within the Financial Planning Framework the Cabinet will direct appropriate action to ensure that the Council s overall service and financial strategic aims and objectives are achieved. As part of its overall financial strategy, development and monitoring arrangements, the Council has a Cabinet Member with specific responsibility for Resources and the Council s statutory S.151 Officer is a member of Executive Team.