4.1.1 The purpose of financial planning is to set out and communicate the Council’s objectives, resource allocations and related performance targets, and to provide an agreed basis for subsequent management control, accountability and reporting.
4.1.2 Budgets are needed so that the Council can plan, authorise, monitor and control the way money is allocated and spent. It is unlawful for the Council to budget for a deficit.
4.1.3 The Council’s budget sets agreed parameters around the annual activities and functions of services and is constructed within the context of a financial strategy which reflects the priorities of the Council.
4.1.4 The Capital Programme sets out the resource allocations to be made to capital schemes that have the approval of Full Council. Capital expenditure involves acquiring or enhancing fixed assets with a long term value to the organisation, such as land, buildings, major items of plant, equipment of vehicles.
4.1.5 To enable members to make informed decisions, all Cabinet and Committee reports must incorporate a separate section on ‘financial implications’. Reports must show the costs or savings of proposals together with any approved budget provision, future commitments, potential risks, tax implications and any other financial consequences which may arise from the options and recommendations.
4.2 The Full Council is responsible for agreeing the council’s policy framework and budget, which will be proposed by Cabinet. In terms of financial planning, the key elements are:
- The Corporate Plan;
- The Revenue Budget, for both the General Fund and the Housing Revenue Account;
- The robustness of estimates and the adequacy of reserves;
- The Tax Base and Collection Fund;
- The Capital Programme;
- Prudential Indicators and Treasury Management Strategy;
- The Financial Strategy.
4.3 In terms of the policy framework, it comprises of a number of statutory plans and strategies and each service area will also have their own.
The Full Council is also responsible for approving procedures for agreeing variations to approved budgets, plans and strategies forming the policy framework and for determining the circumstances in which a decision will be deemed to be contrary to the budget or policy framework. Decisions should be referred to the Full Council by the Monitoring Officer.
4.4 The Full Council is responsible for setting the level at which Cabinet may reallocate budget funds from one service to another. Cabinet is responsible for taking in-year decisions on resources and priorities in order to deliver the budget policy framework within the financial limits set by the Council.
Preparation of the Corporate Plan
4.5 The Head of Paid Service is responsible for proposing the Corporate Plan to Cabinet for consideration before its submission to the Full Council for approval.
4.6 Guidelines on budget preparation are issued to members, directors, managers and budget holders by Cabinet following advice from the Section 151 Officer. The guidelines will take account of:
- Legal requirements;
- Medium term planning prospects;
- Forecasts of available resources externally;
- Forecasts of internal resources available;
- Spending pressures;
- Best value and other relevant Government guidelines;
- Cross cutting issues (where relevant);
- Impact assessments;
- Risk factors;
- Consultation with residents and businesses.
4.7 The general format of the budget will be approved by the Full Council and proposed by Cabinet on the advice of the Section 151 Officer. The draft budget should include allocations to different services and projects, forecasts of funding from central government, proposed taxation levels and contingency funds and the robustness of estimates and the adequacy of levels of reserves.
4.8 The Section 151 Officer is responsible for:
- Ensuring that a robust revenue budget is prepared on an annual basis for consideration by Cabinet, before submission to the Council. The Council may amend the budget or ask Cabinet to reconsider it before approving it;
- Ensuring that a capital programme and Treasury Management plan are prepared on an annual basis for consideration by Cabinet, before submission to the Council;
- Establishing the tax base for the council on an annual basis for the consideration by Cabinet and Council between 1 December and 31 January.
4.9 Cabinet is responsible for issuing guidance on cash limits and the general content of the budget on advice from the Section 151 Officer.
4.10 It is the responsibility of directors and managers to ensure that budget estimates reflecting agreed service plans and within the notified cash limits, are submitted to Cabinet.
Budget Monitoring and Control
4.11 The Section 151 Officer:
- is responsible for providing appropriate financial information to enable budgets to be monitored effectively;
- must monitor and control expenditure against budget allocations and report to Cabinet on the overall position on a regular basis, at least quarterly during the financial year.
4.12 It is the responsibility of directors and managers to control income and expenditure within their area and to monitor performance, taking account of financial information provided by the Section 151 Officer. They should report on variances within their own areas. They should also take any action necessary to avoid exceeding their budget allocation and alert the Section 151 Officer to any problems.
Financial Strategy (FS)
4.13 The Section 151 Officer shall ensure the FS is agreed annually at Full Council, at the same time the budget is agreed. The FS should:
- Build on all the aspects of budget compilation;
- Be at least three years in duration;
- Take account of the Government’s Spending Review and settlement for local government;
- Consider consultation with and take account of changes in the Shires demographics, underlying drivers and changes in policy;
- Consider the impact of measures to improve efficiency and value for money;
- Consider Government legislation plans;
- Consider the Administration’s long term goals, priorities and approved policies;
- Consider the direction of the economy.