Magazine article Public Finance

Never Fear, the S151s Are Here

Magazine article Public Finance

Never Fear, the S151s Are Here

Article excerpt

Should the chief finance officer of a large publicly quoted company with a turnover of millions of pounds have a seat on that company's top executive team? Most people would think this was a rhetorical question - but apply it to the public sector and it sometimes seems that this is not the case.

It is true that matters relating to finance and financial management stretch throughout any well run organisation. Indeed, it is vitally important that they do. Good financial management must travel way beyond the finance function. It is about how the board exercises control, how risk is managed and about all the decisionmaking by non-finance people on the front line.

So does this mean that financial specialists, and in particular the chief finance officers of organisations, can throw their caps into the air and retire to the garden? I think not. In the same way as having good management throughout an organisation doesn't reduce the need for a managing director, so having good financial management doesn't reduce the need for a chief finance officer.

In local government, this intuitive reasoning is in fact enshrined in law. In England and Wales the chief finance officer is colloquially known as the 'S151 officer', as the relevant provisions are contained in section 151 of the Local Government Act 1972 (there are similar requirements throughout the UK).

Section 151 requires every local authority to 'make arrangements for the proper administration of their financial affairs' and give one of their officers responsibility for this. That officer has specific duties under other statutes, including issuing a preventative report if there is, or is likely to be, unlawful expenditure or an unbalanced budget, and reporting to the authority at budget-setting time on the robustness of estimates made and the adequacy of the financial reserves. Under the Prudential Code, the chief finance officer has responsibility for ensuring that the authority is given information on all 'matters required to be taken into account' when making decisions on capital investment.

These duties are significant, as is the amount of public money involved. The Office of the Deputy Prime Ministers latest published financial statistics show that local authorities' gross expenditure and income was £107bn in 2002/03. After deducting sales, fees, charges, receipts and other non-grant income, the overall cost to the central and local taxpayer of local authority services was some £1,650 per head of population.

It is the democratically elected and accountable council that makes the budget decisions (in the Greater London Authority, the mayor). The S151 officer has statutory duties to provide sound financial advice to inform that decision-making.

In the published statement of accounts, which reports how the money raised from the budget has been spent, the authority is required to approve the accounts. The S151 officer is responsible for preparing the statement of accounts in accordance with proper practices, keeping proper accounting records and taking reasonable steps to prevent and detect fraud. He or she must also sign and date the statement of accounts, declaring that it presents fairly the financial position of the authority at the accounting date and its income and expenditure for the year.

In carrying out these duties, the S151 officer has an established fiduciary duty not just to the authority but also to local citizens. So CIPFA was concerned by recent reports in local government circles that this role might be downgraded. …

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