Financial Management Code consultation: Summary of responses

1. Introduction

a. The Chartered Institute of Public Finance and Accountancy (CIPFA) ran a public consultation on the draft Financial Management Code (FM Code) between 20 March and 30 April 2019. The consultation invited respondents to submit their views on driving improvement in financial management for all local authorities in the United Kingdom.

b. This document summarises the points raised by respondents to the consultation and provides the Institute’s response. 

c. The Institute received 59 responses from a broad range of stakeholders including treasurers’ societies which represent many of the individual authorities covered by this Code. This response rate was similar to comparable CIPFA consultations. 

d. There was a strong response from the sector, which agreed there was a need for a Financial Management Code and expressed full support for its aims and ambitions.

e. Consultation responses contained well thought-out challenges and raised queries that included comments on the wording, level of prescription, a requirement for additional clarification, areas for more guidance and a closer alignment with other supportive documentation. Some respondents chose to answer the questions asked, while others replied more generally within their overall response. 

2. Question 1: How can the collective responsibility of the leadership team for Financial Management be made more explicit in the Code?

Summary of responses:

a. The majority of respondents were supportive of the approach set out in the draft FM Code.

b. Suggestions were made on reinforcing responsibilities; leadership training; closer links with monitoring officers; the need for different arrangements in different contexts eg police.

c. Respondents expressed caution over the perception of the Code being the responsibility of the CFO and reinforced the need to ensure buy in from across organisations.

d. There were additional requests for strengthening this narrative and that working with the sector on wording would be useful.

3. Question 2: Does the applicability of the FM Code satisfactorily reflect the increasing complexity and variety of local bodies?

Summary of responses:

a. The police sector felt that more specific drafting would be required, while respondents from the audit profession felt that there was sufficient flexibility.

b. Some respondents felt that the Code should reflect the commercial arrangements currently in place in local bodies, as well as arrangements including partnership agreements and wholly owned subsidiaries. However, some suggested that the complexity of such arrangements warranted an entirely separate section.

c. Respondents in Northern Ireland referenced their simpler structures and raised whether the Code was proportional. 

4. Question 3: Would the inclusion within the Annual Governance Statement of a statement of how the authority had complied with the Code be an effective means of reporting compliance?

Summary of responses:

a. While most respondents considered that the Annual Governance Statement would be an appropriate route for compliance, this was not universal. 

b. Those who were not supportive felt that it would make the Annual Governance Statement too detailed.

5. Question 4: Given that the FM Code makes medium- and long-term financial planning obligatory, how can CIPFA encourage local authorities be more ambitious in the timescales chosen?

Summary of responses:

a. Respondents felt that this was a positive ambition overall, but that the short-term nature of financial settlements from central government, along with the political cycle, present challenges to long-term planning.

b. Some responses included useful examples of how planning was achieved and suggestions that additional guidance would be welcomed.

c. Overall the financial benefits of longer-term planning were recognised. 

d. Audit Scotland was strongly supportive of a move towards long-term planning.

6. Question 5: How can the FM Code give additional support to leadership teams in taking the decisions necessary to restore financial sustainability?

Summary of responses:

a. Respondents expressed concern over sustainability being limited to a small set of indicators, with some feeling it was already covered in the CIPFA Statement on the Role of the Chief Financial Officer.

b. Respondents also noted that commercial risk was not addressed as an issue.

7. Other issues raised

Summary of responses:

a. A number of respondents considered introduction of the Code in 2020 to be an overly ambitious timeframe.

b. Respondents expressed concern that the Code was too prescriptive, expressing the need to achieve the right balance between the prescriptions of the Code and the ability to access detailed guidance.

c. A number of suggestions were made to reduce the number of standards where duplication was identified.

8. CIPFA response and next steps

a. The FM Code was always intended to be aspirational and raise the standards of financial management across the sector. We are pleased to see support for the message that good financial management is the responsibility of the entire leadership team.

b. In light of the level of insightful and informed feedback we received, both through the consultation and through broader conversations with stakeholders, the Code needs to be recrafted into a leaner document but still one that retains the key standards of good financial management. The commentary and feedback from all sectors will be considered as the code is redrafted to reflect these insights. 

c. Reflecting the feedback, guidance material will be developed to assist in meeting the requirements of the Code balancing the need to provide support whilst avoid prescription.  

d. The redrafted document will be shared with treasurer groups and key stakeholders as part of ongoing engagement and governance. 

e. The Code will be formally published in Autumn 2019.