Meeting documents

To discuss and comment upon the attached report.

 

Contact Officer:  Nuala Donnelly (01296) 585164

The Council had undergone significant changes in the last 2 years with major organisational restructuring and changes. At its meeting in November 2017, the Finance and Services Scrutiny Committee had recommended that the Quarterly Finance Digest be refreshed to ensure that Members were getting sufficient information to understand the financial position of the Council and any inherent and emerging risks.

 

Financial Reporting Requirements

 

The Council needed to demonstrate how well money was being spent and then report it appropriately.  There were a number of good principles in relation to this, namely:

·                    Members should receive regular and accurate accruals based financial information including the risks to the financial position and how they are being managed.

·                    Information for Committees should be summarised appropriately, and provide details on the next steps/ required actions.

·                    The level of information should be commensurate with decision making required.

·                    Committee Members should receive regular and accurate information on the balance sheet.

·                    There should be a link to operational performance and financial reporting.

·                    Reporting needs should be informed by users

·                    Reports should be user friendly and understandable, and financial terminology explained

·                    Reports should be indicative that financial performance was aligned to operational performance.

·                    Allow for exception reporting/ RAG rated, with appropriate risks highlighted.

 

A number of options had been considered on how financial information could be presented to Members, who would also receive annual financial information as part of the Annual report.

 

Currently, the Quarterly Finance Digest was the main vehicle for reporting to Members on the Council’s financial performance to Members.  Recent feedback from Internal Audit and from the Scrutiny Committee suggested that whilst this provided a good financial overview of the Council, some additional information was required.

 

One option would be for interim changes to be made to the current reporting format that would allow for immediate progression on changes to reporting of information.

 

Work was progressing to review the content of the Quarterly Finance Digest for the third quarter of 2017/18 and the following was being suggested:

·                    a move to a more narrative report – taking the variance analysis from the tables to a narrative report.

·                    The narrative report would give an overview of the financial position and provide additional narrative on exceptional areas only by portfolio

·                    An organisation overview would be produced with a report on costs and income, and the net position.  The spend would also be split between pay and non-pay costs to give further granularity of detail.  This could be at portfolio level.

·                    subjective level analysis would be available, e.g. spend on areas of interest e.g. agency spend /forecast by Portfolio.

·                    The report would identify variance to plan and outline actions plan/corrective actions being taken to address emerging issues.

·                    Additional narrative on cash and treasury.

·                    Performance against capital budgets

·                    Some comments had been raised by members re: budget profiling.  This would be reviewed when reporting and commented upon as appropriate.

·                    Aim to produce reports within 6 weeks of end of period

 

A second option would involve a longer-term project to develop reporting requirements for the Council and Members.  Any suggested changes would need to be iterative and the development of reporting processes would need to be discussed with key stakeholders.  It would also depend upon system reporting capabilities.

 

Members were also asked to comment upon the timing and regularity of reporting.  As a general guide, monthly reporting was good practice although the Finance Digest was currently produced quarterly.  Other issues impacting on reporting included providing enough level of detail so that Members could get the big picture, reporting both reactively and on emerging issues, reporting by exception and highlighting information in a way that helped Councillors understand the impact of the budget variances and on the remedial action that could be taken.

 

It was suggested that the key measures for financial management should be cash resources, operating results, balance sheets and financial Key Performance Indicators (KPIs). A list of reports that were a useful indicator of financial performance included:

 

Income and Expenditure (I&E)

·                     Organisational I&E – Year to date Plan / Actuals/ Variances to plan.

·                     Organisational I&E - In month performance (plan/actual/variances).

·                    Organisational Income and Expenditure – Annual budgets/ Forecast outturn/ variances.

·                    Organisational Month by month expenditure levels (to assess trends).

·                    Organisational Month by month income levels (to assess trends).

·                    Information on Budget profiling and impact of budget profiling.

·                    What are we spending our money on?

o        Subjective level reporting – staff and non-pay

o        Income by type

·                    Performance against Procurement savings.

·                    Trend information: Last years outturn as indicator

·                    Overview of Risk analysis:  Key risks and actions being taken to address.

·                    Overview of Financial Opportunities: Regular review financial opportunities.

 

Balance sheet reporting/ Financial reporting to include:

·                    Treasury Management information:  levels of cash / rolling cash flow

·                    Treasury Management: Detail of Investment balances

·                    Treasury Management: Detail of borrowings

·                    Use of balances – risk and opportunities

·                    Balances on Reserves …  and likely commitments/ cash outflow over time

·                    Debt: Aged profiled of debt, monthly changes in bad debt provision

 

Key Financial Performance Indicators

·                    Payment information:  performance against payment terms

·                    Key KPIs in relation to finance, including e.g. creditor and debtor invoices.

·                    Other "performance" indicators might also be identified in relation e.g. to Customer activities.

 

Currently, the Quarterly Digest did not make direct references to non-financial data to support the review of the financial position although some progress had been made in producing integrated performance reports through the "Business Intelligence Project".

 

The Business Intelligence Project was responsible for development of integrated performance management information, providing metrics to help the senior management team monitor overall performance.   A Dashboard was also being developed.

 

Member considered all of the information and their requirements regarding future reporting and commented:-

 

(i)            that different Members would require different levels of information.  However, it would be helpful to provide some narrative with reporting.

 

(ii)           that they would like information to be reported monthly (with key messages), and then summarised quarterly for the Committee.  It would also be helpful for reporting cycles to coincide with Committee meetings.

 

(iii)          that they were open to experimenting with levels of information provided, but would like the following to be considered:-

·                     report by Department, rather than I&E information, on planned, actual and variances against budget (for both last year and this year), including a brief narrative on exceptions and on the remedial action being taken in relation to variances.  This should also include highlighting significant differences for Members.

·                     Summary Dashboard, with both financial and non-financial (KPI) information, and including direction of travel information and using a traffic light (RAG) rating system.  This would primarily be a summary of major information supported by some narrative.

·                     Members having access to a financial reporting system so they were able to ‘drill down’ and analyse spend on areas of interest.

·                     information on end of year variances and re-charges.

·                     Reserves – to be clear whether they were committed or non-committed (with a very brief narrative).

·                     more financial and non-financial information to be provided on Connected Knowledge programme, particularly due to the size of investment in the programme and its importance in delivering a sustainable infrastructure for the Council that will support the delivery of further efficiencies.

·                     automating systems so that financial information could be easily produced for Members and senior Officers.

 

(iv)            that, if the Council established any more companies, it should be explicit in their Articles of Association that the accounts would be available and able to be viewed through the Council’s financial systems.

 

In summary, Members were in agreement with the options proposed to update financial reporting for the future.  The Committee also recognised that any changes to the reporting would be iterative and the development of reporting processes would be dependent on system reporting capability.

 

RESOLVED –

 

That Officers be requested to take into account the discussions and comments made at the meeting, wherever possible, in reviewing the format and financial / performance information reported to the Committee.