“The rise of the commercially-minded “dealmaker” as a local authority chief executive requires a “reappraisal” of council governance skills, according to CIPFA chief executive Rob Whiteman.
Whiteman spoke to Room151 at the 2018 CIPFA conference in Bournemouth, explaining the need for his organisation’s new financial resilience index.
Whiteman said that it made sense for many councils to appoint chief executives with commercial skills, but added that traditional oversight skills are in danger of being lost.
“Councils are now understandably appointing dealmakers, and that is good in terms of developing their commercial and their development opportunities.
“But there is a risk to that. For want of a better word, the town clerk element of being a chief executive is under pressure.
“This is the element which insists on good governance; that insists on options being looked at; that gives advice on there being a fit and proper relationship between officers and members, where officers can speak truth unto power and can give an opinion even if that opinion is unwelcome.”
Whiteman said that hand-in-hand with improved commercial know-how, councils must have “a reappraisal of governance skills because we are placing the taxpayer and public at more risk unless we strengthen the safeguards and assurances that we have”.
He added: “If we are going to have more dealmakers we have to have better governance and better assurance.”
Whiteman said CIPFA’s new index is a necessary response to the decision earlier this year by Northamptonshire County Council to issue a section 114 notice bringing a halt to all but essential spending.
“There is a strong feeling that, as the body that regulates professional conduct and the quality of financial management support in local government, we need to take steps to acknowledge that Northamptonshire was a failure of sector-led improvement.”
Northamptonshire’s section 114 notice was issued in February, five months after a financial peer review commissioned by the Local Government Association raised a number of issues with the authority’s financial management.
“The advice from Max Caller, the independent inspector of Northamptonshire, is that a section 114 notice should have been served earlier and, if it had been, it may have stopped the authority getting to a position which, to the lay person, was one of insolvency,” Whiteman said.
He went onto say that in some authorities, a lack of effective communication between finance officers and top level council decision makers can hinder efforts to avoid financial problems.
He said: “I speak to finance officers who think they are not being listened to by the corporate management team or by members or by the chief executive. On the other hand, I could speak to corporate managers, or members or chief executives, who think finance officers are not listening to them.
“What we cannot allow, as a sector, is the position that people might be heading for financial failure and they don’t know it.”
The proposed resilience index is also intended to help prevent a culture of denial leading to overlooked financial problems , Whiteman said.
“The reason that CIPFA is looking at the index is to make sure we have an alternative to speculation that can be dismissed or discounted.”
He said the index was driven by a need to ensure council finances were heading in the right direction.
“That is not only good for those councils but it is good for the sector,” he said.
Whiteman said that CIPFA would produce the index using its in-house team of 30 analysts, would not take sponsorship to fund it and would not charge councils for it.
“It is important that an independent body such as CIPFA produces a way of warning where failure could occur in a few years’ time,” he said.
“If CIPFA doesn’t do it, who else would do it? And, if nobody does it, could we have other Northamptonshire style failures?”