In this AB article in December 2020, I considered the lessons for organisations arising from the serving of the London Borough of Croydon section 114 notice. Here are some actions that a local authority finance director can take to avoid the need to serve a statutory notice.
Being a local authority CFO is one of the most challenging roles in financial management
The story since December 2020 has been one of continued pressure on local authority finances, in part driven by the Covid-19 pandemic. In the case of Croydon, a second 114 notice was served and, in July, Slough Borough Council also had a notice served.
In the case of both authorities, applications had to be made to the Ministry of Housing, Communities and Local Government to secure significant levels of ‘capitalisation directives’, which would enable them to use capital resources to meet revenue deficits. Following this, both authorities received criticism for financial management shortcomings from the then Secretary of State, Robert Jenrick MP, in his speech at this year’s Local Government Association Conference.
No alternatives
No local authority CFO serves a section 114 notice lightly. It is done after careful consideration and where there are no other alternatives. However, it is to be avoided where possible. This means getting to a financial position that is sustainable and addressing the financial challenges the organisation faces.
So, what can CFOs do to avoid the need for the serving of a section 114 notice, even in a challenging financial environment?
Some of the most successful CFOs are those who can communicate the complexities of finance to stakeholders with a non-financial background
If CFOs are to drive a financial sustainability programme in a challenging business environment, they need to have a clear picture of the journey, milestones and risks. This will involve an in-depth analysis of the issues and a medium-term financial plan, which will become an integral part of the strategic management of the organisation.
To establish a culture in an organisation that values and works towards financial sustainability, the CFO must share the burden with senior colleagues. No matter how able and charismatic the CFO is, success will not be achieved by their own motivation and efforts alone. The whole of the senior leadership team must own the financial agenda and collaborate to achieve positive outcomes. CFOs who do not have their senior colleagues on board will find delivering financial sustainability a difficult road. A problem shared really is a problem halved.
Communicating the vision to the wider organisation, the political leadership and partners is one of the most challenging elements of working towards financial sustainability. But for senior stakeholders to buy into the vision, they must first understand the nature of the task, the variables that are affecting it and why the result is important. It is sometimes easy to hide behind professional details; some of the most successful CFOs are those who can communicate the complexities of finance to managers, politicians and leaders from a non-financial background.
The public sector environment asks big questions of CFOs, not only in their technical ability but in their personal resilience
As a complement to support networks within the organisation, it is important for the CFO to have an external network that provides support and advice. Colleagues who have successfully faced similar challenges can have important insights to help you. Support and advice are also available from professional bodies including ACCA, and from the Local Government Association and the Society of Local Authority Chief Executives, which can offer sector knowledge that can be applied to specific local situations.
Be single-minded about pursuing your journey and arriving at your ultimate destination of financial sustainability. Achieving financial sustainability in a challenging situation requires a significant degree of determination. The current public sector environment asks big questions of CFOs, not only in their technical ability but, more importantly, in their personal resilience. That is why being a local authority CFO is so much more than being a very able accountant; it requires a whole portfolio of business and political skills, making it one of the most challenging roles in financial management.
The good news
In an environment where local government has seen a significant reduction of resourcing in recent years, most local authorities have remained in a financially sustainable position. Significant credit for this goes to council members and management teams, but the role that CFOs have played in providing financial leadership has been definitive in achieving what has been a generally positive outcome across England as a whole.
Adopting the approaches above could go some way to help those in these difficult roles avoid the need to serve a 114 notice and contribute to the building of financial sustainability for the medium term in the local authority sector.
