Agenda item

To receive a report providing an update on implementation of the FM Code.

Michael Armand (Senior Finance Analyst) introduced the report, providing an update on the council's progress in implementing the CIPFA Financial Management Code since the previous update provided to the Committee in February 2024. The report was structured into two main sections. Section 4 provided an update on the council's progress against each of the 17 financial management standards included in the CIPFA Financial Management Code. Section 5 presented the report’s conclusion that the Council was continuing to broadly comply with the code while acknowledging areas requiring continuous improvement through implementation of external auditor recommendations. The highlights of the report are summarised below:

·            Significant Financial Challenges had been identified, with the external auditor having identified a significant weakness in the area of financial sustainability for 2023-24 and 2024-25, primarily due to the council's continued use of reserves to fund overspends on homelessness services and temporary accommodation. This led to several recommendations including increasing the level of usable reserves, improvements to monitoring and reporting of statement delivery, MTFS risk register updates, and enhanced scenario planning. The council had then addressed these concerns in the 2025-26 budget approved in February, which was set on the basis of not continuing to use reserves for unplanned expenditure. Growth was built into the budget to address significant pressures, particularly in areas such as homelessness. The budget included difficult decisions regarding savings and updates to the council tax support scheme effective from April 1, enabling a balanced budget without relying on reserves.

·            Section 4 of the report discussed the council's journey along the hierarchy of financial management styles linked to the three Es. Economy: The council maintained a well-established approach to budget setting focused on making available funding stretch further and taking necessary difficult decisions. Efficiency: Since the last update, a budget assurance panel had been established providing additional scrutiny of budgets and performance against targets. The council had also undertaken more benchmarking activity and enhanced performance reporting to provide indicators for management and members. Effectiveness: Financial management was recognized as a dynamic task involving the whole council. The Embrace Change portfolio was listed to be transforming how the council worked to tackle current and emerging challenges while maintaining sustainable finances.

·            Beyond the external audit, several other reviews had taken place including a corporate peer review, an internal audit review of financial management, and a critical friendly review of the MTFS model by Oliver Wyman. All recommendations from these reviews would be taken forward as part of Brent’s efforts in implementing the CIPFA financial management code.

Following this, the Chair opened the floor to any questions or concerns held by members of the Committee. The key highlights of these questions have been summarised below: 

·            Regarding the HRA Business Plans monitoring, members asked about paragraph 5.3 of the report, specifically who conducts this monitoring and whether council officers or councillors are involved. Amanda Healy (Deputy Director Investment and Infrastructure) responded that the HRA business plan was presented as part of the budget setting process and was publicly available, with constant reviews throughout the year included in quarterly financial monitoring updates to cabinet, providing updates on the in-year position and any risks and issues. When asked who sees the detailed business plan, Amanda Healy clarified that at the time of the meeting it remained an officer-led work plan.

·            Following this, members asked on CIPFA requirements for local audit reform. Questions were aimed particularly on the now mandatory requirement for one independent audit committee member to be placed on the audit committee, with members asking officers how this would work given Brent's unique structure of having two Audit committees. The Chair acknowledged this as a good point, explaining that the current structure came about because the Advisory Committee operated as a decision-making committee rather than the typical non-decision-making audit committee. The Chair noted this would need to be considered and whether they regarded themselves as one committee or two under the new legislation. This would be a decision that the Council would need to determine, considering the distinction between voting and non-voting members,

·            Regarding the recommendation in section 5.3 of the report, which looked at the introduction of zero-based budgeting in targeted service areas, members wished for specific details on where these areas might be. Michael Armand explained in response, that no conclusions had been reached yet, but a workshop with heads of finance had been conducted to examine different recommendations, which would drive decisions about zero-based budgeting implementation. Amanda Healy added that zero-based budgeting was very resource-intensive, so the Council had a need to review and prioritize where it would add the best value, noting that finance teams had already done significant work linking key drivers of spend to outputs, but a full zero-based budgeting approach would require careful prioritization.

With no further questions or concerns noted, the Chair thanked Michael Almond and his team for their good work. The committee then moved to RESOLVED and note the contents of the report. In doing this they acknowledged the council's alignment with the CIPFA Financial Management Code.

The Chair included a formal amendment to the report’s recommendation, commending the Council accept the longer-term recommendations listed in section 5.3, specifically referring to the zero-based budgeting implementation on a targeted basis.