PAPER C

ENVIRONMENT AND TRANSPORT SELECT COMMITTEE - 30TH JANUARY 2003

VIREMENT PROCESS

STRATEGIC DIRECTOR FOR FINANCE & INFORMATION AND COUNTY TREASURER

REASON FOR SELECT COMMITTEE CONSIDERATION

Members regularly receive budget monitoring reports in order that they are aware of any budget pressure areas, either current or likely in the future, and to ensure that focus is maintained on priority budget areas, both capital and revenue. At the meeting on 27 November 2002, during the review of the highways capital programme, members noted the term virement was recurring in the comments field on the capital programme appendix, and requested that a report on the subject be brought to a future meeting, outlining the Council’s agreed rules on the subject.

ACTION REQUIRED BY THE SELECT COMMIITTEE

Members are asked to note the content of the report, to ask questions and seek explanations about the virement process as necessary, and to consider whether they wish to make any suggestions for changes to the Council’s existing Financial Procedure Rules with regard to virements to improve the scrutiny process. It is anticipated that the current Financial Procedure Rules will be reviewed during March and presented for approval in April. Consequently this is an opportunity to influence the review process.

BACKGROUND

The Council’s current Financial Procedure Rules were approved at Council on 17 April 2001. As custodians of public funds, local authorities are expected to maintain the highest standards of financial propriety as well as delivering value for money. The Rules contain a comprehensive set of requirements and standards which apply to all officers of the Council involved in financial transactions or budget management. Each Director is responsible for ensuring that all relevant officers in her/his department are aware of the various requirements, and that they are followed. Whilst the role may be delegated, ultimate responsibility cannot be.

Members also fulfil a key role within the context of corporate financial control in that they provide the policy framework from which objectives can be set. Members are responsible for approving the Financial Procedure Rules and Contract Procedure Rules; setting the overall budget framework; providing the reporting framework to monitor the achievement of approved policies and strategies; and agreeing corporate review arrangements.

The rules regarding Budget Monitoring are contained in paragraph 7.4 of the Financial Procedure Rules. These state that ‘Directors are required to monitor their capital and revenue spending against available budgets on an ongoing basis and to report thereon, as required, to the Directors’ Group via the Strategic Director for Finance and Information. Any projected overspends which cannot be retained within a directorate’s cash limit and will cause an overspend greater than 1% of the limit must be reported to the Directors’ Group, the Executive and to the Chairman of the relevant Select Committee at the earliest opportunity, together with proposals to remedy the situation.’

With regard to Virements, the rules are contained in paragraph 7.6. This paragraph states that ‘Funds may be transferred from one budget head to another in order to reflect changing requirements, subject to the approval of the Strategic Director of Finance and Information, provided that it does not result in a change to the service provision implicit in the approved budget. Directors should be careful not to utilise one-off savings to fund long term commitments, unless there are long term plans to match spending with resources. Budget changes which do not represent a change to the service provision implicit in the approved budget may be made by the Executive, provided that they do not result in any change to the budgeted withdrawal from, or contribution to, the Council’s General Reserve, and do not, in the opinion of the Strategic Director for Finance and Information, represent a material threat to the future financial health of the Council. Any other budget changes require approval of the Full Council.’

RELEVANT PLANS, POLICIES, STRATEGIES AND PERFORMANCE INDICATORS

The content of this report relates directly to the Council’s Financial Procedure Rules, which were approved by the Council on 17 April 2001.

CONSULTATION PROCESS

No specific consultation has been undertaken in the production of this report.

FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS

There are no direct financial, legal or crime and disorder implications arising from the production of this report. However, the underlying theme has potential financial implications related to all services within the Committee’s terms of reference.

BACKGROUND PAPERS

Isle of Wight Council publication ‘Financial Procedure Rules’

Contact Point : Stuart Fraser Φ 823657

JOHN PULSFORD

Strategic Director for Finance and Information and County Treasurer