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					Scottish Borders Council                                   Building a Successful Borders

                                                    Our Vision

     We seek the best quality of life for all the people in the Scottish Borders, prosperity for our businesses
                and the promotion of health, happiness and confidence in all our communities




                        Our Values                                            Our Standards

                       Public service                            Putting people at the heart of what we do
                       Respect for all                           Being fair, equal and open
                         Courage                                 Continually improving our services
                         Integrity                               Working with partners and stakeholders
                         Honesty                                 Delivering value for money in the use of
                       Commitment                                our resources




Financial Strategy 2010/11 – 2012/13
                                                     11 February 2010
FINANCIAL STRATEGY 2010/11 – 2012/13


CONTENTS

1.   INTRODUCTION                                    9.    FINANCIAL INFORMATION


2.   AIM                                             10.   FINANCIAL AWARENESS


3.   FINANCIAL TARGETS                               11.   STAFFING RESOURCES


4.   FINANCIAL MANAGEMENT FRAMEWORK                  12.   ASSET MANAGEMENT


5.   FINANCIAL POLICIES                              13.   BUSINESS TRANSFORMATION


6.   FINANCIAL SYSTEMS AND PROCEDURES                14.   COUNCIL TAX LEVELS


7.   FINANCIAL PLANNING                              15.   RESERVES


8.   FINANCIAL MONITORING AND REVIEW                16.    REVIEW




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1.0   INTRODUCTION

1.1   On 12 February 2009, the Council approved its financial strategy for the period 2009/10 to 2011/12. Alongside preparation of the revised Revenue (for
      2010/11 to 2012/13) and Capital (for 2010/11 to 2014/15) Financial Plans, it is opportune to review and update the previously approved strategy.


2.0   AIM OF THE STRATEGY

2.1   The fundamental aim of this strategy is to set out the arrangements that the Council has, or will, put in place to ensure that its financial targets are met.

2.2   Financial targets may be

      •   set by the Council itself (e.g. Council Tax collection levels);

      •   imposed by statute (e.g. requirement to set a Council Tax sufficient to meet estimated expenses);

      •   recommended by an independent regulatory body (e.g. requirement to prepare Accounts in accordance with Statements of Recommended Practice
          [SORP]);

      •   implicit in Scottish Government directions (e.g. ring-fenced grant allocations);

      •   necessary to comply with recognised “best practice”.

2.3   However these targets arise, the Council recognises it is essential to

      •   identify what they are;

      •   put in place policies and procedures designed to achieve them;

      •   measure performance/progress towards achieving targets on a regular basis;

      •   review performance/progress and take corrective action if appropriate.




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3.0   FINANCIAL TARGETS

3.1   Overarching the Council’s whole financial management arrangements are

      •   the statutory duty imposed on it by Section 95 of the Local Government (Scotland) Act 1973 to “make arrangements for the proper administration of
          their financial affairs and secure that the proper officer of the authority has responsibility for the administration of those affairs”.

      •   the statutory duty imposed on it by Section 1 of the Local Government in Scotland Act 2003 to “secure best value”.

      •   its duty to the electorate to ensure proper stewardship of public funds;

      •   the principles of openness, integrity and accountability which underpin sound corporate governance.

3.2   Accordingly, at the highest level, the Council’s financial strategy must be designed to ensure that these duties are discharged and these principles are
      upheld. The remainder of this document describes

      •   the financial management and administration framework and

      •   the financial planning, control, monitoring and review systems

      which are designed to achieve these high-level targets.




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4.0   FINANCIAL MANAGEMENT FRAMEWORK

4.1   Fundamental to sound financial management in the Council is a framework which clearly establishes accountabilities, responsibilities and authority
      levels for both Elected Members and officers.

4.2   This framework comprises the following, each of which is published separately but which collectively create the accountability framework for conduct of
      all the Council's financial business:-

        Document                                            Purpose


        Procedural Standing Orders                          To regulate the conduct of the Council’s business

        Scheme of Administration                            To regulate the
                                                            (a) constitution and membership of the Committees of the Council;
                                                            (b) allocation of the functions of the Council among its Committees;
                                                            (c) delegation of authority to Committees to exercise the Council’s functions.

        Scheme of Delegation                                To regulate the delegation of authority to officers to exercise the Council’s functions.

        Financial Regulations                               To provide a mandatory framework for financial management and administration in the
                                                            Council.

        Code of Corporate Governance                        To provide the framework for ensuring that the Council’s business is conducted in accordance
                                                            with the principles of sound corporate governance.

4.3   Each of these will be subjected to regular update and review to ensure their continuing relevance and completeness.

4.4   Completing this framework are Job Descriptions for individual Council officers which set out principal accountabilities and resource responsibilities.
      These are subject to annual review through the Performance and Personal Development Planning Process (PPDPP).




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5.0   FINANCIAL POLICIES

5.1   In order to support the achievement of the aim of this financial strategy, the Council has put in place (or will develop) a range of specific policies as
      follows:-

        Policy area                                          Status


        Risk Management                                      Implemented

        Treasury Management                                  Implemented.

        Staff Development                                    Implemented.

        Revenue Collection                                   To be developed.

        Charging for Services                                To be developed.

        Charging for publications                            Implemented


5.2   These policies will be subjected to annual review to ensure their continuing relevance and completeness.

5.3   These policies will be communicated to relevant employees and Elected Members using the methods set out in the Council’s Communications Strategy.




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6.0   FINANCIAL SYSTEMS AND PROCEDURES

6.1   In order to secure effective financial administration and management throughout the Council’s activities, we will maintain and continuously develop
      corporate financial systems and supporting procedures in the following areas:-

        Area                                             (Current) Computer System


        Accounting                                       Financial Information System (FIS) General Ledger (Infor)

        Accounts Payable (AP)                            Commitment Accounting
                                                         FIS (AP module)

        Accounts Receivable (AR)                         FIS (AR module)

        Asset Management                                 Technology Forge

        Budgeting                                        FIS (General Ledger)

        Human Resources/Payroll                          Resourcelink

        Pensions administration                          Lynx Heywood

        Income Management                                Radius

        Treasury Management                              Logotech (FAMS/HALT/Leasing/LTM)

        Investment Management                            Euraplan

        Insurance claims                                 QLAS

        Revenue collection                               Northgate

        Benefits administration                          Northgate

        Procurement                                      Proactis




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6.2   We recognise that these key financial systems need to be

      •   modern

      •   reliable

      •   integrated (both with each other and with related management information systems operated by the Council)

      to effectively support financial administration and management requirements. We will, therefore, commit the necessary resources, both in terms of staff
      and finance, to ensure that these systems

      •   are continuously developed to meet business needs

      •   make appropriate use of new technology

      •   are available to users and managers with the minimum downtime

      •   are integrated wherever possible to minimise data processing and maximise integrity.




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7.0   FINANCIAL PLANNING

7.1   Sound financial planning, undertaken within an integrated Corporate and Business Planning framework, is fundamental to

      •   ensuring delivery of the Council’s objectives

      •   effective resource utilisation and allocation

      •   effective financial control throughout the Council’s activities.

7.2   Following review in the Spring of 2009, the Council approved a number of policy initiatives which are incorporated into the Council’s current Single
      Outcome Agreement (SOA) and the approved Council Priorities. Rolling 3-year Business and Financial Planning processes are in place to support the
      delivery of Council Priorities. These Business and Financial Planning processes will continue to be brought closer together with the ultimate aim of fully
      integrating them.

7.3   The Council’s revenue expenditure may be financed by

      •   Aggregate External Finance (AEF) from the Scottish Government in the form of

          •   General Revenue Funding

          •   Ring-fenced grants

          •   Share of Non-domestic Rates Pool.

      •   Other Scottish Government and UK Government grants and subsidies

      •   Fees and charges for services provided.

      •   Council Tax

      •   Surplus asset sales

      •   Contributions from reserves




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      In approving the 3-year Revenue Financial Plan annually, we will ensure that planned expenditure

      •   fully utilises the resources available to the Council

      •   reflects the strategic objectives set out in the SOA

      •   reflects the priorities set out in the Council Priorities document

      •   reflects partnership working

      •   is consistent with approved Business Plans.


7.4   In respect of each rolling 3-year period, the Council will determine a strategy for preparation of the Financial Plan which sets out

      •   resource allocation methodology

      •   links between the revenue budget process, Council Priorities and Business Planning processes

      •   the detailed budget preparation process and timetable

      •   the consultation and communications arrangements.


7.5   For 2010/11, the Council’s funding from Scottish Government was reduced by £4.2m (£2.9m revenue and £1.3m capital) being its share of the local
      government share of £521m efficiency savings announced in the Chancellor’s budget in March 2009. It is clear that as a result of the recession which
      took place in 2008 and 2009, public expenditure will be subject to significant reduction as Central Government looks to reduce the level of public sector
      debt. There will be a General Election in the Spring of 2010 and a Comprehensive Spending Review will be conducted by the new government over the
      summer following its election. It is estimated that local government funding from the Scottish Government will reduce by up to 4% per annum in real
      terms over the period of the next finance settlement (2011-14) – this equates to around £8m per annum across revenue and capital combined. A high
      level analysis of the avenues open to the Council to address this has already been carried out. The Administration Budget Working Group will use that
      as a basis for a detailed programme of work to be carried out over the spring and summer of 2010 to inform the preparation of financial plans for 2011
      onward.




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7.6   The Council has already established a joint Members/Officers Capital Management Group charged with operational management of the Council’s
      Capital Financial Plan. That Group’s role includes:-

      •   consideration of new projects for inclusion in the plan

      •   annual preparation of a rolling 5-year Capital Financial Plan

      •   monitoring progress against the approved plan

      •   consideration of amendments to the approved plan (e.g. increased project costs, impact of slippage)


7.7   Links between the Capital Financial Plan management process and the Council’s Strategic and Business Planning processes are maintained through

      •   the Capital Management Group which is Chaired by the Leader of the Council and which has the Chief Financial Officer as a member

      •   services requiring to demonstrate a clear link between proposals for new projects to be included in the Capital Programme and service
          developments in the Business Plan

      •   revised Business Plans being required to include the impact of Financial Plan decisions.


7.8   Following a review carried out in 2009/10, the Council will develop its Capital Financial Planning process during 2010/11 with the aim of moving from the
      production of a 5-year plan to two plans

      •   a 10-year strategic plan which is consistent with its asset management strategy

      •   a 3-year operational plan which includes only projects already underway or approved to get underway during the 3-year plan period and which have
          passed the appropriate gateways in the project development process.

7.9   The Council will ensure that its capital expenditure plans are

      •   prudent

      •   affordable and

      •   sustainable

      by setting Prudential Indicators which are both appropriate and relevant to the Council’s circumstances.


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7.10 In approving the Capital Financial Plan annually, the Council will seek to ensure maximum utilisation of capital resources through

     •    where appropriate, seeking developer contributions

     •    proactively identifying and disposing of surplus assets

     •    maximising partnership working

     •    ensuring awareness of all sources of external capital funding (e.g. Scottish Government grants, European grants, etc.)

7.11 Financing of the Capital Financial Plan will be undertaken in accordance with the annual Treasury Management Strategy and will be consistent with the
     approved Prudential Indicators.




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8.0   FINANCIAL MONITORING AND REVIEW

8.1   The key components of our financial monitoring and review process are

      •   regular financial reporting to management, Elected Members and Partnership Boards underpinned by effective budgetary control procedures

      •   continuous, independent review of financial and internal controls and performance.

8.2   The Council’s Financial Regulations require compliance with Revenue and Capital Budget Monitoring Codes of Practice. This is the foundation for the
      preparation of budgetary control reports for consideration by the Council’s Management Team and Executive in accordance with an annual timetable.
      The Council’s Management Team and Elected Members have a key responsibility to consider these reports at corporate level and be satisfied that
      appropriate action is being taken by Heads of Service to ensure expenditure/income remains within approved budget at all times. In addition, monthly
      management reports are made available to all budget holders and Heads of Service across the whole Council. Finance staff will, through regular
      meetings with relevant Service staff, ensure that appropriate action is being taken in respect of variances highlighted in these reports. In relation to the
      Capital Budget, the Capital Management Group has responsibility for monitoring financial performance against the approved programme and
      recommending to the Corporate Management Team and the Executive appropriate remedial action.

8.3   A continuous, independent review of financial and internal controls and performance is effected through

      •   the Audit Committee which contains two external appointed members

      •   the Council’s Executive

      •   the preparation of an annual Internal Audit Plan and the maintenance of an Internal Audit resource to execute that Plan

      •   the statutory regulatory and Value for Money audits carried out by independent external auditors appointed by the Accounts Commission

      •   the Scrutiny Committee

      •   the Performance Monitoring Panel

      •   the incorporation in the Annual Financial Statements of a Statement on the System of Internal Financial Control informed by Assurance Statements
          completed by Directors and Heads of Service.




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9.0   FINANCIAL INFORMATION

9.1   Good quality financial information is essential to support managers in effective

      •   policy formulation

      •   decision making

      •   service planning

      •   financial planning

      •   financial monitoring and control.

9.2   The quality standard will only be met where it can be demonstrated that financial information is

      •   complete, accurate and up to date

      •   available to managers at times they need it

      •   accessible and understandable to all who need to use it.



9.3   Financial information is provided through 4 key corporate systems:-

      •   Income Management, which records every income transaction.

      •   e-Procurement, which provides facilities to order goods and services and match these to available budgets through interface with Commitment
          Accounting

      •   Financial Information System (FIS), which provides general ledger, debtors and creditors accounting and budgeting facilities

      •   Human Resources, which includes facilities for paying salaries and wages to all the Council’s employees.




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9.4   In paragraph 6.2 above, we have already committed to providing the necessary staffing and financial resources to ensure that these systems

      •   are continuously developed to meet business needs

      •   make appropriate use of new technology

      •   are available to users and managers with the minimum downtime

      •   are integrated wherever possible to minimise data processing and maximise integrity.

9.5   During 2010/11 we will further improve the reporting from these key corporate systems through further development and roll-out of the COGNOS
      reporting toolkit.




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10.0 FINANCIAL AWARENESS

10.1 Proper administration of the Council’s financial affairs can only be achieved if the systems and procedures referred to earlier in this strategy are
     implemented, operated and reviewed by employees and Elected Members who have the appropriate level of financial skills and awareness.

10.2 Financial Awareness training was included in the Induction Programme for Elected Members following the Council Elections in May 2007. A structured
     training and development programme for Elected Members has been developed and includes appropriate skills/awareness training in financial
     management and Local Authority finance. During 2010/11 appropriate Elected Members will undergo specific training in treasury management.

10.3 Employee training needs will be identified and continuously reviewed through the Council’s Performance and Development Review (PDR) process.
     Once identified, training needs will be met in a planned way through a variety of in-house and external training courses subject to available resources.
     In-house courses will be provided through

     •    ‘Managers Passport’, the Corporate Development Programme for managers. This programme includes:

          • mandatory financial awareness modules for all managers
          • elective in-depth financial planning module (from 2010)

     •    appropriate financial skills and awareness training for all employees

     •    additional training to meet service specific requirements

     In relation to budgetary control, all budget holders will require to undergo mandatory training in

     •    using the Council’s Financial Information System and, where appropriate, Commitment Accounting System;

     •    budgetary control techniques.




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11.0 STAFFING RESOURCES

11.1 In addition to ensuring that employees have the required level of financial skills and awareness to fully and effectively undertake financial duties, the
     Council is committed to ensuring that sufficient staffing resources are in place to ensure that effective financial control and sound financial administration
     are in operation throughout the Council.

11.2 Directors are responsible for ensuring that the financial performance of the services for which they are responsible is properly managed. Implicit in that
     responsibility is the continuous review of the adequacy of resources devoted to specific activities. As part of such review, Directors, in consultation with
     the Chief Financial Officer, will review the procedural and regulatory financial management and administration responsibilities relative to their Services
     and assess the adequacy of the resources available to discharge these. In the event of any assessed deficiency in the level of such resources, the
     Director concerned will assess the remedial action/additional resources required and take appropriate action reporting, if necessary, to the Executive or
     Education Executive as appropriate.


12.0 ASSET MANAGEMENT

12.1 The Council’s Corporate Property Asset Strategy and Management Plan was approved by the Executive on 31 October 2006. Central to that strategy is
     the requirement to identify surplus assets and dispose of these in order to generate capital receipts and reduce future revenue costs in maintaining and
     operating these assets. The Strategy and Management Plan have been reviewed in 2009/10 and will be updated for implementation in 2010/11 to
     2014/15.

12.2 The 2010/2015 capital programme assumes receipts from surplus assets disposals of £11.9m. However, it is recognised that there may be some
     slippage in the realisation of capital receipts as decisions have been made to delay the marketing of certain surplus assets due to current market values
     being deflated to a large extent.

12.3 Any receipts in excess of these baseline targets in the next 3-4 years are expected to be reinvested to support continuing asset rationalisation and to
     support the Council’s broader Business Transformation Programme.




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13.0 BUSINESS TRANSFORMATION

13.1 The Council has recognised that in the long-term

     •   demand for services and improved service quality will continue to grow
     •   resources from the Scottish Government will continue to be limited and are unlikely to keep pace with inflation and service pressures.
     •   we are required to continue to seek continuous service improvement and meet the Government’s best value regime.

     In response to this, the Council has embarked on a Business Transformation Programme designed to focus the Council’s services on the needs of its
     customers and deliver these services more economically, effectively and efficiently. The aim is to provide a long-term sustainable service delivery model
     consistent with

     •   anticipated resources from the Scottish Government
     •   Council Tax levels that are seen to provide value for money for local taxpayers.

13.2 The main strands of the Business Transformation programme are as follows:-

     •   HR change – a redesign of job roles and profiles which was introduced on 24 November 2008 leading to
         • modernisation of pay and conditions
         • a more flexible workforce

     •    Customer First – a programme aimed at improving and standardising the way our customers access services and information including:
         • redesigning services around the customer’s needs
         • taking a corporate view of the customer
         • using new and proven technologies to provide better services and widen choice of access – including web enabled services

     •   Property & Asset Management – see section 12 above

     •   Strategic Review Programme – this will review key areas of service, undertaking options appraisals of how the reviewed services should be
         provided in the future, with the aim of achieving at least 7% savings in the areas under review.

     •   Procurement – aimed at delivering savings through more efficient and effective procurement of goods and services.

     •   ICT Programme – this will put the enabling infrastructure in place to allow automation of processes, improvements in customer service delivery,
         flexible working, electronic records and document management and the sharing and transfer of data.

     •   Shared Services – the Council is investigating in conjunction with other local authorities how a number of services are delivered and how these
         may be delivered differently to offer better value for money in the future.

     •   Organisational Redesign – a redesign of the Council’s organisational structure to better support Business Transformation.
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13.3 The strategic reviews of Support Services and Children Services (TCS) were substantially implemented during 2009/10. The Older People Services
     review (TOPS) was completed in 2009 and implementation is now underway.

     On 12 February 2009, the Council approved a further 6 strategic reviews

     •    Property and Asset Management
     •    Capital Planning
     •    Technical Services/Planning & Economic Development Review
     •    Enterprise Resource Planning Systems
     •    Residential Care Review
     •    Education and Lifelong Learning Community Services

     These reviews are ongoing and the Council will consider the proposals that arise from the reviews as these are finalised.

14.0 COUNCIL TAX LEVELS

14.1 Traditionally Council Tax levels in the Scottish Borders have been low in comparison to other local authorities in Scotland.

14.2 The aspiration of the Scottish Government to have Council Tax frozen at 2007/08 levels across Scotland has brought a new dimension to local authority
     financial strategy and planning. The Council’s Administration has broadly welcomed the freezing of Council Tax and agreed that Council Tax for
     2008/09, 2009/10 and 2010/11 should be frozen at 2007/08 levels. The position for 2011/12 will be reviewed in due course when the outcome of the
     2010 Spending Review is known.

15.0 RESERVES

15.1 Local authorities need to maintain reserves for three main purposes:-

     (a) a working balance to help cushion the impact of uneven cash flows

     (b) a contingency to cushion the impact of unexpected events or emergencies

     (c) earmarked reserves to meet known or predicted future liabilities.

15.2 The Council operates a number of funds from which it meets recurring, but unpredictable, expenditure. The overall objective in operating these Funds is
     to ensure that they have sufficient resources in them to deal with the “worst case” scenario.

     Contributions to these funds will be “top-sliced” from available resources and re-calculated annually in the light of each Fund’s overall position.

15.3 The contribution to the Property Maintenance Fund for the year 2010/11 will be based on that for 2009/10 increased for inflation at December 2009.
     Contributions for 2011/12 and 2012/13 will be similarly calculated.

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15.4 Expenditure on keeping roads in the Borders free from ice and snow can be subjected to significant annual variations depending on the weather. We
     need a funding mechanism therefore that

     •   has the flexibility to cope with such variations in spending

     •   is robust enough to cope with a 1 in 10 year storm

     •   incorporates highly predictable general fund revenue contributions

     •   recognises the strategic importance of keeping our roads clear in winter.

     To achieve these objectives, revenue contributions will be “top-sliced” from available resources before distribution to services. For 2010-13, the
     following provisional contributions will be made

                                   Year                        £’000

                                   2010/11                     2,700
                                   2011/12                     2,900
                                   2012/13                     3,100

     These contributions will be reviewed annually in the light of the previous year’s actual expenditure.


15.5 The General Fund Reserve is maintained to provide a working balance and funds to cushion the impact of unexpected events or emergencies. The
     optimum level of General Fund Reserve is generally accepted at 2 - 4% of revenue expenditure. At 31 March 2010, the General Fund Reserve is
     projected at £6.1m (excluding DSM and other earmarked balances) – equivalent to 2.3% at 2010/11 levels. Given the financial pressures facing the
     Council over the next few years, we propose that the General Fund Reserve be managed within the recommended parameters of 2 - 4% for the
     foreseeable future.

15.6 For the period this strategy covers, it is not planned to utilise any balances to support expenditure in the Administration’s revenue budget proposals.


16.0 REVIEW

16.1 This Strategy will be reviewed annually by the Director of Resources and Chief Financial Officer and proposed amendments reported to the Council.45




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