Hail the Chief (Finance Officer)

The Chief Finance Officer plays a vital role in administering a local authority’s affairs. However, their functions are set by statute and are limited; there can be no prospect of a coup d’etat by the Chief Finance Officer. Sappho Dias and Lee Parkhill examine the role.

There is not much levity to be found in Local Government Law but just occasionally in our practice we have come across problems raised which have brought a smile to our faces. The question which was recently posed to one of us was this: what could the Chief Finance Officer do in circumstances where a local authority had failed to set a council tax by an appropriate statutory deadline? Was there power for the Chief Finance Officer to arrogate the role to himself and set the Council tax?

In the quiet of our studious room lined with heavy tomes on Local Government Law, we considered the prospect of a coup by the Chief Finance Officer. The answer, needless to say, did not lie in a coup d’etat.

The Chief Financial Officer does not have the power to set Council tax, not even when the statutory deadlines have passed. However, having been appointed pursuant to S.151 of the Local Government Act 1972, there are important, and interesting, duties which lay with the Chief Financial Officer. In the case of Attorney-General v De Winton (1906) the court held that a Treasurer (which is what a Chief Financial Officer is) is not merely a servant of the Council, but holds a fiduciary relationship to the tax payer.

The Chief Finance Officer’s post is a statutory one. Every local authority must make arrangements for the proper administration of its financial affairs and s. 151 of the Local Government Act 1972 demands that one of the local authority’s officers have responsibility for the administration of those affairs.

The person having responsibility for the administration of the financial affairs of a relevant authority must fulfil certain requirements set out in s. 113(1) of the Local Government Finance Act 1988. The officer must be a member of a body specified in s. 113(3), being the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Chartered Association of Certified Accountants, the Chartered Institute of Public Finance and Accountancy, the Institute of Chartered Accountants in Ireland, and the Chartered Institute of Management Accountants. This statutory requirement that the Chief Finance Officer hold membership of a recognised accountancy body underlines the central importance of their role in the fiscal management of local government.

The Chartered Institute of Public Finance and Accountancy (“CIPFA”) has set out five principles to guide the work of Chief Financial Officers. In summary, the five principles require the Chief Financial Officer to be (i) a key member of the leadership team, (ii) to bring influence to bear on all material business decisions, (iii) to lead the promotion and delivery of good financial management, (iv) to lead and direct a finance function which is resourced and fit for purpose and (v) to be a professionally qualified and suitably experienced person.

The precise duties of the responsible officer differ depending on whether the local authority operates executive arrangements. The duties must, in general, be performed by the officer personally, see s. 114(5) and s. 114A(5) of the Local Government Finance Act 1988.

Section 114 sets out the duties a Chief Finance Officers has in respect of a local authority which is not operating executive arrangements. It provides that the Chief Finance Officer must make a report if it appears to him that the authority, a committee of the authority, a person holding any office or employment under the authority, a member of a police force maintained by the authority, or a joint committee on which the authority is represented: (1) has made or is about to make a decision which involves or would involve the authority incurring expenditure which is unlawful; (2) has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency on the part of the authority; or (3) is about to enter an item of account the entry of which is unlawful (see s. 114(2)).

Section 114(3) also requires a report where it appears that the expenditure of the authority is likely to exceed the resources (including sums borrowed) available to it to meet that expenditure.

It is the duty of the Chief Finance Officer of a relevant authority, in preparing such a report, to consult so far as practicable with the person who is for the time being designated as the head of the authority's paid service and with the person who is for the time being responsible for performing the duties of the authority's monitoring officer.

Where a Chief Finance Officer of a relevant authority has made a report under the above provisions he must send a copy of it to various people including the person who at the time the report is made has the duty to audit the authority's accounts each person who at that time is a member of the authority.

Where there are executive arrangements s. 114A of the 1988 Act requires the Chief Finance Officer to make a report to the executive of the authority if it appears to him that, in the course of the discharge of functions of the authority, the executive or a person on behalf of the executive: (1) has made or is about to make a decision which involves or would involve the authority incurring expenditure which is unlawful; (2) has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency on the part of the authority; or (3) is about to enter an item of account the entry of which is unlawful.

Section 114A imposes duties in respect of consultation with the head of the authority’s paid service in similar terms to s. 114. A duty to provide a copy of the report to specified individuals is also set out under s. 114A.

The importance of the Chief Finance Officer’s role cannot be doubted. However, beyond the reporting functions described above, the Chief Finance Officer’s role is limited. In particular, they have no power to set the council tax where the authority has failed to do so by the deadline.

The Chief Finance Officer’s inability to set the council tax where the authority has failed to do should not add to the problems associated with missing the deadline. Section 30 of the Local Government Finance Act 1992 demands that the council tax be set by 11 March in the financial year preceding that for which it is set. Although the 11 March deadline is fixed, s. 30(6) provides that the setting of the council tax will not invalid merely because it is set on or after that date. So, no need for a coup d’etat by the Chief Financial Officer.

Sappho Dias and Lee Parkhill are barristers at 4-5 Gray’s Inn Square.