At the earliest possible stage a chief financial officer (CFO) should make informal confidential contact with the Ministry of Housing, Communities and Local Government to advise of financial concerns and a possible forthcoming s.114 requirement, CIPFA has proposed in amended guidance.
CIPFA has also proposed modifying its guidance to say that the CFO should communicate the potential unbalanced budget position due to COVID-19 to MHCLG at the same time as providing a potential s.114 scenario report to the council executive (cabinet) and the external auditor.
The organisation said the temporary modifications would allow councils under budgetary pressure during the pandemic “the time and space to explore alternatives to freezing spending via a s.114 notice”.
Local authorities have a statutory duty to balance their budgets and, under the framework set out in the Local Government Finance Act 1988, the S.151 officer, who is usually the CFO, needs to issue a S.114 notice if they think spending is likely to exceed resource levels.
CIPFA said the changes it is proposing would mean that it should not normally be necessary for s.114 notices to be issued while informal discussions with government are in progress.
Rob Whiteman, CIPFA CEO, said: "The challenges posed to local government finance by COVID-19 are likely to deepen as the year progresses. It is essential that local government and its partners in central government respond jointly to this crisis.
"With the pandemic accelerating demand across all local services, any freezes on spending in any local area could potentially be highly disruptive and not an effective tool at this time. Temporary change to the S.114 notice process creates space to explore other options or financial support that may be available to local authorities, while allowing finance directors to meet their statutory responsibilities."
The full statement can be found here.