Managing Finance

Abstract

The organisation and control of council finances is central to the management of an authority. Notwithstanding various other aspects of the planning and decision-making process, the budget represents the most concrete and explicit statement of what the organisation hopes to do and achieve in current and future years; it is a quantitative expression of the plans of the organisation. It also provides a very revealing indication of the actual priorities of the organisation, and the reality that underlies — and may sometimes deny — the public statements of purpose and objectives. A comment made on the management of central government applies equally to local authorities throughout the country: ‘the task of allocating money is the most pervasive and informative operation of governmentn… In short, the expenditure process is an immense window into the reality of British political administration’ (Heclo and Wildaysky, 1991, p. xii). Budgets and financing are therefore important to any organisation; they are particularly important to public organisations. This is because a local authority is spending public money, the majority of which is raised through taxation of one form or another, and therefore it must be accountable for the expenditure of this money. Budgets are also important because they are based upon an appropriation of funds from the taxpayer, rather than any projection of income which the organisation can raise from the sale of goods or services to willing customers. An understanding of budgets and finance is important for managers in local government, as is observed in a publication by the Chartered Institute of Public Finance and Accounting (CIPFA): ‘finance is the common currency for all local government services in determining the scale on which they are to be carried out, both in absolute terms and in relation of one to another’ (CIPFA, 1990, p. 1).