Good financial management for combined authorities

Combined authorities (CAs) represent a significant evolution in the local governance landscape, offering new opportunities for regional development, strategic planning, stakeholder engagement and delivery at scale. However, new opportunities also bring new challenges, particularly in establishing and maintaining good and sustainable financial management practices. 

This guide provides practical advice and insights to help CAs successfully navigate these challenges. In this guide, we: 

• define the foundational aspects of good financial management and their importance to CAs
• provide practical tips and examples based on real world challenges identified through discussions with combined authority finance officers
• offer a resource library for further exploration and continuous learning.

1.1 What are CAs?

CAs are corporate bodies formed of two or more local council areas, established with or without an elected mayor. They enable groups of councils to take decisions across boundaries on issues that extend beyond the interests of any individual council. They are legal bodies set up using secondary legislation and must be initiated by the councils involved. 

For this guide, we use CA as a collective term for all types of combined authorities, including combined county authorities (CCAs). CCAs are made of upper-tier councils only, and any district or borough councils in the proposed area are not able to be members (or constituent councils, as they are known).

1.2 Who should read this guide?

This guide is intended to assist CAs in demonstrating sound financial management arrangements and to support good practice. It provides a foundational basis for those beginning their journey and seeking to establish a CA and offers a checklist for pre-existing authorities aiming to review and improve their approach to financial management.

The guide will be of specific interest to:

• finance officers in CAs of all types
• finance officers in areas without a CA who may seek to explore the idea.

Elected members, especially those with a finance portfolio, may find it useful background information. 

Where looking for guidance that crosses over between the fields of financial management and governance, readers may wish to use this guide in conjunction with its companion guide, ‘Good Governance for Combined Authorities.’

1.3 Approach to developing this guide

To inform this guide, we have surveyed and interviewed finance officers working in CAs and their constituent local authorities. This has provided a wide range of views on the key aspects of good financial management in CAs, some of the challenges faced and the practical steps that officers can take to overcome those challenges. 

To complement this engagement, we also reviewed a range of documents, including pre-existing sources of guidance produced by other professional institutes. We have signposted to these documents throughout the guide.

1.4 Role of the Local Government Association (LGA)

The LGA supports CAs in developing and implementing best practice and helps identify the resources and strategies needed to foster effective financial management. 

This partnership aims to enhance the capabilities of CAs, ensuring they are well-equipped to meet the needs of their communities. The LGA's support extends to facilitating knowledge sharing, offering guidance, and providing tools essential for improving financial management within CAs. This guide is part of the LGA’s commitment to meeting this need, enabling emerging authorities to benefit from established practices without "reinventing the wheel."

The publication of the Levelling Up White Paper in 2022 set a goal for every part of England that wants one, to have a devolution deal by 2030, including more powers and straightforward, long-term funding.

Since the first CA was established in Greater Manchester in 2011, the Government has published devolution deals with 18 areas in England.

Whilst this plan shows the direction for devolution in England, until that plan is delivered, CAs face a complex and uncertain financial environment. This can affect their ability to manage their financial resources, especially if the foundations of good and sustainable financial management are not established early on and financial processes are not designed in a scalable way.

The Levelling Up White Paper introduced four levels of devolution for authorities, based on their structure and powers. The level of a CA determines its powers and control over funding and spending. CAs with more powers, including those with trailblazer deals, typically have greater financial freedoms and certainty. Greater autonomy to use funding as a CA chooses can make it easier to align financial plans with strategic priorities but that comes with the challenge of managing a larger and more complex organisation. In contrast, CAs with fewer powers tend to be smaller and easier to manage but limited financial freedoms can make it harder to align their financial plans with strategic priorities.

The variation in power and scope between the different levels of CAs do not affect the key messages of this guide, which are that CAs should:

• establish solid foundations of financial management based on best practices, including, for example, those set out in the CIPFA Financial Management Code
• ensure that their approach to financial management is scalable
• regularly review their approach to financial management to ensure it is fit for purpose and demonstrates accountability to the public and Government.

The Devolution Framework

The Level 4 Devolution Framework outlines the approach to decentralising powers. It specifies the powers and functions that could be transferred as part of a devolution deal, noting that some powers may be restricted to certain types of authorities or specific geographies. The framework has four levels, each with a different degree of devolution depending on how the authority is set up and whether it has a mayor (Directly Elected Leader or DEL) and meets certain standards of eligibility and accountability:

• Level 1 involves local authorities collaborating across a Functional Economic Area (FEA) or whole county area, for example, through a joint committee, representing the initial stage of devolution.
• Level 2 is for a single institution or county council without a DEL but still covers an FEA or an entire county area, offering a basic level of devolution.
• Level 3 applies to a single institution or county council with a DEL, covering a FEA or the entirety of a county area, indicating a moderate level of devolution.
• Level 4 represents the deepest level of devolution, applicable to an established single institution or county council with a DEL in a position that meets specific eligibility and accountability criteria. This level signifies a significant transfer of powers and autonomy.

The Government has committed to constantly reviewing the framework to ensure that it remains relevant and responsive to the needs and opportunities of local governance, facilitating tailored and effective devolution arrangements.

3.2 A challenge for new CAs

The process of setting up a new CA can be daunting. It is common for new CAs to have limited internal capacity and they may inherit financial management procedures and templates from their constituent local authorities and other more established forms of local authority. While this can be useful, care must be taken to ensure that inherited procedures and templates are adapted to accommodate the distinct governance and decision-making structure of a CA.

It is good practice for new CAs to identify and document gaps in their financial processes and procedures and develop plans to address them with clear ownership. Further, it is recommended that finance teams in new CAs should work with and invite peer review from those within more established CAs during their early stages.

3.3 Key roles and responsibilities

• The directly elected Mayor of a CA will have a role in the overall financial leadership of the authority, including setting strategic priorities and budgets, leading negotiations with Government and constituent local authorities, and promoting fiscal responsibility. Mayors are accountable to the public and Government for how a CA’s financial resources are used. As Chair of the CA, they are subject to scrutiny by elected members on the financial decisions they take. In CAs without a directly elected leader, the Chair of the CA will perform a similar role.
• Portfolio holders are elected members of a CA’s constituent local authorities who are responsible for overseeing a specific area of a CA's work. They are accountable for their portfolio, including setting and monitoring performance against its budget. They are appointed by the Mayor or Chair of the CA.
• The Chief Executive Officer is responsible for leading and managing the CA, ensuring that it delivers its strategic priorities effectively, efficiently, and economically. They hold executive accountability for the CA's finances.

• Section 73 of the Local Government Act 1985 requires that each CA “shall make arrangements for the proper administration of its financial affairs and shall secure that one of its officers has responsibility for the administration of those affairs.”

  Typically, the Chief Financial Officer, Finance Director or Treasurer of a CA performs the Section 73 Officer role. They are required to be suitably qualified, as defined by Section 113 of the Local Government Finance Act 1988.

  The Chartered Institute of Public Finance and Accountancy (CIPFA) is in the process of preparing guidance on the role of the Chief Financial Officer within CAs. It is recommended that Section 73 Officers read that guidance when it is published.

3.4 Financial management as a set of interrelated processes

When developing or reviewing their approach to financial management, it can be helpful for CAs to consider financial management as a range of interrelated process areas embedded within a system of compliance and internal control. To facilitate discussion of this, this section of the guide sets out key considerations for CA finance teams across four priority areas:

• compliance and internal control
• data and systems
• budgeting, forecasting, and reporting
• financial analysis and insight.

3.4.1 Compliance and internal control

As discussed in the companion to this guide, Good Governance for Combined Authorities, CAs need to demonstrate accountability to the public and the Government. To achieve this, it is crucial that officers and members are aware of the legal and fiduciary duties of CAs and therefore the relevant legislation and guidance that covers them. We have included links to some of the key legislation in this section of the guide.

CAs need to ensure that they can provide assurance to stakeholders on their performance and their approach to risk management. This can be achieved by having a strong system of compliance and internal control supported by the Local Assurance Framework agreed upon with DLUHC.

3.4.1.1 Key legislation for CA finance teams to be familiar with

The main legislation covering combined authorities is:

• the Local Democracy, Economic Development and Construction Act 2009 
• the Cities and Local Government Devolution Act 2016 
• further provisions can also be found in the Levelling Up and Regeneration Act 2022-23

There is also a range of related legislative provisions and guidance for the financial arrangements of CAs, these include:

• The Combined Authorities (Finance) Order 2017
• The Combined Authorities (Overview and Scrutiny, Access to Information and Audit Committees) Order 2017 (SI 67) 
• Overview and scrutiny: statutory guidance for councils and combined authorities (HMG, 2019)
• English Devolution Accountability Framework

3.4.1.2 Key financial governance documents that CA finance teams should have in place

A CA’s approach to ensuring a strong system of compliance and internal control should be documented across several key documents, as discussed in this section of the guide. These documents help members and officers to understand their responsibilities in respect of financial decision-making and the wider financial governance of the organisation.

3.4.1.2.1 Financial regulations

Financial regulations are a key part of a CA’s constitution and play an important role in the financial governance arrangements of the authority. Their purpose is to set out the financial management policies of the CA and to ensure that its financial affairs are conducted in a responsible, transparent, and compliant manner. 

When developing financial regulations, CAs should ensure that they:

• provide clear guidance on financial rules and procedures
• describe the accountability for compliance and clearly define the roles and responsibilities of individuals and committees involved in the financial management of the CA
• provide guidance on budgeting and financial reporting requirements
• outline the procurement and contracting procedures that must be followed by the authority.

It is important for CAs to regularly review and update their financial regulations to ensure that they remain relevant, up to date and fit for purpose.

3.4.1.2.2 Scheme of delegation

The scheme of delegation sets out how a CA has delegated decision-making. Its purpose is to ensure that decision-making is efficient, effective, and transparent, while also ensuring accountability and compliance with legal and regulatory requirements. It also ensures that the focus of senior officers is directed to those things of highest importance (measured in terms of financial value, political exposure, and risk).

When developing its scheme of delegation, a CA should ensure that it:

• identifies where decision-making powers lie and who is delegating. This may vary between CAs depending on the details of their individual devolution deals
• sets out the levels of financial authority that individuals and committees have to make decisions on behalf of the CA. For larger organisations, a more detailed record of financial authority by establishment post could be useful. This can be checked by line managers against workflow authorisation levels on the finance system. New or rapidly changing organisations can be vulnerable to risks arising from inappropriate financial delegations, particularly when the use of government funds awarded are often subject to strict provisions
• outlines decision-making processes, including the requirements for scrutiny, consultation, reporting, and documentation (including the recording and publication of decisions)
• delegates specific functions to individual officers or committees.

The Centre for Governance and Scrutiny (CfGS) has produced technical advice for local authorities in England on reviewing schemes of delegation. This advice addresses the principles of delegated decision-making, clarifying the distinction between member and officer roles and emphasising political accountability.

3.4.1.2.3 Financial processes and procedures

Standard Operating Procedures (SOPs)

CAs should ensure that their financial processes and procedures are well documented and accessible. SOPs can help to ensure that finance officers are following the same procedures, reducing the likelihood of errors and inconsistencies. They are an essential component of business continuity planning and can help finance teams to identify opportunities to make processes more efficient.

To ensure that financial processes and procedure are well documented and accessible, CAs should:

• establish and prioritise systems to document financial processes and procedures as SOPs
• ensure that SOPs are easy to follow and written in plain English
• ensure that SOPs are clearly owned, regularly reviewed, and updated to reflect any changes to processes or systems
• work with other CAs to identify opportunities to share or co-create financial SOPs, to avoid duplication of effort across the sector
• design SOPs to be adaptable and scalable.

One size doesn’t fit all

CAs are often made up of different public services with separate funding and governance arrangements (e.g., waste, fire, and police & crime commissioner functions). This means that complete standardisation of financial processes may not be achievable or desirable. CAs should identify where standardisation is possible and document both CA-wide and function-specific SOPs, clearly signposting where there is a deviation in approach between the different functions.

3.4.1.2.4 Internal audit plans

CAs should ensure that they develop risk-based internal audit plans that periodically review the main areas of risk relating to the financial management of the CA. As well as reviewing and evaluating the effectiveness of internal controls, the internal audit function can help finance teams to monitor compliance, identify risks, and improve performance. CA finance teams should work closely and transparently with internal audit colleagues while also respecting their independence. It can be helpful for finance officers to view internal audit colleagues as 'critical friends,' and it is recommended that Section 73 Officers encourage this narrative.

It is also recommended that Section 73 Officers and CA finance teams foster a proactive and ongoing dialogue with external auditors. Seeking advice from external auditors and keeping them informed of any issues that arise or changes to accounting policies during a financial period can help CAs to identify the best approach and facilitate the final audit.

It is important that CA finance teams act on any recommendations made by auditors and agreed upon by management in a timely manner. This will ensure that the benefits of those recommendations are realised and contribute to a stronger system of compliance and control.

3.4.1.2.5 Continuous Professional Development (CPD) and training policies

CAs should encourage and support finance officers to undertake professional training activities and develop new competencies. It is good practice to arrange regular training sessions on key financial and regulatory topics for all members and officers. CAs should ensure that training and development opportunities are accessible to all finance officers, regardless of their role or level of experience. This will help to ensure that officers are equipped with the necessary skills and knowledge to perform their roles effectively./span>

Many finance officers working in CAs will be qualified finance professionals and therefore subject to the CPD requirements of one of the UK’s professional accounting institutes. CAs should encourage and support those officers to undertake CPD activities and share their knowledge across the wider finance team. 

The role of effective induction should also not be overlooked. It is crucial that new starters are provided with the necessary training and support to help them understand a CA's financial processes and procedures. CIPFA’s "Key Competencies for Public Sector Finance Professionals” guide is a useful resource for finance officers in CAs to use when identifying their personal and professional development goals.

3.4.2 Data and systems

To ensure that decision makers have access to usable and trust-worthy financial information, CAs should prioritise how they collect and manage financial data to make sure it is of good quality. Fundamentally, if the quality of the underlying financial data that is used to support decision making is poor, then there is a risk that sub-optimal decisions will be made that do not represent good value for money. It is worth noting that, compared to the private sector, use of data in the public sector is less advanced due to lower historic levels of investment. This means that this is a key area of opportunity for CAs looking to streamline and strengthen their approaches to financial management.

Key areas of focus for CA finance teams should include:

3.4.2.1 Ensuring good quality financial data

CA finance teams should ensure that they have people with the right knowledge and skills in place to inform the CA’s overall data strategy and guide their use of financial data. They should work closely with data analyst colleagues to consider how they will manage financial data and ensure its quality and availability to inform decisions. Key roles for the finance team will include:

• promoting a strong data quality culture. The Government Data Quality Framework includes five data quality principles that can help CAs to ensure that their data is fit for purpose
• identifying the key financial and non-financial data sets that the CA will need to make financial decisions
• ensuring that the data used to support financial decision making adheres to the data quality dimensions as defined by DAMA UK including accuracy, validity, timeliness, consistency, and completeness
• regular review to ensure that new or updated datasets are integrated and conform to key data quality dimensions.

3.4.2.2 Building data partnerships

Partnering with other public sector organisations, including local authorities and NHS trusts, can provide CAs with access to a wider range of data sources that can be used to better understand the local context, benchmark services and expenditure, and improve financial decision-making.

Private sector partnerships can provide CAs with the opportunity to learn from best practice approaches from business. This can facilitate the introduction of new methods and technology that can help to streamline and strengthen their approach to financial management.

When considering data partnerships, it is important that CAs carefully assess the potential benefits and risks. They should also ensure that partnerships adhere to legal and regulatory requirements and that appropriate safeguards are in place to protect the confidentiality and security of data.

3.4.2.3 Developing the Chart of Accounts (CoA)

The CoA is a comprehensive listing of all the accounts a CA uses to record financial transactions in its general ledger. It provides a systematic methodology for recording and categorising financial transactions, allowing CAs to generate accurate and relevant financial reports. There is no single model for CAs. Consequently, there is little apparent scope for developing a completely standardised CoA that can be used by all CAs. However, there will be similarities in the structure of CoAs between CAs and emerging CAs may wish to work with established authorities to understand and learn from the structure of their charts of accounts.

To establish and maintain an easy-to-use chart of accounts, it is recommended that CAs follow the best practice principles below:

• before setting up the CoA, consider the current and future needs of the CA. Having a clear understanding of requirements will help to ensure that the CoA is fit for purpose
• keep the CoA as simple as possible. This will make it easier to use and understand, reducing the likelihood of errors and confusion
• ensure all accounts are named and numbered consistently and aligned with CIPFA’s Code of Practice on Local Authority Accounting in the United Kingdom and any other relevant accounting standards
• ensure the CoA is reviewed and updated regularly. CAs should proactively review the impact of organisational change on the CoA
• design the CoA to be scalable. This can be achieved by using a hierarchical structure, with broad categories (e.g. assets, liabilities, revenue, and expenditure) at the top and more specific accounts below
• develop clear processes for adding new accounts and departments to ensure that changes are made consistently and accurately. This may involve central management of the CoA. 

3.4.2.4 Developing the finance system

Getting value from the finance system

A CA’s finance system is a powerful tool that can facilitate financial analysis and reporting. However, there are common pitfalls that, if not avoided, can result in inefficiencies or errors, and have a detrimental impact on financial management. Typically, these pitfalls relate to officers understanding and knowledge of the finance system or limitations resulting from how it is specified.

To avoid these pitfalls and ensure that the finance system adds value to a CA’s financial management practices, CA finance teams should:

• provide all users with access to training and SOPs
• nominate super-users who can troubleshoot and provide internal support
• procure an appropriate level of external support. This will often be provided by the system supplier as part of an ongoing support package
• develop and maintain an improvement plan to address any issues that limit the CA’s ability to manage and analyse data and present financial information
• when upgrading or replacing a finance system, ensure that the change and implementation programme is adequately funded and supported by a strong governance framework;
• ensure that the CA has the appropriate skills and knowledge to act as intelligent client when procuring a new or upgraded finance system
• establish clear accountability for any project to upgrade or replace the finance system at a senior officer level within the finance team.

Ensuring that the CA’s finance system is fit-for-purpose

When considering the key features of a new finance system, CAs should ensure that it:

• integrates all core business processes into a single, unified system
• provides remote, real-time, and continuous access to data, analytics, and reporting
• is scalable and can accommodate increasing volumes of data and users without affecting performance
• is customisable and can allow for tailored processes and workflows. CAs should note that whilst this is optimal, they should consider the increased risk and cost of this approach compared to the purchase of a less customisable, off-the-shelf product.

3.4.3 Budgeting and reporting

Effective budgeting and reporting processes help to ensure that financial resources are allocated in an efficient, effective, and economical way and that stakeholders are provided with timely and accurate information on the financial performance of the CA.

The National Audit Office has published guidance around financial management in government, strategic planning and budgeting that sets out good public budget setting practices. It is recommended the CAs should familiarise themselves with this guidance and implement it where it is appropriate to do so

3.4.3.1 Budget Setting

Budget setting processes

CAs should establish budget setting processes and clearly identify a timeline for budget preparation, consultation, approval, and reporting. CAs need to approve budgets prior to the start of the financial year. Consequently, approval of budgets is usually sought in January or February with the process starting in autumn to allow sufficient time for all stages of the process to take place. Budget setting processes should set out roles and responsibilities, including, for example, the interrelated roles of the mayor and CA in setting out and approving the combined authority mayoral budget.

A CA’s legal and fiduciary responsibilities in respect of budget setting

When setting its budgets, a CA should consider its legal and fiduciary duties. These include the stewardship of public funds, the requirement to set a balanced budget, and that revenue budgets must be set at a level that is sufficient to meet its legal and financial commitments and ensure the proper discharge of its statutory duties.

Further, in exercising its fiduciary duty, a CA should ensure that its financial plans demonstrate a prudent use of its financial resources and that it is acting in good faith for the benefit of the region. To satisfy this requirement, CAs should ensure that they engage local stakeholders in their budget setting processes and develop budgets that reflect the authority’s strategic priorities.

Mayoral CA budgets

The key features of mayoral CA budgets, including the arrangements for setting and approving the mayoral budget, the ability for the mayor to set a precept to fund mayoral functions, and the ability to establish a mayor’s general fund are provided for in The Combined Authorities (Finance) Order 2017. 

This legislation is useful reading for all finance officers in mayoral CAs.

Types of budget

The exact budgets for each CA will be dependent on the specific powers and functions included in their individual devolution deals. Typically, they will include the following:

• a mayoral combined authority budget (for those CAs with a Level 3 or 4 devolution deal)
• a general revenue budget including specific programmes and corporate functions
• budgets related to specific functions, including fire, police & crime commissioner, transport, and waste
• a capital programme budget.

3.4.3.2 Budget approval

CAs must prepare reports for the approval of each of their budgets. For each budget, the reports for approval should clearly set out the purpose of the report and the recommendations that it is seeking approval for. The reports should provide details of the proposed budgets including:

• the purpose of the budget and its alignment with strategic priorities
• detail of specific activities including their planned costs
• detail on how those activities are funded including clear differentiation between the use of devolved funding, specific grant funding, reserves, and local authority contributions
• detail on the apportionment of any costs to a CA’s constituent local authorities.

3.4.3.3 Capital programme budgets

One of the key differences between CAs and local authorities is the scale of their capital programme delivery. Consequently, CA finance teams need to have a strong focus on capital programme budgeting and accounting, and the assurance framework that provides evidence of the effective stewardship of the capital programme and processes that ensure value for money. For this purpose, Local Assurance Frameworks are required to demonstrate robust assurance, project appraisal and value for money processes before they are signed off by DLUHC. Key considerations for the finance team include:

• working with programme and project management colleagues to ensure that capital programme delivery plans are scheduled based on sound planning assumptions and consider factors that can lead to delay. These factors include, for example, supply chain availability and the impact of seasonal weather
• ensuring that the CA has reporting and monitoring processes in place to identify and manage slippage to the capital programme and the resulting financial impact
• managing the relationship between the delivery of the capital programme and the CA’s borrowing strategy, including scenario planning based on potential or known delays to delivery. 

3.4.3.4 Budget monitoring

CAs should report their actual financial performance compared to budget through the meetings of the CA and its audit committee. To ensure a ‘no surprises’ approach, it is advised that CAs hold regular finance briefings with portfolio holders to discuss variances against budget.

Internally, budget holders should be held accountable for their budgets and be supported by the finance team to understand variances against budget and plan any required mitigating actions. It can be helpful for budget holders to be provided with ‘read only’ access to finance systems. This provides them with continuous access to financial information and promotes accountability for budget management.

It is recommended that CAs work with members and budget holders to ensure that budget monitoring reports are easy to understand and provide the information needed to make timely decisions and interventions to manage budgets.

Statutory duty

The requirement for a CA to monitor its financial position is formalised in Section 28 of the Local Government Act 2003 which imposes a statutory duty on CAs to monitor expenditure and income against the budget during the financial year. 

If the monitoring establishes an adverse position against budget, a CA must take such action as it considers necessary to deal with the situation.

What should budget monitoring reports include?

Budget monitoring reports should include:

• clear identification of any variances against the budget
• quantification of any variances in absolute and percentage terms
• narrative description of the causes of the variances
• agreed or proposed action to mitigate adverse variances
• detail of any revisions to budgets, including, for example, the receipt of specific grants outside of the normal budget setting cycle.

3.4.3.5 Preparing in-year forecasts

CAs should prepare regular in-year financial forecasts compared to their budgeted position incorporating the impact of known variances, agreed mitigating actions and any changes to the assumptions on which the original budget was based. When preparing forecasts, it is essential that CAs have confidence in the actual baseline from which they are developed. Consequently, finance officers should consider the interaction between the accounting close and the preparation of forecasts.

Forecasts are typically prepared on a quarterly basis or when circumstances require (e.g., in the event of a significant change to budget assumptions). Finance officers should proactively engage with budget holders to ensure that they capture all relevant facts and changes to assumptions when preparing forecasts. A proactive and comprehensive approach to forecasting can help increase the likelihood of achieving a balanced budget position at year-end. Reporting on forecasts should clearly identify assumptions that have been used to prepare the forecasts, including, for example, the carry forward of adverse variances from previous years or planned additional use of reserves.

3.4.3.6 Longer-term financial planning

In the absence of fully devolved settlements, CAs have an incomplete view of the funding available to them in future years and are dependent on the receipt of specific and limited grants to fund service delivery. As a result, effective financial planning processes are essential for CAs to ensure that they make informed decisions about the allocation of resources and the management of financial risks over the medium- and long-term. Both medium-term (three to five years) and long-term financial planning processes involve forecasting future financial resources and requirements, identifying priorities, and developing a financial plan to achieve those priorities. Long-term financial planning is particularly important for CAs to understand their borrowing strategy, including their borrowing and re-financing requirements.

3.4.4 Financial analysis and insight

To support good and sustainable financial management, CA finance teams need to promote transparency around their financial performance and provide members and officers with good quality and meaningful financial information to inform the decisions they take. To ensure that they are providing value-adding analysis and insight, CA finance teams should focus their efforts in the priority areas set out below.

3.4.4.1 Finance business partnering

Good quality financial analysis and insight relies on finance officers having a deep understanding of the different service areas of a CA, including their objectives, delivery plans, and risks. This understanding forms the foundation for all financial analysis and insight activities and can help to drive better decision-making. 

To promote effective finance business partnering, CAs should ensure that:

• Finance Business Partners (FBPs) are embedded across the CA and work closely with service areas
• FBPs co-locate with the teams they support. Given remote and hybrid working arrangements, this might mean attending all service team meetings, irrespective of whether they have a financial focus
• FBPs have a dotted line on the organisation chart to the budget holder of the area that they support.

It is important to recognise that finance business partnering skills have not always been essential for traditional accounting roles. It is therefore not sufficient to simply change role titles and expect to achieve impactful outcomes. It is recommended that CAs should set the expectation for finance officers to work as part of wider, matrix teams and support them to develop the skills they need to perform FBP roles effectively.

3.4.4.2 Developing the use of technology to support financial analysis and insight

Increasingly, technology allows regular process tasks, including basic financial analysis, to be automated. CAs should capitalise on the opportunity this provides to release capacity and allow finance officers to focus on higher value activities. 

To ensure that they have the right skills and experience to develop the use of technology by the finance team it is recommended that CAs:

• review role profiles to ensure that they include a requirement to undertake CPD activities and to stay up to date with emerging technologies and their use cases in the finance team
• identify the training needs of finance officers in relation to the tools and systems used by the finance team
• nominate super-users for the tools and systems used by the finance team and promote a culture of continuous improvement and knowledge sharing
• identify gaps in the finance team’s understanding of new technology and seek support to develop skills in-house or buy in these skills when required
• ensure that the finance team has the right skills and experience to act as an ‘intelligent client’ when procuring new systems.

3.4.4.3 Improving the transparency of financial information

CAs need to ensure that accurate financial information is available to decision makers at the right time and that it is presented in a clear and informative way. They also need to publish financial information to promote transparency around their activities and the decisions they take. It is recommended that CAs should consider developing the use of data visualisation and dashboards to engage stakeholders and share financial information with them. To develop the use of data visualisation, CA finance teams should:

• consult with members and budget holders to identify the financial metrics that are most important to them
• review how the data that informs those metrics is managed and accessed
• use a data visualisation tool to create financial dashboards that display the metrics in a meaningful way
• seek feedback from members and budget holders to ensure that the dashboards are useful
• provide training to finance officers to ensure that they can create and communicate financial dashboards
• look to build on any best practice from other CAs and local authorities
• give thought to how the CA’s financial information might compliment and integrate with that of its constituent local authorities so that a comprehensive and coherent presentation of the region’s financial health can be presented to the public.

From our discussions with finance officers working in CAs, we identified several challenges that they face in respect of the financial management of their authorities. In this section of the guide, we have used these challenges to highlight key focus areas for CAs, including a brief discussion of each challenge and some practical actions that CAs can implement to manage them

4.1 Aligning financial plans with strategic priorities

Aligning financial plans with strategic priorities can be a challenge for combined authorities (CAs) for various reasons. Restrictions on how specific funding can be used, a lack of long-term visibility of funding, and strategic priorities that extend beyond a CA’s agreed devolution deal can all contribute to this.

To manage this challenge, finance officers should work closely with members and budget holders whilst they are preparing budgets and financial plans. Collaboration with senior stakeholders during the financial planning process can help to build awareness and test the appropriateness of financial plans, the assumptions on which they are based, and how they support the delivery of strategic priorities.

It is also recommended that CAs incorporate non-financial performance indicators in their financial reporting and budget monitoring reports. The Environmental, Social and Governance (ESG) framework can be used to identify and incorporate non-financial performance indicators. This can help CAs to communicate how their financial resources are being used to deliver environmental, societal, and place-making priorities, improving transparency and accountability with stakeholders. The alignment of financial and non-financial performance indicators can lead to more strategic conversations about financial reporting, which in turn can improve both financial decision-making and the scrutiny process.

Section 73 Officers should ensure that the CA’s budgets and financial plans explicitly reference the link between proposed expenditure and the delivery of the authority’s strategic priorities.

4.2 Avoiding the use of unrealistic planning assumptions

There is a risk that strategic or political direction extending beyond the scope of a combined authority’s (CA) agreed devolution deal can lead to unrealistic assumptions being used in the preparation of its budgets and financial plans. To help manage this challenge, it is important that all members and officers involved in the budget process are reminded of the CA’s legal and fiduciary duties in respect of budgeting. They should take responsibility for ensuring that budgets and forecasts are prepared prudently and based on real-world assumptions.

To ensure that the assumptions used to prepare budgets and financial plans are prudent and subject to an appropriate level of scrutiny, the following tests might be helpful:

• Is there evidence to support the use of more optimistic assumptions?
• Can any risks created by the use of more optimistic assumptions be effectively mitigated?
• Is there an opportunity cost of using a less optimistic assumption that impacts on the delivery of the CA’s strategic priorities? If yes, does the opportunity cost outweigh the risks created by using a more optimistic assumption?

4.3 Dealing with uncertainty about future funding and limited financial freedoms

Beyond the receipt of the single funding pots agreed as part of each area’s devolution deal, CAs still face uncertainty about future funding and limited flexibility to use that funding when and how they choose. These interrelated challenges can impact on investment planning and decision-making.

Whilst the direction of travel in England is towards single financial settlements aligned to whole spending review periods, CAs will need to address these challenges in the short term. Practical actions that CAs can implement to help to address these challenges include:

• maintain detailed funding schedules recording specific grants and devolved funding, and the programmes that they are assumed to deliver. This can help CAs to communicate and manage the risks around funding with members, officers, and other stakeholders
• where specifically funded programmes are known to be time-limited, or there is a significant risk that they will be, consideration should be given to exit strategies at the outset
• identify and develop case studies to demonstrate the benefits of more flexible funding. These case studies should highlight where flexibility has been used to align funding to local priorities and deliver outcomes more efficiently and effectively. For example, this could include developing case studies relating to the use of the Investment Fund Grant or Business Rates Retention Pilot scheme
• identify and develop case studies to demonstrate the benefits of long-term funding. These case studies should highlight where longer-term certainty about funding has enabled better planning and more strategic decisions to be taken, leading to better outcomes
• use the case studies developed to lobby the Government for greater certainty on current and future funding instruments.

4.4 Ensuring a consistent approach to financial management

CAs can experience challenges delivering a consistent approach to financial management where the structure of the CA is complex, and its functional areas are governed and funded differently, for example, in respect of those authorities with Police and Crime Commissioner and Fire and Rescue functions.

To manage this challenge, CAs should identify areas where financial processes and approaches can be applied consistently across the different functions. A review of Standard Operating Procedures (SOPs) can be used to identify areas where there is scope for standardisation of processes for operational and strategic benefit. Examples could include:

• the integration of treasury management across different functions, enabling the CA to manage its cash more strategically
• the adoption of common reporting practices and a common approach to finance business partnering
• the consolidation of accounts receivable and accounts payable processes across different functions.

4.5 Identifying funding for corporate services

It can be a challenge for CAs to identify guaranteed and long-term funding to support the delivery of corporate services, including the finance function. Corporate services are typically funded by contributions from constituent local authorities and an overhead charged to specific programmes. However, this does not always cover the required level of expenditure. This is particularly the case where a CA is growing and has a back-office transformation need or requires specialist professional advice. The lack of guaranteed funding can affect services’ ability to develop the skills and capacity they need at the right time. This can lead to gaps in financial processes and pose a risk to the financial management of the authority.

To manage this challenge, it is important that CAs develop a detailed and costed understanding of the skills and capacity that corporate service teams need. Finance teams should ensure that this forecast is built into the medium-term financial plan, and that they consider the options available to them to pay for it. This should be part of an effective process of engagement and negotiation with the constituent local authorities and is another example of the crucial importance of establishing good relationships and trust at an early stage, and maintaining this as the CA develops and grows. Opportunities to pool resources and share costs could form a core part of this process.

Specific actions that CAs can take to help to address this challenge:

• agree on the maximum level of revenue funding possible when negotiating the terms of specific grants and devolved funding agreements. Maximising the proportion of revenue funding that is received can provide greater financial freedom to pay for the costs of corporate services
• consider whether the current corporate overhead model is sufficient to ensure that the costs of back-office services are accounted for in full and consistently applied (where allowable) across all the CAs activities
• consider top-slicing new grant funding (where allowable) to provide a guaranteed funding stream for the incremental back-office costs generated by the activity that is funded by the grant.

4.6 Developing a strategic finance capability

Typically, the development of a combined authority (CA) over time will involve growing from a small organization with a relatively fixed and easy-to-understand budget to a larger one with more flexible funding streams. As they grow, CAs need to ensure that they can allocate financial resources effectively across unrelated and competing strategic priorities and justify those decisions to the Government and the public. CAs that have well-established processes relating to strategic prioritisation and scenario planning will be best placed to make 'apple and pear' comparisons and effectively allocate financial resources between competing demands.

To prepare for this challenge, it is recommended that CAs establish a strategic finance capability relatively early in their existence. This can be achieved by establishing a specific role or incorporating responsibility within a wider role profile. This will ensure that there is responsibility for developing this important capability as a CA grows.

Our research noted that the more flexibility a CA has to use its funding as it chooses, the more closely it resembles a large local authority in terms of the need to prioritise resources across different objectives. Consequently, it is recommended that new CAs seek support to develop strategic finance capabilities from their constituent local authorities.

4.7 Managing the rapid growth of a CA

CAs can grow from small to large organisations quickly and this can create a challenge for their finance teams who need to introduce new financial processes and capabilities or scale existing ones at short notice, sometimes with limited internal resources.

To help manage this challenge, finance officers should: 

• focus on establishing solid foundations as soon as possible with clearly documented processes
• be proactive and learn from the growing pains of other CAs to understand what capabilities and financial processes they will need to manage both their current and future requirements
• work with other CAs to create a library of template documents (e.g. SOPs and role profiles) that can be adapted and used as required.

It is important that CA finance teams understand and prepare for a repeated cycle of growth when designing their approach to financial management. As discussed earlier, they should design financial processes to be scalable, and regularly review and update them. This repeated growth cycle, which is set out in the table below alongside key considerations for finance teams, might be helpful for finance officers to think about when they are planning for how their financial management processes might need to develop over time.

4.8 Developing a culture that supports good financial management

A key risk for new CAs, which can continue if not addressed at an early stage, is the lack of a uniform culture around financial management. Culture can have a significant impact on how an authority manages its finances. It can have a positive or negative impact on transparency, accountability, and the ways of working between the finance team and the wider authority. To mitigate this risk, Section 73 Officers should take responsibility for developing the culture across the finance team and work with the Chief Executive Officer to ensure that the authority has a consistent, supportive, and accountable culture in relation to its approach to financial management.

CAs should be under no illusion that officers and members are likely to have to navigate a challenging working environment at times. This arises from the dynamic between several potential centres of executive power (for example, the mayor, executive and constituent local authorities). Building consensus between these groups will need to be a key area of focus for finance teams. This is especially true of financial decisions in the current economic climate.

Practical actions that CAs can consider to promote a positive culture in relation to financial management include:

• promoting regular and transparent interaction between members, finance officers, and other stakeholders
• listening to and acting on feedback from the wider organisation in relation to their experience of the financial management of the CA
• delivering finance training for non-finance officers to help to build their understanding of the CA’s financial processes and lead to better business partnering relationships
• making sure that financial information is available in a useful and easy-to-understand format
• promoting the discussion of new ideas and methods within the finance team and ensuring that endorsed ideas are implemented to promote a culture of continuous improvement
• engaging with internal and external auditors and acting on their recommendations
• consulting stakeholders and including them in financial decision making.

The culture in CAs can be less formal than the culture within central and local government. This is partly by design to enable more agile, devolved decision-making and partly due to the newness of CAs and a lower level of member involvement in their day-to-day activities. Whilst this less formal culture has benefits, there is a risk of reduced accountability and transparency as financial decisions are not always subject to the same level of scrutiny as they would be in a more traditional local authority setting. To manage this risk, CAs should make sure that their approach to scrutiny is consistent with the English Devolution Accountability Framework and that they communicate financial decisions transparently.

4.9 Business continuity and knowledge retention in new CAs

New CAs often have limited internal capacity and roles may be held by interim officers as the CA establishes itself and develops the skills and capacity it needs. These interim resources are often provided by donor organisations. Historically, these donor organisations have included the CA’s constituent local authorities, Local Enterprise Partnerships (now abolished) and regional transport authorities. During this period, there is a risk that officers are recalled at short notice and that finance teams do not retain institutional knowledge that is critical to the effective financial management of the CA. To manage this risk, it is recommended that CA finance teams should:

• ensure that clear handover procedures are in place to manage the retention of knowledge as officers leave the authority
• establish a library of financial policies and procedures;
• ensure that they have a clear document management system that identifies when and by whom policies and procedures are reviewed
• keep close control of the level of interim appointments, particularly to key finance roles in the early stages of CA development, as a change in direction at the formative stage could inhibit progress in embedding finance processes or undermine financial control.

4.10 Supporting stakeholders to understand the complex CA funding landscape

CAs are a relatively new type of local government organisation, and the understanding of their role is still developing. This extends to the understanding how they are constituted, their powers, and how they are funded. To help to develop the understanding of CA finances, finance teams should support members and officers to understand their roles and responsibilities in relation to the financial management of the CA. In particular, CAs should support members to understand how their roles and responsibilities differ in relation to the CA and the local authority to which they are elected. Actions to support this could include briefings for members and officers, specific training, and / or engagement on key financial documents. 

It is also important that CAs support their members and officers to understand how they are funded, and the flexibility they have to use their financial resources when and how they choose. The documents linked to below provide a useful starting point for this. 

• Table of funds received by each CA – This table sets out the funding instruments available to each combined authority with devolved powers (correct at the time of its publication). 
• CAs: Financial freedoms and fiscal devolution – This report includes a discussion of the financial freedoms and flexibilities of each of these funding instruments.
• Combined Authorities: signs of success – Pages 9 and 10 of this report include a discussion of the main forms of funding for CAs. 

These documents can also be used to compare the funding received by different CAs. This can help to identify and support the development of peer networks around specific funding streams and their associated risks and challenges.

4.11 Supporting members to balance their local and regional roles

Although the strategic priorities of a CA should be consistent with the interests of its local place, members can find that the financial decisions they are required to make on behalf of the CA are not always aligned with the immediate priorities of the local authorities or the wards that they represent. This pressure is likely to increase as local authorities experience financial pressures driven by increasing service demand and structural funding challenges. CAs should be sympathetic towards this and support members to balance their local and combined authority roles. Members and officers should work together to discuss any conflicts in an open way, and finance officers should support members by providing them with the information they need to make balanced and objective financial decisions. CAs should also develop tools and training to support members in their roles and support member development as an essential activity. These actions can help to address the potential impact of competing priorities on financial decision-making in CAs.

4.12 Further development of peer networks

The challenges faced by CA finance teams are often shared, and there is value in pursuing a collaborative approach to problem-solving. Newer CAs can benefit from the experience of more established authorities who will almost certainly have faced similar challenges during their development. CAs should engage through existing channels, such as the Mayoral Combined Authority Finance Officers Group, and develop new channels focused on specific challenges and opportunities. The benefits of this for CA finance teams include:

• faster identification and mitigation of risks and issues through learning from the experience of others
• identification of shared challenges and opportunities, and shared capacity and capability to work on them
• co-ordination of conversations with the Government and other stakeholders on common issues.

To build on the existing positive approach to peer networking, it is recommended that CA finance teams should:

• establish working groups to resolve specific shared challenges
• establish new officer groups for each level of devolved authority (in addition to the Finance Officers’ Group) to discuss the specific challenges they face
• develop a knowledge-sharing site to share and develop shared documents and templates.

This section of the guide summarises the key areas of focus for CAs to establish or review their financial management practices. This checklist is structured around the foundations of good financial management and the challenges and key areas of focus identified in this guide.

In this section, we offer a resource library to enhance financial management practices within CAs. The following resources are recommended to support CAs in deepening their understanding and implementation of good financial management practices. Several of these resources are linked to throughout the guide and compiled in this section for ease of access.

Guides, toolkits and resources

• The English Devolution Accountability Framework outlines the accountability structure for institutions in England with devolved powers, like mayoral combined authorities and the Greater London Authority (GLA). It sets out three primary forms of accountability: local scrutiny and checks and balances, accountability to the public, and accountability to the UK government. This framework emphasises the importance of ensuring value for money and involving local business voices in decision-making. It also discusses the role of local scrutiny committees and the need for clear communication with the public about the roles and performances of institutions. The framework is part of the broader Local Government Accountability Framework and is expected to evolve with future devolution deals.
• The Best Value Guidance is a comprehensive guide for local authorities in England, focusing on delivering best value in public services. It outlines principles for continuous improvement, effective leadership, governance, and resource management. The guidance emphasises the importance of transparent, ethical practices, and accountability in local government operations. It also details the process for identifying and addressing service delivery failures and the various intervention models available to the government in cases of non-compliance with best-value standards. This document serves as a statutory guide to help local authorities achieve higher standards of efficiency, effectiveness, and economic management in their services. 
• The CfGS document Reviewing Schemes of Delegation: guidance for English Authorities provides technical advice on governance frameworks for local authorities in England. It addresses the principles of delegated decision-making, clarifying the distinction between member and officer roles and emphasising political accountability 
• The CIPFA Financial Management Code (FM Code) provides guidance for good and sustainable financial management in local authorities. By complying with the principles and standards within the code authorities will be able to demonstrate their financial sustainability. The FM code is not freely available but will be accessible by most CAs.
• CIPFA’s The Role of the Chief Financial Officer series explores the nature of the finance function and the work of the CFO in the public services. It also considers the competencies CFOs need if they are to fulfil their role effectively, the relationships they need to develop and the organisational culture they need to create. CIPFA are in the process of producing guidance specifically relating to the role of the CFO in CAs.
• CIPFA’s Key Competencies for Public Finance Professionals is aimed at public finance professionals working both within and alongside the public sector and has been designed to stimulate thinking and discussion, and to aid planning in relation to career pathways and the development needs of those tasked with all aspects of public financial management.
• The National Audit Office has published guidance that aims to provide insights and good practice on strategic planning and budgeting for better financial management in government.
• The Combined authorities: Financial freedoms and fiscal devolution report published by the LGA assesses how freely English combined authorities are able to raise and spend funding. These ‘financial freedoms’ were researched in late 2021/early 2022, updating research conducted at the beginning of 2018.
• The Combined authorities: signs of success report published by Grant Thornton and Bond Dickinson in 2017 includes an analysis of the combined authority model of local government and a review of each combined authority formed at that date, set against economic performance indicators of the area. In this way, it begins to establish a benchmark against which future performance may be evaluated. The report also includes discussion of the challenges faced by CAs.