Developing a robust financial strategy is paramount when working for local authorities in the UK. This strategic framework serves as the guiding light for all financial decisions made within a local authority. It’s not merely about managing budgets; it’s about ensuring that public funds are used efficiently and effectively to benefit the community.

A well-crafted financial strategy begins with a clear understanding of the local authority’s goals and priorities. This involves a comprehensive assessment of the services that need funding and the resources available. It considers both short-term needs and long-term sustainability, aiming to strike a balance between providing essential services today while securing financial stability for the future.

Local authorities often rely on a combination of funding sources, including government grants, council tax revenue, and various fees and charges. The financial strategy outlines how these sources will be tapped into and managed. It also takes into account potential fluctuations in revenue and prepares contingencies to address them.

In addition to funding allocation, the financial strategy includes prudent financial management practices. This encompasses budgeting, forecasting, and performance measurement. The goal is to ensure that resources are directed to areas where they will have the most significant impact on the community’s well-being.

Transparency and accountability are fundamental principles of any financial strategy. Local authorities are accountable to their constituents, and the strategy outlines mechanisms for reporting financial performance to the public. It also incorporates risk management strategies to mitigate potential financial setbacks.

Furthermore, the financial strategy evolves over time, adapting to changing circumstances and priorities. Regular reviews and adjustments are essential to maintain its relevance and effectiveness in achieving the local authority’s mission.

Projects and the financial strategy

In the early stages of deciding feasible projects, among other criteria, ‘investability’ can be used for shortlisting the possible projects. Several projects could be eliminated if it is highly unlikely that funding would be attainable and not aligned with the local authority’s strategic approach to project financing.

A catalogue of projects that are aligned with the local area’s strategic energy plans can be considered together at this stage. The detail of each project can be at a very high level.

At this stage, all key stakeholders within the local authority may need to be notified of the possible projects being considered. This could be, for example, capital and assets teams to make them aware that the project may involve use of land owned by the local authority. Land use could take many different forms, from simple lease to creating security (such as a mortgage) over the land to support the fundraising. The local authority also needs to consider what to prepare for, such as more electric vehicle charging.

It is helpful to identify the role of the local authority in the project, for example as a customer (probably through a short- or long-term contract) or owner of deployed assets.

Creating a contract will often be needed to provide the committed cash flow that the project will rely on for raising funds.

Risks         

Risk of project failure is high during the concept and feasibility phase. High risk means that external debt is unlikely to be raised for this phase. As a result, equity funding (direct investment of risk capital by one or more investors) is required.

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