Performance, finance and risk reporting: Guidance and top tips

Performance, finance and risk reporting: Guidance and top tips in gey writing on a white sheet
This guide is for senior members and officers who contribute to their authority’s strategic planning, performance, finance and/or risk management.
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Introduction

The aim is to support work with relevant teams to make the best use of financial, performance and risk information to inform decision making and, ultimately, to achieve better outcomes for residents and businesses in their communities. 

Why is an integrated approach to performance, finance and risk important?

Performance, finance and risk are closely connected: an authority which is performing well but is financially unsustainable will not usually be able to maintain that performance level for long and will be building up other risks. Poorly managed risks are likely to lead to increased costs, poor performance and reputational damage in the longer term. A decision which balances all three dimensions effectively is more likely to be robust.

Integration of performance, finance and risk reporting isn’t an end in itself – but by achieving greater integration, authorities should be able to take better informed, more evidence-based decisions and build assurance in the right places and at the right times, by taking more targeted actions to address areas for improvement. Considering risk, cost and desired performance levels can help to inform difficult decisions.

Most authorities have a corporate plan which sets out their vision for the place, usually setting out some key financial and performance metrics associated with that plan.  Few will explicitly consider risk as part of that plan, yet all three dimensions are essential in ‘telling the story’ about the place ie does the corporate plan and budget reflect the authority’s risk appetite? 

This isn’t just relevant for the process of reporting information, informing decisions or formally seeking assurance. A good performance management culture can mitigate risk: if there is a culture in which officers are encouraged to look for opportunities to learn and continually improve, they are more likely to flag current or potential problems. Conversely, a culture of blame or mistrust can lead to issues being hidden, and risks growing until it’s too late to address them without significant cost.

Scrutiny functions and the audit committee are vital components of the authority’s governance framework – they help to keep it safe. An understanding of areas of high risk or high spend will help inform the focus of deep dives for scrutiny (to inform policy development or performance review) or for audit (to check the effectiveness of risk management), particularly when resources for this work are constrained.

What does this mean in practice?

Sources of information on performance, finance and risk

There are many possible sources of information:

  • Regular council reporting on corporate performance, budget monitoring and the risk register. Financial monitoring reports will not just report on the revenue budget but also the capital programme and (where relevant) the Housing Revenue Account. Are all aspects of the council’s finances performing equally strongly? In combined and strategic authorities, the capital programme will have even greater importance.
     
  • The Section 25 report written by the chief finance officer as part of the report to full council when setting the budget. The report assesses the robustness of the estimates used to inform the preparation of the budget and the adequacy of the proposed financial reserves.
     
  • Reports by the external auditor, including its findings on value for money.
     
  • External inspection reports by regulators such as Ofsted, CQC and the Regulator of Social Housing, as well as reports by the Local Government and Social Care Ombudsman on individual complaints and its annual letter to the authority.
     
  • The Annual Governance Statement, its action plan to address areas for improvement, and progress in addressing those actions.
     
  • Benchmarking of the authority’s performance with relevant comparators (LG Inform enables each authority – and members of the public – to do this and value for money profiles enable comparisons of expenditure for different service areas, set against comparative performance). 

Should finance, performance and risk all be reported in one place?

Reporting all of this information in one place could lead to a very large document which may be difficult to follow! So, what can help to make the information more digestible?

  • Gather information about performance, risk and finance for the same time period, through an integrated process (so that you are looking at comparable information, gathered by people who have an understanding of all three dimensions for their service) and if possible have it on the same agenda for Cabinet/Performance and Resources Committee so that members can see and make connections between the different reports on the agenda.
     
  • Consider reporting on a particular ‘slice’ of the information in more detail if required – for example, for services for children with learning disabilities to inform a scrutiny deep dive.
     
  • Consider use of exception reporting to members for routine performance reports to enable focus on the areas which require attention.
     
  • Use tools such as Power BI or Tableau to bring together information from multiple systems to create a whole-system view, avoiding the temptation to make visuals too complex.
     
  • Consider including both finance and risk mitigation information, where relevant, in the commentary on performance against key metrics, anticipating and answering likely questions.  For example: ‘X service is not hitting its performance targets and this is a significant risk to the achievement of X corporate objective. The service currently spends X per cent more than the average of its comparators. It is therefore proposed to…’.   

In all cases, reports should be appropriately concise and it should be possible for non-technical experts to understand the contents of the report. However, it is essential to avoid any over-simplification which could be misleading. See the case studies at the end of this guide for some examples of different approaches.

Don’t forget the big picture

Integrated reporting of performance, finance and risk can support authorities to ensure that their corporate objectives are achieved. The ‘golden thread’ should connect at service, directorate, corporate management and executive member level to consider the performance, financial implications and risks to delivery of these corporate objectives. A well-functioning system will ensure that the right level of detail is reported at each level and that risks and issues are appropriately escalated so that there is strategic understanding of the likelihood, costs and risks of meeting (and not meeting) the authority’s corporate objectives.

In many cases, risks may impact on more than one service area or objective so bringing together relevant teams should assist the identification of interdependencies and mitigations in a more holistic way than can be achieved by individual services. Consideration of relevant risks and financial implications of each objective will help ensure that it is deliverable and informs the medium-term financial strategy. This can ensure that appropriate mitigations to any known risks are put in place from the outset. 

A corporate plan must be a living document, subject to regular review. This will enable officers and members to consider whether any new risks have emerged that will impact on delivery or on the finances available to support it. 

An integrated approach is not, however, only about the corporate plan’s big-ticket objectives. Unless there is also focus on the ‘business as usual’ corporate health indicators and financial and risk monitoring, the authority may miss opportunities to ensure that it stays ‘safe and legal’ and has the capacity to deliver. 

Good decision making

Good decision making in local authorities requires that all decision reports include consideration of all the implications of that decision – for example to invest in a new service or a transformation programme. It is good practice to:

  • Consider the financial and risk implications of alternative options to demonstrate that the strongest option has been chosen.
     
  • Consider the cumulative impact of decisions: what impact would this decision have on the authority’s financial position when considered alongside all decisions since the budget was set? Will this decision, when considered alongside all other recent decisions, still be consistent with the authority’s overall risk appetite and financial strategy?
     
  • Look at implications for the longer term, particularly in relation to savings proposals. For example, how long can maintenance of buildings be delayed without a significant risk of impacting on health and safety and/or service delivery?
     
  • Ensure a consistent understanding of all of the above across members and senior officers, to inform further decision-making.
     
  • Remember that performance, finance and risk are dynamic and inter-connected: has the set of circumstances which informed an initial decision on a programme changed, and if so, should the decision change?

Who does what, where and when?

There are multiple opportunities where performance, finance and risk can be usefully considered together, for example, at:

  • The corporate management team for information at corporate level, and at directorate and team meetings for information at their respective levels (following the ‘golden thread’) to ensure operational attention is focused in the right places.
     
  • Relevant programme boards for major projects and programmes to ensure appropriate actions are taken, including escalation where necessary.
     
  • Cabinet meetings, so that members have the fullest possible view to inform their executive decision-making.
     
  • Scrutiny, to inform scrutiny work planning.
     
  • Audit Committee, to assess the effectiveness of the authority’s internal controls.
     
  • ‘Golden Triangle’ meetings of the chief executive, chief finance officer and monitoring officer, to ensure good administrative, financial and ethical governance of the authority.

Such considerations require meaningful review and constructive challenge of the information presented. Different levels of detail and concision will be required in each case: decision-making members and the senior leadership team should be focused on a strategic overview, with layers of progressively more detailed information considered by the teams reporting to the strategic leadership team. 

A useful question to consider in each place – for both members and officers as appropriate – is:

Has this information provided sufficient assurance, or is more information required to gain that assurance?

The frequency at which the information is considered will vary according to the role and purpose of the meeting: project and programme boards should be considering performance, finance and risk at every meeting. Cabinet meetings should be considering monitoring reports regularly (usually at least quarterly). 

How confident can you be in the data?

Effective consideration of finance, performance and risk information requires an understanding of what conclusions cannot be drawn from the data as well as what the data is telling you. For example, there will always be a time lag between the data being produced and the point at which it is being reviewed. This can become more pronounced when seeking to benchmark performance or unit costs with comparators; however, it is still valuable to monitor your authority’s own performance in real time while benchmarking ‘lagged’ comparative data when it becomes available. When doing so, guard against the temptation to ‘explain away’ older data: is this view backed up by other evidence? 

Confidence in the accuracy of the authority’s data is essential, and the Audit Committee will need to seek assurance on the controls to ensure this. Some questions to consider in relation to the accuracy of the data:

  • Are there multiple systems and reporting conventions which record and track data in the authority, which might lead to inconsistencies, or is there a ‘single version of the truth’?
     
  • Is there an over reliance on manual processes, which could risk causing inefficiencies and data quality and version control issues?
     
  • Are all teams reporting to the required standards of accuracy and frequency?
     
  • Do customer-focused insights (eg complaints, residents’ surveys) back up what the internal performance information is saying?

The LGA offers a range of support for councils which would like to start improving their data maturity, including a local government data maturity self-assessment tool.

What does good look like?

  • Regular (usually at least quarterly) publication of corporate performance information, budget monitoring and the strategic risk register (presented clearly and concisely) to demonstrate the authority’s commitment to openness and transparency. 
     
  • Senior leaders in the organisation- both members and officers – champion the agreed approach so that reviewing and acting in light of budget/performance/risk information is seen across the organisation as essential, interconnected activity, ensuring a holistic view. 
     
  • Championing an organisational culture where any issues or dips in performance are seen as opportunities for learning and improvement rather than a trigger for blame (a ‘high challenge: high support’ culture). Senior managers should expect to be challenged – constructively – about their understanding of the data, risks and their actions to address any under-performance/non-delivery of savings. A ‘learning organisation’ will also regularly review the effectiveness of their approach.
     
  • Elected members are engaged meaningfully throughout the process, for example to:
    • understand the level of detail and style of presentation which work best for them, with opportunities for feedback to inform continuous improvement
    • inform the selection of key performance indicators
    • undertake ‘deep dives’ by scrutiny on areas of high risk and/or poor performance
    • meaningfully challenge assumptions about relative risks (for example, when considering decision reports at Cabinet and when reviewing the authority’s strategic approach to risk at Audit Committee).
       
  • All corporate directors understand the performance/risk/finance issues of their colleagues and see it as their shared responsibility to address challenges and to continue to develop the effectiveness of the monitoring process. Regular, scheduled discussions help to ensure consistent understanding and calibration of risk across different teams.
     
  • Development opportunities are available for elected members and officers to enable them to better:
    • analyse, interpret and question data
    • understand financial reports
    • consider risks strategically.
       
  • ‘Deep dives’ are used to look behind the key performance indicators and budget monitoring to consider the causes for poor performance, trends and/or emerging and future issues. Opportunities can be created both at member level as part of a scrutiny work programme and for officers at, for example, directorate performance boards. 
     
  • Systems, policies, procedures and guidance support a coordinated approach (for example, aligning reporting timescales across finance and performance, and consistent requirements across directorates). Processes for joint ownership and joint working across finance, risk and performance leads will also support this.
     
  • Risk is considered fully – the PERFORMANCE model is a useful reminder of the many dimensions to consider:
    • political
    • economic
    • regulatory
    • financial
    • opportunities/outcome
    • reputation
    • management assets
    • new partners/projects
    • customers/citizens
    • environment.
       
  • External challenge is used to test assumptions and get new perspectives on performance and risk.

Any top tips?

  1. Create opportunities for ‘curious conversations’ for both members and officers to explore what the data is telling you. Is there a shared understanding or are there different perspectives? Where is the authority an outlier? What are the implications for the authority’s finances and/or risk of current trends? What are the implications for performance arising from the financial context?  
     
  2. Be led by the strategic planning framework (the corporate plan with directorate/team plans underneath) to ensure focus on the authority’s critical priorities. To enable this, make risk management an integral part of planning and decision making, service delivery and oversight, from policy/project inception through implementation to everyday delivery of services – and ensure consideration of longer term, as well as immediate risks.
     
  3. Don’t lose sight of outcomes rather than focusing solely on measuring inputs/outputs. Do you have the resources where you need them to achieve the outcomes in your strategic plan? What are the risks which might get in the way? What evidence do you have that mitigating actions will have the desired impact?
     
  4. Recognise that establishing integrated reporting takes time and resource. IT requires officers with performance, finance and risk backgrounds to understand and appreciate each others’ requirements and constraints and work together to achieve an approach that benefits the authority as a whole. 

Where can I go to get more support?