Headlines: February 16th, 2010

The Audit Commission’s financial health checker has proved popular with the 150 county and single tier councils and it has now been enhanced so that the 210 district councils can compare their financial performance.

The private sector can focus on the bottom line and companies use the profit margin as a quick indicator of their financial health. But in local government, where profit isn’t the motive, other measures need to be used to provide a financial health check. To meet this need the Commission has distilled the accounts of England’s councils into five indicators based on financial ratios. But there is a health warning that it does not tell the whole story,

The ratios include working capital, usable reserves, long-term borrowing, long-term assets, and total school reserves.

The calculations are not necessarily indicators of good or poor financial performance, as they reflect local challenges and decisions. But over time they do allow similar councils to make comparisons and identify common trends and movements.

The health checker is available from the AC. http://www.financialratios.audit-commission.gov.uk/