Pixel: Reorganisation - complexity of disaggregating funding in a multi-unitary business cases – systems and finance issues

This report, produced by Pixel Financial Management for the County Councils Network, outlines the significant systems and financial challenges associated with Local Government Reorganisation (LGR), particularly where county and district councils are split into several new unitary authorities. It highlights that the scale and complexity of these arrangements - especially multi-unitary splits - are unprecedented and introduce major operational, financial, and reputational risks.

The core issue indentified in the report is the difficulty of disaggregating systems, funding, and services that were originally designed to operate as unified entities. New authorities must ensure critical functions such as cash management, payroll, revenues, and service delivery systems are operational from day one, despite relying heavily on legacy systems that may persist for years. Splitting balance sheets, allocating assets and liabilities, and completing accounts add further complexity, often requiring lengthy negotiations and risking delays in financial reporting.

Additional challenges arise from workforce restructuring, loss of institutional knowledge, and the need to manage legacy organisations during transition. Service-specific systems, particularly for schools, council tax, and housing, are especially difficult to divide and reconfigure.

Overall, the report stresses that without realistic timelines, robust planning, and sufficient capacity, the risks to service continuity and public confidence are high.

Key findings:

• Reorganisations that split counties into several unitary councils create unprecedented complexity, especially when splitting both county and district systems.
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• Day-one operational readiness (cash, payroll, revenues) is high-risk and hard to guarantee.
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• Legacy systems will likely remain in place for years, reducing data quality and increasing integration challenges.
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• Splitting balance sheets is time-consuming, contentious, and can delay audited accounts.
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• Workforce fragmentation risks loss of expertise and continuity.
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• Service-specific systems (schools, revenues, HRA) are especially difficult to split.

Recommendations for local authorities include:

• Adopt realistic timelines reflecting the scale of change.
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• Develop detailed, system-wide transition plans early.
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• Prioritise robust cash management and financial controls for day one.
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• Use interim arrangements (e.g. shared systems) cautiously to manage risk.
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• Ensure adequate resourcing, skills retention, and external support.
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• Carefully assess feasibility of splitting complex service systems before implementation.

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