Agenda item

Oladapo Shonola, Principal Accountant for Financial Planning introduced a report which set out the 2017/18 Quarter 2 financial position for the Council. It was noted that:

a.    The Council was projecting an overspend by £6.6m in 2017/18 against a £255m budget. The overspend consisted of £2.1m in Children’s Services (P1), £3.4m in Adult Social Services (P2) and £0.8m in Temporary Accommodation (P5). There were also smaller overspends in P3 & P5 and a projected underspend by around £400k in Priority X.

b.    There was an improved variance in Priority 1 from the first quarter of 2017/18 by around £1.1m.

c.    There was a worsening variance in Priority 2 from the first quarter of 2017/18 by around £2.1m.

d.    There were also improved variances in Priority 3 & Priority x.

e.    The HRA showed an improvement by £0.6m giving an overall net favourable movement by 0.2m from Quarter 1 to Quarter 2.

f.     In relation to the Capital Budget there was a significant underspend forecast of £108m, which consisted of £89m on the General Fund and £19m on the HRA.

g.    The MTFS savings target for 2017/18 was £20.6m. As at Quarter 2, services were projecting that £10.17m (49%) of planned savings would be achieved compared to £13.8m (67%) at Quarter 1. The most significant adverse movement related to savings within Adult Social Services.

Following discussion of the report, the following points were noted:

a.    In response to a query around the use of General Fund reserves, the Committee was advised that the approved budget for 2017/18 included a planned use of £8.8m of reserves from the General Fund, which would reduce the overall level of reserves in the General Fund to £6.2m. The minimum level of General Fund reserves recommended by the S151 Officer at the time of setting the budget was £15m.

b.    The Committee sought reassurance around the General Fund reserves, given their reduction to £6.2m and a projected overspend of £6.6m at Quarter 2. The Committee questioned what was being done to manage this. In response, officers advised that budget recovery plans were being drawn up corporately to mitigate the projected overspend and that there were other activities being considered, such as a redesignation of ear-marked reserves to the General Fund.

c.    Members enquired how confident officers were that sufficient additional revenue or other sources of funding would be found to meet the funding gap. In response, officers advised that they were reasonably confident of meeting the shortfall this year, but acknowledged that meeting the underlying gap of £15m would be dependent upon increasing revenue levels.

d.    In response to a request for clarification, officers set out that that the achievement of savings under the MTFS was included within the overspend forecast of £6.6m and that this combined with the £8.8m from General Fund reserves left a funding gap of around £15m.

e.    The Committee was advised that Finance had met with the lead officers for each Priority to discuss areas of additional savings and additional revenue streams, such increased grant income.

f.     The Committee queried about the extent to which the cost of interims and temporary staff had an impact on the budget deficit. The Committee also requested that an assessment be done around the effectiveness of outsourcing and whether there were any long term savings involved in bringing services back in-house. The Chair suggested that the Veolia contract would be an obvious candidate for reviewing the efficacy of bringing the service back in-house. The Committee agreed that it would look into the Veolia contract as part of the budget scrutiny process. (Action: Clerk/Environment & Community Safety Panel).

g.    The Committee raised concerns with a significant underspend in Temporary Accommodation, given the pressures on that service. In response the Principal Accountant suggested that part of the reason may have been because of difficulties in acquiring specific types of property. The Principal Account for Financial Planning agreed to provide the Committee with a response on the reasons for the underspend in temporary accommodation. (Action: Oladapo Shonola).

h.    The Committee noted its concern with the significant underspend in the Capital budget.

RESOLVED

That the Committee:

     I.        Noted the Q2 forecast revenue outturn for the General Fund of £6.6m overspend, including corporate items;

    II.        noted the net HRA forecast position of £0.2m underspend;

  III.        noted the latest capital  position with forecast capital expenditure of £ 101.59m in 2017/18;

  IV.        noted the risks and mitigating actions identified in the report in the context of the Council’s on-going budget management responsibilities/savings as set out in Appendix 3(a) and 3(g);

   V.        noted the measures in place to reduce overspend in service areas; and

  VI.        note budget virements set out in Section 6 and Appendix 4 of the report.