Decision details

Consideration was given to the report which set out the financial position for the Revenue and Capital Budgets at the end of October 2017 and was based on actual costs and income for the 7 months ending 31^st October, 2017 and forecasted for the remainder of the financial year. This was the fourth of a series of monitoring reports for the 2017/18 financial year which would continue to be brought forward to Cabinet and Commissioners on a regular basis. 

Delivery of the Council’s Revenue and Capital Budget and Medium Term Financial Strategy within the parameters agreed at the start of the current financial year was essential if the Council’s objectives were to be achieved.  Financial performance was a key element within the assessment of the Council’s overall performance framework.

As at October, 2017 the Council had a forecasted overspend on the General Fund of £4.594m, an increase of £0.6m over the £4.0m forecast overspend as at September.  The main reason for this increase was a continuing rise in the projected overspend by the Children and Young People’s Directorate of a further £0.434m, chiefly attributable to continued increases in the number of children in care.

This increase in the number of Looked After Children had also placed significant and unavoidable pressure on Legal Services, which currently had a forecast Budget overspend of £1.1m resulting in a net projected overspend for the Finance and Customer Services Budget of£0.6m. In addition, the Adult Care and Housing forecast overspend had increased by £0.2m from £5.1m to £5.3m. 

Offsetting these pressures, the Assistant Chief Executive’s Budget projected underspend had increased by £34k to £244k, chiefly as a result of staffing savings mitigating other cost pressures.   It was still anticipated that the review of Business Rates and Treasury Management would deliver £5m of savings against the Central Services budget this year. 

The Regeneration and Environment Services projected budget outturn remained a break even position achieved through ongoing tight day to day budgetary control. 

Management actions to address areas of overspend were also ongoing and the overall budget position would continue to be monitored closely.  The current round of budget monitoring showed, however, that the Council’s Revenue Budget position had deteriorated by £0.6m since the previous monitoring report showing the position as at September. 

The majority of the £24m budget savings approved within the 2017/18 budget were on target to be achieved.  Within this target there were £11.9m of Directorate budget savings, which combined with a further £5.4m of 2017/18 Directorate budget savings agreed in previous budgets, gave a total Directorate savings target for 2017/18 of £17.3m.  The current monitoring indicated that of this total, £6.8m  of savings proposals were at risk of non-delivery in the manner approved by Council when the 2017/18 Budget was set (an improvement of £0.4m compared to September). These at risk proposals and the impact of mitigating actions were reflected in the current overspend projection.  Cabinet approval would be sought for any budget savings which ultimately were proposed to be delivered differently on a permanent basis.  

In order to balance the Revenue Budget for 2017/18 if expenditure could not be contained within budgets by management actions or by identifying additional savings, the Council would need to call on its reserves.  The use of £10.5m from the Council’s reserves was approved as part of the 2017/18 Revenue Budget, in recognition of the timescales associated with developing future plans to achieve the significant additional budget savings required to stabilise the Council’s Budget position for the financial years 2018/19 and 2019/20.  This approach permitted the Council to use its current balance of reserves to mitigate the overall budget risk in the short term and to support a sustainable financial plan in the medium term before these reserves were reinstated in future years.  The current financial climate, the risks associated with continuing reductions in Government funding and the resulting significant savings required by the Council meant that there was a need to maintain prudent levels of reserves and to avoid calling on them except in exceptional circumstances.  Given this, it was essential that all services continued to develop mitigating actions and identify alternative savings to compensate for financial pressures and delays in delivering the full amount of savings proposed in the Revenue Budget.

The current forecast outturn position reflected the financial effects of the mitigating actions that have been identified and implemented to date and the progress made in re-establishing a balanced budget position would be reported regularly through these Financial Monitoring reports. 

As indicated in the Budget and Council Tax report 2017/18, the summary Medium Term Financial Strategy had been reviewed, informed by the financial outturn for 2016/17 and taking into account current economic factors and latest financial planning estimates of the Council Tax base, Council Tax collection rates, business rates income and business rates appeals.  

This review results in estimates of the MTFS Budget Gaps for the following 2 financial years of £15.1m in 2018/19 and £15.8m in 2019/20, a total of £30.9m over the two years.   

There continued to be significant in-year pressure on the Dedicated Schools Grant (DSG) High Needs Block – the projected overspend had increased by £140k in the past month to the current projection of £7.360m.  Whilst at present this pressure did not directly affect the Council’s financial position, it was imperative that the recovery strategy was implemented setting out clearly how this position would be resolved and avoiding any risk to the Council in the future. This included the planned transfer of £3m DSG in 2017/18 to reduce the forecast High Needs Block deficit. 

A recovery plan intending to mitigate as far as possible the in-year pressure and achieve the previously reported position of an overall cumulative deficit of £1.796m by April 2019 has been devised by the service.  As reported previously, the key areas of focus which would deliver the targeted deficit reduction by April 2019 included:-

·                A revised Special School funding model (November 2017);

·                A review of high cost out of authority education provision to reduce cost and move children back into Rotherham educational provision (November 2019); and

·                A review of inclusion services provided by the Council (December 2017). 

The Public Health Budget was forecast to spend at budget whilst spending in the Housing Revenue Account (HRA) was forecast to be £0.583m below budget, reducing the planned use of HRA reserves from £1.16m to £0.6m.

An in-year variance of £15.396m reduced spend on the 2017/18 Capital Programme was forecast, the majority of which related to schemes which were re-profiled into 2018/19.  The most significant variance was in respect of the Adult Care and Housing Capital Programme – where it was estimated that £10.821m of spending would be re-profiled into 2018/19 and later years of the Capital Programme, mostly to reflect delays on several major projects providing new housing.   This revised and re-profiled Capital Programme position would continue to be closely monitored and any further revisions and adjustments required to the Programme would be reported within the next financial monitoring report to Cabinet.

Cabinet Members in noting the position and challenge welcomed the news that the budgeted funding gap had reduced slightly and this would be reported in February, 2018.

This report had been considered by the Overview and Scrutiny Management Board as part of the pre-Scrutiny process who were in support of the recommendations.

Resolved:-  (1)  That the current General Fund Revenue Budget forecast overspend for 2017/18 of £4.594m be noted. 

(2)  That management actions continue to be developed to address areas of overspend and to identify alternative and additional savings to mitigate shortfalls in achieving planned savings in 2017/18.

(3)  That the review of the Medium Term Financial Strategy and the updated estimates of the Budget Gaps for 2018/19 and 2019/20 be noted.

(4)  That the current forecast outturn position on the approved Capital Programme for 2017/18 be noted.

(5)  That the proposal to further extend Superfast Broadband across South Yorkshire be supported on a basis of being cost neutral to the Council and that Council be recommended to add the Authority’s share of the capital investment to the Capital Programme.