Agenda item

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 seven 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 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 forecast 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.  Approval by Cabinet 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 will 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 two 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 has 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 had 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.

Members identified the pressures in respect of Adult Social Care and noted that most unitary and upper tier council had pressures in this area. In the future it was considered that this would represent a significant pressure on the budget. In response, officers confirmed that this was correct and noted that additional 3% levied on Council Tax for adult services in 2017/18. Information would be presented to Members as part of the budget on how the adult care budget would be progressed and how increasing costs would be managed.

Having regard to the earlier presentation by the Leader of the Council and Chief Executive, Members sought assurances that the budget was under control and regularly monitored. Officers confirmed that the budget was regularly monitored through reports such as this which are considered by the Cabinet, Commissioners and the Senior Leadership Team. Any re-profiling of the budget would need to come through to Members for determination at Council and assurances would be provided with any recommendations to do so.

Reference was made to the practice of vacancy management where vacant posts had been left unfilled to deliver in-year savings and Members queried whether such posts were needed if they could be left unfilled for significant periods of time. Officers indicated that this was a valid point and the question pre-empted some of the savings that were proposed to be considered as part of the budget scrutiny process later in the month.

Assurances were sought in respect of the Troubled Families Programme and the claim submitted in October 2017 had been accepted. The Assistant Director of Financial Services indicated that he expect that it had been, but would confirm in writing outside of the meeting.

Referring back to the earlier presentation by the Leader of the Council and Chief Executive, assurances were sought in respect of the ability to scrutinise and challenge third parties who might deliver services on behalf of the Council in future. In response, it was explained that this would need to be built into agreements and contracts in future.

Resolved:- 

That Cabinet be advised that the recommendations be supported.