Agenda item

2017/18 CORPORATE REVENUE OUTTURN REPORT

Section 151 of the 1972 Local Government Act requires the Chief Financial Officer (as the responsible officer) to ensure proper administration of the Council’s financial affairs.  This report is the concluding part of the Council’s 2017/18 budgetary control cycle. Budgetary control, which includes the regular monitoring of and reporting on budgets, is an essential requirement placed on Cabinet Members, the Chief Executive, and Directors in discharging the statutory responsibility.

Minutes:

Hitesh Jolapara informed the meeting that accounts for 2017/18 were closed subject to the Audit, Pensions, and Standards Committee approval on 17th July 2018.  The key headlines from the report were set out in Table 1 providing details of the departmental budgets, the actual spend and variance.  The meeting noted the biggest areas of pressures, general fund and reserves balances.

 

Hitesh advised that reserves were stable and slightly increased during the year.  Ideally, the general balance should be between £14 - £20 million.  He noted that other London boroughs faced similar pressures in Adults and Children’s Services budgets. Furthermore, our reserves were around the mid point range which was good.

 

Judith Worthy asked for an explanation of earmarked reserves and the effect of using Section 106 funding to balance the budget. Chris Littmoden further enquired what it meant when funds were earmarked, who earmarks the funds and could they be unearmarked?  Hitesh explained that £1.6m S106 funds were used to mitigate pressures in the budget last year.  S106 funding consists of specific and non-specific spend. He was comfortable to use S106 funding if the spend met the criteria.

 

The Chair asked how long S106 funding would last before there was no more funds left to use? The meeting was informed that there was a need to be disciplined when using reserves and S106 funding.  Some reserves were strictly earmarked for specific purposes and to meet future liabilities while others were a matter of choice. Cabinet takes the decision to earmark and use reserves when appropriate. Due to the financial pressures facing the Council, the use of reserves would be more closely monitored and stricter controls introduced. 

 

Judith Worthy stated that in relation to earmarked funds and the allocation of internal funds, it would have been helpful to see what was spent where. Hitesh agreed that the presentation would be considered in future reports. Emily Hill noted that there were not many significant commitments against reserves. The expectation was for most long-term contracts to be kept within the annual budget.  The Chair asked why just £70m of the £90m was allocated. The £19m General Balances was unallocated. It is the place of last resort. Hitesh explained that certain amounts for provisions were set aside for any future liabilities.  Around £40m in earmarked reserves were restricted.   £14m of restricted funds were set aside to cover grants, insurance and other committed spend. The rest of the reserve funds was uncommitted.

 

The Chair suggested that reports going forward could have key points presented at the beginning.  Hitesh agreed to provide an executive summary with key numbers highlighted with some graphs.  He also offered one to one sessions with members to help explain the figures in more depth.

 

Action: Hitesh Jolapara

 

Hitesh stated that the council is reasonably comfortable at this stage with the current position of having £90m in reserves and £19m in General Balances considering the last 10 years of austerity.  We are not in a bad position compared to other local authorities of similar size. But we need to acknowledge that there will be more tough days ahead.  Councillor Max Schmid added that we have managed to slightly increase our reserves despite the current financial climate.  He was comfortable with the reserves position as we have had to make significant savings.  Hitesh and his team should be praised for the work done in managing the budget.

 

Regarding Invest to Save projects, the meeting was informed that the council was reviewing this and are likely to look for a 2-3 years payback on proposals.  The Finance Team was getting tougher with approvals and on staffing overspends.

 

Chris Littmoden suggested there should be a formal system of post implementation reviews and regular monitoring of projects.  Hitesh noted that learning from the managed services contract had been incorporated into the Hampshire IBC project.  The Finance Team would be looking at how services had managed to deliver on their promises.  This was part of a new procedures being put together around business cases for invest to save.

 

The Chair asked why the requested ‘Ruthlessly Financially Efficient’ report had not been submitted to the committee.  The meeting was informed that the paper had not yet been finalised and would need to be reviewed one final time before it was brought to the committee.  The Chair noted that there was no communication explaining why it was not forthcoming.  He emphasised that the Chair and Chair alone, not the Chief Executive, Leader, Cabinet Member or Officers should decide what reports should come to the committee.  The primary role of PACs is to help shape policy.  He requested that the paper be presented to the next meeting and that this was not to happen again.  

 

Action: Hitesh Jolapara

 

Councillor Patricia Quigley requested an explanation about the level of banking charges paid by the Council. Emily Hill advised that the council paid commercial banking charges which was in line with other large organisations due to the level of transactions made.  The figure in the report was an underspend due to a prior year correction.

 

Regarding an overspend in short breaks placement budget, it was explained that the level of spend depends on children’s specific needs. The spend could spike if there were children needing greater support. A further question was asked on the nature of the Education staffing overspend. It was agreed that officers provide details of this variance offline as the responsible officers were not available.  Councillor Max Schmid explained further that growth had been included in the SEN budget this year’s budget as there were concerns about the service last year. It was hoped that the growth would eliminate the overspend at the end of the financial year.

 

Action: Steve Miley

 

Councillor Quigley inquired why the Council paid private landlords an incentive payment. David McNulty (Assistant Director) explained that the one-off incentive payments were made to landlords to secure private sector accommodation for homeless families.  This was a cost-effective way of reducing costs to the council.  The Council incurs a saving if we do not put people into temporary accommodation.  If the Council were to approach private sector housing to pay for temporary accommodation, the rates would be much higher than the incentive payment.  Once the family has secured private sector accommodation, the Council has discharged its duty under the homelessness act.  The practice prevents homelessness.

 

David McNulty added that Council was competing with other local authorities for properties.  In comparison with other local authorities’ payments, our incentive payment was at the very low end.  The Chair asked who was responsible for the payment of rent? The meeting was informed the tenant was responsible for paying their rent.  Councillor Max Schmid explained that the payment incentivised landlords who previously would not rent their properties to people on housing benefit.

 

Councillor Vincent asked why was there a 10% overspend in parking and what was the process of authorising overspends on projects.  Emily Hill explained that were positive variances within the budget especially with regards to the new cashless parking service and some of the expenditure was directly related to the additional income.  The new system was performing better than expected with a positive income variance of £2m.

 

Mahmood Siddiqi explained that there had been a one- off cost of £900,000 to cover the move to the new cashless system.  Delays in cash collection due to an unforeseen delay in the procurement of the new pay and display machines and higher transition cost had contributed to the overspend.  All these costs had been put through governance.

 

The committee felt that there should be more scrutiny around overspend approvals and better budget forecasting. 

 

Action: New cashless parking system - breakdown of the £900,000 one - off cost to Members. Mahmood Siddiqi

 

Hitesh stated that commercial income was an area of concern.  The senior management are looking at this and introducing better governance.  The Chief Executive said that we had been over optimistic in the past around sales income.  We should be more thorough with the figures and look at business cases and sale forecasts in more detail.

 

Councillor Schmid stated that a breakdown of the Commercial Directorate budget would be needed for a detailed scrutiny of this area.  It was agreed that a report on commercial income should be submitted to the committee.

 

Action: Hitesh Jolapara

 

Councillor Guy Vincent observed that there were still high staff overspends in departments especially Children’s, Adults, and Housing. Hitesh Jolapara stated that there had been a staffing overspend in Children’s Commissioning and the use of agency staff was an issue. However, efforts were being made to reduce it. The Chair asked for information about the use of temporary staff for frontline services opposed to non-frontline services.

 

It was agreed that a report on staff and agency costs including a breakdown of front line vs non-front-line staff.

 

Action: Mark Grimley

 

Chris Littmoden asked how rigorous was the questioning of what we do and why we do it? Looking at the commercial area for example.  Councillor Max Schmid stated that a few years ago, the council undertook an outcome based budgeting exercise.   Each service looked at what service they provided – statutory vs non- statutory service, meeting manifesto commitments and improving social inclusion. This helped us ascertain that there was no unnecessary departmental spend which was not of benefit to residents.  Sadly, the exercise did not offer up any significant savings nor areas which did not contribute to the Council’s core objectives.

 

While considering the Public Health outturn position, Councillor Johnson noted that there was a £958,000 underspend in the substance misuse services.  He inquired whether that meant the number of residents accessing substance misuse services had dropped? Councillor Schmid stated that the number of clients were lower.  Therefore, higher payments were not triggered.  Better contract monitoring had helped.  Members requested further clarification on this and is there any impact on these contracts for 2018/19?

 

Action: Prakash Daryanani

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