The report of the Director of Corporate Services (Document “AK” – Report to Follow) provides Members with an overview of the forecast financial position of the Council for 2016-17.

It examines the latest spend against revenue and capital budgets and forecasts the financial position at the year end. It states the Council’s current balances and reserves and forecasts school balances for the year. 

The report will also be considered by the Executive at its meeting on 7 February 2017.

Recommended –

That the Corporate Overview and Scrutiny Committee  review and comment on the QTR 3 Financial Position Statement.

                                                            (Andrew Cross – 01274 436823)

The report of the Director of Corporate Services (Document “AK”) provided Members with an overview of the forecast financial position of the Council for 2016-17.

It examined the latest spend against revenue and capital budgets and forecasted the financial position at the year end. It stated the Council’s current balances and reserves and forecasted school balances for the year.  The report was also being considered by the Executive at its meeting on 7 February 2017.

The Strategic Director Corporate Services gave a synopsis of the main financial messages arising from the report:

·         That the Council was forecasting that spend would be £0.2m above the approved budget of £378.1m.  This represented a £5.8m improvement from the forecast position reported at the Quarter 2 stage, this was mainly due to a £2m improvement on central budgets; a 2.0m reduction in the Health and Wellbeing services forecast overspend to £3.2m, due to a £0.8m improvement in Purchase Care, a £0.7 utilisation of non recurrent funding and £0.5m of further underspends across the department.

·         A £0.6m increase in the Department of Finance underspend to £1.2m, due to mostly to further reductions in IT costs following the end of the IBM contract.

·         A further £1.2m of smaller scale improvements shared across Human Resources, Children’s Services, Regeneration and non service.

·         At the 31^st  December 2016 allocated and unallocated reserves stood at £150.4m of which £116.6m related to the Council and £33.8m related to Schools.

·         During the financial year there had been a net reduction in total reserves of £17.3m, including £11.4m of reserves to support the budget.

·         Unallocated reserves currently stood at £13.8m as a contingency reserve.

·         Regarding Capital Expenditure, the position for the Capital Investment Plan stood at £80.2m.

·         Regarding Council Tax collection rates, these were higher than the forecasted amount, however in relation to Business the position was less favourable with a projected shortfall of £5.8m, mainly caused by the impact of successful appeals.

During the discussion Members asked a number of questions, the questions together with the responses are detailed below.  Strategic Directors and Assistant Directors were also present at the meeting to respond to service specific budget issues that were raised.

A Member ascertained how the Council dealt with the rolling over of loans and  interest rates; and spending below its budgeted forecast and not borrowing. In addition he asked how the balance in capital spending was regulated. He also requested that a briefing note be provided to Members which set out how the capital account worked and its impact on the revenue account.

In response the Strategic Director Corporate Services stressed that a number of factors would impact on the revenue budget, so reported savings compared to the forecast spend was partly due to the lower than planned capital expenditure and lower interest rate loans.  Whether this would be repeated next year was difficult to predict, however the capital plan was generally quite ambitious and capital schemes were normally delivered slower than planned, which assisted the revenue budget.

A Member asked for a laymen’s interpretation of allocated and unallocated reserves, and a definition of when the Council would fail to deliver services, due to the inadequacy of the reserves.

In response the Strategic Director Corporate Services stated that allocated reserves were reserves earmarked for a specific purpose or set aside for a known future liability .  In addition it referred to money that had been set aside but not fully committed to spend or generated revenue retained by the Service.  He added that unallocated reserves referred to money that was held in contingency and would be used for specific purposes and that £62m of unallocated reserves had been used this year.

In terms of the adequacy of the Council’s finances, the Strategic Director explained that in his Section 151 report to the Executive and Council budget setting process, he would set out the deliverability of the budget and the adequacy of the reserves, and therefore an assessment was made at that stage.

In response to a question on Section 106 contributions and how this was reflected in the position statement, the Strategic Director explained that Section 106 contributions would normally show up in the capital expenditure part of a scheme development. 

In relation to a question regarding Business Rates / Council Tax collection rates target, the Strategic Director explained that in terms of Business Rates, there was a projected deficit of £5.8m this year and in this context, in future years a lower collection rate was being forecasted.

In response to a question relating to earmarked reserves and estimating the cost of providing services, the Strategic Director explained that in designating reserves, an estimate was made of what the amount should be and assumptions were made regarding volatility, time to implement and liability.

However departments were constantly challenged on the levels of reserves and whether the spend was still needed.

In response to a question relating to the cost of providing Local Authority adult social care compared to the private sector, it was pointed out that this data was available and could be disseminated, albeit to say that in overall terms the cost of local authority care was higher.

In response, a Member stated that in making this comparison, it was important to fully understand the significant pension contribution the Council had to make.

In response to a question regarding the cost of adult social care, the Strategic Director Adults explained that significant savings had been made in the budget and that this should be seen in the context of additional demands placed on the Service, however the Service was now much better equipped in managing early intervention, which was resulting in more timely and appropriate help being offered.  The Service was also going through a big transformational change programme, where a number of services were being re profiled, with an emphasis on providing more at home care as appose to long term residential care.

In response to a question regarding the support the Council could offer to private residential homes in order to ensure that they did not fail there inspection.  The Strategic Director highlighted that there was already a good working relationship with a number of homes in the district and that most homes offered a good standard of care.  In addition the Care Quality Commission Registrations showed significant improvements across the board.

A Member suggested that a breakdown of the unit costs associated with the different aspects of care would give Members a better breakdown and understanding of the Adult Social Care budget.

In relation the Children’s Services and Looked After Children a Member ascertained how many children were placed outside of the district due to capacity issues with the district.  The Assistant Director Social Care acknowledged that there were approximately 20 or so children that were placed outside of the district, however placements were regularly reviewed to ensure they were appropriately placed and although there were significant costs associated with placing a child outside the district, this was a national issue and specialist care came at a significant additional cost to the Authority.

Resolved –

(1)       That the Strategic Director Corporate Services and officers from           the respective service areas be thanked for providing detailed          responses to Members’ questions.

(2)       That this Committee requests that the impact of funding of the   Pension Fund on the Councils budgets be considered at a future meeting.

ACTION:       Strategic Director Corporate Services.