Agenda item

The attached reports were approved at Executive on 4 September 2024 and are submitted to OSB for its consideration.

 

A Humble, Head of Financial Planning and Support, accompanied by the Executive Member for Finance and Governance, was in attendance at the meeting to provide Members with an overview of the Council’s financial position at Quarter One 2024/25.

 

A copy of the report, and associated Appendices, submitted to the Council’s Executive on 4 September 2024 had been circulated with the agenda.

 

The report enabled the Executive to discharge its financial management responsibilities by setting out:-

 

·        General Fund Revenue Budget forecast outturn at Quarter One

·        Statement of the Council’s projected reserves and provisions at Quarter One

·        Capital Programme forecast outturn at Quarter One

·        Statement of the Council’s borrowing and prudential indicators

·        Statement to monitor the level of debt owed to and to be recovered by the Council

·        Actions the Council had taken, and planned to take, in order address the issues identified.

 

The report provided a forecast of the Council’s year-end financial outturn, as at Quarter One 2024/25, and sought approval of budget virements within the revenue budget and revisions to the capital programme in relation to activity in Quarter One.

 

Key headlines from the report were as follows:-

 

·        The forecast 2024/25 revenue outturn as at Quarter One was a year-end overspend of £3.742m (2.6%), and there was a need to take management action in consultation with the Executive to control expenditure within the approved budget of £143.190m.

 

·        Financial Recovery Plan savings of £1.877m had been identified which, if fully assured and delivered, could potentially reduce the forecast year-end overspend to £1.865m.

 

·        The forecast outturn of £3.742m at Quarter One currently included £2.498m of net savings where there was a high risk that they would not be deliverable in 2024/25. If those remained unachievable at year-end, the £3.5m Exceptional Financial Support (EFS) - agreed in-principle for this - would need to be utilised, and this would attract associated borrowing costs which had been factored into the MTFP.

 

·        The remaining element of the forecast overspend not linked to savings delivery (£1.244m) would need to be funded from reserves.

 

·        Based upon the Quarter One forecast, this would mean that the General Fund Balance would be £11.1m, whilst the balance on useable unrestricted reserves would reduce to £6.5m at 31 March 2025.  This would be lower than that recommended by the Director of Finance in the Reserves Policy approved by Council on 8 March 2024.

 

·        The 2024/25 Capital Programme forecast year-end outturn of £99.698m at Quarter One, a reduction of £6.49m from the revised £106.188m budget for 2024/25 - work was taking place to establish improved programme management and control arrangements to achieve more effective management and forecasting of the capital programme going forward.

 

The Board was advised that the Executive had approved:-

 

·        The revenue budget virements over £250,000, as set out at paragraph 4.13 (and Appendix 3) of the report - It was proposed that where it was determined that the allocated growth was not required in full (and underspending within Directorates had arisen directly from a surplus of budgetary growth provided), the surplus budget was transferred (vired) from Directorates in 2024/25 to be held centrally.  The Director of Finance would then assess how this budgetary provision could be applied to best effect to offset the financial pressures arising elsewhere in the Council to meet forecast pressures.  The review would be undertaken quarterly throughout the year as refinements to demand and cost modelling were progressed. In Quarter One, the budget adjustments, in summary, were: Concessionary Fares £0.414m;  Waste Disposal £0.673m; Integrated Transport Unit £0.732m.  These adjustments would be actioned for 2024/25 only with any ongoing adjustments included in the 2025/26 MTFP report to the Executive.

 

·        The inclusion of additional expenditure budgets to the Capital Programme, totalling £8.973m for 2024/25, which were externally funded (detailed in Appendix 9).  This would increase the approved 2024/25 Capital Programme budget to £106.188m.

 

·        The proposed virements over £250,000 between schemes in the 2024/25 Capital Programme approved by Council on 8 March 2024 which were funded from within existing Council resources, as detailed at paragraph 4.37 and Appendix 9 of the report - The capital programme currently included £2.589m budget assigned to Middlesbrough Development Company.  This was funded by £2.014m of Council funding and £0.575m of Towns Fund grant funding.  There was an outstanding dispute with the main contractor at the Boho Bright Ideas project.  Once the dispute was settled, approval was requested from the Executive that any balance remaining against the £2.589m budget would be vired to the Housing Growth and De-Risking Sites budgets to replenish this budget for use in future Housing Growth schemes, to maximise the value of future land disposals.

 

The Executive Member for Finance and Governance highlighted that whilst the Council’s financial position remained critical, a significant improvement had been achieved compared to the same period in the previous year, 2023/24, when an £11.5m overspend (9.2%) was identified. 

 

In addition, acknowledging that Children’s Services incurred the highest levels of spend, monthly meetings had been established with the Executive Member for Finance and Governance, the Mayor and the Directorate in order to track the ongoing work within the service aimed at improving outcomes and reducing costs, particularly working with families and young people to divert them away from certain behaviours (such as the Shift Programme and Edge of Care Services).

 

During discussion, the following issues were raised:-

 

·        In response to a query regarding the £3.7m overspend, it was clarified that this was the figure if no further action was taken.  There were savings that would be made during this financial year as a result of the Transformation Programme.  It was hoped that the overspend figure would be reduced by Quarter Two and this would be reported to the Executive in November.

 

·        Reference was made to Council reserves ideally being 20% of its total budget and it was queried whether this was realistic.  It was highlighted that, on 8 March, Council approved the Financial Reserves Policy which proposed that there should be a minimum General Fund Balance of 7.5% of the Net Revenue Budget, equivalent to £11.1m for 2024/25 and that a Financial Resilience Reserve Balance of between £8m and £10m over the term of the MTFP to 2026/27 to strengthen its financial resilience.  It was further highlighted that there was a separate dedicated Schools Grant, currently £20m, which could potentially cease at any time. 

 

·        A Member referred to the Integrated Transport Unit savings of £732,000 and queried whether this was a one-off saving or year on year.  In response it was stated that £2.9m had been built into the budget which appeared to have been an over-estimation.  The figures were being revisited in order to take out some growth and the adjustments would be seen in the MTFP together with a projection of costs. 

 

·        A Member referred to the Capital Programme Works Slippage (Appendix 10) where slippage in delivery of various schemes had occurred and it was queried, in the instances where slippage had occurred due to “staff capacity”, whether work could be contracted out in order to avoid further delays.  The Executive Member responded that this was an important question which she would be happy to explore further.  In addition, it was highlighted that the Financial Resilience Working Group, would welcome any suggestions and ideas where potential savings could be made.  The Group currently invited Group Leaders to its meetings and it was considered that this invitation should be extended to all Elected Members.

 

·        It was queried whether there was any update in relation to reducing expenditure within Children’s Services.  The Executive Member stated that there was a lot of work ongoing within the Service including reducing the spend on placements and exploring ways of stopping children coming into care in the first place – some of which was being addressed through the Transformation Programme.  It was highlighted that for the Quarter Two report, as well as containing information on the overspend at year end, consideration was being given to including what the expenditure would have been if certain actions had not been taken.  Additionally, the workforce was beginning to stabilise with the permanent appointment of the Director and some interim appointments now made permanent and two Agency Heads of Service had now become permanent staff.

 

·        Reference was made to Appendix 12, “Council’s approach to debt recovery”, and page 62 which referenced £6.427m housing benefit overpayment, and it was queried how this was split between landlords and tenants.  It was explained that the overpayments had been received by the Council and that Housing Benefit was paid to entitled tenants but in some cases it was paid directly to the landlord, however, it would be the tenant that applied for the benefit so a distinction between landlord and tenant in this category would not be made. 

 

·        A Board Member highlighted that there may be cases where the benefit was paid directly to the landlord, and the eligible tenant may have moved on but not notified the landlord and the payments may continue for some time and that there might be an opportunity to make an analysis of the payments between landlord and tenants and the age of the debt.  The Head of Financial Planning and Support stated that the overpayment figure had built up over a number of years but had reduced in year and it might be worth considering including in the report in future, what action had been taken as well as providing the figures.

 

·        In response to a query regarding the £6.731m Business Rates, it was confirmed that this was the amount outstanding, however, the figure had stood at almost £8m so £1.67m had been collected.

 

The Chair thanked the Officer and Executive Member for their attendance and the information provided.

 

AGREED that the information provided be noted.