Agenda item

The Executive Member for Finance and Governance submitted a report for Executive’s consideration.

 

The report advised Executive of the Council’s financial position at year-end 2022/23.

 

The Council’s Scheme of Delegation gave Executive collective responsibility for corporate strategic performance and financial management / monitoring, together with associated actions. Standing Orders and Financial Procedures required Executive’s approval for major virements between revenue budgets, and in-year changes to the Council’s Capital Investment Strategy (Capital Programme).

 

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

 

·         The final pre-audited revenue and capital budget outturn for the year-end 31 March 2023;

·         The statement of the Council’s borrowing and reserves and provisions; and

·         The actions the Council had taken, and planned to take, to address the issues identified.

 

A revised Investment Strategy (Capital Programme) for the period 2023/24 to 2025/26 was attached at Appendix 1 considering the 2022/23 outturn for Executive’s consideration and approval.

 

The approved 2022/23 Revenue budget for the Council was £118,328,934 as set out in the Revenue Budget, Council Tax, Medium Term Financial Plan (MTFP) and Capital Strategy 2022/23 Report approved by Council on 23 February 2022.

 

The Council continued to operate in a challenging financial and economic environment with inflation, as measured by CPI, at the financial year-end 2022/23 running at 10.1%. Inflation was forecast to remain high throughout 2023/24 and potentially into 2024/25.  The Council’s financial resilience had been depleted by the reduction in earmarked reserves in recent years, as referenced by the former interim s151 Officer, with earmarked usable reserves totalling £4.515m at 31 March 2023.

 

It was essential that actions were taken through the 2023/24 financial year to rebuild the Council’s financial resilience over the medium term. The General Fund Reserve stood at £12.041m as planned in the MTFP. This was equivalent to 9.5% of the 2023/24 net revenue budget and should only be used in exceptional circumstances as a last resort.

 

Children’s Social Care expenditure levels remained the biggest area of financial risk to the Council given the demand and price pressures facing the service. As previously reported to Executive, the Children’s Social Care budget was increased during 2022/23 by £5.665m to a total of £45.409m. The final outturn against this budget was £54.832m an overspend of £9.423m (20.8%).  The 2023/24 base budget approved by Council in February 2023 recognised the ongoing financial pressures in the service, setting a budget of £54.649m and the Service had a Finance Improvement Plan requiring the delivery of savings totalling £2.9m in 2023/24 and a further £1.8m in 2024/25. It is essential that this plan is delivered in full to avoid further weakening of the Council’s financial position.

 

OPTIONS

No other options were put forward as part of the report.

 

ORDERED

 

In respect of the General Fund Revenue Budget, Executive:

 

1.    Note the 2022/23 final pre-audited net revenue outturn of £121.084m against an approved budget of £118.329m, an overspend of £2.755m (2.3%). This is an improvement of £0.656m from the forecast outturn at Quarter Three;

2.    Note that within the outturn, total revenue expenditure of £0.755m in relation to transformation of Children’s Services was assessed as qualifying expenditure under the Government’s Flexible Use of Capital Receipts initiative and therefore supported the reduction of the overall revenue outturn overspend position. The Flexible Use of Capital Receipts Strategy was approved by Full Council on 7 September 2022;

3.    Note the progress against the Financial Recovery Plan 2022/23 as approved by Executive on 18 October 2022, which had succeeded in contributing to reducing the forecast overspend from £9.012m (7.6%) at Quarter One to £2.755m (2.3%) at year-end;

4.    Approve that the final revenue over-spend of £2.755m will be met by a contribution from the earmarked Social Care Transformation Reserve, leaving a balance of £2.354m in the Reserve. This Reserve would then be closed and its balance transferred;

5.    Approve, in recognition of the pressures that face the wider Council financial position, that a corporate Financial Resilience Reserve (FRR) be established as part of the closure of accounts process at the 31 March 2023. The purpose of the Reserve was to meet unforeseen financial pressures that could not ultimately be managed within directorate budgets. The Reserve would also meet exceptional one-off costs to meet the Council’s improvement work to satisfy the Department for Levelling Up, Housing and Communities (DLUHC) and the External Auditor’s requirements;

6.    Approve the balance of £2.354m on closing the Social Care Transformation Reserve shall be transferred to the Financial Resilience Reserve;

7.    Note that further consideration will be given to the feasibility of revising the 2023/24 Flexible Use of Capital Receipts Strategy to support further transformation across Council services during 2023/24 and in developing the 2024/25 Medium Term Financial Plan (MTFP). This would be addressed in future reports to the Executive in due course;

8.    Note that the initial analysis of the financial outturn has highlighted the risk of potential ongoing financial pressures arising from 2022/23 (detailed in table 14 and paragraphs 62 and 63 of the report). These would be investigated further and be subject to management action by the Leadership Management Team within 2023/24 and would inform the update and development of the Council’s Medium Term Financial Plan for 2024/25 to 2026/27; and

9.    Note the management actions being taken to control expenditure in order to mitigate the risk of overspending in the future (detailed in paragraphs 64 to 67 of the report).

 

In respect of the Capital Programme and Treasury Management, Executive:

 

1.    Note the 2022/23 capital programme final pre-audit outturn of £58.962m against a revised capital budget of £61.456m, an underspend of £2.494m (4%). The outturn represented an underspend of £65.863m (53%) against the original capital budget approved by Council in February 2022;

2.    Approve the revised Investment Strategy to 2025/26 at Appendix 1 of the report, including £181.194m for the financial years 2023/24 to 2025/26; 

3.    Note the 2023/24 allocation included £4.942m of funds that were assumed to be spent in 2022/23 as in the Quarter Three Executive report and which had slipped to 2023/24; and

4.    Note the Treasury Management outturn position with respect to the Council’s prudential indicators which were set out at paragraphs 91 to 99 of the report.

 

In respect of the Dedicated Schools Grant (DSG), Executive:

 

1.    Note the in-year deficit of £2.809m for 2022/23, including £1.959m relating to the High Needs Block;

2.    Note the total cumulative deficit of £6.565m at 31 March 2023, including £7.021m relating to the High Needs Block, which were set out in Table 15 and paragraphs 68 to 74 of the report; and

3.    Note under existing government regulations this could not be funded from the General Fund, and the Council was required to deliver a recovery plan to the Department for Education (DfE).

 

In respect of the Council’s reserves and provisions, Executive:

 

1.    Note that the balance on the General Fund Reserve at the 31 March 2023 was £12.041m as planned in the 2023/24 MTFP;

2.    Note the balance on other earmarked reserves and provisions which were set out in Table 19 (paragraphs 100 to 104) and detailed in Appendix 2 of the report; and

3.    Note that usable earmarked reserves as set out in Table 19 of the report were at a critically low level. Measures would be required during 2023/24 and in developing the 2024/25 budget and MTFP to rebuild the Council’s financial resilience over the medium term.

 

REASONS

 

To enable the effective management of finances, in line with the Council’s Local Code of Corporate Governance, the Scheme of Delegation and agreed corporate financial regulations.