Agenda item

 

To present the first quarter performance on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programme, specifically including the financial impact of the Covid 19 pandemic in these areas.

 

Decision

 

(1)       The progress on the financial performance for the period 1 April 2020 to 30 June 2020, the projected outturns for 2020/21 and the impact of Covid 19 on the Council’s financial position be noted.

 

(2)       The underlying impact of the pressures and underspends identified in paragraphs 3.2, 4.3 and 5.2 of the report, as set out in Appendices B, D and F respectively be noted.

 

(3)       The budget revisions to the General Fund as summarised in paragraph 3.18 of the report and to the Housing Revenue Account as summarised in paragraph 4.11 of the report be approved.

 

(4)       The proposed contributions from earmarked reserves as set out in paragraph 3.19 of the report be approved.

 

(5)       The changes to the Housing Investment Programme approved by the Chief Finance Officer as detailed in paragraph 7.10 of the report be noted.

 

 

As an alternative to the measures set out in this report, Executive could decide to take no action at this point and wait until later in the year to make any required changes to the budget. However, the S151 Officer with a responsibility to ensure that the Council maintained a balanced budget, offered caution with this approach, and the likelihood of an unbalanced budget that would arise. 

 

 

Updates were reported as follows:

 

General Fund Revenue Account

 

For 2020/21 the Council’s net General Fund revenue budget was set at £12,963,220, including a planned contribution from balances of £286,310, resulting in an estimated level of general balances at the year-end of £2,522,188 after allowing for the 2019/20 outturn position.

 

The General Fund summary was currently projecting a forecast overspend of £78,802, as set out in Appendix A of the report. Although this represented a relatively minor overspend in comparison to the net budget there were a significant number of forecast year-end variations in income and expenditure against the approved budget, primarily as a result of Covid 19 along with variances arising from measures taken to address the budget pressures and the financial support provided by Government. Full details of the main variances were provided in Appendix B of the report while the key variances were noted as follows:

 

	Forecast £’000
Increased expenditure arising as a result of Covid19	518
Income losses as a result of Covid19	5,722
Income Compensation Scheme	(2,600)
Government Grants (Covid19, Rough Sleeping, New Burdens, Test & Trace support).	(1,446)
Budget Review savings/Reduced operating costs due to Covid19	(1,408)
Coronavirus Job Retention Scheme	(138)
Review of capital programme	(307)
Covid19 Reserve (set asides for 19/20)	(291)
Anticipated overachievement of TFS target	(50)
Overall Impact of Covid19 and measures to mitigate	0
2020/21 national pay award implications	110
Net other variances	(31)
Overall forecast budget shortfall	79

 

The most significant of the forecast variations was income losses as a result of Covid19. Paragraphs 3.4 -3.8 of the report set out further detail on the key financial challenges that the Council was facing in 2020/21 arising as result of Covid19. Financial support received from the Government in this respect was set out at paragraph 3.9 of the officer’s report. The total of this package of financial support was currently estimated to be £4.046m which still left the General Fund facing a budget shortfall of £2.194m, prior to the offset of any expenditure savings arising as a result of Covid19.

 

Paragraphs 3.10-3.17 of the report outlined measures to address the budget shortfall, amounting to £2,193,675, which along with the financial package of support provided by the Government, would ensure the General Fund maintained a balanced budget for 2020/21 without the need to call upon earmarked reserves and balances.

 

Budget revisions were planned to reflect these measures and these resources were held in contingencies, offsetting the budget shortfall in the service areas. This was as opposed to allocating the resource to specific services at this stage, as current forecasts were likely to fluctuate during the financial year. However, there was a need to allocate £127,050 to the leisure services budget in order to meet additional costs above officer delegated approval limits. The required budget revisions were:

 

·         A reduction in service area budgets of £1,408,070

·         A new income budget for CRJS of £138,000

·         An increase in the TFS target of £50,000

·         A reduction in DRF charges of £307,070

·         An increase in the leisure services budget of £127,050.

 

The balance on the Covid19 earmarked reserve would be held and allocated following the final outturn position for the financial year.

 

Additional contributions from earmarked reserves that the Chief Finance Officer had identified as being required, subject to outturn, included:

 

Directorate	Reserve	Amount £
DCE	Strategic Priority Reserve - Intervention Team Funding re-profiled from 2019/20	2,500
DCE	Invest to Save Reserve – VIC Start Up Funding      re-profiled from 2019/20	7,270
	Total additional reserve contribution required:	9,770

 

Housing Revenue Account

 

For 2020/21 the Council’s Housing Revenue Account net revenue budget was set at £75,000, resulting in an estimated level of general balances at the year-end of £921,071, after allowing for the 2019/20 outturn position.

 

The Housing Revenue Account was currently projecting an in-year variance of a £182,615 underspend, which would increase the general balances to £1,103,686 at the end of 2020/21.

 

Although the forecast position was an underspend there were a number of forecast year-end variations in income and expenditure as a result of Covid 19 along with variances arising from measures taken to address the budget pressures.

 

The details of the main variances were provided in Appendix D of the report and were summarised as follows:

 

	Forecast £’000
Increased expenditure arising as a result of Covid19	129
Income losses as a result of Covid19	566
Budget Review savings/Reduced operating costs due to Covid19	(240)
Coronavirus Job Retention Scheme	(124)
Earmarked reserve to fund new Rent Hardship Fund	(100)
Reduced repairs and maintenance expenditure	(230)
Overall Impact of Covid19 and measures to mitigate	1
2020/21 national pay award implications	46
Increased rental income arising from Buy-Backs	(148)
Net other variances	(81)
Overall forecast budget surplus	(182)

 

Paragraphs 4.5 -4.6 of the report set out further detail on the key financial challenges that the Council was facing in 2020/21 arising as result of Covid19.

 

Paragraphs 4.7 -4.10 of the report outlined measures to address the budget shortfall, amounting to £694,088, which would ensure the HRA maintained a balanced budget for 2020/21 without the need to call upon earmarked reserves and balances.

 

Budget revisions would be made to reflect these measures and these resources were held in contingencies, offsetting the budget shortfall in the service areas. This was as opposed to allocating the resource to specific services at this stage, as current forecasts were likely to fluctuate during the financial year. The required budget revisions were therefore:

 

·         A reduction in service area budgets of £218,890

·         A budgeted surplus from HRS of £21,300

·         A new income budget for CRJS of £124,000

 

The use of the earmarked reserve to resource the Rent Hardship and the underspend on repairs and maintenance would be held and allocated following the final outturn position for the financial year

 

Housing Repairs Service

 

For 2020/21 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature.

 

At quarter one the Housing Repairs Service was forecasting a surplus of £44,853 in 2020/21, with a summary and details of main variances set out in Appendices E and F of the report respectively.

 

Earmarked Reserves

 

The details of all the earmarked reserves and their forecast balance as at 31st March 2020 were attached in Appendix G of the report. In summary:

 

	Opening Balance	Contributions	Actuals Q1	Forecast Q2-Q4	Forecast Balance
	01/04/20				31/03/21
	£’000	£’000	£’000	£’000	£’000
General Fund	6,513	(460)	(630)	(22)	5,401
HRA	1,403	(33)	0	(100)	1,271
Capital Resources	19,449	14,941	0	(26,587)	7,803

 

General Fund Investment Programme

 

The original General Fund Investment Programme for 2020/21 in the Medium Term Financial Strategy 2020-25 amounted to £15.586 million. This was increased to £16,430 million following quarter four approvals and year-end re-profiles from 2019/20.

 

The Chief Finance Officer had delegated authority to approve financial changes up to an approved limit as set out under Financial Procedure Rules. All changes over the approved limit required approval by the Executive.

 

There were no budget changes approved by the Chief Finance Officer, no changes that required Executive approval, also no new projects approved at Capital Programme Group requiring Executive approval, all for the first quarter.

 

The overall spending on the General Fund Investment Programme for the first quarter was £0.12 million, which was 0.73% of the 2020/21 programme and 1.01% of the active programme and was detailed further at Appendix J of the report. Although this appeared to be a relatively low percentage of expenditure at this stage of the financial year, quarter 1 was constrained by the national lockdown as well as the diversion of internal resources to focus on Covid 19. The majority of schemes had now recommenced either on site or in terms of their development stages, however it was likely that a number of schemes would not be completed by their original targets and the budgets would need re-profiling accordingly.

 

Housing Investment Programme

 

The original Housing Investment Programme for 2020/21 in the Medium Term Financial Strategy 2019-24 amounted to £25.640 million and was increased to £28,505 million following approvals and year-end re-profiles as part of the 2019/20 outturn. This had been further adjusted to £29.324 million during the first quarter of 2020/21, with a summary of the changes set out at paragraph 7.9 of the report.

 

Expenditure against the Housing Investment Programme budget during the first quarter was £1.407 million, which was 4.8% of the programme. A further £2.559m had been spent as at the end of July 2020, with expenditure detailed further at Appendix L to the report.

 

Although this appeared to be a relatively low percentage of expenditure at this stage of the financial year, quarter 1 was constrained by the national lockdown as well as the diversion of internal resources to focus on the Covid19. The majority of schemes had now recommenced either on site or in terms of their development stages, however it was likely that a number of schemes would not be completed by their original targets and the budgets would need re-profiling accordingly.

 

Councillor Ric Metcalfe thanked the Council’s Chief Finance Officer and her team for their excellent stewardship of the Council’s finances, reflecting that it had been an extremely challenging year in very difficult circumstances. The impact of the Covid 19 pandemic on the council’s finances was not territory the authority was used to being in having happened so suddenly with emergency action required.