Agenda item

Purpose of Report

 

To present the provisional 2023/24 financial outturn position on the Council’s revenue and capital budgets, including General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes.

 

This report provided the Executive with a summary of actual income and expenditure compared to the revised budget and how any surpluses had been allocated to reserves.

 

Executive should note that the financial outturn was still subject to Audit by KPMG, the Council’s external auditors.

 

Decision

 

1.             That the provisional 2023/24 financial outturn for the General Fund, Housing Revenue Account (HRA), Housing Repairs Service and Capital Programmes as set out in sections 3-7 of the officer’s report, and in particular the reasons for any variances, be noted.

 

2.             That the General Fund carry forward requests as detailed in paragraph 3.7 of the officer’s report be approved.

 

3.             That the proposed transfer to General Fund and HRA earmarked reserves as detailed in paragraphs 3.8 and 4.7 of the officer’s report be noted.

 

4.            That the financial changes to the General Investment Programme and Housing Investment Programme as approved by the Chief Finance Officer detailed in paragraphs, 7.6, and 7.13 of the officer’s report be noted.

 

5.            That the financial changes to the General Investment Programme and the Housing Investment Programme that were above the limit delegated to the Chief Finance Officer, as detailed in paragraphs 7.5, 7.11 and 7.12 of the officer’s report, be approved.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

During the last quarter of 2023/24, the position on the General Fund, Housing Revenue Account and Housing Repairs Service had remained positive with budget surpluses achieved across both the General Fund and HRA at the end of the financial year.

 

Despite this positive outturn position the Council continued to face escalating cost pressures, above those already factored into the MTFS. The positive outturn in 2023/24 had been largely driven by investment income with interest rates continuing above the levels assumed within the MTFS, with other overachieved income in the General Fund. This would not be the case in 2024/25 with budgets adjusted to reflect the base rate forecast, as such strong financial discipline and delivery of the significant savings targets underpinning the MTFS would remain critical in ensuring the Council maintained a sustainable financial position in the medium term.

 

A summary of the financial position of the Council for the financial year 2023/24 was outlined at paragraph 2.4 of the officer’s report, together with the detailed financial position shown in sections 3-7 and accompanying appendices to the officer’s report.

 

Updates were reported as follows:

 

General Fund Revenue Account

 

For 2023/24 the Council’s net General Fund revenue budget was set at £14,402,660 including a planned contribution to balances of £191,110, resulting in an estimated level of general balances at the year-end of £2,228,739 (after allowing for the 2022/23 outturn position).

 

The financial performance quarterly monitoring report for the 3rd quarter predicted an underspend against the revised budget of £476,652 (before additional transfers to earmarked reserves and carry forward requests). The provisional outturn for 2023/24 now indicated an improvement of £383,314 (before additional transfers to earmarked reserves and carry forwards requests). Based on this position, additional transfers to earmarked reserves, and carry forward requests, totalling £843,547 had been proposed resulting in an overall budget underspend of £16,419. This represented a variance against the revised budget of 1%. 

 

There were a number of variations in income and expenditure against the approved budget; key variations were detailed at paragraphs 3.3- 3.5 of the report, with the main variances provided at Appendix B to the report.

 

In response to the key cost pressures that had occurred in 2023/24; the additional staff costs arising as a result of the pay award were unavoidable, and the levels of income in relation to development in the city were primarily driven by economic factors, both of which had required the resetting of budgets for 2024/25 (this was taken into account in the latest MTFS). However, in relation to the increasing cost of housing benefits which the Council was bearing the Corporate Management Team had commissioned a range of responses, these would focus on both manging the demand for temporary accommodation as well as exploring options to increase the supply of suitable accommodation to reduce the reliance on costly bed and breakfast usage. In addition, careful review of all supported accommodation claims was in place to ensure the appropriate levels of housing benefit were awarded.

 

Carry Forward Requests

 

Financial Procedure Rules allowed Assistant Directors to carry forward any budget provision not utilised during the financial year, to be used for the same purpose, in future years subject to their Directorate as a whole not being overspent. Following confirmation of the final cash limited outturn for each Directorate in 2023/24 a list of requests (which would be transferred from the surplus to earmarked reserves for drawdown in future years) totalled £281,227, as detailed at paragraph 3.7 of the officer’s report:

 

All of the carry forward requests were reflected in the provisional outturn of £16,419 budget underspend.

 

Transfers to Reserves

 

In addition to the above carry forward requests, a number of requests for additional transfers to reserves had been made, whereby Directorates had requested a transfer to a new, or existing, reserve for a number of underspent budgets, to be used for alternative purposes or to mitigate risks, in future years subject to their Directorate as a whole not being overspent Following confirmation of the final cash limited outturn a list of requests totalled £562,320 as detailed at paragraph 3.8 oof the officer’s report 

 

All of the transfers to reserves were reflected in the provisional outturn of £16,419 budget underspend

 

Towards Financial Sustainability Programme

 

The savings target included in the MTFS for 2023/24 was £185,210. Progress against this target, based on the provisional outturn performance showed that secured savings totalled £247,670. This resulted in an under-achievement of £62,460. Despite this under-achievement, the General Fund had out-turned in an overall positive position. A summary of the specific reviews that had contributed to this target were shown in Appendix K.

 

Housing Revenue Account

 

For 2023/24 the Council’s Housing Revenue Account (HRA) net revenue budget was set with a planned contribution from balances of £58,930, resulting in an estimated level of general balances at the year-end of £1,125,516 (after allowing for the outturn position).

 

The financial performance quarterly monitoring report for the 3^rd quarter predicted an underspend of £13,787. The provisional outturn for 2023/24 now indicated an improvement of £19,515, resulting in an overall budget underspend of £5,728 (including additional transfers to earmarked reserves). This would result in HRA balances as at 31^st March 2024 of £1,131,244.

 

There were a significant number of variations in income and expenditure against the approved budget, as outlined at paragraph 4.3 - 4.5 of the officer’s report, with full details of the main variances provided at Appendix D of the report.

 

In response to the key cost pressures that had occurred in 2023/24;  the additional staff costs arising as a result of the pay award were unavoidable and had required the resetting of budgets for 2024/25 (this was taken into account in the latest MTFS). In relation to the additional costs transferred from the HRS, the Housing Directorate Management Team were commissioning work to review the individual repairs service areas, i.e. Aids & Adaptations, Voids, Responsive Repairs etc, in order to identify a range of specific mitigations to manage demand and cost drivers. In addition, work continued within the HRS to address the recruitment and retention challenges, (this also formed part of a wider scope of work developing the Council’s Workforce Development Strategy), which was already seeing some success with a reduction in level of vacancies at the end of the financial year.

 

HRA Earmarked Reserves

 

The provisional outturn of a £5,728 budget underspend included a number of additional transfers to earmarked reserves, in addition to those transfers to/from earmarked reserves already approved and budgeted for as detailed at paragraph 4.7 of the officer’s report.

 

Following contributions to earmarked reserves the underspend of £5,728 would result in HRA general balance of £1,131,244 as at 31^st March 2024, remaining within prudent levels

 

The level of each of the current earmarked reserves, as at 31^st March 2024 attached at Appendix G, took account of the contributions to earmarked reserves agreed as part of the revised budget and the drawdown of funding to cover expenditure, together with the additional transfers set out in para. 4.7 of the officer’s report.

 

Housing Repairs Service

 

For 2023/24 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature. 

 

The provisional outturn for 2023/24 showed a trading deficit of £288,844, an improvement of £263,218 since quarter three, which was repatriated to the HRA. Appendix E provided a forecast HRS summary with full details of the main variances provided within Appendix F, with key variances summarised at paragraph 5.2 of the officers report

 

The main contributory factor to the deficit was the ongoing recruitment and retention challenges, which were being felt not just by the council but across the construction industry as a whole. The inability to attract and retain staff resulted in a greater reliance on the use of sub-contractors to ensure service demands were met.The cost of using subcontractors was more expensive than the HRS’s own workforce, due to the ongoing impact of inflationary factors, a reduced national workforce and a reduced pool of contractors from which to secure services. These additional costs were therefore not fully offset by the vacancy savings achieved by not carrying out the work internally.

 

As the increased subcontractor costs were not reflected in the service hourly rate and overhead recovery was not recouped on sub-contractors this resulted in an under recovery of full costs from the HRA.

 

Whilst last year high vacancy levels, and the use of sub-contractors rather than the Council’s own workforce, resulted in an underspend on materials for the Council, this year higher than anticipated inflation levels, an industry wide issue, and an expected increase in repairs jobs had resulted in a very small underspend.

 

The deficit also included the impact of the national pay award, which was significantly over and above the assumptions included within the MTFS as outlined in both the General Fund and HRA variances.

                                                                                                                              

Due to the interconnection of the HRS and HRA the consequential costs in the HRA were ordinarily reduced, and therefore offset any repatriated deficit. However, due to the increased usage of more expensive sub-contractors and materials, and an increased volume of works, this was not the case this financial year, as detailed above, and there was a significant additional cost for repairs and maintenance of the housing stock that was being incurred by the HRA. This additional cost was currently being offset against the overall HRA position as set out in section 4 of the officer’s report.

 

The main contributory factor for this deficit was the ongoing recruitment and retention issues, which were being felt across the industry, this resulted in a reliance on the use of sub-contractors. The cost of subcontractors was more expensive than the HRS’s own workforce, due to the ongoing impact of Covid19, the current inflationary crisis and a reduced pool of contractors from which to secure services. These additional costs were therefore not fully offset by the vacancy and material savings achieved by not carrying out the work internally. These increased costs were further compounded by increased demands resulting from the higher level of voids currently being experienced, although this was partially offset by a reduction in responsive repairs works being requested.

 

Earmarked Reserves

 

Details of HRA Earmarked Reserves and their balances were set out at Appendix G of the officer’s report, with further details in the MTFS 2024-2029 summarised at paragraph 6.2 of the officer’s report

 

General Fund Investment Programme

 

The revised General Fund Investment Programme for 2023/24 amounted to £15,334m following the quarter three report. At quarter four, the programme had reduced by £3,702m to £11, 632m. A summary of the budget changes was detailed at paragraph 7.2 of the officer’s report.

 

New projects added in quarter 4 had already received Executive approval as detailed at paragraph 7.5 of the officer’s report

 

The Chief Finance Officer had delegated authority to approve financial changes up to an approved limit or to reprofile the budget under Financial Procedure Rules. The changes approved during Quarter 4 was detailed at paragraph 7.6 of the officer’s report.

 

A summary of the provisional outturn position for the General Investment Programme at 31 March 2024 was detailed at paragraph 7.7 of the officer’s report.

 

Overall spending on the General Investment Programme active schemes, excluding externally delivered schemes, for the final quarter of 2023/24 was £10.4m, which was 86% of the budget

 

Housing Investment Programme

 

The revised Housing Investment Programme for 2023/24 amounted to £16.120m following the Quarter 3 position. At Quarter 4 the programme had been decreased by £1.388m to £14.732m.

 

Changes over the approved limit at Quarter 4 which required approval by Executive were detailed at paragraph 7.11 and new projects added to the Housing Investment Programme which required Executive approval were detailed at paragraph 7.12 of the officer’s report.

 

Financial changes approved during Quarter 4 delegated to the Chief Finance Officer under financial procedure rules up to an approved limit were detailed at paragraph 7.13 of the officer’s report and a summary of the projected outturn position for the Housing Investment Programme was detailed at paragraph 7.14

 

The overall expenditure on the Housing Investment Programme for the final quarter 2023/24 was £14,732m which was 91.3% of the budget.