Agenda item

Purpose of Report

 

To present the first quarter’s financial performance 2024/25 (up to 30 June 2024) on the Council’s revenue and capital budgets, including General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes, including approval sought for changes to the capital programmes.

 

Decision

 

1.             That the financial performance for the period 1 April to 30 June 2024 be noted.

 

2.             That the underlying impact of the pressures and underspends identified in paragraphs 3.3 (and Appendix B), 4.3 (and Appendix D), and 5.2 (and Appendix F)  of the officer’s report be noted

 

3.             That the changes to the General Investment Programme and Housing Investment Programme approved by the Chief Finance Officer as detailed in paragraphs 7.5 and 7.12 of the officer’s report be noted.

 

4.             That the changes to the General Investment programme and the Housing Investment programme approved, or to be approved, by the Executive as detailed in paragraphs 7.3, 7.10 and 7.11 of the officer’s report be approved.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

Financial Procedure Rules required members to receive, on a quarterly basis, a report prepared jointly by the Chief Finance Officer and Corporate Management Team commenting on financial performance to date. This report was designed to meet this requirement.

 

This report covered the General Fund Revenue, Housing Revenue Account budgets and Investment Programmes for the current financial year.

 

Whilst there were still a number of variables which were subject to a level of uncertainty, based on the latest set of assumptions as at the end of the first quarter (up to 30 June 2024) the forecast financial position of the Council for 2024/25 was detailed at paragraph 2.2 of the officer’s report, together with the detailed financial position shown in sections 3-7 and the accompanying appendices.

 

Updates were reported as follows:

 

General Fund Revenue Account

 

For 2024/25 the Council’s net General Fund revenue budget was set at £15,427,670 including a planned contribution from balances of £146,820 resulting in an estimated level of general balances at the year-end of £2,391,979 (after allowing for the 2023/24 outturn position).

 

The General Fund Summary was currently projecting a forecast underspend of £3,530 (Appendix A provided a forecast General Fund Summary), resulting in general balances at the year-end of £2,395,509. This position maintained balances above the prudent minimum of c.£1.5 - £2m

 

There were a number of forecast year-end variations in income and expenditure against the approved budget, both positive and negative; as detailed at paragraphs 3.3- 3.6 of the report, with the main variances provided in Appendix B to the report.

 

In response to the key cost pressures anticipated in 2024/25; the additional staff costs arising as a result of the proposed pay award were unavoidable and would require the resetting of budgets for 2025/26 onwards within the upcoming Medium Term Financial Strategy (MTFS). However, in relation to the increasing cost of housing benefits, a range of mitigating actions were being taken, e.g. lobbying against current subsidy rules and Local Housing Allowance rates, focusing on actions to manage the supply of and demand for affordable/social housing and temporary accommodation, review of all supported accommodation claims to ensure the appropriate levels of housing benefit were awarded, supporting housing providers to attain social registered landlord status etc. These actions were not likely to reduce costs in the short term, but were part of a longer term solution.

 

While the forecast outturn for the General Fund was a small budget underspend, there still remained uncertainty in terms of service demands and income forecasts. As such the final outturn position for the year was still subject to further change and would continue to be carefully monitored. While mitigating actions were underway as set out above, strong budgetary control should continue to be a focus to ensure expenditure and income remained balanced within the budget, resulting in a positive contribution to reserves at outturn.

 

Towards Financial Sustainability Programme

 

The savings target included in the MTFS for 2024/25 was £125,000.

 

Progress against this target, based on Quarter 1 performance, showed that secured savings totalled £128,460 for the General Fund, resulting in a forecast over-achievement of £3,460 in year.

 

Housing Revenue Account

 

For 2024/25 the Council’s Housing Revenue Account (HRA) net revenue budget was set with a planned contribution from balances of £101,220, resulting in an estimated level of general balances at the year-end of £1030,024, after allowing for the 2023/24 outturn position.

 

The HRA was currently projecting a forecast underspend of £607,544, which would result in HRA balances of £1,637,568 at the end of 2024/25. (Appendix C provided a forecast Housing Revenue Account Summary). This position maintained balances above the prudent minimum of circa £1m.

 

Although the forecast position was an underspend, there were a number of significant 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 in Appendix D of the report.

 

As set throughout this report, there still remained a number of variables in the forecast assumptions, and as such the final outturn position for the year was still subject to further change. At this stage no additional mitigations, other than those currently being implemented in response to the issues faced by the Housing Repair Service (HRS) and in response to void levels were recommended. Strong budgetary control should continue to be a focus in this financial year to ensure expenditure and income remained balanced within budget.

 

Housing Repairs Service

 

For 2024/25 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature.

 

At quarter 1 the HRS was forecasting a deficit of £355,311 in 2024/25, which had been repatriated to the HRA as detailed within the forecast HRS summary at Appendix E, with full details of the main variances provided in Appendix F of the report, together with a summary of the key variances provided at paragraph 5.2 of the officer’s report.

 

The main contributory factor for this 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. This inability to attract and retain staff resulted in a greater reliance on the use of sub-contractors to ensure that service demands were met. The cost of using sub-contractors was however more expensive than the HRS’s own workforce, due to the ongoing impact of inflationary factors.

 

Additionally, the HRS was seeing increased levels of work in relation to regulatory compliance, such as damp and mould remediation and installation of fire doors, this was increasingly affecting the capacity to carry out routine works, further compounding the reliance on sub-contractors.

 

As the increased sub-contractor 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.

 

The ongoing impact of higher than anticipated material prices, coupled with a forecast increase in repairs jobs had resulted in an overspend on materials further compounding the HRS forecast position.

 

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

 

It should be noted that due to the interconnection of the HRS and HRA, the consequential costs in the HRA had reduced, and therefore offset the repatriated deficit. Whilst this was not the case last year due to increasing costs of sub-contractors and materials, measures were taken at budget setting to reflect the anticipated impact of this. It was essential however, that the tight controls implemented to monitor premium sub-contractor spend were maintained to minimise the projected deficit and mitigate against the potential for the current net underspend in the HRA, as outlined in section 4 of the officer’s report, to deteriorate

 

Earmarked Reserves

 

The Council held a number of earmarked revenue reserves over both the General Fund and HRA. These reserves were sums set aside for specific purposes and to mitigate against potential future known or predicted liabilities. Key reserves included income volatility, business rates volatility, IT investment fund, asset sinking funds for future refurbishment etc. A number of these reserves were budgeted for use over the period of the MTFS.

 

The details of all the earmarked reserves and their forecast balances as at 31 March 2025 were attached in Appendix G, and summarised at paragraph 6.2 of the officer’s report, with further details in the MTFS 2024-2029 summary.

 

General Fund Investment Programme

 

The original General Investment Programme for 2024/25 in the MTFS 2024-29 amounted to £17.5m which was increased to £23.2m following Quarter 4 approvals and year end re-profiles from 2023/24. At Quarter 1 the programme had been increased by £0.3m to £23.5m, as detailed at paragraph 7.2 of the officer’s report.

 

Changes over the approved limit requiring approval by the Executive for the first quarter in relation to ‘Re-Imagining Greyfriars’ were detailed at paragraph 7.3 of the officer’s report.

 

There were no new schemes over an approved limit in Quarter 1 requiring Executive approval.

 

The financial changes delegated to the Chief Finance Officer up to an approved limit, or to reprofile the budget as set out under Financial Procedure Rules for the first quarter 2024/2025 were detailed at paragraph 7.5 , with a summary of the projected outturn position provided at paragraph 7.6 of the officer’s report.

 

The overall spend on the General Investment Programme for the first quarter of 2024/25 was £1.9m, which was 10.58% of the budget as detailed further at Appendix I of the report.

 

Housing Investment Programme

 

The revised Housing Investment Programme (HIP) for 2024/25 amounted to £22.763m following the 2023/24 outturn position. At quarter 1 the programme had been decreased by £5,112m to £17.650m, as detailed within paragraph 7.9 of the officer’s report.

 

All changes over the approved limit requiring approval by the Executive for Quarter 1, were detailed at paragraph 7.10 of the report. Schemes added to the HIP, having been approved at Executive during Quarter 1 were detailed at paragraph 7.11 of the report and financial changes given to the Chief Finance Officer under delegated authority and approved during Quarter 1 were detailed at paragraph 7.12 of the officer’s report.

 

A summary of the projected outturn position for the Housing Investment Programme was detailed at paragraph 7.13 of the officer’s report.

 

The overall expenditure on the Housing Investment Programme for the first quarter of 2024/25 was £2.517m, which was 14.26% of the 2024/25 revised programme. This excluded expenditure relating to Western Growth Corridor, which was currently shown on the General Investment Programme (GIP), to be apportioned at year-end (current forecast outturn £0.984m) This was detailed further at Appendix J).

 

A further £1.082m had been spent as at the end of July 2024; although this was still a low percentage of expenditure at this stage of the financial year, works had been constrained by the availability of contractors and materials however new contracts were in place and spend was expected to increase by the end of the financial year.