Agenda item

Purpose of Report

 

To present the second quarter’s performance (up to 30 September 2024) on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes, and to seek approval for changes to the capital programmes.

 

Decision

 

1. That the financial performance for the period 1 April 2024 to 30 September 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 as approved by the Chief Finance Officer 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 Housing Investment Programme, as detailed in paragraph 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 a report prepared jointly by the Chief Finance Officer and Corporate Management Team on a quarterly basis commenting on financial performance to date. This report was designed to meet this requirement.

 

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 second quarter (up to 30 September 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 which included 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 £37,277 (Appendix A provided a forecast General Fund Summary) resulting in general balances at the year-end of £2,429,206. 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, as detailed at paragraphs 3.3-3.5 of the report, with the main variances provided in Appendix B to the report.

 

Alongside these variances, a significant variance against the Council’s crematorium budget was also forecasted, resulting from a continuation of the reduction in income from cremations seen last financial year, driven by increasing competition from neighbouring Crematoriums. This position was being carefully monitored and an action plan developed. In addition, the service was currently being supported by external industry professionals, increasing the management and administration costs, this was being carefully monitored and would only remain in place for as long as required.

 

In addition, a significant in-year variance was now forecasted for the Cornhill Market. The refurbished Market opened on 17 May 2024 but the original budget for 2024/25 was set on the basis of a full year of operation and based on the draft business plan approved at Executive in July 2021. Now that the market was operational, a full review of the business plan based on the actual operating costs and income levels was underway, would be reported to Executive in early 2025 and reflected in the next update of the Council’s MTFS. The in-year variance being reported at the end of Q2 therefore reflected a number of one-off opening costs in this regard.

 

Whilst 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 detailed within the officer’s report, 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 2 performance, showed secured savings of £88,840, with a further £25,400 identified savings totalling                       £114,240 for the General Fund, resulting in a forecast under-achievement of £10,760 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 £1,030,024, after allowing for the 2023/24 outturn position.

 

The HRA was currently projecting a forecast underspend of £519,410 which would result in HRA balances of £1,549,435 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 report, with full details of the main variances provided in Appendix D of the report.

 

In response to the key cost pressures forecast in 2024/25; the additional staff costs arising as a result of the nationally agreed pay award were unavoidable and would require the resetting of budgets for 2025/26 within the upcoming Medium Term Financial Strategy (MTFS). In relation to housing repairs, the Housing Directorate Management Team continued work on the individual repairs service areas, i.e. Aids & Adaptations, Voids, Responsive Repairs etc, in order to review and manage demand and cost drivers. Work also continued within the Housing Repair Service (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 levels of vacancies.

 

As detailed 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 HRS 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 2 the HRS was forecasting a deficit of £17,146 in 2024/25, an improvement of £338,165 since quarter 1, which had subsequently been repatriated to the HRA as detailed within the forecast HRS summary at Appendix E. Full details of the main variances were provided in Appendix F, together with a summary of the key variances at paragraphs 5.2 – 5.3 of the officer’s report.

 

While the forecast outturn for the HRS was a small budget overspend, there still remained uncertainty in terms of service demands and income forecasts. As such it was essential 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, to deteriorate.

 

The forecast deficit also included the impact of the national pay award announced in November 2023, which was significantly over and above the assumptions included within the MTFS, as outlined in both the General Fund and HRA variances.

 

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 balance as at 31 March 2025 were attached at Appendix G, and summarised at paragraph 6.2 of the officer’s report, with further details in the MTFS 2024-2029.

 

General Fund Investment Programme

 

The revised General Investment Programme (GIP) for 2024/25 amounted to £23.5m following the quarter 1 report. At quarter 2 the programme had increased by £4.4m to £27,9m, as detailed at paragraph 7.2 of the officer’s report.

 

Changes over the approved limit which required approval by the Executive for the second quarter were detailed at paragraph 7.3 of the officer’s report.

 

There were no new projects added to the GIP, which required Executive approval.

 

The financial changes delegated to the Chief Finance Officer and approved for the second 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 active schemes for the second quarter of 2024/25 was £3.2m, which was 14.5% of the budget as detailed further at Appendix I of the report.

 

The low percentage of expenditure at this stage of the financial year was mainly due to the reprofiling of a number of large schemes, only starting on site towards the end of quarter2/beginning of quarter 3 e.g., Greyfriars, Yarborough Leisure Centre, Western Growth Corridor Phase 1a Homes and the LUF2 Eastern Access Bridge.

 

Housing Investment Programme

 

The revised Housing Investment Programme (HIP) for 2024/25 amounted to £17.650m following the quarter 1 position. At quarter 2 the programme had been decreased by £0.219m to £17.432m, as detailed within paragraph 7.10 of the officer’s report.

 

All changes over the approved limit which required approval by the Executive for quarter 2 were detailed at paragraph 7.11 of the officer’s report.

 

Two new projects were added to the Housing Investment Programme having been approved at Executive during quarter 2 as detailed at paragraph 7.12 of the officers report.

 

The financial changes delegated to the Chief Finance Officer for approval as set out under Financial Procedure Rules for the second quarter 2024/2025 were detailed at paragraph 7.13 and a summary of the projected outturn position for the Housing Investment Programme at paragraph 7.15 of the officer’s report.

 

The overall expenditure on the Housing Investment Programme at the end of quarter 2 of 2024/25 was £5.730m, which was 32.87% of the 2024/25 revised programme. This excluded expenditure relating to Western Growth Corridor, which was currently shown on the General Investment Programme, to be apportioned at year-end (current forecast outturn £1.3m) This was detailed further at Appendix J.

 

A further £1.091m had been spent as at the end of October 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.

 

Members praised officers for accomplished management of the Council’s finances despite there having been significant cuts in resources over recent years, which was testament to their excellent management skills.