Agenda item

Purpose of Report

 

To present the third quarter’s performance (up to 31 December 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 31 December 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 proposed carry forward requests and transfers to earmarked reserves detailed in paragraph 3.11, 3.12, 4.9 and 4.10 of the officer’s report be approved;

 

4. 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.

 

5. That the changes to the General Investment Programme and 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 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 third quarter (up to 31 December 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 to 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 £138,429 (Appendix A provided a forecast General Fund Summary), resulting in a general balance at the year-end of £2,530,408. 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 and beyond. 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, and would be reported to Executive in summer 2025 following a full year of operation and changes to the service provision. The next update of the Council’s MTFS would reflect the expected position. The in-year variance being reported at the end of Quarter 3 therefore reflected a number of one-off opening costs in three main areas.

 

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.

 

Earmarked Reserves

 

Details of carry forward requests and transfers to reserves were detailed at paragraphs 3.10 - 3.12 of the officer’s report.

 

Towards Financial Sustainability Programme

 

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

 

Progress against this target, based on quarter three performance, showed secured savings of £88,840resulting in a forecast under-achievement of £36,160 in-year for the General Fund. While this was an under-achievement against the target, the overall forecast position for the General Fund was positive, with additional contributions to General Balances.

 

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 £714,390 (Appendix C provided a forecast HRA Summary), which would result in HRA balances of £1,744,414 as at the end of 2024/25. This position maintained balances above the prudent minimum of c.£1-1.5m.

 

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.

 

The potential impact beyond 2024/25 of these changes in key variables had been assessed and in some cases had required future years budgets to be reset as part of the refreshed MTFS 2025-2030. The additional staff costs arising as a result of the proposed pay award were unavoidable and had required an ongoing increase in future pay budgets. 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 for management of demand and cost drivers to be reviewed. Work also continued within the HRA and 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.

 

As outlined 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 to ensure expenditure and income remained balanced within budget, resulting in a positive contribution to reserves at outturn.

 

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 3 the HRS was forecasting a surplus of £32,882 in 2024/25, an improvement of £50,136 since quarter two, which had subsequently been repatriated to the HRA, as detailed at 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 surplus and mitigate against the potential for the current net underspend in the HRA, 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 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 £27.9m following the quarter 2 report. At quarter 3 the programme had decreased by £5.9m to £22.0m, as detailed at paragraph 7.2 of the officer’s report.

 

Changes over the approved limit which had already been approved by the Executive were detailed at paragraph 7.3 of the officer’s report.

 

New schemes or changes to current schemes over an approved limit which required Executive approval in quarter 3 were detailed at paragraph 7.4 of the officer’s report.

 

In addition to the changes to schemes that required the approval of the Executive, the General Investment Programme also included schemes as part of the Lincoln Town Deal, for which the Council was the Accountable Body. Changes to a number of schemes during quarter 3 had been approved by the Town Deal Board, under a separate governance framework, as detailed at paragraph 7.5 of the officer’s report

 

Delegated authority to approve financial changes up to an approved limit or to reprofile the budget during quarter 3 given to the Chief Finance Officer, as set out under Financial Procedure Rules were detailed at paragraph 7.6 of the officer’s report

 

The overall spending on the General Investment Programme active schemes (excluding externally delivered schemes), at the end of quarter 3 was £10.1m, which was 53.1% of the budget as detailed further at Appendix I of the report.

 

The low capital spend at this stage of the year was primarily mainly due to the profiling of a number of large schemes only starting on site towards the end of quarter 2, 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 for 2024/25 amounted to £17.432m following the quarter 2 position. At quarter 3 the programme had been decreased by £0.020m to £17.411m, as detailed within paragraph 7.11 of the officer’s report.

 

All changes over the approved limit already approved by the Executive for quarter 3 were detailed at paragraph 7.12 of the officer’s report.

 

New schemes, or changes to current schemes, over an approved limit, in quarter 3 requiring Executive approval were detailed at paragraph 7.13 of the officer’s report.

 

New projects added to the Housing Investment Programme under delegated authority given up to an approved limit to the Chief Finance Officer during quarter 3 were detailed at paragraph 7.14 of the officers report.

 

The financial changes delegated to the Chief Finance Officer for approval as set out under Financial Procedure Rules for the third quarter 2024/2025 were detailed at paragraph 7.15 and a summary of the projected outturn position for the Housing Investment Programme at paragraph 7.16 of the officer’s report.

 

The overall expenditure on the Housing Investment Programme at the end of quarter 3 was £8.861m, which was 50.89% of the 2024/25 revised programme. This excluded expenditure relating to Western Growth Corridor, which was currently shown on the GIP, to be apportioned at year end (current forecast outturn £1.3m), as detailed further at Appendix J.

 

A further £0.680m had been spent as at the end of January 2025, 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 billing of capital works.

 

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