To consider the Outturn for 2018/19.
· Financial Outturn 2018/19 report
· There had been an improvement at year end to that forecast at the end of February
· Savings delivery was at 58% although when historic savings which had not been achieved were included, this rose to 77%. The previous year savings achieved stood at 71%.
· The budget had been predicated on the use of reserves of £7M
· The general reserve ended the year at 5.28% of revenue excluding schools and HRA reserves
· The MTFS is being reviewed and updated alongside financial plans
· The Panel remain concerned at the variance between the end of February and the closure of the accounts. Adult Services had ended the year with an underspend much of which had been achieved by general housekeeping of the financial system and removing commitments. This is a recurring theme and needs to be addressed.
· There had also been an improvement to the pupil inclusion budget arising from charges to other local authorities for children with statements in Powys’ schools
· Capital charges were underspent following a low outturn on capital spend
· Children’s Services were £5.6M overspent largely due to the number of agency staff and an increase in looked after children
· Highways were overspent due to non-delivery of savings
· The Panel reiterated its concerns at the lack of financial control within directorates to see such variances late in the financial year.
· There should be more accountability throughout the year regarding the year end position – a £2M change in one month was unacceptable
· The schools delegated budgets were also a cause for concern. The reserves position was stated excluding schools and HRA and whilst it was acknowledged that the schools’ budgets were delegated, ultimately these reserves have an impact on the financial sustainability of the Authority.
· Members had received information showing that the schools delegated budget showed a net surplus of £78K. This figure was not replicated within the report and the Head of Finance explained that the figure shown represented the impact on the general fund, but the outturn report showed actual expenditure against budget. Within the report a variance of 0.8% was given a RAG status of Blue which, the Panel believed, masked serious issues given that schools were showing a potential deficit of £12M in three years’ time.
· The monthly budget monitoring report will now include schools budget performance
· The Head of Finance was to reassess the way in which reports are presented given the confusion that has arisen
· The Panel have previously commented on reliance on windfalls and one-off grants and this needs to be highlighted
· It was known that £1.3M deficit had been written off when Builth Wells and Llandrindod Wells High Schools had been closed and merged to become a new school – where was this money paid from? In 2017/18 there had been an underspend on school’s central budget of which £1M was sent aside to meet the overspend. The remaining £300K remains on the balance sheet as a deficit.
· £5M had been moved from 21 Century Schools budget to support social services expenditure. The revised Funding Formula was to be implemented and issues were anticipated which have materialised – the revenue reserve could have been used to mitigate the effects of the revised Funding Formula. Members also queried where the £5M had originated and questioned whether it was due to underspends on the Ystradgynlais schools’ modernisation project. The Head of Finance reported that the revenue reserve had been built up over a number of years where there had been underspends on previous budgets. It had been agreed that these be set aside to support schools. The transfer had been clear in the budget papers that £5M was to be redirected.
· Reserves are reviewed annually and there is no movement between reserves without the approval of the Head of Finance
· The risk regarding claims against Job Evaluation is diminishing and proposals for that and other reserves will be reviewed by Cabinet
· The amount paid out in insurance claims was also noted – there had been a significant increase in the number of claims although it was acknowledged that not all resulted in a payment. The Panel asked if there were trends developing and were advised that a detailed report was being prepared for the Senior Leadership Team which would highlight any trends and whether any mitigation is being considered.
· It was confirmed that the HRA reserve was within acceptable parameters
· The Panel noted that by not spending capital, the revenue position had been improved. This seemed somewhat perverse as capital projects could lead to revenue savings.
· The Head of Finance to review the style of reporting
· Recommendations regarding finance training to be reinforced