To consider the report of the Portfolio Holder for Finance /Strategic Director Resources.
Minutes:
Documents:
· Deficit Recovery Plan – Report of the Head of Financial Services
Discussion:
· Monthly monitoring reports are submitted to Cabinet which indicate projections at year end
· Savings are not accounted for until they have been achieved
· As the year progresses there is an expectation that the projected deficit will reduce as savings are achieved
· Increased overspends on Adult Social Care and, more recently, Children’s Services have led to an increased projected overspend amounting to £6.3M at year end
· Unachieved savings account for 52% of this figure
· It is unlikely that all savings will be achieved. Some risk is inherent in savings and early monitoring is essential.
Funding the Gap
· A Management of Change Budget is in place to support transformational change. Within this budget, £600K is currently uncommitted. Whilst this balance could be frozen, it is necessary to assess whether this funding may be needed to ensure future savings delivery.
· Technical adjustments could be made. This may include using the capitalization directive to capitalize some transformational costs but this can only be achieved if there are sufficient capital receipts available within the year. During the current year, this amounts to £329K but may rise to £700K by year end. Further investigations are ongoing.
· Management must prioritize delivery of savings
· Consideration must also be given to delaying spend (for example use Skype rather than travel, delay filling vacancies etc
· The Minimum Reserves Policy (MRP) could provide one off savings but it would need to be demonstrated that this was prudent and sustainable going forward and in line with the requirements of the Future Generations and Wellbeing Act
· The Housing Revenue Account (HRA) balance is being reviewed – there must be no cross subsidisation with the General Fund, but it must also be affordable. The Portfolio Holder for Finance informed the Committee that this work would have been undertaken as a matter of course and it was essential that future savings are not put in jeopardy.
· Reserves – the use and projected use of reserves is to be reviewed
· Cabinet will be advised of ongoing work through the monthly budget monitoring report
· The Committee noted that the report indicated that Adult Social Care (ASC) was expected to deliver savings but were concerned that, given the track record of achieving savings in that service, that this was not realistic. The Head of Financial Services acknowledged that savings within Reablement amounting to £600K were at risk but others should be achieved. Unachieved savings currently amount to £900K.
· It was further noted that the service was running a projected £1.2M overspend and the Committee asked if this was continuing. The figure was based on commitments on the system and were liable to change particularly with winter approaching.
· If all savings identified with green or amber status within the sensitivity analysis were achieved, only £600K would be achieved. The majority of savings were identified as red and the Committee were concerned that these would not be achieved.
· The Committee considered that the Authority must take a firmer stance on savings targets
· Impact Assessments were currently being finalised as part of the budget process – the Portfolio Holder for Finance indicated that there would be more emphasis on deliverability and would welcome scrutiny by the Finance Scrutiny Panel. The system has continued to improve and it was disappointing that it was realised early in the financial year that some savings were not achievable.
· Members commented that the Improvement Plan for Children’s Services had not been costed – the report was written at a time when costs had not been identified. The Head of Financial Services informed the Committee that a position on costs had now been established and would be presented to Cabinet when the Improvement Plan was due to be signed off on 14 November 2017. The Committee questioned whether the costs could be absorbed – costs in the current year are included in the Budget Recovery Plan but the position regarding the current deficit was not clear. The impact next year is likely to require an additional budget.
· The Portfolio Holder for Finance was asked how the reported £4M additional budget had been determined – he responded that this was an initial estimate but funding would be profiled over a number of years. It was expected that costs would rise in the short term but be brought into control in the longer term. Looked After Children (LACs) showed the highest costs in Wales. It was his opinion that the main issue had been a lack of management and a focus on outcomes for children. Additional recruitment was needed but this was unlikely to occur before the final quarter.
· Concern was expressed that reserves could fall as low as £1.65M which was considerably less than a prudent level
· Reserves are not ring-fenced but projects have been identified. Political decisions will be required going forward
· The Committee were of the opinion that services must take ownership of their budgets and sought assurance that action would be taken. There was very little difference between the July and September reports to Cabinet and it was thought action was not being taken quickly enough.
· It was noted that full year packages for children were now included in the projections which had impacted upon the final figure. To date, only packages for six months had been included.
· The Committee had been concerned by the overspend during the previous financial year and noted that a Recovery Plan had been produced. Members asked what effect that Plan had had and whether it had been implemented. It was likely that ASC would be subject to an inspection early in the New Year. Work is currently ongoing to see what additional resources are required to enable the service to prepare for the inspection.
· A joint report had been produced by Audit Committee and the Adult Social Care Working Group earlier in the year which identified that one of the main drivers for the overspend had been on learning disabilities which was considerably higher than the Welsh average. A further investigation was to be carried out in the spring but the Committee were unaware of any findings. No savings were allocated to that area but there was the potential to save up to £9M if the Authority limited its expenditure in this area to the Welsh average. It was noted that it was difficult to unwind packages that were already in place.
· There was further concern that the projected overspend did not include recovery for Children’s Services
· A report on absenteeism was to be considered later on the agenda but Members were concerned at the rising costs of absenteeism. A further concern was the cost of backfilling of posts in the absence of the Chief Executive.
· Scrutiny Chairs now attend the Strategic Overview Board and it is essential that Portfolio Holders are aware of the challenges and how to challenge their service areas. The Finance Scrutiny Panel has attempted to interview a number of Portfolio Holders, but to date, has not been wholly successful. However, the Portfolio Holder for Finance has attended regularly and robust discussions have taken place.
· Members were frustrated that whilst the document was well intended, action was needed. Greater clarity around monitoring was also requested.
· A Member asked whether monitoring of the situation should fall to SWAP but was advised that it was a management responsibility. The role of Internal Audit was to support and challenge the Council by setting out a work plan which has been agreed by the Audit Committee. Work is about to start on auditing the ASC Recovery Plan.
· Members also raised the issue of capital projects being overspent but the Head of Financial Services explained that the capital budget was separate to the revenue budget. Costs for the running of the Brecon Cultural Hub, for example, were included in the revenue budget, but the overspend on the project was not.
· Members remained concerned regarding accountability and responsibility and agreed that a statement highlighting their concerns be sent to the Cabinet
(The Committee adjourned whilst a form of words for the statement be prepared for consideration by the Committee)
· There was to be a seminar at the end of November regarding budget plans
· Savings were becoming more difficult to achieve
· The Committee continue to press for a true understanding of the costs of running each service and that budgets should be reset accordingly
Outcome:
· The following statement was agreed and would be sent to Cabinet for consideration alongside the Budget Recovery Plan on Tuesday 7 November 2017:
The Audit Committee views with acute concern the Budget Recovery Plan to go before Cabinet on Tuesday 7 November. We call upon all Portfolio Holders to accept full responsibility for their department and exercise full control of departmental spending and identify all necessary savings in time to be considered by Members of the Council at the budget seminar at the end of November. All Portfolio Holders must agree to take full control of their departmental expenditure and immediately identify savings. The Audit Committee cannot accept that the level of general reserves should fall to the figure suggested in the paper under comment. We remain concerned that the Cabinet are not fully committed to achieving all possible savings.
The Audit Committee are of the view that an improving picture will not emerge in future papers and that it is essential that individual Portfolio Holders and the Leader accept the importance of implementing immediate measures and monitoring to reverse the critical situation that the Council is now in.
Supporting documents: