Agenda item

This matter is the responsibility of the Executive Councillor Ross Henley, Portfolio Holder for Corporate Resources.

The purpose of this report is to provide information related to SWT’s financial performance for the 2019/20 financial year. The outturn figures included are provisional subject to the completion of the external audit of the statutory financial statements.

The report set out information relating to SWT’s financial performance for the 2019/20 financial year. The outturn figures included were provisional subject to the completion of the external audit of the statutory financial statements. The audit was due to be completed between July and October with the findings to be reported to the Audit, Governance and Standards Committee on 2nd November this year.

2019/20 was the first financial year for the new Council, which was created on the 1 April 2019 and replaced the predecessor Councils – Taunton Deane Borough Council and West Somerset Council. The budget was set by the Shadow Council in February 2019, and created to a large extent by mapping the two historic budgets of the old Councils into a single budget structure.

The past financial year was significant in terms of change in leadership, both senior management and political, and an ongoing period of organisational change and disruption. The year started with budgets reflecting the operating model designed through the transformation project. Changes through the year meant that this did not reflect the organisation structure as it is now. The organisational changes during the year had also led to changes in budget holders and budget responsibilities, and changes within the finance officer team too, with a loss of background knowledge of the previous Councils / budgets where experienced staff left during the year. All of these changes presented some challenges within the budget monitoring process, meaning some variances now reported were not predicted or not identified sooner. The risk of budgets and costs/income not aligning was higher than normal due to the scale of continuous change through the year.

The budget for 2020/21 had been re-shaped to reflect the directorate structure. This should provide a solid foundation for financial management and reporting in the current year.

COVID-19 impact started to effect service expenditure and income in March, therefore the financial consequences were not significant in the last financial year. However, it was evident that there were significant impacts in 2020/21 that were not expected or anticipated when the budget for 2020/21 was approved in February. This was covered within the separate financial strategy and financial monitoring reports.

The leadership team and S151 Officer had prudently considered the financial risks as part of their year-end analysis and prioritised strengthening the Council’s reserves. A robust review of earmarked reserves had been completed with £1.2m proposed to be released to general balances. Equally, SMT considered requests from services to carry forward £0.7m of budget underspend into the next financial year, however SMT took the prudent view that it was better to return the full reported underspend to increase General Reserves due to these financial risks. On this basis the full reported £1.8m underspend had been added to the general reserves balance to provide greater flexibility and resilience where the COVID impact was expected to be at its greatest. Overall, General Reserves had been boosted by £3m as a result of this action.

The revenue outturn position for the financial year 2019/20 was set out:

The General Fund (GF) Revenue Outturn position for 2019/20 was a net underspend of £1.836m (8.2% of Net Budget), after reserve transfers. This is a relatively large underspend, and is as a result of several factors including general variances to budget, accounting provisions not fully required and thus released to the revenue account, and a decision not to approve carry forwards of underspends/surpluses into next year which would have reduced the reported net underspend.

The HRA is a ring-fenced ‘Self-Financing’ account used to manage the Council’s Housing Landlord function, which is budgeted to ‘break even’ (net of approved transfers to/from HRA Reserves). The HRA Revenue Outturn position for 2019/20 is a net underspend of £8k (0.03% of gross income).

The capital outturn position for 2019/20 was detailed:

The total General Fund Capital Programme budget in place in 2019/20, including schemes brought forward from previous years, was £65.832m. This related to a combination of schemes to be delivered in the year and some that will span over more than one year. £20.073m has been spent during 2019/20. Of the remaining £45.759m, £30.567m will be carried forward for ongoing schemes, £11.567m has been included in the 2020/21 approved capital budget and is therefore not carried forward (to avoid duplication), and a £3.625m net underspend is reported overall.

The HRA approved Capital Programme at the end of 2019/20 was £32.356m. This relates to planned schemes and works during the year and some costs that are expected to span across financial years also. The actual expenditure on the Capital Programme during 2019/20 was £16.069m, with £15.857m of planned investment to implement approved schemes in future.

            During the discussion the following points and questions were raised:-

·        It was considered What percentage of revenue is the underspend? The reasons for the underspend was requested.

·        Gross expenditure around £80 million. Around 2% of gross budget. Agreed large variances were not welcomed.

·        Final redundancy costs were provided for, not all costs were incurred so provisions set aside for this was not needed. Treasury management position was better than was budgeted for such as insurance costs.

·        Delivering services was an important principle.

·        Transformation savings envisaged has not delivered, budget gap was still being experienced, extra pressures from government funding and Covid-19 impact.

·        Projections not easy due to the increased amount of uncertainty

·        Loss of funding through bus rates and NHB, further information was awaiting form the spending review and settlement for the next financial year, a one year settlement was expected, this was not supportive in long term financial planning.

·        The Outturn was unaudited.

·        Capital bids for a lift facility in a leisure complex was requested to be completed shortly due to the inconvenience it has caused.

·        East Quay Loan to the Onion Collective was considered and the costs around this explored. There were two separate loans, one had not been determined as needed, grant funding from the Lottery has been received to the Onion Collective, SWT are the accountable body.

·        Does SCC hold any finances on behalf of SWT? – no

·        Investment income, value of assets and the return from income on these requested. An update was due in December in respect of commercial investment.

·        Project management was questioned and concerns expressed that some projects not completed within the financial year.

·        Underspend provided positives such as reserves and resilience for future years.

·        Recs – all agreed

·         

The Scrutiny Committee reviewed and supported the following proposed recommendations to the Executive:

·        Note the reported General Fund Revenue Budget underspend of £1.836m in 2019/20 and the General Reserves Balance of £4.522m as at 31 March 2020 which provided financial resilience and flexibility to meet increased financial pressures in 2020/21 and subsequent years.

·        Note the reported Housing Revenue Account Budget underspend of £8k in 2019/20 and the HRA General Reserves Balance of £2.701m as at 31 March 2020.

·        Approve the transfer of £1.2m of General Fund Earmarked Reserves back into General Fund General Reserves, as set out in Appendix B.

·        Note the Capital Outturn position and approve the proposed carry forward of £29.996m approved budget to 2020/21 General Fund Capital Programme (as per Appendix C) and £15.822m to the 2020/21 Housing Revenue Account Capital Programme (as per Appendix D).