This matter is the responsibility of Executive Councillor Fran Smith, Housing.
Report Author: Kerry Prisco (Management Accounting and Reporting Lead).
The report was introduced by PFH for Housing, Executive Cllr Francesca Smith.
The report author Kerry Prisco made the following comments in support of her written submission.
During the Qtr 1 report it was requested that where savings were identified, these were referenced in Qtr 2. These are indicated as follows:-
· Para. 5.10 on capitalising material costs c£250k, e.g., identifying jobs that were initially considered revenue in nature but once works were completed ended up being capital related expenditure;
· Para. 5.11 on capitalisation staff costs £254k, e.g., if hypothetically the capital programme did not exist then this team would not be required.
· Para. 5.14 on central recharges £320k, e.g., a full and detailed review of shared costs has been undertaken this year resulting in a reduction in cost to the HRA;
· Para. 5.17 on capital charges / net interest payable re reduction in capital spend, e.g. if we spend less on the capital programme then less of our capital financing reserves are used and thus earn interest instead; and
· Para. 5.18 on depreciation charges vs VRP. E.g., the increase in depreciation charges is a combination of where external audit advised us last year to reduce our useful life from 100 to 70 years plus the increase in house prices inflating the value of our assets. We have proposed to offset this pressure in part against the voluntary repayment of debt (funding this from a different pot of money i.e. existing capital receipts) though this still leaves a pressure of c£400k.
The Finance team appreciate that these are mainly technical financial adjustments or updated forecasts, but the ability to make any immediate savings on essential services is incredibly difficult. The service is working on some operational improvements such as progress towards a new material supply contract to deliver efficiency savings and an updated review of service charges to maximise income.
Comments from the committee as follows:-
· The Chair congratulated the finance team on finding ways to reduce the pressure on the HRA and working hard to reduce the projected overspend.
· The benefit of capitalising salaries means that the HRA can be given a breather during this period of heavy financial pressures. This has arisen due to the inflationary expenditure being experienced due to the Cost-of-Living crisis and the war in Ukraine. Income is not able to meet the expenditure within the ring-fenced HRA. This moves the money around, but may not be a permanent fix.
· Cllr Lloyd asked what would happen if an overspend remained at the end of the financial year? The deficit would be made up from the General Reserves which are in a healthy position. The SWT HRA would be combined with Homes Sedgemoor to become a new single HRA within the new council. The new combined business would have an operating turnover of approximately 47million and would hopefully have greater capacity and resilience.
· Why have staff costs exceeded the budget? This was partly due to the estimated pay-rise which was set at 2%. The actual figure came in higher which impacted on the budget forecast.
· It was questioned whether the Cost of Living crisis was already impacting on tenants ability to pay their rent, and whether rent arrears had increased. Simon Lewis reported that this was an area where SWT was in the top quartile of Council’s and had a good record on rent recovery. There are two dedicated financial support officers who work with tenants to help with income generation and rent collection. A lot of communications go out via SMS and social media reminding and encouraging tenants to pay their rent over the Christmas period.