Agenda item

This report provides the Governance & Audit Committee with the details of the Council’s provisional outturn position for the financial year 2022/23.

The Deputy Leader of the Council introduced the report.

2022/23 was a turbulent financial year which required the Council on 24 November 2022 to approve a series of amendments to the budget framework in order to respond to significant volatility to the budgets resulting from the pressures on utilities, fuel, pay and inflation.  Following this, budgets were amended accordingly and the variances in this report were in relation to those amended budgets.

The report ensured that the final account figures could be reconciled back to the budget set by the Council.

Due to timing differences in grants and budgets being approved, it was proposed to carry a number of budgets forward into 2023/24 to fund specific and previously approved projects.

The amended budget set by Council on 24 November 2022 was £22.148m. Budgets have been amended as projects have commenced and these changes increased the 2022/23 budget to £22.209m.  For the purposes of the outturn variance analysis, the budget carry forwards had been removed from this which reduces the budget for comparative purposes to £20.249m.

The forecast outturn position as at Quarter 3 was reported to the Finance, Economic Development and Corporate Services Overview and Scrutiny Committee on 21 February 2023.  At this time, a reduction in the forecasted spend, additional projected investment interest and Minimum Revenue Provision (MRP) reduction resulted in a forecasted balanced position.

The budget set by Council on 3 March 2022 for the 2022/23 General Fund Capital programme was £19.608m.

As at 31 March 2023, there was an underspend of £13.008m which included underspends of £308k on the Disabled Facilities Grant, £224k on the Vehicle Replacement Programme, a deferral of works to the re-surfacing of Welham Street car park at £127k and £793k underspend on the Sustainable Warmth Grant which the Council received to assist with the upgrade of energy efficient homes for low income households.

Discretionary Reserves of £10.873m have been established to financially support the delivery of the Council’s Corporate Plan ambitions including both revenue and capital projects as well as to prepare for unforeseen financial pressures, such as an impending staff pay award.  It was within the role of the Governance and Audit Committee to consider the movement of funds within the Reserves.

The Deputy Leader informed Members that the Climate Change Reserve was used to fund one-off climate initiatives.  There were sufficient funds to create a Lighting Reserve for the upgrade of street-lighting to LED lighting within the district, as discussed at the Environment Overview and Scrutiny Committee held on 11 July 2023. 

Governance Reserves of £8.071m were maintained to mitigate risk, satisfy statutory and grant awarding bodies’ requirements and support prudent financial management.

The Chief Finance Officer informed Members that the last year had seen significant increases in investment income compared to budgets due to 13 increases in the base rate. 

The Housing Revenue Account (HRA) capital fund was approximately £10 million underspent at this time.  The General Fund was in a similar position due to the Deepings Leisure Centre refurbishment programme not being taken forward  by the Council.

During discussion, Members raised the following points:

·            A Member requested that more assurance be provided on the ‘earmarked’ reserves.  For example, £300,000 was allocated to the Climate Change Reserve.  What was the money specifically to be spent on?

·            What scrutiny was to take place on the prioritisation of funds, particularly on the Climate Change Reserve?

·            How was the £300,000 reserve movement for Climate Change decided and did it represent a reduction in ambition?  It was considered that the Climate Change Reserve was unique in its required use.

·            It was important that assurance was provided to the public that great consideration was given to how the Climate Change Reserve funds were allocated.

·            Were there sufficient funds within the Staff Pay Award Reserve to cover any potential rise in pay?

·            It was welcomed that proactive action was to be taken against Climate Change.

The Chief Finance Officer informed Members that reserve movement recommendations were a key part of the report.  Reserve movements referred to replenishing funds within a reserve heading to be used subject to the normal processes of delegation, authority to spend and procurement.  The report provided a detailed list within paragraph 5 as to what each reserve covered.  The Climate Change Reserve, as an example, was a request to put monies aside to fund the declared emergency the Council has placed in respect of 30% reduction by 2030.  Where the monies were to be spent would be subject to policies and frameworks established by the Financial Conduct Authority.  The recommendations within the report had been taken with due care and diligence to enable the Council to carry out its statutory obligations.  The Chief Finance Officer informed Members that the £500,000 allocated to the Pay Award Reserve was to support funds already put aside.

The Deputy Leader confirmed that whether small financial spends were taken to Overview and Scrutiny Committees for decision was determined by the financial regulations and it was appropriate that Officers make decisions as defined within the Scheme of Delegation and the Financial Procedure Rules.  The Property Maintenance Reserve was essential to assist in the maintenance of the Council’s properties as there was a need to be prepared for unexpected expenditure.  The Deputy Leader continued that it was important that the ICT Reserve was replenished to keep IT equipment up to date due to the constant threat of possible cyber-attacks.  Future Climate Change initiatives would include the promotion of behavioural change across the district such as sustainable transport, composting and household recycling and embedding climate change resilience into future property projects.

The Leader of the Council added that it was the remit of any Committee to scrutinise anything within its subject area that it wished and the Leader would encourage this to happen.

It was confirmed that at the Environment Overview and Scrutiny Committee of 11 July 2023, the work programme was discussed and it was agreed that the climate change action plan, supplementary to the Climate Change Strategy had been added.  This was expected to contain ideas, proposals and business cases for validating the spend against that Reserve.

The Cabinet Member for Housing and Planning informed the Committee that there was no reduction in ambition with Climate Change, however, the administration was relatively new and required time to make progress.  In reference to the Housing Maintenance Programme, the Cabinet Member confirmed that the Council’s housing stock of 6,000 made South Kesteven the largest Local Authority Housing provider in the East Midlands.  The maintenance carried out on the housing stock had not been as robust as perhaps desired in recent years.  Almost 1 in 2 void properties were found to be in need of major works such as new bathrooms or electrical rewiring and this was quite a challenge to reduce while raising the standard of the homes provided.  The Council’s residents deserved a good standard of housing and it made sound economic sense to protect those assets.

The Chief Finance Officer highlighted that the Committee was able to approve the movement of reserves, and that there were other processes in place to scrutinise individual spends that utilised funding from these reserves – moving reserves was not an authority to spend that money. The Chief Finance Officer had given his professional opinion to identify where spend pressures would arise over the next 12 months, and which reserves could alleviate these pressures. For example, the Climate Change Reserve had increased but the funding for this had largely come from the Business Rate Volatility Reserve, which now had no need to exist as it was set up to alleviate the pressures on Business Rates created by Covid-19.

It was proposed, seconded and AGREED, following a Chairman’s casting vote that the:

Governance & Audit Committee: 

1. Reviewed and approved the provisional Revenue and Capital Outturn position and associated appendices for the financial year 2022/23.

2. Noted the budget carry forwards (appendices D and H).

3. Reviewed and approved the following reserve movements in respect of the General Fund:

a)         £1.5m of the Business Rates Volatility reserve to be transferred to the:

ICT Reserve increase by £0.150m

Property Maintenance Reserve increase by £0.400m

Invest To Save Reserve increase by £0.150m

Climate Change Reserve increase by £0.300m

Creation of a Pay Award Reserve of £0.500m

b)         The balance of the Inflation Reserve of £0.500m to be transferred to the:

Budget Stabilisation reserve increase by £0.250m

Street Scene reserve increase by £0.250m