Agenda item

To submit a report by the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources)/Section 151 Officer outlining the financial performance of the Council’s services at the end of the first quarter of the 2018/19 financial year (1 April to 30 June) was presented for the Executive’s consideration.

The Portfolio Member for Finance reported the Council in February 2018 set a net budget for 2018/19 with net service expenditure of £130.870m to be funded from Council Tax income, NDR and general grants which after adjustments came to a total of £130.9m The budget for 2018/19 included required savings of £2.522m. These have been incorporated into the individual service budgets and achievement or non-achievement of these is reflected in the net (under)/overspend shown in the report. The Portfolio Member said that based on the outcome for Quarter 1, the overall projected financial position for 2018/19 including Corporate Finance and the Council Tax fund, is an overspend of £1.744m. This is 1.33% of the Council’s net budget for 2018/19.This is due to similar budget pressures experienced in 2017/18, the most significant of which is the cost of statutory children’s services.

The Portfolio Member for Finance said that much has been made of the Authority’s use of agency staff and/or consultants and the costs arising therefrom; the Authority monitors these costs closely reporting on them on a quarterly basis as part of budget monitoring. He pointed out that the Authority is currently involved with two major infrastructure projects which require specialist expertise and support from outside the Council.

The Head of Function (Resources)/Section 151 Officer said that the forecasted outcome of an overspend on the 2018/19 budget is a reflection of the cumulative effects of budget cuts on services over time. Historically, services at the Council in Anglesey have a relatively good record of living within their budgets with services that underspent helping to mitigate overspends in other service areas. However, as budgets have reduced and unused budgets have been deleted, the scope for services to deliver underspends on their budgets has also diminished – the report shows that most services are likely to be on, or marginally over budget at year end which is not helpful in terms of offsetting a significant budget overspend in Children’s Services. The report covers the first quarter of the new financial year so the situation can change particularly over the winter months. The position with regard to the main overspend which is in Children’s Services will have to be addressed although the opportunities for action are limited due partly to the shortage of placements locally on the Island for children who are looked after. Because of this, the Service has to seek placements out of county which are expensive and which also have cost implications for the Learning Service in terms of funding the education provision for those children placed outside Anglesey.

The Officer said that some other services are also currently overspending for example Central Education where there are significant budgetary pressures on school transport; Adults’ Social Care where the budgetary pressures are in Physical and Learning Disabilities and Mental Health Services and the ICT Service which is estimated to overspend by £327k by year end. All software and hardware budgets across the Council apart from schools have been centralised and are now managed within the ICT Service. The software budgets are perceived to be historically insufficient and once centralisation is fully embedded, a reduction in these costs are expected. A forecasted underspend in Corporate Finance budgets will help mitigate other service overspends.

The Head of Function (Resources)/Section 151 Officer referred to expenditure to date against the Invest to Save budget and the progress of individual projects as detailed in Appendix CH to the report. Appendices DD and E cover Agency and Consultancy costs; to date £224k has been spent on agency staff which has been part-funded by the staffing budget because they related to staff vacancies, whilst £149k has been in relation to staff cover in Children’s Services to support Newly Qualified Social Workers, and to look at Legacy cases. Expenditure on consultancy during the quarter was £401k with £285k of this funded externally from grants or contributions. The Officer highlighted that in August, 2018 HMRC accepted the Council’s claim for a refund of VAT (dating back to 2012) paid over to HMRC on Leisure Services. This amounts to approximately £800k net of costs for the Council and follows a legal judgement made in November 2017 that VAT should not be charged on Leisure Services income. A decision will have to be made whether to credit the refunded sum to the general reserve or to credit an earmarked reserve to invest in the Leisure Service or a combination of both options.

The Executive noted the Revenue Budget position at the end of Quarter 1 along with the indicative end of year outcome. With regard to the use of the windfall VAT refund of £800k, the Executive was agreed that this should be credited to an earmarked reserve the use which should be determined at a later date.

It was resolved to note the following –

•  The position set out in appendices A and B in respect of the Authority’s financial performance to date and expected outturn for 2018/19.

•  The summary of contingency budgets for 2018/19 detailed in

Appendix C.

•  The position of the Invest to Save Programmes set out in Appendix CH.

•  The position of the efficiency savings for 2018/19 set out in Appendix D.

•  The monitoring of agency and consultancy costs for 2018/19 set out in Appendices DD and E and that -

•  The windfall VAT refund of approximately £800k be credited to an earmarked reserve the use of which shall be determined at a later date.