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Report to: |
Executive |
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Date: |
13 October 2022 |
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Title: |
Month 5 Revenue Budget Monitoring 2022/2023 |
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Portfolio Area: |
Finance and Assets – Cllr H Bastone |
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Wards Affected: |
All |
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Urgent Decision: |
N |
Approval and clearance obtained: |
Y |
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Date next steps can be taken: |
N/A
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Author: |
Pauline Henstock
Lisa Buckle |
Role: |
Head of Finance Practice and Deputy S.151 Officer Corporate Director for Strategic Finance (S151 Officer) |
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Contact: |
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RECOMMENDATION: That the Executive RESOLVES to note the forecast income and expenditure variations for the 2022/23 financial year and the overall projected deficit of £54,000 (0.5% of the total Budget £10.464 million). |
1. Executive summary
1.1 This report enables Members to monitor income and expenditure variations against the approved budget for 2022/23, and provides a forecast for the year end position.
1.2 The gross service expenditure budget for 2021/22 was set at £44 million (£10.464 million ne1t). This report identifies a projected deficit of £54,000 which is nearly 0.5% of the overall Budget set for 2022/23 of £10.464 million.
2. Background
2.1 Regional and national context
2.2 The Covid-19 pandemic has drawn into sharper focus the financial challenges faced by Local Authorities which have existed for some years. There remains outstanding a number of Local Authority Government reviews into Local Authority funding to reset the way local Councils are funded and the mechanism for the distribution of funding.
2.3 Financial Monitoring arrangements
2.4 The Council’s financial procedure rules require that reports must be made on budget monitoring on a regular basis to the Executive as part of the Council’s arrangements for budget management.
3. Outcomes/outputs
3.1 Budget overview - Table 1 below provides an analysis of the projected variances against budget.
TABLE 1: 2022/23 BUDGET FORECAST
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2022/23 Budget expenditure/(income) |
Budget variations
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|
Note |
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|
|
£000 |
% |
£000 |
£000 |
|
|
APPROVED BUDGET |
|
|
|
10,464 |
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|
Reductions in expenditure/additional income |
|
|
|
|
|
|
Customer Service & Delivery |
|
|
|
|
|
|
Homelessness Prevention Grant |
n/a |
n/a (no budget) |
(169) |
|
A |
|
Governance and Assurance |
|
|
|
|
|
|
Savings on Member travel, expenses and training |
39 |
77% |
(30) |
|
B |
|
Place and Enterprise |
|
|
|
|
|
|
Car parking income |
(3,162) |
9% |
(280) |
|
C |
|
Dartmouth Lower Ferry income |
(827) |
23% |
(190) |
|
D |
|
Employment Estates income |
(887) |
12% |
(110) |
|
E |
|
Dartmouth Asset Transfer |
60 |
50% |
(30) |
|
F |
|
|
|
|
|
|
|
|
Other Comprehensive Income & Expenditure |
|
|
|
|
|
|
Investment Income |
(123) |
307% |
(377) |
|
G |
|
Sub total of variations |
|
|
|
(1,186) |
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|
Increases in expenditure/reductions in income |
|
|
|
|
|
|
Customer Service & Delivery |
|
|
|
|
|
|
Planning income |
(1,084) |
9% |
100 |
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H |
|
Additional salary costs |
7,500 |
2% |
120 |
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I |
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Pay award |
185 |
222% |
410 |
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J |
|
Homelessness costs |
237 |
38% |
90 |
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K |
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ICT Support Contracts |
548 |
13% |
70 |
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L |
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Council Tax Collection income |
(155) |
26% |
40 |
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M |
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Governance & Assurance |
|
|
|
|
|
|
Waste contract inflation |
130 |
138% |
180 |
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N |
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Place and Enterprise |
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|
|
|
|
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Fuel and utility costs |
457 |
42% |
190 |
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O |
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Dartmouth Lower Ferry fleet maintenance |
40 |
100% |
40 |
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P |
|
Other Comprehensive Income & Expenditure |
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|
|
|
|
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Sub total of variations |
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1,240 |
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PROJECTED OUTTURN |
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10,518 |
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PROJECTED DEFICIT FOR 2022/23 |
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|
54 |
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There is projected to be an overall deficit of £54,000 when compared against the Revenue Budget set for 2022/23.
Notes
A. Homelessness Prevention grant – as set out in the grant conditions, this grant is ring-fenced for 2022/23. This will be applied against costs incurred in reducing temporary accommodation numbers and enforcing the Homelessness Reduction Act.
B. Savings on Member travel, expenses and training – following Covid 19, it is currently anticipated that a saving of up to £30,000 could be achieved in 2022/23.
C. Car parking income – additional income of £183,000 has been received as at 31 August 2022. It is currently anticipated that this could increase further to £280,000 by the end of the 2022/23 financial year. The additional income is mainly from Bigbury and Salcombe (North Sands) car parks, and additional income on permits.
D. Dartmouth Lower Ferry income – additional income of £108,000 has been received as at 31 August 2022. It is currently anticipated that this could increase further to £190,000 by the end of the 2022/23 financial year. This equates to 23% of the annual income target for Dartmouth Lower Ferry of £827,000.
E. Employment Estates income – employment estates income is currently projected to be over budget by £110,000 in 2022/23 due to high occupancy rates and regular rent reviews.
F. Dartmouth Asset Transfer – following the transfer of assets to Dartmouth Town Council in 2018, the Council approved to make an annual maintenance contribution to Dartmouth Town Council for 5 years, reducing annually. The contribution for 2022/23 has reduced to £30,000 in 2022/23 from £60,000 in 2021/22, resulting in a saving of £30,000. This is the 5th and final year of the maintenance agreement so a further saving of £30,000 can be expected in 2023/24.
G. Investment income– investment income is currently anticipated to be up by 307%, which equates to additional income of £377,000 in 2022/23. The predicted interest rate forecast is that interest rates will rise as the Bank of England looks to tackle surging inflation.
H. Planning income – there is a shortfall in income of £100,000 as at 31 August 2022. For the purposes of the 2022/23 projection it has been assumed that income will be on budget for the remainder of the year. However, this is a volatile area which can be very difficult to forecast given the impact of large applications.
I. Salaries – there are additional staffing costs of approx. £120,000. This is mainly due to new posts in relation to the Housing Delivery team, as per the report to the Executive on 26th May 2022, and the additional cost of five agency staff in the Legal team.
J. Pay award – the impact of the proposed employer’s pay offer for 2022/23 of £1,925 on all NJC pay points, is significantly higher than the current budget provision of £185,000 (3%). The proposed pay award will result in additional salary costs of approx. £410,000.
K. Homelessness – It is anticipated that there will be additional expenditure on temporary accommodation over and above what is claimable through the DWP subsidy. This is due to a number of external factors beyond our control,
· the housing crisis and lack of accommodation
· an increased number of properties on Airbnb
· Staycation holidays creating higher demands for hotels in the area and driving up costs
· The Homes for Ukraine Scheme
· More family units presenting as homeless compared to previous years requiring more than one room
· Having to stay longer in the accommodation due to the housing crisis and limited suitable accommodation to move them onto.
L. ICT Support Contracts - There are additional costs in respect of ICT support contracts mainly due to,
· Above inflation increases, e.g. Microsoft Licensing
· Additional costs for new licenses, laptops and accessories due to an increase in the number of users on our network
· The acquisition of remote diagnostics software as a result of the increase in remote working
· Disability Access legislation for the website has required the purchase of tools for monitoring compliance and enhancing access
M. Council Tax Collection income – summons costs recovered in respect of Council Tax and Business Rates are currently anticipated to be 26% down on the 2022/23 budget.
N. Waste contract inflation - the impact of the current rate of inflation for 2022/23 (12.2%) is significantly higher than the current budget provision of £130,000 (3%). This will result in additional contract costs of £180,000 in 2022/23, for the six month period covered under the waste contract. Contract inflation is based on published indices for fuel inflation, wage inflation and consumer price index (CPI).
O. Fuel and utility costs – due to the rise in energy costs and inflationary pressures, additional costs of £190,000 are projected in 2022/23, mainly due to the increase in utility prices.
P. Dartmouth Lower Ferry fleet refurbishment – The annual fleet refurbishment costs are predicted to be £40,000 in excess of the budgeted amount.
3. Other items to be considered in the 2022/23 Budget
3.1 Waste and recycling service – there was a separate report on the 21st September 2022 Executive agenda regarding the service. A report will be presented to the 1st December 2022 Executive meeting on the budget monitoring position of the waste and recycling service, after the Council takes the service back in house on 3 October 2022.
3.2 At Council on 14 July 2022, Members approved the use of £3million from the business rates retention earmarked reserve, to fund the additional costs during the transitional phase of bringing the waste service back in house.
4. Earmarked Reserves
4.1 Budgeted contributions to and from Earmarked Reserve were part of the 2022/23 Budget reports.
4.2 A schedule of Earmarked Reserves is attached at Appendix A, which shows Earmarked Reserves have a projected balance of £13.121 million at 31.3.2023 currently.
4.3 The Council’s level of Unearmarked Reserves currently stands at £2.056 million. The deficit of £54,000 would go into Unearmarked Reserves at the year end, in accordance with normal accounting practice (the Accounting Code of Practice, which sets out that surpluses or deficits at the year end are added to Unearmarked Reserves). This gives a predicted year end (31.03.23) balance of £2.002 million for Unearmarked Reserves.
5. Prudential Indicators
5.1 The prudential code indicators were approved in the Capital, Investment and Treasury Management Strategy report to the Council on 31 March 2022. The indicators are monitored during the year through the normal revenue and capital monitoring processes. All Treasury Management limits have been adhered to.
6. Income and Reserves
Income monitoring is an integral part of financial management. Current income forecasts are as follows: Income monitoring is an integral part of financial management. Below shows the current income (surpluses)/shortfalls already experienced for April 2022 to August 2022. The table also shows the latest 2022/23 projections for the major streams of income.
|
Service |
Deficit/ (Surplus) April – August 2022 £’000 |
Projected Income 2022/23 £’000 |
Income Budget 2022/23 £’000 |
Deficit/ (Surplus)
£’000 |
Deficit/ (Surplus)
% |
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Car Parks |
(183) |
3,442 |
3,162 |
(280) |
(9%) |
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Planning |
100 |
984 |
1,084 |
100 |
(9%) |
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Employment Estates |
(140) |
1,007 |
887 |
(120) |
(14%) |
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Trade Waste |
- |
819 |
819 |
- |
- |
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Dartmouth Ferry |
(108) |
1,017 |
827 |
(190) |
(23%) |
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Recycling |
- |
451 |
451 |
- |
- |
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Business Rates Pooling Gain |
- |
285 |
285 |
- |
- |
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Investment income |
(71) |
500 |
123 |
(377) |
307% |
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Licensing |
- |
201 |
201 |
- |
- |
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Land Charges |
- |
170 |
170 |
- |
- |
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TOTAL |
(402) |
8,876 |
8,009 |
(867) |
(11%) |
7. Management Actions
7.1 The table below sets out the relevant management actions for the revenue expenditure and income variations shown above. It is best practice for the Council to state whether there are any corrective actions that need to be taken for the variances identified in 2022/23.
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Budget variations overspend/ (underspend) |
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£000 |
Management Action |
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Reductions in expenditure/additional income |
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Homelessness Prevention Grant |
(169) |
Additional income of £170,000 has been built into the 2023/24 budget. |
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Member travel, expenses and training |
(30) |
The projected underspend will be kept under review during the year. |
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Car parking income |
(280) |
Additional income of £350,000 has been built into the 2023/24 budget. |
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Dartmouth Lower Ferry income |
(190) |
Additional income of £355,000 has been built into the 2023/24 budget. |
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Employment Estates income |
(110) |
Additional income of £100,000 has been built into the 2023/24 budget. |
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Dartmouth Asset Transfer |
(30) |
A saving of £60,000 will be built into the 2023/24 Budget. |
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Investment income |
(377) |
Additional income of £300,000 has been built into the 2023/24 budget. |
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Increases in expenditure/reductions in income |
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Planning income
|
100 |
Income levels will be kept under close review in 2022/23.
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Salaries |
120 |
This will be kept under close review in 2022/23. |
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Pay award |
410 |
A budget provision of £435,000 has been built into the 2023/24 budget. |
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Homelessness |
90 |
This will be kept under close review in 2022/23. |
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ICT Support Contracts |
70 |
This will be kept under close review in 2022/23. |
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Council Tax collection income |
40 |
Recovery of summons costs will be kept under review in 2022/23. |
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Waste contract inflation |
180 |
A cost pressure of £360,000 has been built into the 2023/24 budget, plus an additional £205,000. |
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Fuel and utility costs |
190 |
A cost pressure of £300,000 has been built into the 2023/24 budget for inflation on all goods and services. |
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Dartmouth Lower Ferry fleet refurbishment |
40 |
A cost pressure of £80,000 has been built into the 2023/24 budget. |
8. Options available and consideration of risk
8.1 At this early stage it is important to note that these forecasts can change over the course of the year. Managers can seek out opportunities to reduce any overspends, whilst considering the risk of any adverse impact on the customer experience.
9. Proposed Way Forward
9.1 Revenue budget monitoring will continue on a regular basis and further reports will be brought to the Executive each quarter.
10. Implications
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Implications
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Relevant |
Details and proposed measures to address |
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Legal/Governance
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Y |
The Council is required to make arrangements for the proper administration of its financial affairs. As part of those arrangements, the Council is under a duty to monitor its budgets throughout the financial year and to take appropriate action to deal with any deterioration in the financial position revealed by the regular monitoring.
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Financial implications to include reference to value for money
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Y |
The report identifies a projected deficit of £54,000 which is 0.5% of the overall budget set for 2022/23 of £10.464 million.
As part of Grant Thornton’s external audit of the Statement of Accounts for 2021/2022, they will assess the arrangements the Council has in place for securing economy, efficiency and effectiveness in its use of resources.
The outcome of Grant Thornton’s work in this area will be reported to Members at the Audit Committee meeting on 24 November 2022.
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Risk |
Y |
1) Budget variances – continual monthly budget monitoring at all levels within the Council ensures early identification of variances. Reporting to the Executive provides an opportunity for Members to identify and instigate remedial action where appropriate. 2) Resource Planning – the Executive takes into account any significant issues when developing the Council’s Medium Term Financial Strategy. These are identified in the Management Actions section of the report (Section 7).
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Supporting Corporate Strategy |
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The budget monitoring process supports all of the Delivery Plans within the Council’s strategic vision, ‘Better Lives for All’. |
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Climate Change – Carbon / Biodiversity Impact |
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A report was presented to Council on 17th December 2020 ‘Climate Change and Biodiversity Strategy and Action Plan update’. The report set out the proposed allocation of the £400,000 in the Climate Change Earmarked Reserve.
A further £200,000 funding for the Climate Change Action Plan was approved by Council on 11th February 2021, as part of the 2021/22 Budget.
Further detail is set out in the Council’s ‘Better Lives for All’ strategy. |
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Comprehensive Impact Assessment Implications |
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Equality and Diversity |
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None directly arising from this report. |
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Safeguarding |
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None directly arising from this report. |
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Community Safety, Crime and Disorder |
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None directly arising from this report. |
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Health, Safety and Wellbeing |
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None directly arising from this report.
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Other implications |
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None directly arising from this report.
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Supporting Information
Appendix A – Schedule of Reserves (Earmarked Reserves and Unearmarked Reserves).
Appendix B – Savings/Additional income schedule
Background Papers:
None.