Agenda item

The Croydon Finance Review - Phase 1 Report update is attached.

Officers present updated Members with an overview of the implementation of the Financial Review Phase 1 Report, which was commissioned in May 2020.

This first phase report reviewed three areas: 1 – Finance planning; 2 – Budget setting; and 3 – Budget monitoring processes and arrangements within the council.

With regards to the arrangements, the CIPFA financial management standards had been mandatorily adopted by local government as best practice standards, with effect from April 2020. The action plan set out alongside the seventy-five recommendations, recognised that it would take time to implement the recommendations and therefore officers prioritised those that were to be implemented quickly. This was how the recommendations were graded as priority 1 to priority 5.

Officers shared that the progress thus far indicated the key issues highlighted in paragraph 3.4 of the report were related to specific areas.

Since October 2020, some of the recommendations had been completed, there were others in progress and some had not been completed, and with the challenges faced, the team had worked very hard on this.

In detail, with regards to the Priority 1 recommendations, there had been improvements in the financial governance and new budget settings processes had been put in place. This followed from the development budget meetings held in autumn and a report would be brought to Cabinet in March 2021.

A lot of work had been done on the medium term financial strategy which was also one of the recommendations that came from the report in the public interest. This set out the proposals to build up reserves over the next three years. The medium term financial strategy also had a contingency budget for both next year and future years, which was important for the organisation in the current circumstances. The council had received support from external advisors like CIPFA to help review the medium term financial strategy, provide feedback, challenge and support. Officers had also reviewed the financial risks of the organisation to ensure that they were reported and monitored monthly and quarterly at the various Cabinet and General Purpose and Audit Committee meetings for more transparency.

Officers highlighted the housing revenue accounts and indicated that the thirty year business plan was to be refreshed, and a new council wide asset management plan was being developed. The capital programme for the next three years was under review, which looked into the in-year capital programme with a view to reducing the capital programme, which ultimately would reduce the council’s borrowing. This item went to Cabinet ahead of the budget setting report in January 2021, where there was discussion on the budget monitoring. Officers advised that they had improved and increased the level of budget monitoring, with all areas due to be reviewed monthly from the start of the next financial year.

Officers also shared that a lot of work had gone into identifying savings. A number of substantial savings had gone into the budget this year, and the budget bill for next year would require even more savings. A tracker system to track all of the savings had been implemented. This would hold senior staff to account and provide an early insight on any risk to delivery or any non-delivery performance.

Members of the Committee welcomed the report and thanked officers for their work in challenging circumstances. The Members discussed the report in detail with comments and asked a variety of questions.

There was a question relating to the number of recommendations that were marked as closed or partially closed based on the Cabinet approval received in July and September 2020. Since there had been changes within the leadership, Members wanted to know whether there was a change within the approach to reopen or examine some of the decision that were approved. Officers informed that there had been ongoing work around setting the budget for 2021-2022 and the review of the capital programme. Though all forward options were reviewed, previous options had not been reviewed under the new Leader.

In a supplementary question relating to closed items, officers confirmed that closed items were thoroughly discussed with other officers before being signed off. They further advised that signing off an action in relation to a recommendation did not necessarily mean the recommendation was implemented as there often may be more than one action to a particular recommendation.

Members reflected on the seventy-five recommendations where some had been completed, some were being progressed and others may had slipped, which provided difficulty in visualising the time scales for success. This was noted by officers.

Members discussed recommendation forty-five and the input council Members in the backbenches of both groups should have to be able to challenge officers with asking the right questions. Officers took note and highlighted that briefings with Shadow Cabinet Members would be arranged for reports to be reviewed in detail so challenging questions could be addressed at meetings.

In regards to recommendation sixty-six, Members asked for further insight to the development, which was not up to standard. Officers informed that this related to high risk budgets and whether they were being scrutinised monthly as a minimum. Though high risks were identified, the analysis around what could be done to manage this was not part of the report. Discussions were held between the Executive Leadership Team and Cabinet, and thus the budget monitoring report would provide further information to assist that process, meaning that the standard was not met.

Members discussed the recommendations, the overall framework for the budget and the implementation of the savings, particularly to actions thirty and forty-one. It was asked what the difference was between what was decided by project management and how the financial systems were monitored, and how cost savings were identified and accounted for by department. Officers informed that the programme officers had designed a tracker where it had been tweaked to cater to the organisation specifically to avoid any duplication. Budget managers would input their forecast and understand the importance of how to forecast inputting the right information for data to be retrieved from the tracker. This had been trialled for implementation for next year. The savings tracker was in an electronic format and managed by the programme management office, the finance team and a responsible officer. Officers further informed that financial monitoring alone would not provide a full picture of the implementation of a particular saving. It provided understanding to the activities happening to support process and identify risk. In regards to the double counting, officers said that as part of the budget setting process the organisation was very much more alert to regularly ensuring balance was in place. 

Members questioned the new processes that helped with the delivery of savings and queried its success. Furthermore, it was questioned whether progress was in line with expectations, and also the impact the change would have on the governance model. Officers agreed that there had been challenging periods, but the organisation now had a greater understanding of its financial position. Although, the council was in a better position than when this work started, there was still more room for improvement. In response to the question about progress, officers informed that by setting expectations it prioritised actions and set deadlines for implementation of tasks where there was considerable progression. In response to the impact of the changes on the governance model and the recommendations and decisions, officers noted that the arrangement would be tweaked within the operation of the organisation should there be a change, though the fundamental principles that applied to the financial management would not change only the decision making which was underpinned by the financial management.

In regards to recommendation forty-four, Members noted that the budget report should only contain saving proposals, and had asked where the evidence was within the budget setting process for clear, achievable and believable path to the benefits realisation. Officers responded that there was a business case that had been challenged and reviewed at the budget development meetings and signed off by the Director responsible in consultation with the finance team. Bigger business cases deemed more risky or challenging had external support for further review. With more scrutiny around this in the future, it would also to be part of the tracker process to hold to hold people to account.

In regards to recommendation forty-six, Members noted the engagement of Corporate Leadership Team for the budget development in regular briefings and asked how there was assurance that a wider leadership team was collectively taking responsibility for the budgets rather than an individual responsibility. Officers informed that at the bi-weekly budget development meetings, the Corporate Leadership Team would be in attendance where several conversations were held (and also within their departmental teams) to work together in delivering cross cutting savings. This was a developmental process which would evolve to more challenging scrutiny within the organisation in the future.

In regards to recommendation fifty-five, Members had noted that budget managers should be held to account for failure to deliver corrective action and asked what impact it would have on the ability to monitor budgets. Officers advised that there was several conversations around holding people to account. Regular monthly monitoring reports (presented at Cabinet meetings) along with the use of the tracker would review the transparency of the savings, overspending in departments and spending control panels. Officers further added that corrective action had been addressed in a controlled way with nearly £29 million pounds worth of corrective action taken during the course of the year to try and bring the budget back within the bounds of affordability; although it was not enough it was a significant amount.

With reference to recommendation twenty-eight, regarding the budget development meetings, Members asked about the challenges and expectations from these meetings. Officers informed that the proposals put forward were tested for robustness and accessibility, though the high level standard of challenge was not met, the services were working towards improving the quality of information at these meetings to provide more robust challenge in future budget development processes.

Members asked for further details relating to EY who had been commissioned to support the medium term financial strategy with an assessment. Officers informed that the scenario based financial resilience assessment was to review and provide guidance for sustainability and deliverance as an organisation. This model stress tested the council’s budget to reflect extreme circumstances to understand whether the council’s finances would hold within those circumstances. It also reviewed the level of reserves that needed to be planned for the medium term financial strategy.

In relation to programme management, Members wanted to understand the process further. Officers advised that transformation projects were treated in the same way as any saving options. For example, with an in-progress activity, the transformation budget would be set aside for the new financial year in April 2021 where officers would be required to bid for the money and produce a business case which would allow the responsible person to be held accountable. These transformation activities and actions would be reported within the programme management officer report as it was to be delivered as part of the 2021-2022 medium term financial strategy holding responsible persons to account. The programme management officer would also manage the response to the report in the public interest and there was a senior level of accountability as part of this process.

The Chair thanked officers for their report.