Home > Agenda item

Agenda item

Financial Performance Report - Period 10

Cabinet Member: Cabinet Member for Croydon Renewal, Councillor Stuart King and Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Director of Finance, Investment & Risk, Chris Buss

Key decision: no

Decision:

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

 

RESOLVED: To

 

1.    Note the net projected general fund financial overspend of £69.1m for the full year as at the end of Month 10, January 2021 which includes all projected COVID-19 related expenditure and income of £40.9m, a net increase of £4.4m from  Period 9, see section 5 of the report. 

 

2.    Note that a number of risks may materialise which would see the variance increase. These include dividends and interest receivable from Brick By Brick (both historic accrued and in-year expectations) of £20.5m, and pending external audit verification of assumptions around 2019/20 accounting treatment of MRP and Transformation funding that could impact by £6.0m. Should all these risks which total £26.6m materialise, which is unlikely, the impact on the current forecast overspend of £69.1m is an increased overspend to £95.7m, with draft general fund reserves of just £7.4m.

 

3.    Note, the above figures are predicated on forecasts from Month 10 to the year end and therefore could be subject to change. Forecasts are made based on the best available information at the time.

 

4.    Note that the Spending Control Panel which was set up at the beginning of November 2020 continues to meet on a daily basis.  Further details on the outputs of the SCP is provided within section 5 of the report.

 

5.    Note that ELT are to continue to take further immediate action to mitigate spend during the reminder of the financial year, and work with their departments to ensure forecast figures are thoroughly reviewed.

 

Minutes:

The Cabinet Member for Croydon Renewal stated that there had been a recognition across the council that there was a need for much greater rigour in terms of financial management which included the frequency with which Cabinet received and interrogated financial reports. To that end, the Cabinet Member informed Members that the report was the first on the monthly reports which would be taken to Cabinet meetings setting out the council’s financial position. It was noted that the report before Cabinet related to month 10 of 2020/21, which set out the council’s position at the end of January 2021 and followed the Quarter 3 report, which ran to month 9, which was considered in March 2021.

 

The Cabinet Member highlighted that there had been movement in the confirmed overspend to £69.1 million with detail behind the change being detailed within the report. It was further noted that there had been a net improvement of £1.4 million in departmental spend.

 

It was noted that this report set out the positive impact of the Spend Control Panel in managing spending within the council, however the Cabinet Member stated that he felt the Panel should not only ensure spend was authorised and the appropriate budget was in place, but should begin to challenge whether the spend was necessary as it was stressed that whilst a budget exists it did not mean it needed to be spent.

 

The Cabinet Member concluded by highlighting the current costs of Covid-19 to the council which had increased by £4.4 million to overall cost of £40.9 million. As such, the pandemic remained a significant and ongoing financial challenge.

 

The Cabinet Member for Resources & Financial Governance noted that the reduction in departmental spending of £1.4 million marked the council turning a corner, in a small way, but it was stressed that it was important that the Spend Control Panel continued to deliver. The report outlined over £8.1 million of expenditure had been rejected by the Panel and the Cabinet Member stated that he felt that going forward it would be beneficial if this was given context and that HRA (Housing Revenue Account) expenditure was separated.

 

The Interim Director of Finance, Investment & Risk (Chris Buss) confirmed that while a budget is given it did not mean it had to be spent and he felt that it was a cultural change which was required within the organisation to support it living within its means going forward. The Interim Director advised that it was taxpayer’s money which was being spent and, as such, should only be spent when necessary. It was felt that the lesson was beginning to be understood and was becoming part of the culture of the council, but it was recognised that it would take some time before it was fully embedded.

 

The Leader stated that she felt that it was positive move that monthly financial reports had started and that there had been some movement in departmental spending.

 

The Cabinet Member for Families, Health & Social Care (Councillor Janet Campbell) queried whether there was a particular area of the council which was following bad practice in terms of raising purchase orders following receiving the product and whether this was due to problems within the system. In response, the Interim Director of Finance, Investment & Risk advised that the council had got itself into bad practice and that there was no department which was particularly worse than others. Members were advised that good practice was to assess whether the service needed to be ordered, consider the procurement options and have the paperwork in place before service was delivered. Raising purchase orders appropriately was noted to be an element within good organisations.

 

The Cabinet Member for Culture & Regeneration (Councillor Oliver Lewis) welcomed what he felt were the green shoots of recovery within the council but queried whether any areas of the council which were causing concern and required additional attention going forward. The Interim Director of Finance & Resources advised Members that a report was being drafted which looked at the issues which may exist with regard to the delivery of required savings.

 

The Interim Chief Executive (Katherine Kerswell) confirmed that all directors were looking at the 2021/22 savings plans and part of the conversation with services was assessing preparedness and the risks to delivery of the savings. Additionally the expectation that services would be delivered to budget or below was being made clear and that income was generated. It was recognised that there were still a number of unknowns in terms of the impact of covid-19 which would be important to the delivery of budgets. Members were advised that savings, budgets and income were all being carefully monitored.

 

In terms of specific concerns, the Interim Chief Executive advised that it was in terms of the adult and children social services saving plans and ensuring the high standards of care were maintained whilst reducing spend to as close as possible to the London average.

 

It was noted that table four of the report included £8.1 million of rejected spend by the Spend Control Panel, and the Cabinet Member for Communities, Safety & Business Recovery (Councillor Manju Shahul-Hameed) queried whether there was a risk that those requests would return and be approved. The Interim Director of Finance, Investment & Risk advised that the majority of those items were unlikely to come back and cause issues to 2020/21 accounts. It was noted that the number of items rejected by Directors before reaching the Spend Control Panel was unknown, but it was felt that it was positive that the message that such spending would not be approved was being heard.

 

In response to queries from the Cabinet Member for Resources & Financial Governance the Interim Director of Finance, Investment & Risk advised Members that future reports would not include the HRA, Pension Fund and Coroner’s Court as that expenditure was not subject spend controls; but it was stressed that they should be subject to the same governance principles which was to spend only when needed.

 

The Cabinet Member for Homes (Councillor Patricia Hay-Justice) noted that table four included the HRA and welcomed the HRA being subject to the same restrictions as the rest of the council to ensure spending was controlled. She further queried whether there was an indicative financial impact of the third lockdown as she noted that the impacts of the first and second lockdowns were reported.

 

In response, the Interim Director of Finance, Investment & Risk advised Members that a monthly return was submitted to MHCLG in terms of the impact of the pandemic on the council’s spending and it was reported that in the couple of months prior to the meeting there had not been a significant change in impact. The Interim Director stated, however, that he was not able to give an accurate indication of the impact.

 

Following on from the Interim Chief Executive’s concerns, the Cabinet Member for Children, Young People & Learning (Councillor Alisa Flemming) provided details of the mitigations which were in place to support driving down social care costs whilst maintaining good levels of care. It was noted that the departments were working closely with finance colleagues to undertake benchmarking. Work was also being undertaken with the Children’s Improvement Board, the Children’s Safeguarding Board and the Local Government Association (LGA) to understand the hidden harms faced by adults and young people during lockdown and the support which was required which could be provided within the financial envelope provided.

 

The Shadow Cabinet Member for Croydon Renewal (Councillor Jason Cummings) expressed surprise that Cabinet Members were suggesting that change had taken place when the council’s financial position was reported to have worsened by £4.4 million. It was noted that one of the issues raised within the Report in the Public Interest was the council’s position in terms of overspend and available resources. In light of this, concerns were raised that should all the identified risks materialise then the councils reserves would be used, including £20 million budgeted contribution to reserves, which would lead to the council being unable to balance a budget once more and questions were asked as to what would happen should the risks materialise.

 

In response, the Leader noted that part of the change in position was in anticipation that risks would crystallise and she confirmed that the council was closely monitoring and anticipating risks. The Cabinet Member for Croydon Renewal thanked the Shadow Cabinet Member for his challenge but noted that the net position of the council from month 9 to month 10 saw an improvement of £800,000. Whilst the overspend had increased, due to the Interim Director of Finance, Investment & Risk assessing the risks and moving them to overspend as they had crystallised. It was stressed that it was important that the Interim Directior expressed his view on risks. 

 

The Cabinet Member felt that it was important to recognise that it appeared that change was being made as it was felt that improvement had been made between months 9 and 10 when looking at overspend and identified risks. It was noted by the Cabinet Member that he had seen an indicative month 11 report which he suggested showed further improvements at the departmental level. Whilst it was felt that improvements were being made the Cabinet Member stressed that the Administration was not becoming complacent, rather than an element of delivering cultural change was to recognise when progress had been made.

 

The Leader added that as part of the work to ensure the organisation was ready for the 2021/22 financial year that important conversations had taken place across the organisation to reflect upon it being everyone’s responsibility to engage with the work being undertaken and to deliver the budget that had been set.

 

It was noted by the Shadow Cabinet Member for Resources & Financial Governance (Councillor Simon Hoar) that risks of £26.6 million to the council remained, principally from Brick by Brick, whereas the previous leadership of the council had suggested that it would be unlikely that Brick by Brick would financially impact the council. Concerns were raised in terms of the governance of the company and any assurance assessment. In response, the Leader stated that over the previous five months there had been a clear examination of the arrangements with Brick by Brick and other council owned bodies, including an external review of governance arrangements.

 

The Interim Director of Finance, Investment & Risk advised Members that it would be difficult to give audit assurance as the accounts had not been audited by the council. It was noted that the 2019/20 accounts had been recently audit by an external party and were publically available. In terms of the impact of the Brick by Brick outstanding debt, the Interim Director advised that this would be dependent on the outcome of work being undertaken by the council’s external auditors in relation to Fairfield Halls. Whilst it was not possible to give any figures with any certainty, it was suggested that a substantial proportion of the interest owed to the council would be paid back.

 

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

 

RESOLVED: To

 

1.    Note the net projected general fund financial overspend of £69.1m for the full year as at the end of Month 10, January 2021 which includes all projected COVID-19 related expenditure and income of £40.9m, a net increase of £4.4m from  Period 9, see section 5 of the report. 

 

2.    Note that a number of risks may materialise which would see the variance increase. These include dividends and interest receivable from Brick By Brick (both historic accrued and in-year expectations) of £20.5m, and pending external audit verification of assumptions around 2019/20 accounting treatment of MRP and Transformation funding that could impact by £6.0m. Should all these risks which total £26.6m materialise, which is unlikely, the impact on the current forecast overspend of £69.1m is an increased overspend to £95.7m, with draft general fund reserves of just £7.4m.

 

3.    Note, the above figures are predicated on forecasts from Month 10 to the year end and therefore could be subject to change. Forecasts are made based on the best available information at the time.

 

4.    Note that the Spending Control Panel which was set up at the beginning of November 2020 continues to meet on a daily basis.  Further details on the outputs of the SCP is provided within section 5 of the report.

 

5.    Note that ELT are to continue to take further immediate action to mitigate spend during the remainder of the financial year, and work with their departments to ensure forecast figures are thoroughly reviewed.

Supporting documents: