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Agenda item

Finance Performance Report - Month 7

The Scrutiny and Overview Committee is asked to:-

1.    Note the contents of the Cabinet report considering the Period 7 financial monitoring position and forecasts as set out in the appendices to this report.

2.    Considered whether there are any areas of in need of further scrutiny that should be scheduled for later in the year by either the Committee or one of its Sub-Committees.

Minutes:

The Committee considered the Month 7 Finance Performance Report as set out on pages 15 to 48 of the meeting’s agenda. The report had also been considered by the Cabinet on the previous evening, 6 December 2021. The purpose of the report being included on the agenda was to allow the Committee to identify any areas of concern they may wish to scrutinise in more detail later in the year.

An introduction to the report was provided by the Council’s Director of Finance, Matthew Davis, who confirmed that the budget position for the 2021-22 budget had improved by approximately £1m, with an underspend forecasted of £400,000 at the end of month 7.  There continued to be budgetary pressures that needed to be closely monitored, with a £1.6m overspend in the budget from the provision of support for unaccompanied asylum seeking children (UASC), a £1.8m overspend on temporary accommodation and a £5.6m shortfall from the Council’s Selective Licensing Scheme not proceeding.

There was an underspend in capital budget which included the £50m capitalisation direction that would be transferred at the year end. Another contributor to the under spend in the capital budget was the inclusion of funds for the purchase of housing from Brick by Brick, which had not progressed. The capital budget for 2022-23 was in the process of being prepared and was due to be reviewed through the same Star Chamber process that had been used for the general fund budget.

The Cabinet Member for Croydon Renewal, Councillor Stuart King, supplemented the introduction to the report, highlighting that the Administration had put a lot of effort into working with departments to ensure the Council was living within its means. The Cabinet was confident in the reliability of the forecasted underspend shown in the report, but it was important to continue closely monitoring the potential risks that could have an impact on the final position of the budget.

Following the introduction to the report, the Committee was given the opportunity to question the information provided. The first comment highlighted that it was difficult to identify within the report which services were overspending. It was suggest that for the sake of transparency, future versions of the report should explicitly reference where there were significant overspends within the Council along with commentary to explain the reason for the overspend and how it was being addressed. 

There was concern raised about the overspend for UASC and in light of the Government only providing one off additional funding there was concern about whether the risks and costs were fully understood. It was agreed that this would be picked up by the Children & Young People Sub-Committee when it reviewed the budget for Children’s Services.

As it had been noted at previous committee meetings that a lack of financial discipline across the organisation had contributed toward the financial challenges which culminated in the Section 114 Notice issued in October 2020, it was questioned whether financial control had improved in the past twelve months.  It was advised that the Spend Control Panel had been in place for the majority of the past year and as a result there had been a major decline in the number of requests made for emergency payment. Any emergency payments requested needed to be fully justify before being signed off by the Panel. As such there was a greater degree of reassurance in the financial forecasting, but an absolute guarantee could not be given that there would be no unforeseen costs.

In response to a follow up question about how the financial culture of the Council had changed as a result of the spend control process, it was advised that it was unlikely the Council would revert to its previous way of working once the Panel was discontinued. Emergency payments would continue to require sign-off by the Director of Finance.  There was also work to do with suppliers to communicate the Council’s payment process.

It was highlighted that there had been anecdotal reports of social workers needing to obtain authorisation in order to pay for taxi rides for clients, which if true, would raise concern. It was confirmed that the Council had a number of procurement cards that could be used for this type of situation, but there could be issues if staff were not familiar with the process. It was agreed that the Vice-Chair of the Committee would seek further reassurance on the Council’s financial systems and provide an update at the next meeting.

The Council’s Chief Executive provided reassurance that the Corporate Management Team (CMT) held regular discussions about how to ensure staff followed the financial controls. It was important that the members of CMT modelled these controls and cascaded them down through the organisation.

It was highlighted that the number of senior vacancies within the Housing service was a concern which would need to be monitored, but it was noted that reassurance had been given at the Cabinet meeting that this was in the process of being addressed.

As the release of a covid grant was a significant contributor to the improved budget position, reassurance was sought that this had been allocated correctly and was unlikely to be questioned when the accounts were audited. It was confirmed that the grant had been announced by the Government in December 2020 for covid related costs and to date £3.4m of these costs had been identified. At this stage there had been no further covid related costs identified and any portion of the grant not used would be held in the Council’s earmarked reserves for future use. Given the Government had provided the grant without restrictions on how it could be used, there was no risk that it would be found to have been allocated incorrectly.

Given the capital programme was underspent, it was questioned whether this was an ongoing historic issue and whether there were any significant risk from the under spend. It was confirmed that it was not uncommon for Council’s to be under spent in their capital programmes as the projects being funded often ran over a number of years. In order to successfully deliver the capital programme the Council needed to have the right structure in place with clear short, medium and long term objectives, and a comprehensive understand of the assets held. A further report on the Capital budget was due to be brought to the next meeting of the Scrutiny and Overview Committee before consideration by Cabinet later in the month.

Further information was requested about how decisions were made on resizing budgets and growth items. It was explained that services had to supply a bid sheet when submitting a growth bid which explained why the growth was needed. The process also required clarification about any underlying pressures to ensure these had been accounted for. There was remained a concern amongst the Committee about process for considering growth item and as such it was agreed that further reassurance would be sought outside the meeting.

Following the Committee’s discussion of the information provided it was concluded that the process for delivering the budget had significantly improved from previous years. There was also reasonable reassurance that the budget was on track for delivery and an awareness of the potential risk to that delivery, which were being monitored.

 

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