Agenda item

The Committee is asked to review the latest Budget Monitoring report for Period 4 (July 2022) and consider whether it is reassured by the progress made in delivering the budget or whether there are any concerns it wishes to flag. 

The Committee considered a report set out in the supplementary agenda which provided an overview of the latest budget position up to the end of July 2022. This report was included on the agenda to give the Committee the opportunity to scrutinise the delivery of 2022-23 budget.

The Cabinet Member for Finance, Councillor Jason Cummings and members of the Corporate Management Team were in attendance at the meeting for this item.

At the outset of this item the Chair expressed the Committee’s disappointment that the report for this item had not been received until 5pm on the day before the meeting. Although Members had agreed to go ahead with this item, the Committee wanted to formally record its disappointment about the late report. The disappointment of the Committee was accepted, with assurance given that the lateness was an issue of timing and ensuring the report reflected the latest budget position, rather than any reflection of past issues concern financial reporting. 

Further clarity was requested on the implications for the Council’s reserves from the current projected overspend. It was advised that it was possible the amount in both the general fund reserve and earmarked reserves may be higher than originally estimated once the outturn process had been completed on the 2021-22 accounts, although this could not be confirmed at the time of the meeting. Although there had been no decision taken, the allocation of £6.9m to reserves in the 2022-23 budget may be reviewed to take account of the current budget position. It was requested that further commentary on the Council’s reserves be added to future budget monitoring reports.

From the report, it was noted that the current projected income from car parking was significantly below what had originally been forecasted in the budget agreed in March 2022. As such it was questioned how the Council’s forecasting was being improved to reduce the likelihood of similar instances of overestimating happening again.  In response it was highlighted that there were several elements agreed within the budget in March that would not be achieved, which totalled £19m. As well as car parking income, an overspend in the Housing Benefit budget was also a significant contributor to the £19m. At present the budget was projecting a £9m overspend which if not for the unrealised elements totalling £19m would be an underspend.

To prevent a repeat of this happening again, CIPFA was delivering budget training to managers across the Council, along with the Council’s own in-house training. The Chief Executive and the Section 151 Officer held monthly budget assurance meetings, which helped to ensure that there was a firm understanding of the Council’s budget situation. As part of the work on 2023-24 budget, additional resource was being invested into programme management to support the transformation work and the delivery of savings.

As it was advised that the implementation of robust financial reporting processes was still a work in progress, it was questioned how long it was likely to be before budget data could be produced at the touch of a button. It was confirmed that it could be up to two years before an instantaneous budget summary could be produced at the touch of a button. Although the Oracle Fusion finance software used by the Council was a good system, it was recognised that it had not been implemented in the way it should have been. As such additional capacity had been allocated to engage the supplier to review the system with a view to optimising its potential.

In response to a follow up question about why the system had not been rolled out fully when installed, it was highlighted that at the time of installation the Council was having to rebuild its finances following the first Report in the Public Interest and as such resources had to be focussed on ensuring the key basics were in place.

It was questioned how the starting position for setting the budget could be identified with any degree of certainty when the accounts for the past three years were still awaiting closure. It was advised that in the current circumstances, budget setting was based upon the preliminary year end position. Modelling was undertaken to gain a better understanding of potential issues that might be realised during the year. The ‘Opening the Books’ exercise (discussed at the previous Committee meeting on 21 July 2022) was aimed at clarifying the potential risks to the budget.

It was suggested that the work to reduce the in-year deficit could be perceived as taking a piecemeal approach and as such it was questioned whether there were any plans for more substantive, transformation work to achieve future savings. It was acknowledged that the short term approach to reducing the deficit could be seen as piecemeal, as there was a need to work across the Council to find savings that would reduce the budget gap. Longer term savings would mainly be achieved through the transformation of services, with proposals for this to be brought forward in the autumn.

Concern was raised about the £8.5m deficit in the Housing Benefit budget as this report was the first time it had been raised as an issue. It was questioned why it had not been an issue in previous years. It was advised that the issue related to the Council not being able to reclaim from the Government housing benefits paid out on certain types of accommodation. The issue had only been brought to light during the process to close the 2021-22 accounts, which was why it was only now being reported. Work was underway to understand the impact of removing benefits from certain providers and the impact it would have on individuals, but it would be a complex project to resolve.

As a follow up, it was questioned whether there was a risk that any changes made could result in homelessness for individuals? It was advised that given other local authorities also placed people in Croydon, the issue had been raised with the Improvement and Assurance Panel to try to identify a solution with the Government.

Given the meeting had heard that the current projected overspend had been caused by undeliverable savings being included in the budget when it was agreed in March 2022, it was questioned how the process would be different this year to prevent any repetition. It was advised that the training being provided for both Members and officers would help to ensure that there was a greater understanding of the budget setting process and how to deliver robust savings proposals. As part of the work to change the culture of the Council, there was an increased expectation that savings proposals brought forward from services would be supported by data that would be subject to robust challenge.

Conclusions

Following its discussion of this item, the members of the Scrutiny & Overview Committee reached the following conclusions: -

1.     The Committee was frustrated that it had only received the report for this item after 6pm the night before the meeting, inhibiting Members' ability to scrutinise the paper with the attention that it deserves.

2.     The Committee was frustrated that significant work was still required before the Council’s financial reporting processes could be considered to be at an expected standard. The Cabinet Member for Finance’s confirmation that it was likely to be ‘two years’ before an acceptable standard could be met was concerning. However, confirmation that additional resource had been allocated to embedding the Fusion Oracle system was welcomed.

3.     The Committee welcomed confirmation from the Cabinet Member for Finance that there would be a greater emphasis on transformational projects to deliver the savings required in the 2023-24 and looked forward to reviewing these proposals once they were published in October.

4.     The Committee was supportive of the principle of using capital funds for ‘invest to save’ schemes that would benefit the revenue budget in the longer term.

5.     The Committee agreed that a report would be added to the Streets, Environment & Homes Sub-Committee work programme to provide further explanation on the Housing Benefit Budget deficit.

6.     The Committee welcomed confirmation that training on the budget scrutiny process would be commissioned for later in the autumn for both officers and scrutiny members.

Recommendations: -

The Scrutiny & Overview Committee agreed to make the following recommendations for the consideration of the Executive Mayor at the next available Cabinet meeting:

1. The Committee would request that a meeting is arranged with the Improvement and Assurance Panel, as part of the Budget Scrutiny process, to allow the Panel to share its insight on the Council’s budget.
2. The Committee requests that future Cabinet Budget Monitoring reports include: -

a.     An explanation of potential changes to the Council’s reserves

b.     The use of a dashboard in the Executive Summary to provide an easily digestible overview of the budget position.

c.     The estimated financial value when outline risks and other issues in the budget (see para 2.12 in Month 4 report for example).

d.     When income projections are included, actual income figures from previous years should be included for comparison.

e.     In light of being told it will possibly take ‘two years’ to get the Council’s financial reporting systems up to standard, the Committee feels it would be beneficial to monitor how this is progressing through the inclusion of milestone targets that can be tracked.