Agenda item

The Scrutiny & Overview Committee is presented with the latest Financial Performance Monitoring report (Month 3 – June 2023) for its information. The Committee is asked to: -

1.    Review the information provided in the report on the Month 3 Financial Performance Report, and

2.    Consider its conclusions on the latest budget position for 2023-24

3.    Consider whether there are any recommendations to bring to the attention of the Mayor.

The Committee considered a report on pages 47 to 82 of the agenda that provided an overview of the latest budget position for 2023-24 up until the end of Month 3 (June 2023). This report was included on the agenda as part of the Committee’s ongoing scrutiny of the delivery of 2023-24 budget.

The Chief Executive, Katherine Kerswell, Corporate Director for Resources & Section 151 Officer, Jane West, Director of Finance, Allister Bannin, Assistant Chief Executive, Elaine Jackson and Corporate Directors Nick Hibberd, Debbie Jones and Annette McPartland were in attendance for this item at the meeting.

During the introduction to the report, the following points were noted: -

• The budget for 2023-24 was only balanced due to the £63m capitalisation request being granted by Government.
• It was predicted that the budget shortfall next year would reduce to £38m, which would then be needed to be found each year on an ongoing basis.
• To stay within budget for this year, the Council must deliver £33m of savings, which was the highest level of savings needed within the London boroughs.
• Two directorates, Childrens and Adults Service, have flagged that their activity rates have continued to increase which means it possible that there would be an overspend in this area.
• However, a balanced budget was still predicted as other directorates were forecasting an underspend which would help to reduce the identified overspend alongside used of the corporate contingency fund.
• The Housing Revenue Account (HRA) was forecasting a £3.8m overspend due to the additional work required to address the missed repair back log, the work to improve void turnaround times and higher legal fees than budgeted for linked to disrepair cases.

It was highlighted that a report was due to be considered by the Executive Mayor at the Cabinet meeting on 27 September 2023 that requested the allocation of additional funding for a project aimed at maximising the functionality of the Oracle system used by the Council for finance and HR processes. Reassurance was sought by the Committee about the potential impact of the issues highlighted in the Cabinet report and whether there was a risk to the accuracy of the financial reporting of the Council. It was advised that the issues with the Oracle system were mainly inefficiencies related to staff time and not related to data accuracy. There was a specific issue related to integration with the new NEC Housing system, which was having an impact on accuracy within that specific area, but it was an identified risk and being managed accordingly.

Given media reports about the cost of fixing the Oracle system at Birmingham City Council, reassurance was sought about the cost of the improvement work in Croydon. It was advised that it had been estimated the project would cost between £2m to £5m, with it more likely to be delivered at the lower end of the estimate. The system was already in place and the Council would not be buying any new modules, instead the project was aimed at maximising the functionality of the existing system. One of the main workstreams for the project would be focussed on business change to ensure staff were getting the best use out of Oracle and able to use it fully. 

It was confirmed that the total corporate contingency fund was £5m, which had been agreed as part of the Budget by Council in March 2023. At present, the month 3 forecast was predicting that £4.5m of the corporate contingency fund would be allocated to offset against overspends elsewhere within the budget.  It was noted that the allocation of the corporate contingency fund had increase from £3.8m in month 2 to £4.5m in month 3, with concern raised about what would happen if the limit of this contingency fund was exceeded. It was advised that there was a view across the directorates that the currently forecast overspend would be corrected and budget holders were being regularly challenged by the Corporate Management Team on this. If the overspend exceeded the £5m in the corporate contingency fund, it would require the use of reserves to balance the budget. If the budget overspend reached the point where there was a need to use reserves, it would be escalated to Executive Mayor and Cabinet and there would be a corporate wide approach to finding a solution.

There was concern raised about how the restructure within the Homelessness service would impact upon budget savings in the current year. However, it was confirmed that any savings resulting from the restructure had not been factored into the 2023-24 budget. The primary driver for the restructure was to provide a better service which would lower demand and as a result reduce waiting lists.  Additional agency staff had been brought into the service to help clear backlogs and to ensure the new structure was launched successfully.

Regarding the overspend within the Childrens service, it was asked whether there was any reassurance that the budget overspend could be corrected, in light of increasing staff costs and service demand. It was acknowledged that an increased demand for services was not unique to Croydon and was an issue across the country, with the report provided additional commentary to explain the pressures the service was experiencing related to a small number of high cost placements. The month 3 report provided a projection of the cost of these placements if they were kept in place for the whole year, but if circumstances changed these costs may be reduced. Officers were working with regional and national groups to highlight the challenges facing social care and the market was being increasingly monitored by Ofsted.

It was confirmed that the £3.8m projected overspend within the Housing Revenue Account (HRA) was in part related to the need to address a backlog of repairs and maintenance that had built up under the previous responsive repairs contract. In August 2023 the Council had appointed three new contractors to manage it responsive repairs service and they were currently working through this backlog. It was envisaged that although there may be further increases, costs were expected to plateau once the backlog had been addressed. The HRA had reserves of approximately £50m, which could be used to address the potential overspend in the current year, if needed.

It was questioned whether staff vacancies within the Sustainable Communities directorate were being used to offset the lower than expected income. It was highlighted that Sustainable Communities was the largest directorate in the Council with approximately 400 staff. There were a number of vacancies across the service, some of which were vacant due to recruitment difficulties and others were being held back for transformation purposes.

At the conclusion of this item, the Chair thanked the officers for their attendance at the meeting and their engagement with the questions of the Committee.

Actions

The Scrutiny & Overview Committee agreed the following actions arising from their discussion of this item: -

1. The Committee agreed to keep a watching brief on the Oracle Project, subject to its agreement by the Mayor in Cabinet on 27 September 2023, and that a deep dive on the outcome of the project would be scheduled when appropriate.
2. That a briefing would be arranged with the Director of Finance on Finance Performance Monitoring reports.

Conclusions

Having reviewed the report and the information provided at the meeting, the Scrutiny & Overview Committee reached the following conclusions on the Period 2 Financial Performance Monitoring report: -

1. The Committee agreed that it welcomed the honesty and openness of officers in response to their questions on the financial position of the Council.
2. The Committee was concerned about the projection that a significant proportion of the corporate contingency fund would be needed to balance the forecasted overspend within the budget and agreed that it would keep this under review.
3. The Committee welcomed confirmation that the inclusion of percentage variance would be added to future monthly reports from month 6.