Agenda item

Financial Recovery Plan - Update Report

Minutes:

Councillors were reminded that, at its budget meeting in February 2023, the Council approved the 2023-24 budget with a £3.3m shortfall which required further work to remove this gap, with the fallback position being the deployment of usable reserves.

The delayed audit of the 2020-21 accounts had identified errors relating to accounting for COVID grants and the Collection Fund, which took place in 2021. These were both sums which were due to be repaid to the Government in 2021-22 rather than sums which were available for use by the Council.  This meant that the level of usable reserves was around £20m less than had been thought when the 2023-24 budget was set.

There had been an overspend of £6.4m on the General Fund budget outturn position for 2022-23, and this had therefore further reduced the sums available to the Council.

An updated Medium Term Financial Plan (MTFP) position had been presented to the Council at its meeting on 25 July 2023, which had set out the key issues and the position in which the Council was now left, which was a remaining in-year deficit of £1.7m and a budget gap of £18.3m over the MTFP period to 2026-27.

The report had therefore concluded that the Council was facing a potential s114 report if actions were not agreed to bring this situation back in to balance by October 2023.

The October report would set out the significant work required to avoid the other potential s114 trigger-point which was the statutory requirement to set a balanced budget in February 2024.

Over the past year, the Council had commissioned several due diligence workstreams to examine the issues identified in more detail. This had been done through a number of expert organisations such as the Chartered Institute of Public Finance & Accountancy (CIPFA), LG Futures, Arlingclose, and Savills, together with additional interim and experienced support within the Finance Team.

This work had helped to clarify the current position and set the baseline from which the Council now needed to work. It had also provided options for the Council to consider. Consideration and then implementation of these options would form an integral part of the Financial Recovery Plan.

The latest work completed was a review of the 2022-23 outturn position and Period 4 monitoring against the revised budget used for the July 2023 MTFP update. This had shown that a number of the key areas of overspend in 2022-23 were continuing in the current financial year and had the potential to take the Council into a far greater in-year deficit than the £1.64m set out in the July 2023 report.

Whilst a fully developed recovery plan would be presented to Council in October, sufficient work had been completed to provide an update report to this meeting. The first issue of the Financial Recovery Plan had set out some immediate actions to help reduce the in-year deficit, the workstreams proposed to aid development of the next MTFP and a work schedule for improvements in the financial procedures and processes within the Council.

The Lead Councillor for Finance and Property, Councillor Richard Lucas, proposed and the Leader of the Council, Councillor Julia McShane seconded the motion to endorse the first issue of the Financial Recovery Plan.

 

During the debate, the following concerns were expressed:

 

·      Whether the Financial Recovery Plan, at this stage, should be “endorsed” given that the implications of certain workstreams were not yet known. 

·      The need for urgency around implementation of the workstreams and securing the necessary savings.

·      The scale of the areas of work described within the financial services workstream to improve the financial governance within the Council.

Having considered the motion, the Council

RESOLVED: That the Council

(1)    endorses the first issue of the Financial Recovery Plan attached as Appendix 1 to the report submitted to the Council; and

(2)    notes that a fully developed plan will be presented to the Council in October 2023.

Reason:

To enable the Council to protect the current level of reserves and to set a balanced budget and a robust Medium-Term Financial Plan.

 

Supporting documents: