Agenda item

The Committee considered a report that set out the financial monitoring position for six-month period April to September 2019.

The report summarised the projected outturn position for the Council’s general fund revenue account, based on actual and accrued data for this period. Officers were projecting an increase in net expenditure on the general fund revenue account of £568,637, which included a £171,280 reduction in the statutory Minimum Revenue Provision (MRP) charge to the General Fund to make provision for the repayment of past capital debt reflecting a re-profiling of capital schemes and a reduction in the anticipated income received from investments of £336,865.

Appendix 2 to the report showed detailed information for each service split between direct expenditure and income and indirect costs. Officers monitored the projected outturn against the revised (or latest) budget as this took into account any virement or supplementary estimates approved since the original budget was set in February 2019.

At service level, the projected outturn was £403,052 higher than the latest estimate once adjusted for items either funded from reserve or transferred to reserve.

The reported position at month 4 had forecasted an underspend at total service level of £513,802. It had since been discovered that this figure included an underspend against central overheads which was in respect of a year-end accrual that had not been reversed.  The restated position at month 4 was therefore an overspend of £461,677.

A surplus on the Housing Revenue Account would enable a projected transfer of £10.929 million to the new build reserve and the reserve for future capital at year-end.  This had been £4,000 lower than budgeted and reflected modest variations in rental income and repair and maintenance expenditure.

Officers were making progress against a number of major capital projects on the approved programme as outlined in section 7 of the report.  The Council was expected to spend £68.95 million on its capital schemes by the end of the financial year.

The Council’s underlying need to borrow to finance the capital programme was expected to be £43.82 million by 31 March 2020, against an estimated position of £53.35 million, which was due to slippage on both the approved and provisional capital programme, as detailed in the report.

The Council held £114 million of investments and £206 million of external borrowing as at 30 September 2019, which included £192.9 million of HRA loans.  Officers confirmed that the Council had complied with its Prudential indicators in the period, which had been set in February 2019 as part of the Council’s Capital Strategy.

Comments from the Committee included the following points:

·        Whilst there was some concern over the number of void industrial properties, it was noted that many of these had been planned whilst redevelopment took place, for example at Midleton industrial Estate. In other cases, the Council had bought into investment properties on Slyfield that were going to be void for a period of time for refurbishment works in order to get them to a lettable state.

·        In response to a question as to whether there had been an incorrect accrual in respect of the position at total service level compared to the position discussed at the previous meeting, which had forecasted an underspend at total service level; and whether any decisions had been taken based on a forecast underspend which now needed to be revisited.  In response, the Director of Finance assured the Committee that there had not been an incorrect accrual.  Whilst the accrual at year end had been correct, it had not been written out correctly in the current financial year.  No decisions had been taken based on an erroneous forecast underspend at total service level.

·        In relation to town centre management sponsorship, it was noted that whilst the amount of sponsorship achieved had been disappointing compared to the budgeted figure of £190,000, the Director of Finance informed the Committee that the officers had undertaken a review of opportunities for sponsorship and advertising income, the results of which had indicated the potential level of sponsorship income that could be achieved.  The process of securing sponsorship had been slower than had been anticipated.

·        In response to a question as to the point at which the Council decides that the loss in capital value of an investment can no longer be sustained, the Director of Finance advised that investments were analysed and reviewed on a quarterly basis and that this report, whilst showing the change in capital value of an investment, did not show, other than the percentage, was the actual income stream achieved, which could be positive overall.  Investments would normally be given up to three years to establish whether performance was acceptable.  It was suggested that future reports could include an additional column in the relevant table summarising the Council’s investment activity showing income streams.

·        In response to a query regarding the reason for the outturn general fund capital expenditure for 2019-20 being lower than both the revised and originally approved figures, the Director of Finance explained that the reason for the revised figure of £107m was due to slippage from the previous year which had been carried forward into the current financial year.

·        There was further discussion around the extent to which slippage in the capital programme was due to issues around project management. The Director of Finance assured the Committee that the governance around project management had been reviewed as part of the Future Guildford transformation project and a Project Management Office would be responsible for these governance arrangements. The process of reporting, estimating and profiling had improved in recent years.  There was also a degree of political uncertainty in respect of certain major capital projects, which had led to slippage.

·        It was noted that many of the Council’s income streams were down partly due to general economic conditions, for example the reduced car parking income was an indication of footfall being down in the town centre, which was manifesting itself in the number of vacant units in the town as well as feedback from some retailers via the Business Improvement District.  The Director of Finance indicated that it might be necessary to reassess income projections going forward.  

Having considered the report, the Committee

RESOLVED: That the results of the Council’s financial monitoring for the period April to September 2019 be noted.

Reason:

To allow the Committee to undertake its role in relation to scrutinising the Council’s finances.