Agenda item

This report details the final revenue and capital outturn position for the financial year ended 31 March 2023.These figures will form part of the Council’s Statement of Accounts, which will be presented to the Audit Committee following the completion of the External Audit. The report also presents a summary of debts written off during the 2022/23 financial year in line with the constitutional requirement to submit a report to Cabinet on an annual basis setting out details of all debt written off.

The Chief Finance Officer introduced the report which provided the final revenue and capital position for the 2022-23 financial year. The final position represented an overspend against budget of just over £6million. The budget had included a planned spend of £5million of reserves, so a total of almost £11million in reserves had been used, leaving the Council’s general reserve balance at just over £10million. However, the Chief Finance Officer noted the outturn position was much improved compared to the position forecast in round three.

The Capital Programme outturn final position showed an overspend of just over £1million, however this would be funded primarily from further grant allocations. Irrecoverable debt written off in 2022-23 was £3.2million, which represented less than 1% of the total debt raised in the same period.

The Committee then raised a number of questions and comments, which included:

Psychology and Special Education Needs Service - In response to a question why the service had been overspent by £3.7million when much of the funding came from central government grants, the Chief Finance Officer explained that some areas such as home to school transport were not funded by the government through education grants, and there had been an increase in the volume and costs, such as fuel and this remained a feature going into the current year. The Council was trying to improve capacity to deliver more places for SEND children locally which would reduce transport costs.

A Member asked if it was only fuel and associated costs which caused the 30% overspend on school transport. The Chief Finance Officer noted the contract was renewed mid financial year, so the budget had been based on a projected increase however the contracts were let at a higher cost than anticipated.

Legal and Governance - In response to a question regarding overspend in the division, the Chief Finance Officer highlighted the majority of the pressure related to locums as staff retention was an issue and the cost of locums was significantly higher than permanent staff. There was a plan to improve retention through the Medpay review.

Reserves – In response to a question regarding Council reserves, the Chief Finance Officer explained the £10million was general reserves. In addition there were reserves which were unusable i.e. for accounting purposes, and other sums set aside for specific risks i.e. provisions for bad debt. Medway’s minimum working balance had been set at £5million up to 2018, when the now Chief Operating Officer increased it to £10million in 2019/20. As at the end of March 2022 the Council had held £16.5m above that minimum balance but had used that room to fund 2022/23. The reserve minimum balance was not mandated by government or external auditors but set by the Council.

A Member asked what position the Council would be in if it had an unforeseen cost similar to the recent experience of other Councils. The Chief Finance Officer stated that the Councils who had to date reported to government an inability to balance their budgets had been largely due to failures of governance or poor decision making. Excessive borrowing was a feature of many instances, however Medway operated a prudent approach on treasury matters. She added that more Councils were now struggling due to the cost of statutory services outstripping available funding, so the Council was working with relevant bodies and lobbying government for greater and longer-term resources rather than the one-year settlements which had been received in the recent past.

Future Funding - A member commented that an identified risk to the Council was uncertain future funding and queried what action had been taken to mitigate this risk in terms of grant applications and reviewing how the Council provided services. The Chief Finance Officer stated the Council had looked at what grant funding it could apply for and kept under review all programmes the most economical way services may be provided. Promoting digitalisation was an example of this to reduce the cost-of-service provision.

She added the government had recognised that requiring Councils to competitively apply for grants had not worked well for the sector but whenever the Council had applied for a significant grant it had been initially considered by the Cabinet or Council. In terms of alternative funding models, the Council had a prudent strategy which provided relative stability and ensured it was able to respond to financial shocks. It would be a matter for Council and external auditors to consider whether those commercial opportunities were within the Council’s prudent approach.

Medway Matters - (page 109 of the agenda pack refers) In response to a question how it could be shown how Medway Matters was regarded and that it represented value for money, the Chief Finance Officer undertook to discuss with the Communications Team and answer outside of the meeting.

Waste Facilities - (page 110 of the agenda pack refers) In response to a question regarding monies received from Kent County Council for usage of waste facilities, the Chief Finance Officer noted that Kent previously had no facility nearby for residents bordering Medway, so Kent County Council had paid Medway to enable their residents to use Medway’s facilities and this was additional income. However, Kent County Council had since opened a facility so no longer required the use of Medway’s facility so this income would no longer be received.

The Member asked if there was an analysis of the income and costs of use of the recycling facilities by people from the Kent area, as to whether this could be an opportunity to charge to generate income. The Chief Finance Officer undertook to raise this with the relevant officers in the development of the 2024/25 budget.

A Member commented that this was an example of investing to save monies in the longer term. The Chief Finance Officer agreed that investing to save monies in the future was an aspiration, but it required long term budget planning and had been very difficult when the Council received one-year settlements from central government.

Pentagon - In response to a question the Chief Finance Officer reported the Pentagon did generate income for the Council but this had been at a lower level than had been budgeted. Some spaces on the first floor were not being used whilst the Healthy Living Centre was being developed, meaning the Council was liable for rent and business rates. However on completion, the occupying service would be responsible for those costs and the area would have an important facility.

Irrecoverable Debt - A Member commented that £3.2million was a large amount of irrecoverable debt and asked for detail on the mechanism for earmarking debt as irrecoverable. The Chief Finance Officer explained that the recovery process was different for each type of debt, in some areas there was a court process, sometimes it was not financially viable to recover.

In response to a question on what action the Council had taken regarding housing benefit overpayments, the Chief Finance Officer explained that it was partly dependent on the cause for the overpayment. Where the error had been malicious, the Council had a strong fraud response, however, often people had failed to inform the Council of a change in circumstances quickly and would not be in a position to make repayments. She added that the move to Universal Credit from housing benefit had removed the simple cases, so with more complex caseloads there was a greater degree of potential error.

The Chief Finance Officer commented that in terms of recovery of Business Rates, quite often no business remained to recover the debt, or for Council Tax a judgement must be made of the costs and appropriateness of taking an individual to court to recover those debts.

In response to a question whether the move to Universal Credit had caused the large reduction in Housing Benefit overpayments written off (page 118 of the agenda pack refers) the Chief Finance Officer stated that she could not comment on what proportion related to the Department for Work and Pensions (DWP) managed migration of claimants to Universal Credit and it was too early to judge the impact of the move. However, a significant proportion of Medway’s claimants had been migrated. Previously Councils operated Housing Benefit at nearly a 100% subsidy, but this was no longer the case and local authorities were responsible for a growing proportion of the cost of providing this support.

Decision

a)    The Committee noted the 2022/23 revenue and capital outturn position.

b)    The Committee requested a briefing note and/or briefing session for members on the Council’s reserves.

c)     The Committee recommended that the potential for charging residents from Kent County Council for the use of Medway HWRC facilities be explored in the development of the 2024/25 budget build.