A4 Executive Decision Report Decision maker and Leadership Team 15 July 2020 date of Leadership Forward Plan reference: 05672/20/K/A Team meeting or (in the case of individual Lead Portfolio: Cllr Mary Weale, Lead Member Member decisions) the for Finance and Customer Delivery earliest date the decision will be taken Report title 2019/20 Financial Outturn Reporting officer Mike Curtis – Executive Director Resources Key decision Yes Access to information Public classification 1. EXECUTIVE SUMMARY General Fund Revenue Position 1.1. The overall position on services is a small overspend of £143,000 (including Grenfell). In addition, there is an underspend of £10.4m on corporate items, of which £3.8m is due to the full implementation of the Treasury Management Strategy and increased investment income which has been reported for most of the year. This is a one-off underspend and budgets have been adjusted for 2020/21. The remainder relates to the corporate contingency and the provision set aside for the pension fund liability which has not been required during the year. Further details are set out in paragraph 5.2. 1.2. After the proposed transfer of the £11.3m to earmarked reserves, the Council will maintain its General Fund working balance at £10m. This £10m is in line with what is agreed in the Council’s Medium-Term Financial Strategy and reserves policy. General Fund Capital Programme 1.3. The total original General Fund Capital Programme budget in 2019/20, including budget carried forward from the 2018/19 was £163.066m. During the first three quarters of the year, there was a total variance of £91.249m giving a current budget of £71.817m. The General Fund Capital Programme outturn position 1 shows total expenditure of £47.776m, a further variation of £24.041m. Of this, £23.535m will be re-phased and relates to spend that will now be incurred in the financial year 2020/21 and £506,000 has been identified as a net underspend on required expenditure. Leadership Team is asked to agree these changes and that the 2020/21 Capital Programme be amended to reflect amounts re-phased. 1.4. The Council has recognised the recurring issue of rephasing spend year on year and the need to review the governance around the capital programme. During 2019/20, the Council commissioned an external review of the processes and governance arrangements for capital investment across the borough. Officers are currently implementing the Action Plan arising from that review during the course of 2020/21, which will introduce measures to address the reasons for the large levels of slippage incurred in recent years, improve accuracy of budgets, monitoring and scrutiny of delivery and timely delivery of projects. Housing Revenue Account Revenue Position 1.5. Overall, at the end of the year there was a drawdown of £7.156 million against the HRA Working Balance, taking the balance to £7.5 million. This compares to a budgeted working balance of £16.4 million. The main reasons for the variation relate to repairs, energy costs and the charging to revenue of expenditure on the former redevelopment at Treverton. Full details are set out in Section 8. Housing Revenue Account Capital Programme 1.6. The total capital budget for the HRA was originally set at £37.79m. This was revised during the year to £17.379m to reflect the content of the new HRA Business Plan approved at Full Council in March 2020. Expenditure in the later months of the year was higher than anticipated, resulting in an overspend of £1.963 million against the revised budget. However, these costs will be contained within the overall 7-year capital budget which has been set for the HRA. Full details are set out from Section 8. 2. RECOMMENDATIONS 2.1. The Leadership Team is recommended to: a. Note the provisional outturn position for the General Fund (Table 1) of a net underspend of £11.3m before proposed transfers to/from reserves. b. Approve the carry forwards and transfers to/from reserves as detailed in section 10 of the report, of which £24.2m transfers from and £1.5m transfers to had been previously agreed by Leadership Team through the 2019/20 budget setting report and 2019/20 in year monitoring reports. For completeness, a full listing of these reserve movements and an additional request of £12.9m transfers from and £30.7m transfers to reserves as part of the year end process are detailed in Appendix 2. 2 c. Note the actions which the Executive Director Resources as Section 151 Officer has taken under delegated authority to close the accounts, which includes: ensuring that the working balance is kept at the target level of £10m at 31 March 2020 as set out in the Medium-Term Financial Strategy; transferring £381,000 to the Car Parking reserve after financing eligible revenue expenditure that can be legitimately financed by parking income; and transferring the remaining underspend of £10.9m into the budget stabilisation reserve. d. Note the outturn position on the 2019/20 General Fund Capital Programme of £47.776m and agree the proposed re-phasing of budget to the 2020/21 Capital Programme. e. Agree that the identified net underspend on the General Fund Capital Programme of £506,000 is transferred to the Capital Contingency increasing the balance to £5.949m to set against any future additional requirements on the programme. f. Note the outturn position of an in-year deficit of £7.2m on the HRA revenue budget g. Note the outturn position on the 2019/20 HRA Capital Programme of £19.342m and agree the proposed re-phasing of budget from the 2020/21 Capital Programme. h. Delegate to the Executive Director Resources authority to agree any required adjustments for the final position to be reflected in the final 2019/20 Statement of Accounts. 3. REASONS FOR DECISION 3.1. The Council is, under statute and regulation, required to close the 2019/20 accounts and publish them by 31 August 2020. This statutory deadline has been delayed due to the Coronavirus pandemic, but the Council published its draft accounts as planned by 30 June. Leadership Team are required to note the outturn position and agree any transfer to and from reserves and the details are set out in this report. 4. BACKGROUND 4.1. There are a number of key financial processes and reports in each financial year. In July 2018, the Council updated its Medium-Term Financial Strategy including 3 the Capital Strategy. This informed the development of service plans and capital project plans through the remainder of the year to inform the budget setting report in March 2019, including the Capital Programme. On 6th March 2019, Council agreed the 2019/20 revenue budget and Capital Programme. The Council then regularly monitors performance through the year against these budgets, including projections for the remainder of the year to enable corrective actions to be developed and agreed. Once the financial year has ended, accounting processes are completed to close the accounts and develop the outturn position to review performance for the full year and agree final adjustments through reserves to account for under/overspends in each service area. This is the outturn report for the year 2019/20 which ended 31 March 2020. For further guidance in understanding the report please refer to Appendix 1. 4.2. As a result of COVID-19, Government extended the deadline for publication of 2019/20 draft accounts from 31st May to 31st August and the deadline for completion of audit from 31st July to 30th November 2020. 4.3. The accounts for 2019/20 are closed and the draft 2019/20 Statement of Accounts signed by the Executive Director Resources submitted to the external auditors, Grant Thornton. 4.4. The external audit has begun and the accounts are expected to be approved by the Audit and Transparency Committee at their September meeting. Any significant changes will be set out in a report to the Audit and Transparency Committee and will be copied to all Council members. 5. PROPOSAL AND ISSUES General Fund Revenue Outturn 5.1. The revenue outturn position for 2019/20 for net expenditure on services was an overspend of £127,000 (excluding Grenfell) after the proposed application of reserves and an underspend of £10.4m on levies and corporate items - such as the centrally held contingency, the provision for the pension fund liability, increased investment income and lower borrowing costs through treasury management. 4 Table 1 – General Fund Revenue Outturn 2019/20 Directorate Budget Outturn Net cont. Use of Adjusted Variation to/from Contingency Outturn reserves £'000 £'000 £'000 £'000 £'000 £'000 Adult Social Care and Public Health 35,613 35,454 (442) 0 35,012 (601) Children’s Services and Education 32,474 34,222 (408) (66) 33,748 1,274 Environment and Communities 5,920 5,501 (235) 0 5,266 (654) Housing and Social 6,555 6,205 612 0 6,817 262 Investment Grenfell - Corporate 14,650 17,623 (2,046) 0 15,577 927 Resources and Customer Delivery 54,408 58,075 (4,346) (402) 53,327 (1,081) Total Service Expenditure 149,620 157,080 (6,865) (468) 149,747 127 Grenfell – Recovery 12,000 10,570 2,047 (601) 12,016 16 Total Service Expenditure 161,620 167,650 (4,818) (1,069) 161,763 143 (including Grenfell) Total Levies and Corporate Items 25,061 13,341 230 1,069 14,640 (10,421) Use of Reserves (22,612) (12,965) (11,147) (24,112) (1,500) Resourcing (164,069) (179,312) 15,735 (163,577) 492 Total 0 (11,286) 0 0 (11,286) (11,286) Transfer to/from reserves 5 Parking Reserve 381 Budget Stabilisation 10,905 General Fund - Deficit/Surplus 5.2.