To provide Cabinet with an update on the Council’s financial performance for the year ended 31st March 2017.

The Group Manager-Financial Planning and Budget Management presented a report updating Cabinet on the Council’s financial performance for the year ended 31^st March 2017. A revised appendix 1 to the report was tabled at the meeting which showed the complete tables. 

She informed Cabinet that on10th March 2016, Council approved a net revenue budget of £254.891 million for 2016-17, along with a capital programme for the year of £43.553 million, which was updated in May 2017 to £18.356 million. She reported that the overall outturn at 31st March 2017 was an under spend of £356,000 which had been transferred to the Council Fund, in line with Principle 8 of the MTFS. After including in-year draw down of reserves, directorate budgets provided a net under spend of £2.279 million and council wide budgets a net under spend of £9.612 million. These were offset by the requirement to provide earmarked reserves for a range of new future risks and expenditure commitments.

The Group Manager-Financial Planning and Budget Management reported that the under spend on Directorate net budgets for the year was a result of a number of factors including the maximisation of grant and other income, strict vacancy management and general efficiencies. In addition, directorates drew down £7.751 million in-year from approved earmarked reserves to meet specific one-off pressures identified in previous years, including funding for transformation projects through the Change Fund, funding for capital projects, draw down of school balances, funding for demolition work and service specific one-off pressures.

She explained that the under spend masked underlying budget pressures in some service budgets which were reported during the year and still persisted. The main financial pressures were in the service areas of Looked After Children and Adult Social Care. These budget areas could be volatile and small changes in demand could result in relatively high costs being incurred. As patterns of provision changed within Directorates, service budgets were reviewed and re-aligned accordingly.

The Group Manager-Financial Planning and Budget Management explained that a report was presented to Cabinet on 5th July 2016 on Financial Performance 2015-16. In the report it was highlighted that, of the £11.225 million budget reduction proposals for 2015-16, £2.692 million were not met in full, with a shortfall in the financial year of £1.909 million. The report stated that these proposals would continue to be monitored alongside current year proposals, with mitigating action to achieve them to be identified. The budget approved for 2016-17 included savings proposals of £7.477 million. £2.385 million of these proposals were not realised in full in 2016-17, but the expenditure associated with them had been offset by vacancy management, and other savings elsewhere within the budget. Appendix 2 of the report identified those budget reductions not achieved in full, and shows that of the £2.385 million of proposals not fully achieved, £540,000 was realised in 2016-17, leaving a shortfall of £1.845 million. As such there was still a recurrent pressure on 2017-18 budgets which would need to be addressed by implementing the proposals in Appendix 2 of the report, or identifying and delivering alternatives.

The Group Manager-Financial Planning and Budget Management explained that a summary of the financial position for each main service area was attached to the report and commented on the most significant variances, along with total draw down on earmarked reserves.

The Council was required to maintain adequate financial reserves to meet the needs of the organisation. The MTFS included the Council’s Reserves and Balances Protocol which set out how the Council would determine and review the level of its Council Fund balance and Earmarked Reserves. During 2016-17, Directorates drew down funding from specific earmarked reserves and these were reported to Cabinet through the Monitoring Reports. The draw down was £4.095 million from Corporate Reserves, £2.368 million from Directorate Reserves and £1.288 million in respect of a net movement on school balances.

The Deputy Leader commented that he was pleased that the budget was generally on target and that it had been well explained.

The Leader commended officers on the report and said that an overall underspend had been achieved and this was important with austerity likely to continue. There was no likelihood of the reductions in central government funding to councils coming to an end so stronger reserves were required to prepare for even greater uncertainty in the future.

RESOLVED:            That Cabinet noted the revenue and capital outturn position for 2016-17.