Minutes:
The Committee considered the undernoted report:
“Relevant Background Information
The Strategic Policy and Resources Committee agreed on 18 June 2010 that:
· The Council would produce financial reporting packs for the Strategic Policy and Resources Committee and each Standing Committee on a quarterly basis
· The Budget and Transformation Panel would also receive monthly financial updates if there were any significant issues to report.
The reporting pack contains a summary dashboard of the financial indicators and an executive summary explaining the financial performance, a copy of which has been circulated. It also provides a more detailed explanation of each of the relevant indicators covering outturn to the second quarter, payment of creditors and recovery of debt. The reporting of procurement compliance to Members as part of the quarterly financial reporting was introduced in quarter 1 of 2012/13.
The style and layout of the financial reporting pack reflects the discussion and feedback arising from the Members’ financial training at the end of September 2010.
Central finance and departmental management teams have worked together to develop the information within the reporting packs.
Key Issues
Current and Forecast Revenue Position for 2012/13
The financial position for the Council at the end of Quarter 2 is a net departmental under-spend of £1.228m (2.1%). The forecast year end departmental position is an under-spend of £1.277m (1.1%), which is well within the acceptable variance limit of 3%.
The key elements of the year to date net under-spend relate to:
· Programming and lead time for Invest to Save projects (£180k)
· Pension costs below half year budget (£101K)
· In Health and Environmental Services, £392k due to delays in commencement of agreed programmes of work and unfilled posts in Environmental Health and receipt of additional income and unfilled posts in Building Control
· In the Development Department, reduced community services transport costs (£129k) delays in recruitment and reductions in the use of casual staff (£103k) and additional net income for Events 2012 (£135k)
There are four main components of the forecast year end position of a £1.27m under-spend. These are:
· A potential under-spend of £200k in the central pensions budget
· A £594k under-spend in the Health and Environmental Services budget due to slippage in the commencement of agreed programmes of work, mainly arising from the delay in establishing Police and Community Safety Partnerships as well as vacancies and unfilled posts and additional income from recyclable materials.
· An under-spend in the Development Department budget of £568k due to vacant posts arising during the structural reviews, reduced transport costs and delays in the commencement of planned projects.
· An over-spend of £350k in Parks and Leisure Services for increased utility costs and reduced external income.
Members should note that efficiency savings in excess of £2.1m will be included in the 2013/14 estimates and this will assist in addressing many of the areas where under-spends have occurred this year
The financial reporting pack contains more detail on both the overall Council position and the financial performance in each of the Committees.
It should be emphasised that the current forecast is made on the basis of the half year position and that there are considerable uncertainties which could impact on the forecast, for example, the level of rates income received. Nonetheless the forecast should be helpful to Members in making financial decisions for the remainder of 2012/13 and in considering the 2013/14 rate setting exercise.
Capital Financing
The capital financing budget is £10.14m and is forecast to be fully utilised at the year end.
The forecast capital financing expenditure of £10.14m is made up of £2.05m to finance existing loans relating to the City Hall, Ulster Hall and Grove Wellbeing Centre projects with a further £7.02m used to finance other committed capital programme projects. The balance of the budget will be used to finance feasibility work to support the Investment Programme (£0.15m) and non-recurrent expenditure works (£0.92m).
Rate Income
The level of rate income received remains a high risk area for the Council, especially given the level of claw back experienced by the Council in recent years, together with the current economic environment and the level of outstanding appeals and bad debt relating to the City. Given these factors the forecast outturn has been maintained at the position reported to members at Quarter 1 of £138k favourable. Officers will continue to monitor this forecast throughout the year and will report back to Committee.
To mitigate the risk of a potential rates claw back, it is recommended that no reallocation of the forecast under spend be made at this stage.
Reserve Movements
It is recommended that the unallocated Waste Fund balance be applied to the following specified reserves, in line with the previous decisions made by the Strategic Policy and Resources Committee (SP&R).
£
Giro d’ Italia 400k
Tall Ships 1,260k
Boxing Strategy 600k
Special Events 64k
Pipe Band Championships 240k
Area Pilots 436k
Total 3,000k
The allocation of the above amounts together with other reserve movements mean that the council is forecast to have year-end Specified Reserves of £4.5m and General Reserves of £13.6m. Members should note that by aligning resources in this way, the burden on the ratepayers is minimised for future years.
Investment Programme
The performance report has been updated to include key financial information for Members on the progress of the Investment Programme.
Committed expenditure approved by the Strategic Policy and Resources Committee for the 3 year Capital Programme stands at £26.7m, leaving £48.3m of schemes within the 3 year programme at the uncommitted or emerging project stage. A separate report, which will be considered at this meeting, provides an update on the physical progress of projects within the Capital Programme.
Committed expenditure on the Local Investment Programme (LIF) projects at Quarter 2 totals £3m, leaving a balance of £2m in the local investment fund. It should be noted that the committed expenditure excludes the expenditure on additional projects approved at SP&R on the 19 October 2012.
The amount of levered external funding for the Investment Programme which has been agreed in principal increased to £16.8m at Quarter 2, with £15.5m of these funds confirmed through letters of offer.
Actual capital expenditure at Quarter 2 was £2.6m with a year-end forecast spend of £10.9m against an annual budget of £19.4m, while non-recurring expenditure is forecast at £0.9m for the year end against a budget of £1.8m.
Better Services: Creditors and Debtors
The average number of creditors paid within 28 days was 70.7% at the end of Quarter 2, which was slightly above the target for the period. As part of the Investment Programme a target of 75% has been set for 31st March 2013. To ensure that this target is achieved a project team has been set up to implement improvement actions during 2012/13. Progress in implementing these improvements will continue to be reported to Members as part of the quarterly financial reporting during 2012/13.
The level of Council debt at the end of Quarter 2 is £3.5m compared to £3.7m at the end of Quarter 2 last year. The Quarter 1 average for debt under 90 days old is 60.4% which is below the target of 65% and 58.2% of debt has been collected within 30 days, against the target of 60%. Staff in the Central Transaction Unit are monitoring those accounts where payment terms have been exceeded and legal action is being taken, where appropriate, to ensure debt is recovered.
Better Services: Procurement Compliance
Procurement compliance refers to purchases that are made in compliance with the Council’s standard procure to pay process. These processes help ensure that our creditors are paid in a timely fashion and our accounts are accurate and up to date. Two compliance indicators have been set for 2012/13 and although these indicators are monitored by management on a monthly basis and from quarter 1 2012/13 are now reported to Committee.
Indicator 1 – compliant purchases. This indicator shows how often goods or services are ordered with a valid purchase order being created prior to the order being placed. A target of 85% was set for this indicator with the council achieving 84% compliance at the end of Quarter 2.
Indicator 2 – timeliness of goods on the system. This indicator shows when goods are received into the council whether they have been marked on the system as received (compliant) or whether the operator has waited for the invoice before marking the goods as received (non-compliant). A target of 65% was set for this indicator for Quarter 2, with the Council achieving 56.5% compliance at the end of the period.
The improvement plan being implemented to increase the number of creditors paid within 28 days will include improvements in both purchase ordering and goods receipting compliance.
Treasury Management
The mid-year report on the council’s treasury management activities and indicators has been circulated for the information of the Members.
Recommendations
The Committee is asked to approve the following recommendations:-
· That the unallocated Waste Fund 2012/13 balance be applied to the following specified reserves, in line with the previous decisions made by the Strategic Policy and Resources Committee.
£
Giro d’ Italia 400k
Tall Ships 1,260k
Boxing Strategy 600k
Special Events 64k
Pipe Band Championships 240k
Area Pilots 436k
Total 3,000k
· That no reallocation of the forecast under spend be made at this stage so as to mitigate against the council’s exposure to the risk of a potential rates claw back.”
The Committee adopted the recommendations.
Supporting documents: