To consider the Council’s financial outturn report.  

1.      That the General Fund outturn for 2016/17, the financing of the capital programme and the annual treasury management report and performance be NOTED.

2.      That the transfers to and from earmarked reserves be APPROVED.

8.1             The report of the Head of Finance and Asset Management, circulated at Pages No. 18-40, highlighted the Council’s financial performance for the previous year and asked Members to consider the general fund outturn for 2016/17, the financing of the capital programme and the treasury management report and performance, as well as to approve the transfers to and from earmarked reserves.

 8.2            The Head of Finance and Asset Management explained that the report before Members represented the financial position for 2016/17 and included five parts: the general fund and revenue outturn; the Council reserves; the capital programme; treasury management; and performance indicators.

8.3             In terms of the general fund outturn position for the full year, there was a deficit of £86,520 which represented a negative variance of 0.93% against the full year budget. Although no deficit was a satisfactory outcome, the Head of Finance and Asset Management was pleased to report a significantly reduced deficit and a close to break-even position for the Council for the whole financial year. He felt that this was particularly encouraging given the challenging financial position of local government and a number of significant external factors which had adversely affected the Council’s budget position such as losses on retained business rates. Table one at Page No. 20 of the report set out the overall position which showed that, if the business rates element was removed, the Council would have been in a surplus position. However, one of the other main reasons for the overspend was employees which was largely as a result of the requirement to bring in interim staff to cover vacancies and sickness. Additional staff had also been employed to meet service requirements and to fulfil the requirements of grant funding received. In addition, provision had been made to meet redundancy and pension payments which had been agreed as part of the management restructure. The overspend in supplies and services was in relation to the expenditure associated with running elections and referendum on behalf of the government; the financing rules meant that this had to be shown as an overspend because it was unbudgeted at the start of the year even though corresponding additional income had been received to finance the expenditure. There was a similar position in relation to One Legal as it recovered all money from clients – that overspend was shown under ‘payments to third parties’. Transfer payments related to the administration of housing benefit on behalf of central government – the outturn position showed a small increase in the quantum of housing benefit paid out during the year to claimants across the Borough but was offset by additional income through the housing benefit subsidy. In terms of income, targets had far exceeded expectation throughout the year – external income had boosted the overall position but this had also been helped by solid income streams in a number of areas with improved recovery of housing benefit subsidy having had a major impact. Commercial and treasury income had been boosted in the last quarter by the net income following the acquisition of a commercial investment property in Tewkesbury. Appendix A set out the position by service grouping and included notes about significant variances of over £30,000. In terms of business rates, the Head of Finance and Asset Management explained that the Council remained in a safety net position and as such would still not be re-joining the Gloucestershire business rates pool. The revaluation of doctors surgeries and subsequent backdating of refunds to 2010 had had the biggest single impact on the Council in the year; although there had been many more successful appeals that had contributed to its losses.

8.4             Appendix B to the report set out a breakdown of the Council’s reserves as at 31 March 2017. The reserves were grouped under strategic headings so as to provide Members with a better understanding of the actual intended use of the monies set aside. It also included a breakdown of the previous year’s reserves for comparison purposes. The total revenue reserves of the Council were £8.04 million as at the end of March 2017 which included earmarked reserves, planning obligations and the general fund working balance. The reductions in overall revenue reserves totalled £1.79 million and could largely be attributed to the movement on the business rates reserve which was a technical reserve held for timing differences between the collection of business rates and payments of the central share to government.

8.5             In terms of the Council’s capital programme, the Head of Finance and Asset Management indicated that this had been substantial in the last few years and this was highlighted in the level of capital expenditure which had been incurred in 2016/17. The bulk of the expenditure had been on the purchase of an investment property and the new waste vehicle fleet. The capital programme had included over £15.5 million which had been invested in the Council’s land and buildings with the final instalments on the new leisure centre and the purchase of an investment property. As the purchase had only been carried out in the autumn a large variance was reported against the original budget for the capital programme which had been projected before the start of the year. An underspend of £478,000 was reported against vehicles and equipment which reflected the timing of payments made for the new fleet; final payments would be recorded in the new financial year. Appendix C to the report set out a summary of the capital programme together with the sources of finance which had been used.

8.6             The Treasury Report was attached to the Committee report at Appendix D and the Prudential Indicators were attached at Appendix E. In terms of the Prudential Indicators, the Head of Finance and Asset Management explained that they had been monitored regularly and there were no material departures arising from the year on investments. There had been a breach of the limits set at the beginning of the year for borrowing levels following the purchase of an investment property but the Indicators had been revised as part of the investment proposal report to ensure compliance with the targets throughout the year. The in-year performance of investments had resulted in an average return of 0.75% and total income of £115,000; this was £5,000 below the budget for the year and reflected the reducing market rates experienced during the course of the year. The Council had undertaken £15 million of borrowing by the year end in order to fund its commercial property investments and a short term rate of 0.4% had been secured for that.

8.7             During the discussion which ensued, a Member questioned whether the overspend amount in the supplies and services section on Page No. 20 of the report was the actual amount it cost to run an election. In response, the Head of Finance and Asset Management advised that £245,763 was the amount across the whole Council and the cost of the elections was within that; it was expensive to run an election but the Council gained as much as it could from the government wherever possible. When the Council ran its own Borough and Parish elections the cost was around £120,000. Referring to Page No. 26, a Member questioned why the Council had paid Cheltenham Borough Council for a cross boundary planning application. In response, the Head of Finance and Asset Management explained that this was the North West Cheltenham site for which planning income had been received and then shared with Cheltenham Borough Council as the site was within both Boroughs. Referring to planning appeals, a Member questioned what the cost of defending them was and the number of appeals etc. In response, the Head of Development Services advised that she was doing some investigatory work on this as part of the service review so she could update the Member at her Lead Member briefing. Also referring to Page No. 26, a Member questioned how the Council’s contract with Ubico was going as she noted there had been a small overspend on the contract for the year. The Member was advised that there would be a seminar for all Members on Ubico next month and this would cover issues including the amount spent by the Council and other partners and the amount received from them in profit from Ubico, comparison of the main Performance Indicators between Ubico and when the service was run in-house etc.

8.8             Accordingly, it was