Agenda item

To consider the quarterly budget position.  

That the financial performance information for the third quarter of 2018/19 be NOTED.  

71.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 12-21, provided the financial performance information for the third quarter of 2018/19 which Members were asked to consider.

71.2           The Head of Finance and Asset Management explained that the report highlighted a quarter three surplus of £664,478 on the revenue budget as well as detailing the expenditure to date against both the capital programme and approved reserves. The summary of the expenditure position for the Council, split out between the main expenditure types, was shown at Paragraph 2.2 of the report. The budget position in relation to the Heads of Service responsibility showed a budget surplus of £311,964 as at the end of December. The majority of the savings (£337,960) related to employee costs, mainly through staff vacancies. In addition, there were a range of smaller savings being made across the headings of ‘premises’ and ‘transport and supplies’ which were also contributing to the overall surplus reported. The surplus on income was £127,444 much of which was from Community Services, mainly in relation to the garden waste service which had seen income above target due to the changes made in respect of the new sticker system and the fixed renewal date of 1 April. There was also additional income shown in Corporate Services which related to grant income for the Benefits Team from central government which had not been budgeted for. The positive income position was being offset by planning application income which was below the expected target and, although a surplus had been returned in quarter three, there remained a deficit against the target. In terms of the corporate codes, these were generally doing well apart from the deficit noted on the ‘corporate savings target’ heading which related to the expected savings in employee costs throughout the year; however, given the surplus on the employees line, that had more than been met.

71.3           In respect of the deficits being reported, the most significant related to the Ubico contract which had a projected overspend of £230,887 – this was a significant increase from the £141,622 position which had been reported in quarter two. It was hoped the projected deficit would be smaller when the final position was reported. The reasons for the overspend were reported by Ubico as being increased employee costs of £89,818, mostly for the use of agency staff to cover increasing numbers of long-term sickness; and transport costs of £99,620 of which the majority related to the maintenance of the recycling and grounds maintenance equipment and vehicles with increased fuel costs across all service areas; and an overspend on tyres of £59,000. In addition, there was an increased cost associated with the grounds maintenance service as a result of the difficulties encountered at the start of the grass cutting season in 2018. The projected full-year overspend of £230,887 was being met by the surplus generated in other service areas and corporate activities, and Officers were working with Ubico to understand its accounting procedure and how overspends were approved etc.

71.4           Appendix B to the report set out the capital budget position and Appendix C showed the current usage of available reserves. In terms of capital, there was an underspend against the profiled budget the main reason for which was that the commercial property investment to date had been less than the profiled budget expectation. It was unlikely that it would be spent in the current financial year and so would be rolled over into 2019/20 as the Council continued to look for investment opportunities. In addition, the refurbishment of the Council Offices was almost complete and was showing an overspend against the agreed budget. The overall costs had increased due to issues such as the discovery of asbestos but contributions from partners and revenue resources were being used to offset any additional cost. In addition, the allocation between revenue and capital resources would take place at year-end and would reduce the cost currently shown on the capital programme. Reserves were set aside from previous years to fund known future costs and the strategic planning of the authority’s operation. Whilst the quarter three position showed a significant balance remained on reserves, the expectation was that the balances would be spent in future. The finance team had asked for updates from all departments about their plans to ensure earmarked reserves were either used for their intended purpose or released back to the general fund.

71.5           Members expressed particular concerns about the Ubico overspend and the responsibility it took for those. In response, the Head of Finance and Asset Management explained that the income from the garden waste service was kept separate from the Ubico contract but some/all of it could be used to offset the Ubico overspend if necessary. One of the elements that the finance team was looking at was Ubico’s authorisation process for overspends and how they were managed. It was understood that some elements were out of Ubico’s control i.e. the grass cutting issues at the start of 2018 and diesel prices; however, there was certainly a need to look at the elements that were within its control. He confirmed that each of the partner authorities within Ubico were billed in the same way and many were also reporting overspends. It was felt that Ubico needed to undertake its own authorisations in order that it could run its business efficiently and effectively; however, there were areas of the process which Tewkesbury Borough Council needed to be part of, such as agreeing overspends. Officers were currently establishing the facts in respect of the chain of decision-making as quarterly reports should certainly not come as a surprise to the Council. How faults were rectified would be dependent on their nature and this would be established through the investigatory process which was currently underway. Members were surprised to hear about an overspend on tyres and questioned how this could happen. In response, the Head of Finance and Asset Management explained that he was unaware of the reason for the overspend but it was likely to be damage to tyres. The Lead Member for Clean and Green Environment explained that this was not necessarily due to pot holes in the roads, or the state of the access road to the tip, it could be happening when the vehicles were driving over the actual site. When the vehicles were delivering to the energy from waste plant this issue should be much improved.

71.6           A Member advised that Brockworth Parish Council had recently asked Ubico to quote for some grass cutting work and had been surprised that it was not interested in the work. The Head of Finance and Asset Management undertook to investigate the reasons for that response as it would be disappointing if Ubico was not promoting commercialisation to the fullest extent.

71.7           Accordingly, it was