Agenda item

To consider the quarterly budget position. 

That the financial performance information for the third quarter of 2019/20 be NOTED.  

84.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 53-63, provided the financial performance information for the third quarter of 2019/20. Members were asked to consider the information provided.

84.2           The Committee was advised that the report highlighted a quarter three surplus of £310,256 on the revenue budget which was pleasing. In terms of employee costs, a surplus of £148,351 was shown which was mainly generated through staff vacancies – services had managed vacancies during the period by utilising current staff to cover work in the short term and limiting, where possible, the use of agency staff. In addition, there were savings arising from the Chief Executive post following the Council’s decision to grant flexible retirement; there was a deficit reported on supplies and services which related to European and Parliamentary Elections, this also affected the deficit position on payments to third parties, but the Council received grant income to cover those costs therefore the income surplus within Democratic Services matched off that expenditure. In addition, the Borough Election expenditure was also contained within Democratic Services and this was matched off through one-off funding from reserves and New Homes Bonus so, overall, Democratic Services was in a cost neutral position. Transfer payments was showing a deficit of £30,000 which related to expenditure on housing benefit and recovery of subsidy from the government – during the year, several significant overpayments relating to claimant error, which went back over several years, had been identified and this had reduced the subsidy that could be recovered from the government which had led to the deficit position. Notwithstanding this, the forecast full year deficit being reported was a significant improvement on the previously reported position and reflected the positive direction of travel over the last three or four months. The Council aimed to recover 100% of the debt from the claimant therefore in the long run the deficit on the housing benefit claim could be eradicated – unfortunately recovering significant overpayments could take time. Income was showing a net surplus of £354,763 which was being offset by a deficit of £105,000 on planning income at the end of December 2019. The expectation was that, by year-end, planning applications received may reduce the deficit to £77,000. There was also a deficit of £81,000 on the amount of recycling credits received due to the actual level of recyclate collected being less than was included in the budget. In addition, it had been identified that the budget did not include a sufficient allowance for non-recyclable material in the system therefore the recycling credits due had been overestimated.

84.3           Referring to the corporate codes, the Head of Finance and Asset Management explained that there was a significant budget deficit shown on investment properties which was due to the Council’s inability to secure another commercial property during the year – this had meant that the income expected to be received in rent had not been achieved. There were currently two properties going through the due diligence process and it was hoped that at least one of those could be secured. The loss in rental income to date had been mitigated to a large extent by treasury management costs having been reduced through lower borrowing and no minimum revenue provision payment being made. Business rates was showing a surplus at December 2019 of £161,129, with the Gloucestershire pool’s latest position showing a positive return, and it was expected that a windfall surplus of approximately £250,000 could be delivered by year-end.

84.4           Returning to the payments to third parties deficit of £214,973, the Head of Finance and Asset Management explained that the majority related to the delivery of the contract sum with Ubico which had increased to a deficit of £204,643 and a projected year-end overspend of £272,857. The information received from Ubico indicated that the corporate costs of the business had been overlooked previously and, having now been reviewed, the significant overspend could be broken down into four key categories: insufficient recovery rate at budget setting for 2019/20, previously agreed at 5.8% of contract sums; 2019/20 budget deficiencies for items such as ICT support and absence management systems; shareholder agreed increased costs such as the appointment costs of Non-Executive Directors and the Financial Director; and cost movements during the year such as support costs from Publica. As a result of the review, an additional £77,000 of costs relating to the corporate core of Ubico had been added to the Tewkesbury contract – all Ubico contracts had been affected by this issue. Following a meeting with Tewkesbury Borough Council Officers, senior management at Ubico had frozen all non-essential spending across the organisation and a value for money review of all elements of expenditure throughout the organisation had been commenced which may lead to reduced costs in future years. Ubico had given assurances that the budget for 2020/21 would not be increased as a result of the additional corporate costs and it would present cost reduction proposals to cover the additional expenditure. In addition, the Section 151 Officers of all shareholding Councils had agreed to support Ubico in a review of the corporate costs of the organisation. The Ubico representative advised that she was extremely disappointed with the current situation and the Director who had previously been reporting on the figures had given no indication of the significant problems which were faced. The work undertaken in partnership on the contract costs had been good but the corporate costs had not been interrogated in the same way. In terms of the Non-Executive Directors, the Ubico representative explained that a Board review had been undertaken with the new Board being based on skills making it more sustainable. The review had recommended the appointment of three Non-Executive Directors and the costs shown were for the recruitment of those posts. The retirement of the Commercial Director and subsequent appointment of a new Finance Director had not been anticipated at the budget-setting process which was the reason it was only being raised at this point. In terms of the additional £77,000 required from Tewkesbury Borough Council, the Head of Finance and Asset Management confirmed that the impact was different across the various partner authorities as it was based on an apportionment of the contract sum. Tewkesbury Borough’s was currently 5.8% - although this depended on any overspend or underspend at year end – the apportionment was done at the beginning of the year. Going forward the Council would have a full picture of Ubico’s finances with complete transparency and Officers were happy with the controls in place; it was felt that the appointment of the new Finance Director would also strengthen that position.

84.5           Accordingly, it was