To consider the quarterly budget position. 

That the financial performance information for the third quarter of 2022/23 be NOTED.  

97.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 15-28, set out the third quarterly monitoring report of the Council’s financial performance for 2022/23. Members were asked to consider the information.

97.2           The Head of Finance and Asset Management explained that the report highlighted a projected outturn surplus based on the quarter three position of £1.18m on the revenue budget and detailed the expenditure to date against both the capital programme and the approved reserves – the pay award had now been finalised and paid during quarter 3 which was fully funded from reserves. The significant increase in surplus projection was due to the costs of both the pay line review phase 1 and the excess cost of the national pay award having been taken from the reserves which were set aside to fund those costs – the total cost of those were £353,000; increased business rates retention of £249,000; increase in planning fees – quarter 2 income was greater than expected by £90,000 and the Council forward projected a further £200,000 due to one large application; the receipt of the UK Shared Prosperity Fund grant of £128,000 which was not expected to be spent by year-end; investment interest received was £100,000 more than expected; the Material Recovery Facility (MRF) gate fee had reduced by a further £35,000; and Ubico’s forecast deficit had reduced since Q2 by £100,000 mainly within diesel and employment costs.

97.3           The main element of surplus expenditure was employees and the full-year projection for employees highlighted a potential gross surplus of £640,830 - although it should be noted that within the Council’s corporate expenditure was a target to save £100,000 from employment costs around the Council – the net position was therefore a surplus against target of £540,830. There were employee savings being accrued across most service areas but the majority of the overall surplus was in One Legal – those savings would be shared by all of the partners in One Legal. The national pay award was agreed in November and had resulted in an uplift of £1,925 on every scale point – the Council had budgeted for 2% increase in salaries and, as a result, the excess cost calculated at £215,111 had now been charged to the pay award revenue reserve. Similarly, the first phase of the local pay line review had now been calculated at a cost of £138,503 and this had been charged against the Medium Term Financial Strategy.

97.4           The projected outturn for supplies and services highlighted a potential underspend of £133,418 – computer annual renewals was expected to be £34,000 below budget across many service areas, this was due to a large majority of licenses remaining with current contracts or being renegotiated at current levels. It was anticipated that bank charges would deliver a saving of £29,000; IT equipment would be £52,000 under budget, as some equipment had been purchased at a lower cost than expected and some would not be purchased until the next financial year. Payments to third parties highlighted a projected overspend of £187,994 – the Ubico contract was forecast to be overspent, mainly driven by the annual pay award which equalled £152,000. Due to the increased cost of fuel, Ubico estimated an overspend of £99,500 on diesel – other areas of additional spend within the contract included vehicle hire, which had been partly funded from reserves, for the additional food round. In addition, at the start of the year, and after the budget was set, the Council was informed by Cheltenham Borough Council of additional running costs in relation to the Swindon Road Depot estimated in the region of £150,000 per year. The MRF gate fee was expected to be £244,000 lower than budget which was due to be a significant reduction in the gate fee per tonne being paid.

97.5           Income in several services was doing well with many income streams projected to deliver income more than budget including planning fees and licensing; however, there were also a few areas which were projecting lower income than budget as a reduced management fee had been agreed. In addition, the vacant commercial unit in the Council offices meant rental income was predicted to be £60,000 down on budget and One Legal income was below target – although this was offset against savings within employee costs and was again shared with One Legal partners. The income position was boosted by the receipt of external ringfenced funding for the UK Shared Prosperity Fund of £128,000. This was to be carried over at year-end into reserves as expenditure was not anticipated until the next financial year. The expenditure associated with corporate activities, as well as the financing of the Council, highlighted an estimated surplus of £648,964 for the financial year largely driven by treasury activities. The commercial property portfolio was currently predicting a deficit in the year as a result of the expected temporary void at one office unit – whilst the unit had now been let, inducements of six months rent free would mean only limited income on the unit in the current year; similarly, another unit had been let using inducements meaning income would be restricted in this financial year – it had not been included in next year’s budget so any income received was additional to expectations. The overall projected position on retained business rates was currently exceeding budget expectations due to awarding more reliefs than anticipated which resulted in more S31 grants income. At year-end the Council would also have the windfall benefit of the Gloucestershire business rates pool which was estimated at around £400,000.

97.6           Appendix B to the report provided the capital position which was currently showing an underspend of £2.4million against the profiled budget of £4.1million – the capital programme estimated total expenditure for the year to be approximately £5.17million – the main elements of this year’s forecast included Ashchurch Bridge; solar canopy; and Disabled Facilities Grant. There were currently unavoidable delays with the delivery of the Ashchurch bridge project and that accounted for the majority of the reported underspend on land and buildings. The solar canopy project was completed in quarter 2 with a final cost of £599,000. An overspend was reported for vehicle replacement as the new sweeper, which was expected in quarter 4 of 2021/22, had been delayed to the new financial year. Appendix C set out a summary of the current usage of available reserves and supporting notes were provided for reserves where expenditure was high. As at 1 April 2022, those reserves stood at £18.13million which was an increase of £1.93million on the previous year. The increase reflected the 2021/22 budget surplus and included significant external funding for a range of projects.

97.7           The inclusion of Key Performance Indicators reflected requirements of the Chartered Institute of Public Finance and Accountancy (CIPFA) Financial Management Code which was designed to support good practice in financial management and to assist local authorities in demonstrating their financial sustainability. An area which was closely monitored was the Council’s aged sundry debt – service areas received monthly reports to make them aware of aged debt and focus attention on collecting those debts where possible. Appendix D to the report showed the level of bad debt for each service area and the percentage that was greater than one year. In addition, the Appendix included some statistics on the treasury management position with investments at quarter three being £42.6million and the return averaging at 2.88% with a total year-end forecast return of £952,000.

97.8           A Member questioned what the UK Shared Prosperity Fund (UKSPF) was earmarked for and was advised that this was a three year fund from the government of just over £1million in total for a range of projects supporting the economy / climate ambitions. It was unlikely to be spent in year one due to the lateness of the award from government so all authorities had been allowed to carry it over to year two – the funding would be used to help provide electric charging points, for retrofitting to make low carbon communities, economic development support and growing skills around the Borough. Referring to the commercial portfolio, the Member queried whether profits would be shown eventually after the incentives provided at the beginning of the contracts. In response, the Head of Finance and Asset Management explained that, overall, the portfolio produced a healthy return – there were two units which had been vacant for a short time, those had now been filled and as part of that inducements had been offered – going forward inducements would cease and income targets should be hit. The Member noted that 15% of total staff levels were vacant and she questioned whether some would not be replaced or were all being filled. In response, she was advised that the Council was trying to fill the majority but there were one or two areas which were being reviewed to understand why they were not being filled / how the posts could be used going forward. In respect of the Garden Town funding, the Head of Finance and Asset Management confirmed that, with the exception of the Garden Town Communications Officer, the funding associated with the Garden Town came from Homes England.

97.9           Accordingly, it was