To receive a presentation on the latest position concerning the Council Budget 2013/14.

The Committee received a presentation on the latest position concerning the Council Budget 2013/14; the presentation had been circulated in advance of the meeting and published as a supplement to the agenda on the Council’s website.

The Chief Officer: Finance & Commercial made the following principal points:

1.       There had been no change in the Council’s net budget of £150.296 million.

2.       The Chief Executive had conducted a review of all service delivery plans.

3.       It had been identified that a service specific grant of £3.8 million had remained in the budget as an income line, despite it being included in the direct grant from government.

4.       The Council’s Internal Auditors, KPMG, had undertaken a review of the net budget position and had concluded:

•        the treatment of the £3.8 million grant had no impact on the overall net budget agreed by Council in February;

•        greater level of detail in budget papers to Cabinet and Council may have helped identify duplication;

•        high level of control of 2013/14 People’s Service budget evident;

•        formal sign-off of Hoople budget information required;

•        lack of stability in senior management in Social Care may have had a historic impact on financial control; and

•        Council took timely action to resolve issue and give assurance that budget soundly based.

5.       Although there had been more detail than in previous years, the duplication of the grant had not been obvious because grant income information had been presented as an overall total in the budget information.

6.       It was accepted that there was a need for greater clarity in the working relationship between Hoople financial services and the Council’s retained finance function.

7.       It was noted that senior management turnover in Social Care had reduced levels of corporate knowledge.

A Committee Member said that assurances had been provided about Social Care in the past but the departure of key staff could undermine stability very quickly; it was suggested that some of the issues might have arisen from changes to statutory posts under the previous government.  He added that recruitment difficulties could be compounded by the outcome of the recent Ofsted inspection.  The Chairman noted that stability was a key issue going forward.

The Head of Finance - People’s Services continued the presentation, key points included:

i.        The review of the service delivery plans had identified a net gap of £7.4 million in People’s Services.  Work had been undertaken to mitigate risks and identify additional savings, with People’s Services recovering internally all except £2.8 million of the budget pressure.

ii.       Attention was drawn to the Directorate Budget Control Totals slide which showed movements, including the transfer of Environmental Health and Trading Standards service from the People’s Directorate to the Places and Communities Directorate, and revised budget for each Directorate.

iii.      An overview was provided of the chronology of the Adult Social Care budget.  It was reported that the Adult Social Care budget presented in February 2013 was based upon September 2012 client activity and expected growth but there was significant volatility due to client numbers (in excess of 2,500).  The Root and Branch report to Cabinet on 5 February 2013 summarised unfinished Root and Branch work and service transformation plans.  The further development of these plans formed the basis of the ‘zero based budget’ and detailed savings plans.

iv.      The key features of the zero based budget approach included: reflecting changes in client numbers to update accuracy of detailed client budgets; service assumption that improvements in processes / controls would deliver zero net growth in client numbers in 2013/14; and reviewing all contracts, especially those due to end in March 2013 which could be stopped.

v.       Detailed savings plans were worked up in line with Assistant Director plans and themes for savings, including: cost reductions / terminations; service redesign; demand reductions; cost of care reductions; and income generation.

vi.      With the identified £3.8 million grant error and consideration given to the potential risks around delivery of some savings, a cautious view was taken of the savings achievable, resulting in the £7.4 million pressure.

vii.     Cabinet and Council considered a report on Service Budget Reductions and Future Financial Planning on 16 and 24 May 2013 respectively.

viii.    It was reported that monthly financial control meetings chaired by the Chief Officer: Finance and Commercial were being held for all Directorates.

In response to a question from the Chairman, the Committee was advised that the Assistant Director - People’s Services was in place until the end of the financial year.  It was recognised that the retention of expertise was essential to ensure the completion of the transformation programme and the Management Team were actively considering recruitment and retention policies within current financial constraints.  The Chief Officer: Finance & Commercial noted: the consequences of cutting too deeply in terms of the impact on senior management capacity; the reliance on interim positions; and the need for a discussion about the level of capacity required to deliver change.  The Head of Finance - People’s Services said that there had been internal redeployment of resources to help support the business change programme.

Officers responded to questions from Committee Members, some of the main points included:

a.       Council Tax accounted for approximately 24% of the total Council gross budget of £334 million which included Dedicated Schools Grant, but was approximately 50% of the net budget requirement of £150 million.

b.       It was re-iterated that, when setting the budget, the authority compared budget against budget not against actual expenditure, as only the projected not actual outturn would be available.  Nevertheless, it was recognised that the level of information presented in budget papers should be reviewed.

c.       It was confirmed that the former Cabinet Member Health and Wellbeing had been involved at all stages of the chronology of the Adult Social Care budget.

d.       Further explanation was provided of the compensatory savings achieved in People’s Services, with the remaining gap being funded through savings in other directorates.

A Committee Member commented that: staff turnover needed to be addressed, particularly to maintain continuity for safeguarding; many social workers felt undervalued; some former employees had cited problems with Frameworki as a reason for leaving; there was a need to monitor the level of interim appointments; and substantial costs could be incurred through in-contract negotiations and terminations.  In response, the Head of Finance - People’s Services advised that progress had been made in resolving a number of issues with Frameworki and discussions with providers had focused on contracts due to end in March 2013.

In response to questions from the Vice-Chairman, the Chief Officer: Finance and Commercial said that: the treatment of the £3.8 million grant had no impact on the Council’s net budget; on the basis of information he was presented with at the time, he would have signed off the budget as Section 151 Officer again; with perfect knowledge, if the grant error been identified in January 2013, the authority would have needed to make further savings or possibly increase Council Tax, although the latter would have been unlikely as this would have triggered a referendum; the reviews that had been undertaken and the zero based budget approach had identified the pressures earlier than might have been the case under normal budget monitoring. 

In response to further questions, the Head of Finance - People’s Services provided further clarification on the treatment of cross cutting savings, reconciliation of the savings schemes, and the zero based budget approach.  The Chief Officer: Finance and Commercial said that the savings schemes for each directorate were projected not final, as in some cases decisions had to be made by officers, or by Cabinet or Cabinet Member where policy changes were required.

The Vice-Chairman questioned whether contingency had been made for ‘known unknowns’.  The Chief Officer: Finance and Commercial outlined the general position with Council’s reserves.  The Head of Finance - People’s Services advised that there had been a small amount of contingency to facilitate some activities without creating pressures elsewhere but this had been reduced recently.  The importance of the zero based budget approach and improvements to forecasting were noted.  The Vice-Chairman expressed concern that the need to find savings to respond to urgent situations could impact on levels of care for existing service users.  The Chief Officer: Finance and Commercial said that as the year developed other savings may be required. 

The Chairman noted that there were vulnerabilities resulting from the budget pressures and would need to be monitored.

RESOLVED:  That the report be noted.