Agenda item

Quarter 3 Financial Monitoring

To consider the 2024-2025 Quarter 3 (Q3) outturn and scrutinise management action to achieve planned budget outturn.

Minutes:

The Director of Finance presented the financial performance report for Quarter 3 of the 2024/25 financial year. The report outlined the forecast outturn position as of 31 December 2024, reflecting three quarters of financial activity.

 

The Director of Finance reported a projected net overspend of £7 million, with management and recovery actions forecast to reduce this to £1.1 million by the year-end (31 March 2025). It was highlighted that this outcome contrasted positively with the national trend, where 30 local authorities had applied for exceptional financial support during the same period.

 

It was emphasised that Herefordshire’s relatively stable position was not attributable to chance, but rather to robust and consistent financial management, both in-year and over several previous financial years. It was noted that continued vigilance and work remained necessary. Quarter 4 efforts would focus on: ongoing expenditure control measures, managing and reducing discretionary spend, focusing on the realistic delivery of savings and conducting activity data reconciliation as part of year-end close-down procedures.

 

The Director of Finance acknowledged that it had been a challenging year nationally for local authorities, due to rising demand, cost pressures, and increased complexity of care. In this context, Herefordshire’s delivery of ambitious savings targets further underscored the strength of financial oversight. In addition, the report highlighted significant future financial risk associated with the Dedicated Schools Grant (DSG), especially regarding councils’ responsibilities for Special Educational Needs (SEN) provision.

 

The capital forecast outturn as of Quarter 3 stood at £80 million, with further delivery and financial commitments continuing into 2025/26, particularly for major projects.

 

The Cabinet Member Finance and Corporate Services supported the report and thanked the Director of Finance and her team for the improved quality and clarity of financial reporting, which had earned national recognition with an award for financial reporting in November 2024.

 

The Cabinet Member Finance and Corporate Services commended Cabinet colleagues for their active engagement with monthly budget reports and for ensuring accountability within their directorates. Continued enforcement of stringent financial controls was noted, including: mandatory director sign-off for any expenditure over £500, the continuation of savings boards and oversight mechanisms introduced in the previous financial year and now extended into 2025/26.

 

The Cabinet Member Finance and Corporate Services concluded by attributing Herefordshire’s strong financial position to the combined effect of tight procedural controls, engaged leadership, and the dedicated efforts of the finance team.

 

Questions were invited following the presentation, with the key points of debate being listed below:

 

  1. The Committee enquired why the targeted amount of £2.66 million savings relating to the Thrive programme had not been delivered.

 

  • The Director of Finance explained that there had been difficulties in reducing third-party spend due to contractual constraints and supplier resistance.

 

  • The Director of Strategy and Corporate Services pointed out that delays in automation and digital transformation had hindered income generation.

 

  1. The committee enquired as to whether the £2.4 million at-risk savings from mutual early resignation (MER) were being absorbed in other areas.

 

  • The Director of Finance confirmed that some were being absorbed into directorate budgets, but frontline posts, like social workers, were excluded from MER.

 

  • The Corporate Director Community Wellbeing pointed out that plans for 2025–26 would focus on vacant post deletions rather than redundancies.

 

  1. The committee requested details regarding how demographic pressures from an aging population would likely affect savings delivery.

 

  • The Cabinet Member Adults Health and Wellbeing stated that care needs were rising sharply. Residential care numbers had increased by 23% and costs by 19%, this had resulted in £2.1million in additional cost pressures.

 

  1. The committee asked about the rising costs in community wellbeing and its implications.

 

  • The Cabinet Member Adults Health and Wellbeing responded that increased care needs and homelessness were driving costs. Modelling was underway to forecast future pressures and plan investment in council-run facilities.

 

  1. The Committee questioned whether £1.9 million interest income should be used to cover overspends.

 

  • The Director of Finance explained that this was not treated as a saving and it was a treasury gain used to reduce reliance on reserves

 

  1. A committee member asked if it was likely that failing savings would trigger staff redundancies in the future.

 

  • The Cabinet Member Finance and Corporate Services stated that there were no plans for redundancies and that savings would be achieved by not filling existing vacancies.

 

  1. The committee focused on special education needs and disability (SEND) and home-to-school transport and enquired as to why £200,000 savings in SEND transport had not been delivered.

 

  • The Director of Finance explained that the situation was still under review. Delays had occurred, but options involving a council-owned fleet were still being explored, and findings from PwC’s earlier transformation review would be feeding into future plans.

 

  1. The committee asked why the Corporate Risk Register hadn’t been published since March 2023.

 

  • The Cabinet Member Finance and Corporate Services stated that a new strategy had been approved by Audit & Governance and the register would be published quarterly from June 2025. The Scrutiny Management Board was to be included in oversight and member training on risk responsibilities was being planned.

 

  1. The committee raised concerns regarding the Dedicated Schools Grant (DSG) and whether the DSG deficit might return to council accounts.

 

  • The Cabinet Member Finance and Corporate Services explained that the council had reserves to absorb the £17.1 million DSG deficit without triggering a Section 114 notice.

 

  1. The committee questioned why capital delivery was consistently under target.

 

  • The Director of Finance and Cabinet Member Finance and Corporate Services acknowledged the need for better forecasting and provided a commitment to improve reporting and challenge project timelines. Delivery was increasing and the project management office (PMO) restructure aimed to strengthen this further.

 

  1. The committee questioned whether the capital program was realistically forecast and noted that many savings/commitments didn’t appear to match with spend data.

 

 

  1. The committee queried why the government’s local authority data explorer indicators were not being used in performance reports.

 

  • The Cabinet Member Finance and Corporate Services and Head of Corporate Performance and Intelligence explained that the council had developed 10 bespoke indicators for more relevant local performance tracking. Government metrics were still considered, but were less reflective of local conditions.

 

 

At the conclusion of the debate, the committee discussed and agreed the following recommendations.

 

That Herefordshire Council:

 

  1. Undertakes a risk assessment regarding the major cumulative risks facing the council including the Dedicated Schools Grant and SEND transport, and the steps being taken to mitigate these risks.

 

  1. Engages all members regarding the major cumulative risks including the Dedicated Schools Grant and SEND transport, and the steps being taken to mitigate these risks.

 

  1. Ensures that the council's risk register is shared with scrutiny committees as part of their work programme planning.

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