Agenda item

To consider the budget monitoring report in respect of Quarter 2, 2021/22.

At its meeting on 24 November 2021, the Cabinet referred the forecast budget position of individual directorates as at 30 September 2021 (Quarter 2 2021/22) to the Budget and Corporate Scrutiny Management Board for consideration.

Services were projecting an overspend of £10.337m against allocated budgets, however, after adjusting for reserves, corporate resources, revenue to fund capital costs (RCCO) and the application of centrally held Covid-19 grant funding, the adjusted projected outturn identified an underspend of £4.490m.

Services continued to experience the financial impact of Covid-19, most significantly a loss of income due to suspended or significantly reduced services. Pressures of £12.133m were expected to be managed through the centrally held Covid funding which was from the unused balance of grants received in 2020/21 and additional grants received or anticipated for part of 2021/22.

In addition to the Covid related issues, services were reporting a number of significant ongoing operational pressures which would need to be incorporated into the next refresh of the Corporate Medium-Term Financial Strategy.

The main change in budget position was noted in Adult Social Care budget, which had changed from a projected underspend of approximately £2m at Quarter 1 to a projected overspend of £0.409m. The main reason for this related to placements costs, in particular placements for people with mental health concerns, which had shown a 4% increase (139 placements) between Q1 and Q6. Also, the number of older people homecare placement numbers had increased by over 3,115 hours per week since April 2021 and this was likely to generate an overspend at year-end.

These budget pressures were being offset by vacancies across the directorate along with brought forward balances from previous years. Staffing costs relating to Covid-19 were being offset by the use of Covid-19 grant income.

There were also cost pressures relating to Children’s Services. Delays in implementing the Oracle Fusion project were also causing cost pressures but these were offset by the use of reserves.

Expenditure on the Council’s Capital Programme was forecast to be £169,276m. There was a decrease of £1.103m in the Adults Social Care budget mainly in respect of slippage of Adult Social Care Grant resources into 2022/23. This slippage would now be used to fund improvements to the Walker Grange facility as agreed by Cabinet on 18 November 2021.

Approval was sought for the revised treatment of earmarked balances and earmarked reserves and the Treasury Management Mid-Year Review, which confirmed that the Council was meeting the requirements of the CIPFA Code of Practice and Treasury Management and the Prudential Code.

The Board sought clarity on what measures were being taken to protect the Council’s reserves, including the consideration of bringing back some contracts in house.

In response, the Director of Finance reported that there was a current underspend in 2021 and Covid funding would also be used to mitigate against Covid budget pressures. In order to protect reserves, the Council would be utilising savings not reserves.

In relation to bringing contracts back in house, this may not be financially viable to the Council as the Council had higher salary costs, due to the pension scheme and terms and conditions in comparison to the private sector, and there was also the maintenance of vehicles, etc. The Council could however consider other options such as creating a trading arm, etc. 

Whilst Covid money was currently being used to address Covid related pressures, as Government had announced there would be no more Covid funding available for local authorities next year, the Council would need to look at income levels returning and financial planning. Assurances measures had been put in place to ensure robust financial management such as monthly budget reports with Directors to hold them to account. 

The Board recognised that there were additional costs related to the SEN transport contract due to increased demand in the service and extending the current contract due to procurement issues. In relation to the ongoing spend with the Sandwell Children’s Trust, it was reported that the Council was working closely with the Trust to look at reducing costs and invest to save proposals. 

In the meantime, Finance were continuing to launch the development of commercial activity across the Council in order to sell services and events to generate income as well as maximising treasury returns. 

Agreed that the observations of the Budget and Corporate Scrutiny Management Board on Quarter 2 Budget Monitoring Report for 2021/22 be noted by the Cabinet.