Agenda item

Report of the Corporate Director for Finance and Resources

Shabana Kausar, Director of Finance and Deputy Section 151 Officer presented a report which provided an update on the Improvement and Assurance Board (IAB) finance instructions. The following information was highlighted:

a)  Even though the deadlines for many of the instructions have passed, it is a continuous exercise to promote good financial governance, financial sustainability and resilience, and was embedded in the Finance Improvement Plan.

b)  Instruction 1: approval a wholly realistic, and balanced, plans and budget. Members noted the processes undertaken for the approval of a balanced General Fund budget for 2023/24 and over the Medium Term Financial Plan (MTFP) period to 2026/27. The subsequent financial position for 2023/24, the issue of the S114(3) report, the application of Exceptional Financial Support (EFS), and the 2024/25 budget and MTFP process were all outlined.

c)  Instruction 2: establish and maintain a sound and prudent reserves policy and practice. Members noted that the Reserves Policy that applied to the financial year 2023/24 was agreed at Executive Board on 21 February 2023. The S151 Officer subsequently recommended that the Financial Resilience Reserve (FRR) be strengthened through the temporary repurposing of £20m of other earmarked reserves to strengthen resilience. Subsequent to the Council achieving this IAB instruction by deadline of 6 March 2023, the policy has been further reviewed and the financial resilience assessed as part of the Council’s annual budget process and Section 151 Officer’s assurance statement on the robustness of estimates and reserves. An updated Reserves Policy was presented to Executive Board on 13 February 2024. In light of a nil balance being left on the FRR as at 31 March 2024, a c£10m one-off contribution has been recommended through the General Fund budget to allow for this to be deployable in-year to provide financial resilience to manage in-year pressures.

d)  Instruction 3: deliver a fully resourced Capital Investment Plan. The Committee heard that following the issuance of the S114(3) report on 29 November 2023 and the Council requesting for EFS from DLUHC to balance the Council’s budget in year (2023/24) and for 2024/25, a revised Capital Strategy, Voluntary Debt Reduction Policy and capital receipts prioritisation has been put forward for recommendation to City Council meeting on 4 March 2024.

e)  Instruction 4: early resolution of all outstanding matters relating to 2019/20, 2020/21 and 2021/22 audit of accounts. Members noted officers have responded to all outstanding audit queries for 2019/20 and a revised draft 2019/20 accounts have been provided to Grant Thornton (GT) on 8

November 2023. GT are undertaking their internal review and assurance

processes. The Council has produced draft accounts for 2020/21 and made significant progress with draft accounts for 2021/22 and 2022/23.

f)  Instruction 5: complete the financing of the £17 million misappropriation of funds relating to the HRA. The Committee heard that a budget provision has been set aside in the General Fund and a credit in the HRA from 2024/25 profiled over 8 years.

g)  Instruction 6: deliver the Financial Improvement Plan covering the key elements identified by the IAB. Members noted that a more comprehensive report on the FIP will be provided later in the meeting at item 11.

h)  Instruction 7: reinforce financial stewardship in providing resilience and sustainability through 2023/27. The Committee heard that CLT are proactively receiving and taking decisions in relation to financial governance. A budget gap of £172 million is forecast over the MTFP period to 2027/28 of which £41 million relates to 2024/25 and is assumed to be funded by EFS. Additional work is being done for officer proposed savings for the Council meeting in March.

i)  Instruction 8: bring forward a credible and risk assessed plan for additional pipeline of capital receipts linked to the implementation of the Corporate Landlord model. It was stated that following the restructuring of functions in November 2023, the Property and Facilities Management functions have been operating towards the Corporate Landlord model, taking an increasingly strategic overview of the council’s property assets. Since then, further work has been undertaken to confirm the scope of the Corporate Landlord model and the assets to transfer into corporate management from individual services. Work is now underway to transfer assets from services into the centralised model. A full review of all assets within the portfolio has been undertaken to identify assets that no longer meet the Best Value requirements of the council.

j)  At the IAB meeting on 25 January 2024, two further instructions were issued by the IAB:

·  The Section 151 Officer, after consultation with the Chief Executive and fellow Corporate Directors, shall present his best professional view on a draft budget for 2024/25 in line with normally expected professional standards but which in particular maximises the level of savings options that Corporate Directors believe can be delivered and thus quantifies the minimum budget imbalance relying on the bid to Government for ‘Exceptional Financial Support’.

·  Subject only to any professionally required changes determined by the Section 151 Officer, the draft budget for 2024/25 as defined in 1 above, shall be presented and recommended to the Full budget setting Council meeting for its approval.

During the discussion and in response to questions from the Committee, the following points were made:

k)  Beverley Gouveia, Head of Property, informed the Committee that there is currently £8.1 million in capital receipts held in the bank and that the two auctions which have recently taken place have secured a further £9 million. There is another auction planned for next week which should give a total of £17 million for the financial year. Work is underway to identify more properties for the coming financial year.

l)  The Committee agreed that the Council was in a difficult financial position and that the scale of cuts would likely impact any improvement and best value duty journey.

m)  It was clarified that even though deadlines set out by the IAB have been met, the changes and the processes implemented are embedded and continue to be considered as ongoing. The Department for Levelling up, Housing and Communities (DLUC) were explicit in their letter in regards to the appointment of commissioners that all 39 instructions (and two most recent) would continue to be in force until such time the commissioners remove them. There will be a transition period from the IAB to commissioners.

n)  The Council is still awaiting a decision from DLUC on its applications for EFS. This needs to be approved before Council can approve a budget as a balanced budget is dependent on the approval of EFS. A decision is expected before the meeting of City Council on 04 March 2024.

o)  The Committee queried the management of Section 106 monies and what needs to be done to improve management of it.

p)  The Committee discussed instruction 5 surrounding HRA monies and queried the IAB’s view of repaying it over an 8 year period with it costing more when interest payments are taken into account. It was explained that the Council would not be able to afford to repay the amount in one repayment, and the IAB’s view is that they are happy for it to be paid over two MTFP periods.

q)  The Committee discussed sensitivity analysis, risk analysis, and how estimates have been established during the budget setting process. The budget process was outlined which involved a rigorous check with CLT through a duties and powers approach to ascertain robust savings which the Council is able to deliver, and this involved forecasting and estimates based on professional opinion. There was, however, a certain degree of unreliability due to uncertainties surrounding the market, inflation and interest rates, and demand. The budget monitoring process will be able to assess those forecasts throughout the year and adjustments can be made if necessary.

Resolved:

1)  To note the update on the IAB finance instructions.

2)  That the Committee receive further information on how Section 106 monies are handled.