The report of the Section 151 Officer is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Section 151 Officer (copy attached to the signed minutes) which provided details of Shropshire Council’s 2021/22 financial performance for revenue and capital.  Shropshire Council ended the financial year better than expected, with a final overspend of £2.5m, which was £1.8m better than the previous estimate.

The Section 151 Officer introduced and amplified his report.  He explained that the report had already been to Cabinet and Council and that it would normally come to Audit Committee first but had not due to the meeting being delayed.  The Financial Outturn report was for Members’ information and sat alongside the Statement of Accounts to help in terms of context and understanding.  He explained that the actual performance of the Council had been considered by Cabinet and Performance Management Scrutiny Committee whereas the Audit Committee needed only consider the process, how the report had been pulled together and the implications and issues arising from that process and ensuring that they had an understanding of the position of over and under spends over the year so they could bring that context into the Statement of Accounts which was the over-arching year end position.

In relation to the key variations set out at paragraph 8.3, and highlighted in the Risk Strategy, the Section 151 Officer was asked to comment on these and the risks for the Council in the future which were highlighted in the previous paper and referred to in the last paragraph of the Chairman’s report to Council about the Committees’ concerns around the structural deficit that may occur in the future.

The Section 151 Officer explained that the key variations identified in paragraph 8.3 were to focus members’ minds on those key areas of variance and there were issues behind each of them.  The fundamental issue being that there were a number of initiatives that had not been completed due to the external environment, including two years of the pandemic and staff being repositioned to pick up the necessary work related to the pandemic. 

He explained the way in which these kinds of shortfalls/variances were managed where there had been an external implication.  Firstly, they would consider whether reasons had been provided for why those initiatives had not been taken forward or could not be completed and would look to see whether there were implications for the future.  For example, where there were unachieved savings, whether they could still be delivered but over a longer time, or where there were pressures, for example in Children’s Social Care or Housing, they were looking at initiatives that would reduce or potentially remove that pressure, whether that would be quickly or would take a long time would need to be assessed and therefore the budget process enabled those pressures to be taken into account going forward.

The Section 151 Officer informed the Committee that when talking about the funding gap, what they were talking about was the gap after they had considered all the issues from the previous financial year.  They then tried to deal with the gap as opposed to not taking it into account.

In response to a query about the General Fund balances, which were below the level that they should be, the Section 151 Officer felt it was important for Members to understand the context of this.  When assessing what the level should be, they tried to be as scientific as they could but there was always going to be an element of estimation within that and by trying to quantify the risks that may or may not occur there was a concern.  The idea of the General Fund balance was to have it there as a last resort, so they try to manage overspends and budgetary savings within the year so that the end of year comes in close to balance. 

They had given an indication this financial year that they had expected an overspend of between £2.5m and £9m.  They were able to achieve towards the lower end of that scale.  In the short term that does mean that the balances dropped to £11.5m and the risk assessed level comes closer to £18m that was a concern. However, as mentioned at Cabinet by the Portfolio Holder, what they had was the collection fund for Council Tax and Business Rates which had delivered surplus of £4m; the first call on that surplus would be to claw back into the General Fund balance.  At the end of year officers could demonstrate that they had dealt with the overspend. 

Effectively, on the 1 April that £4m goes in and the balance is now £15m.  Whilst not up to the risk assessed level, officers were looking to review the methodology around the General Fund balance calculation which may result in the General Fund balance needing to increase or even reduce and that would be looked at objectively to see what that comes out at.  The important point was to hold a balance that was felt reasonable and if it ever needed to be used, that it was immediately put back, otherwise you would start to move into unsustainable territory whereby you would be unable to deal with funding issues in the year adequately and you would have to start making decisions to try and manage the position.  What officers did not want to do was to put the Authority in an unsustainable position whilst trying to find money to put into the General Fund in case it was needed.

RESOLVED:

In respect of the revenue budget:

A. To note that the outturn is a overspend of £2.505m.

B.  To note that as a result of the outturn position that the level of the General Fund balance stood at £11.522m, which was below the recommended level. 

C.  To note the decrease in the level of service-related Earmarked Reserves and Provisions of £8.152m.

D.  To note that the Council has received revenue funding relating to Covid-19 in 2021/22 which covered all Covid-19 costs in the year, and so no additional costs have had to be funded by the Council’s base budget.

Relating to ringfenced funding:

E.  To note that the outturn for the Housing Revenue Account (HRA) for 2021/22 was an underspend of (£0.251m) and the resulting level of the HRA reserve is £11.592m.

F.  To note that the level of school balances stood at £8.191m (£5.995m in 2020/21).

In respect of the capital programme:

G.  To approve net budget variations of £3.598m to the 2021/22 capital programme (in Appendix 11) and the re-profiled 2021/22 capital budget of £83.572m.

H.  To approve the re-profiled capital budgets of £132.724m for 2022/23, including slippage of £1.245m from 2021/22, £82.009m for 2023/24 and £34.077m for 2024/25 as detailed in Appendix 15.

I.  To accept the outturn expenditure set out in Appendices 12 and 13 of £82.327m, representing 98.5% of the revised capital budget for 2021/22.

J.  To approve temporary application of capital receipts of £18.273m to generate a one-off Minimum Revenue Provision saving of £0.398m in 2022/23.