To receive a presentation from the Head of Finance and to consider any further actions.
Minutes:
Lee Colyer, Director of Finance, Policy and Development and Jane Fineman, Head of Finance, Procurement and Parking gave a presentation explaining the council’s budgeting processes. Key areas covered included:
· The first strand in the council’s annual finance management cycle was in budget setting:
o Phase 1: Budget Projections and Strategy Report which used the current year’s budget as a base line and projected demand for services, inflation and other market factors.
o Phase 2: Budget Update report which updates projections based on Q1 actual figures and takes account of legislative changes. It also includes a benchmarking report comparing the council’s unit costs by service against geographical and statistical neighbours.
o Phase 3: Draft Budget report includes detailed service projections compiled from the various Heads of Service and seeks permission to consult on draft proposals.
o Phase 4: Results of consultation reported and Final Budget report presented to Full Council.
· Second strand: Budget management – rolling process between Heads of Service and the Accountants to monitor budgets with quarterly reports to Cabinet comparing budget to the actual and setting out any changes.
· Third strand: Statement of Accounts – full year accounts prepared starting in February and March and running for approximately six-months in a process which includes public inspection and independent audit; resulting in final accounts and an Audit Findings Report signed off by the Audit and Governance Committee.
· All reports available in public.
· Constant rolling process.
Answers to questions to officers and Councillor Christopher Hall, Cabinet Member for Finance and Performance included:
· The technical nature of the reports, particularly those relating to the Statement of Accounts, were heavily prescribed but officer’s covering reports could give greater flexibility in explaining the key factors.
· Officers would ensure all-member briefings or briefings with the members of the Audit and Governance Committee as appropriate were held ahead of formal consideration of any such reports to explain the key processes and findings.
· Meetings were regularly held with Group Leaders and such meetings could be arranged with other members on request.
· A helpful diagram showing the annual budgeting process which was shared with members at their induction will be made available on the council’s website for the information of all.
· Officers’ covering reports to the more technical documents provided a summary of the key parts.
· Discussions were ongoing with members of the Audit and Governance Committee on proposed enhancements to the quarterly reports which would be reported back to that committee in the near future.
· A £944k budget deficit had been identified as part of the normal budget setting cycle and a transfer from reserves had been agreed by Full Council in February 2022. At the end of quarter 1, had it not been for external factors such as increasing energy prices and high inflation, the deficit would have reduced. Income from parking and planning fees was up and there were savings from staff costs.
· The Council was not choosing to operate with reduced staffing but struggling with staff attrition and difficulties recruiting.
· Energy costs were expected to increase by £600k this year, even without further expected increases in October 2022. Government plans for support lacked detail.
· The council was temporarily holding additional cash from the Government pending distribution, on which the council was earning additional interest.
· All the aforementioned improvements to the budget were wiped out by the projected energy costs.
· At the time the Budget 2022/23 was agreed, the extent of the post-Covid recovery was still not known. For example, how quickly parking income would recover. Since the start of the year, those elements of the budget which were under the direct influence of the council had improved better than forecast.
· Income from parking charges was on a par with 2019/20 (pre-Covid) so it was unlikely they would improve further. The council always took a prudent approach to forecasting.
· Staffing costs were £268k under budget for the quarter.
· The total establishment for the council was 326.39 full-time equivalents.
· There were 41 vacancies, details of which were set out in the appendices to the quarterly revenue management reports.
· The council’s financial processes were well managed and in good order, as confirmed by the external auditors.
· Members of the Cabinet were working on portfolio plans to set out the future direction. Plans would set out priorities, seek income opportunities and potential cost savings.
· The Borough Partnership wanted to protect discretionary services as much as possible, new income and some savings would be necessary.
· The process by which the council was managing the budget deficit was set out in the quarterly reports which went to Finance and Governance Cabinet Advisory Board ahead of Cabinet. There were over 60 different services which were constantly under review. The Council must carefully consider changes to current services to avoid making adverse consequences which could not easily be undone. There were also a number of external factors to consider, for example the Local Governments Finance Settlement which would not be received until the last day of Parliament in December. It would not be prudent to make significant changes until such factors were known.
· The deficit was not unique to Tunbridge Wells, many other authorities had similar problems due to the way local government were funded. Council’s had to manage increasing demand, restrictions on their ability to raise funding and increasing cost. Contract inflation was 14 per cent and other costs were also increasing but Council Tax was capped at 2 per cent. No business would be able to absorb that difference. The council’s services were relatively fixed, the range and quality of which was not discretionary.
· The Council would set out how it intended to tackle the problem but they were nationwide problem
Debate by members included:
· Most members and the public were not trained in the finer details of public finances and the amount and complexity of information could be overwhelming. More narrative in covering reports would help understanding.
· Financial information and explanation was available to those who wished to find it.
· Quarterly reports would benefit from the inclusion of more trend analysis and the context of certain questions to help readers understand where decisions had come from.
· Holding member briefings in the evenings would assist those who are not available during the day.
· Better understanding of the budgeting and financial management processes may have resulted in a less extreme reaction to the projected £944k budget deficit.
· The council was dealing with a cost of living crisis, inflation and 15 per cent shortage of staff, these matters should be the focus rather than the budget deficit.
· The deficit was in the current year budget and being used to justify increases in fees and charges to residents.
· The purpose of this meeting was to review the budget setting process rather than scrutinise individual budget items, such issues could have been discussed at the recent Finance and Governance Cabinet Advisory Board.
· The new administration were approaching the budget setting process in a methodical manner.
· Questions were seeking to scrutinise the process by which the budget deficit came about.
· Deficits were a problem across the country but forecasts were not the same as debt. Income was rising but outweighed by new costs, principally high inflation and increasing staffing costs.
· Portfolio plans, which would include a review of services, were awaited.
· A review of services did not necessarily equate to cuts.
· The budget deficit was real, as confirmed by Full Council in February.
· Negative characterisation of the previous administration’s management of the budget was misrepresentative.
RESOLVED – That the report be noted.
Supporting documents: