Revenue Monitoring Report Council Summary 1 April 2022 to 18 September 2022
North Lanarkshire Council · 30 November 2022
Back to Finance and Resources Committee — 30 November 2022 and its agenda
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North Lanarkshire Council Report Finance and Resources Committee Does this report require to be approved? ☐ Yes ☒ No Ref EK/KS/VR/SD Date 30/11/22 Revenue Monitoring Report Council Summary 1 April 2022 to 18 September 2022 From Elaine Kemp, Head of Financial Solutions E-mail kempe@northlan.gov.uk Telephone 07939 280 601 Executive Summary This report updates the Finance and Resources Committee on the overall position for the General Fund Account, Housing Revenue Account and Adult Health and Social Care, for the financial year to 31 March 2023. The report consolidates the budget monitoring position of all Services, highlighting and explaining major variances as per the Council’s approved Financial Regulations. The Council approved its General Fund Revenue Budget on 17 February 2022. Following notification from Scottish Government of further funding made available to local authorities and the reallocation of Scottish Child Payments Grant as Agency managed grants the budget has been revised to £871.841m. The Council is currently projecting an overall overspend of £0.538m against budget. This position reflects a net £8.212m of forecast costs in excess of budgetary provision, attributable to inflationary pressures experienced across services in relation to utility costs, contract price increases and increased school meal food costs. Resources totalling £10.147m have been provided through a combination of corporate budgetary provision and use of reserves to help manage the increased costs arising from higher inflation rates. Therefore, there is an offsetting drawdown of £8.212m from such resources, leaving a balance of just £1.935m to support any further pressures not yet realised. It should also be noted that services are required to continue to take action to help manage the overall position including managing vacancies and curtailing non-essential expenditure. The 2022/23 budget incorporates £10.484m of net savings with resources of £3.372m set aside to manage the impact of delayed implementation, reducing the current year target to £7.112m. It is projected that £5.417m of the current year target (76%) will be delivered within the financial year, with replacement savings identified to fully address the shortfall. Recommendations It is recommended that the Finance and Resources Committee: (1) Acknowledge the financial position of the 2022/23 revenue budget; and (2) Otherwise endorse the contents of this report. The Plan for North Lanarkshire Priority All priorities
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Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
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1. Background 1.1. The Council’s approved Financial Regulations require services to remain within their approved budgetary provision, and to report all significant deviations - defined as the higher of £100,000 or 5% - within their budget monitoring reports. Where significant deviations are identified, services must provide explanatory commentary, outline the action required to rectify such deviations and where relevant, must also highlight the impact this has on other budget headings. 2. Report 2.1. Summary of General Fund Financial Position 2.1.1. At its meeting of 17 February 2022, the Council approved a General Fund Revenue Budget of £887.270m. This included spend which is offset by ring fenced grants of £50.126m resulting in an opening budget position for Net Service Expenditure of £837.144m. Additional funding has since been confirmed as part of the Scottish Government budget setting, including additional directed funding for Adult Social Care, Free School Meal Expansion monies, Local Heat and Energy Efficiency Strategy funding offset by a reallocation of Scottish Child Payments Grant to agency managed grants resulting in an overall increased budget of £871.841m. 2.1.2. Following the budget setting in February the Council has an approved savings target £10.484m for 2022/23. However, £2.000m of one-off resources have been set aside from General Fund reserves to manage the financial impact of the delayed implementation of the Active and Creative Communities saving of £3.058m, and £1.372m has been earmarked from the IJB reserves in respect of the delayed closure of the Muirpark facility. These actions reduce the overall savings requirement in 2022/23 to £7.112m. Further detail can be found in Section 2.3 below. 2.1.3. The following table summarises the projected income and expenditure position, which illustrates a projected deficit of £0.538m position: Annual Budget (£m) Projected Outturn (£m) P6 Variance (£m) P4 Variance (£m) P4 to P6 Movement (£m) Expenditure Total Expenditure 871.841 872.379 (0.538) 0.158 (0.696) Income Aggregate External Finance 707.792 707.092 - - - Local Tax Collection 158.049 158.049 - - - Use of Balance 6.000 6.000 - - - Total Income 871.841 871.841 - - - Projected variance: Surplus/(Deficit) at 31 March 2023 - (0.538) (0.538) 0.158 (0.696) Table 1
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2.2. Analysis of Significant Variations 2.2.1. Table 2 below illustrates the projected outturn financial position of services: Service P6 Outturn (£m) P4 Outturn (£m) P4 to P6 Movement (£m) Education Children and Families (5.144) Overspend 0.158 Underspend (5.302) Enterprise and Communities (3.959) Overspend - On Budget (3.959) Chief Executives and Other Corporate Services 0.353 Underspend - On Budget 0.353 Social Work (Non-Integrated) - On Budget - On Budget - Executive Services Total (8.750) Overspend 0.158 Underspend (8.908) Financing Costs - On Budget - On Budget - Budget Assumptions (inflation) 2.927 Underspend - On Budget 2.927 Use of Reserves (inflation) 5.285 Over Recovery - On Budget 5.285 Total (0.538) Overspend 0.158 Underspend (0.696) Table 2 2.2.2. Education, Children and Families is reporting a projected overspend of £5.144m. There is a projected overspend in Property costs of £5.608m largely due to an anticipated increase in utilities/energy costs due to inflationary pressures, a projected overspend in transport costs of £5.394m due to ongoing demand pressures within ASN transport and increases to mainstream transport contract rates. There is also a projected increase in payments for ASN placements of £0.743m and Family Placements of £0.303m, due to cost pressures associated with External Fostering and Kinship Care Placements and a projected under recovery in income of £1.784m due to reduced membership and visitor fees for Active and Creative Communities. These are partially offset by a projected reduction in employee costs of £4.855m, largely due to delays in recruitment and establishment of staffing models. In addition, there are projected underspends in other expenditure of £1.988m, supplies and services of £1.554m and administration costs of £0.370m predominately due to management action and curtailment of non-essential expenditure. 2.2.3. Enterprise and Communities is projecting an overspend of £3.959m, largely due to inflationary pressures of £3.068m in the relation to utilities, food, fuel, materials and waste tonnage. There are also forecast increased non-inflationary related costs of £2.396m due to a delay in the achievement of office rationalisation savings (£0.450m), increased use of agency staff to support waste collection due to ongoing recruitment difficulties, increased costs of street lighting and electric car charging (£0.536m), other
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expenditure pressures of £0.890m, and income under-recoveries (£0.365m) in relation to demand for paid school meals and special uplifts. These overspends are partially offset by a £1.184m underspend in employee costs due to vacancies across the service. 2.2.4. Chief Executives and Other Corporate Services are projecting an underspend of £0.353m, primarily due to lower than budgeted contract costs as a result of a delay in transferring to a cloud environment, thus reducing the forecast cloud consumption costs by £1.000m, and a £0.200m underspend in property costs in respect transitional rates relief. However, these overspends are partially offset by a net overspend in employee costs of £0.644m in relation to vacancy savings offset by a delay in achievement of digital savings, and a £0.283m under recovery in come. 2.2.5. Within the service’s reported position above, unbudgeted inflationary impacts totalling £8.212m have been reported. However, Corporate Management Team will recall resources totalling £10.147m have been provided through a combination of budgetary provision and use of reserves to help manage the increased costs arising from higher inflation rates. Therefore, there is an offsetting drawdown of £8.212m from such resources, leaving a balance of just £1.935m to support any further pressures not yet realised. 2.2.6. Given the volatility in the economy, Government policy announcements and market conditions, it is very difficult to accurately assess the impact of inflation across the Council. Whilst the Council has identified funds to assist with offsetting the impact of inflation within the current year, it continues to be vitally important that services curtail all non-essential expenditure to support the Council’s overall management of this significant risk. 2.3. 2022/23 Budget Savings 2.3.1. As outlined in paragraph 2.1.2 above, the Council has approved net savings of £10.484m for 2022/23. After taking account of the £3.372m one-off resources set aside to manage the delayed implementation of savings, the overall savings target is £7.112m. Each Service reports on the achievement of their savings within the relevant Services’ monitoring report. It is projected that £5.417m of savings (76%) will be achieved in the current year. It is anticipated that the remaining in year gap of £1.695 will be fully mitigated by replacement savings and implemented in full in future years. 2.4. Earmarked Reserves and Change Management Fund 2.4.1. The Council’s audited annual accounts highlight a General Fund reserve balance of £236.264m. This balance includes £8.000m for the Contingency Reserve. There is also a total of £169.240m earmarked for specific future commitments including £30.551m in relation to COVID and £54.175m to support the future contractual obligations in respect of PPP schools, following a change in presentation in respect of such balances, as discussed and agreed with Audit Scotland. A further £29.424m has been allocated to the Change Management Fund to support future budget pressures, one-off costs of existing approved savings and to ensure the Council has a resilient and sustainable strategic financial plan. This leaves £29.600m of unallocated balances. 2.4.2. A total of £103.096m of earmarked reserves are profiled for use in 2022/23 with a further £66.144m profiled for use in future years. It is currently projected that £102.096m of the 2022/23 earmarked reserves will be fully spent during this financial year. A summary position in respect of the above is shown in Appendix 2.
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2.4.3. The unallocated reserves will change depending on overall financial performance year on year, unexpected commitments and to account for future drawdowns from the capital fund. Therefore, reflecting the current year forecast overspend of £0.538m and the capital fund drawdown of £0.396m, the unallocated General Fund balance is currently forecast to reach £29.458m by the financial year end. Appendix 3 summarises this position. 2.5. Risks and Uncertainty 2.5.1. All activities undertaken by the Council are subject to risk, and in acknowledging the Council’s approved Risk Management Strategy, Services manage these as part of their overall corporate and service planning processes. The current economic climate such as the rising forecast of pay and non-pay inflation, on-going COVID impact, the cost of living crisis and other external factors, have the potential to impact upon the Council’s ability to provide quality services within approved budget levels. 2.6. Housing Revenue Account 2.6.1. The Housing Revenue Account is currently projecting a breakeven position for the financial year and anticipate that £1.849m of savings (100%) will be delivered by the year end. 2.7. Adult Health and Social Care 2.7.1. Council Adult Health and Social Care provision to the Integration Joint Board (IJB) is projecting an underspend of £8.624m. This position is primarily due to a projected underspend in employee cost of £5.126m as a result of slippage in recruitment of posts relating to “Winter Planning and Enhanced Support”, a projected under spend in payments to other bodies of £1.961m as a result of staff shortages within the care at home sector SDS commissioning framework, a projected underspend in administration costs of £1.329m due to lower than anticipated Carers costs and numerous other smaller budget movements. 3. Measures of success 3.1. The Council continues to operate within approved budgeted resources. 4. Supporting documents Appendix 1 Summary by Division Appendix 2 Anticipated Commitments – Earmarked Reserves Appendix 3 Availability of One-Off Funds – Change Management Fund Elaine Kemp Head of Financial Solutions
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5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☐ No ☒ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒
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If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed?
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Appendix 2 Total Total Reserve Balances 2022/23 Revised Earmarked Reserve 22/23 Projected Spend Anticipated Year End Balance Anticipated Future Year Use No Longer Required Profiled for Future Years Anticipated Future Year Use No Longer Required No Longer Required £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Change Management Fund 29,424 29,424 1,624 27,800 - - 27,800 27,800 - - Earmarked & One Off Resources Schools Future Contractual Obligations 54,175 - - - 54,175 - 54,175 54,175 - - COVID-19 Directed Funding 6,392 6,392 6,392 - - - - - - - COVID-19 General Funding 21,159 19,283 19,183 100 1,876 - 1,876 1,876 - - Covid Recovery (From Core) 3,000 3,000 3,000 - - - - - - - Early Learning and Childcare 14,249 7,490 7,490 - 6,759 - 6,759 6,759 - - Strategice Workforce Planning 13,000 13,000 13,000 - - - - - - - Temporary Accomodation 9,288 9,288 9,288 - - - - - - - 2022/23 Budget One-off Investment 6,000 6,000 6,000 - - - - - - - DSM Balances 5,332 5,332 5,332 - - - - - - - Winter Reserve 1,500 1,500 1,500 - - - - - - - Youth Guarantee Funding 2,367 2,367 2,367 - - - - - - - Pupil Equity Fund 5,122 5,122 5,122 - - - - - - - Energy Costs and Other Non Pay Inflation 7,220 7,220 7,220 - - - - - - - Digitisation 2,499 2,319 2,319 - 180 - 180 180 - - Enterprise Contract 1,686 1,000 1,000 - 686 - 686 686 - - Business Gateway & Business Recovery 1,700 801 801 - 899 - 899 899 - - Active and Creative Communitites 2,000 2,000 2,000 - - - - - - - Rapid Rehousing (Non-COVID) 1,159 500 500 - 659 - 659 659 - - Other Earmarked Funds 11,392 10,482 10,482 - 910 - 910 910 - - Earmarked & One Off Resources Total 169,240 103,096 102,996 100 66,144 - 66,144 66,144 - - Total Reserves 198,664 132,520 104,620 27,900 66,144 - 93,944 93,944 - - Contingency Reserve 8,000 Unallocated Balance 29,600 General Fund Surplus at 31 March 2019 236,264 NORTH LANARKSHIRE COUNCIL ANTICIPATED COMMITMENTS AGAINST EARMARKED RESERVES AS AT 18 September 2022 (PERIOD 6) 2022/23 Future Years
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Appendix 3 £000 £000 Total Balance B/f per 2021/22 Unaudited Accounts 29,424 29,600 Period 5 reported overspend (538) Total Balance 2022/23 before commitments 29,424 29,062 Known Commitments :- Revised one - off costs of approved savings (1,624) Draw down from Capital Fund 396 Total Balance 2022/23 27,800 29,458 Estimated future Commitments to 2026/27 (27,800) Estimated future Capital Fund Drawdown to 2023/24 1,000 Forecast Balance 0 30,458 NORTH LANARKSHIRE COUNCIL AVAILABILITY OF GENERAL FUND BALANCES AS AT 18 September 2022 (PERIOD 6) Change Management Fund Unallocated General Fund