2 - Revenue and Capital Budget Monitoring Overview Report
Renfrewshire Council · 14 September 2023
Back to Finance, Resources and Customer Services Policy Board — 14 September 2023 and its agenda
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To: Finance, Resources and Customer Services Policy Board On: 14 September 2023 Report by: Director of Finance and Resources Heading: Revenue and Capital Budget Monitoring – Council Overview as at 23 June 2023 1. Summary of Financial Position 1.1. The projected Revenue outturn at 31 March 2024 for all services is an overspend of £5.679m. 1.2. The projected Capital outturn at 31 March 2024 for all services is an underspend of £0.143m. This is split between General Fund Services and the Housing Revenue Account (HRA) in the table below, with further analysis is provided in the Appendices. Table 1: Revenue Division Revised Annual Budget Projected Outturn Budget Variance (Adv)/Fav Budget Variance £000 £000 £000 % General Fund Services 509,587 515,266 (5,679) (1.1%) Housing Revenue Account (HRA) 0 0 0 0.0% Total 509,587 515,266 (5,679) (1.1%) Table 2: Capital Division Revised Annual Budget Projected Outturn Budget Variance (Adv)/Fav Budget Variance £000 £000 £000 % General Fund Services 145,890 145,747 143 0.0% Housing Revenue Account 29,678 29,678 0 0.0% Total 173,899 173,756 143 0.0%
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2. Recommendations Members are requested to: 2.1. Note the projected Revenue outturn position detailed in Table 1 above, considering that the forecast position is based on best estimates at this point in time; and also note the substantial risks to this position as outlined in section 3 of the report; 2.2. Note the projected Capital outturn position detailed in Table 2 above; 2.3. Note the prudential indicators detailed in section 6 of the report. 3. Revenue Monitoring 3.1. The Revenue Budget Monitoring report at Appendix 1 identifies a projected annual overspend of £5.679m (1.1% of total budget) for all Services. Details for all services can also be found here, along with an explanation of significant projected variances. 3.2. The projected outturn is based on information currently available, and assumptions made by service budget holders. Any changes to these projections will be detailed in future reports to this board. 3.3. The main reasons for the projected outturn position are indicated in the appendix showing both the subjective analysis (what the budget is spent on) and the objective analysis (what division is spending the budget). 3.4. In line with last year, there are ongoing cost pressures within Children’s Services, Soft Facilities Management, Waste Services, Parking and Streetscene. Reasons for significant variances are included within Appendix 1. 3.5. Members should also note that the forecast outturn position does not include any impact of non-teaching pay settlements for 2023/24, which are not yet agreed. 3.6. Directors and management teams are closely monitoring their costs and are aiming to mitigate increases where possible; however, as noted in the Revenue Estimates 2023/24 report, the Council is expected to use up to £4m from ring-fenced reserve balances in order to break even at year end, particularly in relation to children’s residential care, energy costs, and parking income shortfalls.
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3.7. Section 6 includes additional information about capital and treasury performance indicators, which will now be regularly reported to this board. Further context is provided at 6.1 and 6.2. 4. Capital Monitoring: Housing Services Programme 4.1. The HRA Capital Investment Programme 2023/24 to 2027/28 was approved by the Council on 2 March 2023. For 2023/24, the approved capital spend totalled £29.678m. There have been no changes to date. 4.2. Capital expenditure to 23 June 2023 amounted to £2.583m, representing 9% of available resources, compared to 6% for the same period in 2022/23. 4.3. 36% of expected capital income has been received to date, compared to 0% for the equivalent period in 2022/23. This difference relates to the timing of receipt of grant for external improvements and council house new build. 4.4. The projected outturn position, after budget changes, is for the Housing Services Programme to break even (see Appendix 2). However, inflationary impacts of delays to work and related cost estimates are still ongoing and may result in this forecast being revised at a future date. 5. Capital Monitoring: Non-Housing Services Programme 5.1. The General Services Capital Investment Programme 2023/24 to 2027/28 was approved by Council on 2 March 2023. For 2023/24, the approved capital spend totalled £145.327m. The current revised programme totals £145.890m (an increase of £0.560m) resulting from the net effect of: net budget increases of £1.452m, mainly as result of new grant awards from Strathclyde Passenger Transport and Cycle Walking & Safer Routes; budget carried forward from 2022/23 to 2023/24 of £3.425m; and projects re-profiled from 2023/24 into 2024/25 of (£4.317m). 5.2. Capital expenditure to 23 June 2023 totals £10.717m, representing 7% of the available resources, compared to 5% for the equivalent period in 2022/23. 5.3. Capital income totalling £6.405m has been received to 23 June 2023. This represents 13% of the total anticipated income, compared to 9% for the equivalent period in 2022/23.
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5.4. The projected outturn position after these budget changes is an underspend of £0.143m (see Appendix 2). However, the full impact of inflation on capital costs on each project is not yet determined, with increased costs through inflation and compliance expected to increase the risk of overspends across the capital programme. It is anticipated that the current forecast underspend will be reallocated within the Education Capital Investment Programme. 6. Capital Overview: Prudential Indicators 6.1. The Council is required to set prudential indicators to ensure that its capital investment plans are affordable, proportionate, prudent and sustainable. The current prudential indicators were approved, alongside the housing and non- housing capital investment programmes, by Council on 2 March 2023. 6.2. The CIPFA Prudential Code 2021 recommends that from 2023/24 a regular update is provided to members noting the current forecasts for prudential indicators compared to those approved at the start of the financial year. These are outlined in 6.4 to 6.8 below. 6.3. The Council will be asked to approve revised Prudential Indicators in December 2023 as part of the mid-year progress report. 6.4. Capital Expenditure: The limit on capital expenditure that the Council has set for 2023/24 is shown in the table below. The limit is based on the resources available to fund the capital programmes, split between Housing and Non- Housing Services, but excludes the Public Sector Housing Grant, as this is not considered to be capital spend for the Council. Approved Plan £m Forecast Expenditure £m Non-Housing 145 145 Housing 30 30 Total 175 175 6.5. Capital Finance Requirement (CFR): The CFR originally planned by the Council for 2023/24 is shown in the table below and is split between Housing and Non-Housing Services. The approved Non-Housing figure in the Treasury Strategy was £94m lower than the Planned figure shown here, and the following two tables, owing to a formula error that omitted other long-term liabilities. The projected outturn at 31 March 2024 is also shown. Any significant increase in the capital expenditure without planned funding at the point of spend will result in an increase to the CFR.
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Planned CFR to 31 March 2024 £m Projected CFR to 31 March 2024 £m Non-Housing 431 424 Housing 121 124 Total 552 547 6.6. Operational Boundary: This is the focus of day-to-day treasury management activity within the Council and is an estimate of the most likely, but not worst case, scenario in terms of cashflow. Risk analysis and risk management strategies are taken into account, as are plans for capital expenditure, estimates of the CFR and estimates of cashflow requirements for all purposes. It is possible that this boundary could be breached occasionally and this should not be regarded as significant. However, a sustained or regular trend of such would be significant and require investigation and action. Planned Operational Boundary to 31 March 2024 £m Projected Operational Boundary to 31 March 2024 £m Borrowing 459 453 Other Long-Term Liabilities 94 94 Total 553 547 6.7. Authorised Limit: This is based on the same assumptions as the Operational Boundary, with additional headroom to ensure sufficient capacity to allow for both planned and exceptional cashflow requirements, without breaching the limit. Planned Authorised Limit to 31 March 2024 £m Projected Authorised Limit to 31 March 2024 £m Borrowing 477 476 Other Long-Term Liabilities 94 94 Total 571 570 6.8. Ratio of Financing Costs to Net Revenue: A key measure of affordability is the incremental impact of investment decisions on Council Tax or housing rents. Estimates of the ratio of financing costs to net revenue stream provide an indication of how much of the Council’s revenue budget is committed to the repayment of debt.
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Approved Ratio of Financing Costs to Net Revenue 2023/24 % Projected Ratio of Financing Costs to Net Revenue 2023/24 % Non-Housing 3.64 3.85 Housing 28.97 29.03 Financing costs include the interest payable with respect to forecast borrowing levels, interest payable on finance leases, interest and investment income, loans fund and finance lease principal repayments and gains/losses on the repurchase or early settlement of borrowing. Because interest rates have remained higher for longer than anticipated in the approved ratio, the forecast cost of interest on potential borrowing levels results in higher projected ratios. Revenue streams relate either to the amounts received in terms of government grant and local taxpayers for Non-housing, or to the amounts received from tenants in respect of housing rents for Housing. 7. Private Sector Housing Grant Programme 7.1. The overall budget provision for this programme is included within the revenue budget. However, in order to monitor the performance of the individual programmes, it is included within capital budget monitoring procedures. 7.2. The Council approved expenditure up to £0.600m for 2023/24. The programme currently stands at £1.117m, an increase in budget of £0.517m to reflect Contribution From Current Revenue (CFCR) in 2023/24 after the approval of the Private Sector Housing Investment Programme 2023/24 by the Communities and Housing Policy Board on 16 May 2023. 7.3. The programme is expected to fully spend by 31 March 2024 and will be contained within the overall resources. ___________________________________________________________________ Implications of this report 1. Financial – The projected budget outturn position for General Fund Services Revenue budget is an overspend of £5.679m (1.1%) and break-even for the HRA Revenue budget. Income and expenditure will continue to be monitored closely for the rest of the financial year and, where necessary, steps will be taken to mitigate overspends. The projected outturn position for General Fund Services Capital budget is an underspend of £0.143m and break-even for the HRA Capital budget.
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The Capital programme will continue to be monitored closely for the rest of the financial year. Any changes to current projections in either Revenue or Capital budgets will be detailed in future reports to this board. 2. HR and Organisational Development - None directly arising from this report. 3. Community/Council Planning - None directly arising from this report. 4. Legal - None directly arising from this report. 5. Information Technology - None directly arising from this report. 6. Equality and Human Rights - None directly arising from this report. 7. Health and Safety - None directly arising from this report. 8. Procurement - None directly arising from this report. 9. Risk - The potential risk that the Council will overspend its approved budgets for the year will be managed at a Council-wide level by the Chief Executive and Directors. 10. Privacy Impact - None directly arising from this report. 11. Cosla Policy Position - N/a. 12. Climate Risk - None directly arising from this report. List of Background Papers Revenue Budget and Council Tax 2023/24. Council, 2 March 2023. Non-Housing Capital Investment Programme 2023/24 to 2027/28. Council, 2 March 2023. HRA Capital Investment Programme 2023/24 to 2027/28, Council on 2 March 2023. __________________________________________________________________ Authors: Alison Burns, Corporate Finance Manager and Geoff Borland, Finance Manager
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Appendix 1 Policy Board Approved Annual Budget Budget Adjustments Revised Annual Budget at Period 3 Projected Outturn £000 £000 £000 £000 £000 % Communities and Housing Services 13,567 591 14,158 13,815 343 2.4% Education and Children's Services 239,035 6,317 245,352 247,975 (2,623) (1.1%) Infrastructure, Land and Environment 31,123 (317) 30,806 33,154 (2,348) (7.6%) Finance, Resources and Customer Services 97,666 833 98,499 99,554 (1,055) (1.1%) Adult Services 94,264 3,273 97,537 97,537 0 0.0% Planning 595 6 601 607 (6) (1.0%) Economy and Regeneration 3,086 7 3,093 3,091 2 0.1% Chief Executive's Service 20,010 (469) 19,541 19,533 8 0.0% GENERAL SERVICES NET EXPENDITURE 499,346 10,241 509,587 515,266 (5,679) (1.1%) Housing Revenue Account (HRA) 0 0 0 0 0 0.0% NET EXPENDITURE 499,346 10,241 509,587 515,266 (5,679) (1.1%) RENFREWSHIRE COUNCIL REVENUE BUDGET MONITORING STATEMENT 2023/24 1 April 2023 to 23 June 2023 Budget Variance (Adverse) or Favourable POLICY BOARD : FINANCE, RESOURCES & CUSTOMER SERVICES ‐ OVERVIEW
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Appendix 1 Policy Board Key Reasons for Significant Projected Variance Communities and Housing Services The projected underspend here relates to vacancies within the Communities and Public Protection service, which are currently being reviewed by operational management. Education and Children's Services Of the reported forecast overspend, £2.651m is related mainly to external specialised residential accommodation placements within Children and Families. An additional £2m was set aside in the 2023/24 budget, with an expectation that up to a further £3m may be required to be funded from ringfenced balances; this will be closely monitored as the year progresses. All external placements are held under continual review by the service to ensure they continue to meet the needs of the individual children and young people and options to mitigate cost pressures continue to be examined. Further overspends are anticipated in relation to contracted mainstream and additional support needs transport costs. Infrastructure, Land and Environment The main drivers of the projected year‐end overspend of £2.348m are the ongoing shortfall in parking income; waste collection costs that are largely driven by inflationary factors and absence cover as a result of annual leave and sick leave, and the impact of other inflationary pressures across the services. Additional expenditure has been incurred as a result of ongoing tree management work that is currently being carried out by the Streetscene team with further analysis required here to establish the full current year impact on the budget. Finance, Resources and Customer Services The projected year‐end overspend is £1.055m, arising from overspends in the repair and maintenance of street lighting columns, due to inflationary pressures, as well as a forecast income under‐recovery within Soft Facilities Management. The position will continue to be monitored closely for the rest of the financial year, with mitigating actions by management following more detailed analysis of drivers. Housing Revenue Account (HRA) An underspend in employee costs is projected due to the timing of recruitment of vacancies within the service. Property costs are projected to overspend, reflecting ongoing demands for repair and maintenance provision, particularly in void properties, as well as additional Council Tax costs for these properties. Transfer payments are forecast to overspend, owing to the impact of repairs pressures on void rent loss. These overspends are expected to be offset by additional interest income due to higher than budgeted interest rates. Overall the HRA is therefore projecting a break‐even position at the year‐end.
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Appendix 1 Subjective Summary Approved Annual Budget Budget Adjustments Revised Annual Budget at Period 3 Total Projected Outturn £000 £000 £000 £000 £000 % Employees 357,984 (7,898) 350,086 349,095 991 0.3% Premises Related 44,692 576 45,268 47,322 (2,055) (4.5%) Transport Related 13,748 (2) 13,746 15,720 (1,974) (14.4%) Supplies and Services 87,011 8,216 95,227 97,666 (2,439) (2.6%) Third Party Payments 96,094 4,446 100,540 103,543 (3,003) (3.0%) Transfer Payments 71,078 14,382 85,460 86,359 (899) (1.1%) Support Services 5,906 (2,762) 3,144 3,083 61 1.9% Depreciation and Impairment Losses 27,023 0 27,023 27,028 (5) 0.0% GROSS EXPENDITURE 703,536 16,958 720,494 729,817 (9,323) (1.3%) Income (204,190) (6,717) (210,907) (214,551) 3,644 1.7% NET EXPENDITURE 499,346 10,241 509,587 515,266 (5,679) (1.1%) Budget Variance (Adverse) or Favourable RENFREWSHIRE COUNCIL REVENUE BUDGET MONITORING STATEMENT 2023/24 1 April 2023 to 23 June 2023 POLICY BOARD : FINANCE, RESOURCES & CUSTOMER SERVICES ‐ OVERVIEW
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Appendix 2 Prior Years Approved Budget Revised Projected Expenditure Budget Adjustments Budget Outturn Total Approved Projected to 31/03/2023* 2023‐24 in 2023‐24 2023‐24 2023‐24 Budget Outurn to 31‐Mar‐27 to 31‐Mar‐27 £000 £000 £000 £000 £000 £000 £000 EDUCATION & CHILDREN'S SERVICES Education & Children's Services 71,715 8,905 (1,567) 7,338 7,195 143 2% 157,644 157,501 143 0% TOTAL 71,715 8,905 (1,567) 7,338 7,195 143 2% 157,644 157,501 143 0% COMMUNITIES, HOUSING & PLANNING Housing(HRA) 40,827 29,678 0 29,678 29,678 0 0% 319,242 319,242 0 0% Housing(PSHG) 0 600 517 1,117 1,117 0 0% 1,117 1,117 0 0% TOTAL 40,827 30,278 517 30,795 30,795 0 0% 320,359 320,359 0 0% INFRASTRUCTURE, LAND & ENVIRONMENT Environment & Infrastructure 78,986 11,868 4,808 16,676 16,676 0 0% 97,689 97,689 0 0% TOTAL 78,986 11,868 4,808 16,676 16,676 0 0% 97,689 97,689 0 0% ECONOMY & REGENERATION Economy and Development 54,136 39,128 4,073 43,201 43,201 0 0% 106,181 106,181 0 0% TOTAL 54,136 39,128 4,073 43,201 43,201 0 0% 106,181 106,181 0 0% FINANCE, RESOURCES & CUSTOMER SERVICES Corporate Projects 4,576 9,982 357 10,339 10,339 0 0% 24,604 24,604 0 0% TOTAL 4,576 9,982 357 10,339 10,339 0 0% 24,604 24,604 0 0% LEADERSHIP Leisure Services 2,548 1,725 461 2,186 2,186 0 0% 4,733 4,733 0 0% Chief Executives 111,559 73,719 (7,569) 66,150 66,150 0 0% 360,864 360,864 0 0% TOTAL 114,107 75,444 (7,108) 68,336 68,336 0 0% 365,597 365,597 0 0% TOTAL ALL BOARDS 364,347 175,605 1,080 176,685 176,542 143 0.1% 1,072,074 1,071,931 143 0% MADE UP OF :‐ Non-Housing Programme 323,520 145,327 563 145,890 145,747 143 0% 751,715 751,572 143 0% Housing Programme(HRA) 40,827 29,678 0 29,678 29,678 0 0% 319,242 319,242 0 0% Housing Programme(PSHG) 0 600 517 1,117 1,117 0 0% 1,117 1,117 0 0% PROGRAMME TOTAL 364,347 175,605 1,080 176,685 176,542 143 0.1% 1,072,074 1,071,931 143 0% Budget Variance (Adverse) or Favourable Budget Variance (Adverse) or Favourable RENFREWSHIRE COUNCIL CAPITAL INVESTMENT STRATEGY ‐ NON‐HOUSING SERVICES 1st April to 23rd June 2023 POLICY BOARD: FINANCE, RESOURCES & CUSTOMER SERVICES Current Year 2023‐24 Full Programme ‐ All years
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Appendix 2 2023/24 Housing Non Housing PSHG Total Services Services Programme A. RESOURCES AVAILABLE TO FUND CAPITAL PROGRAMME £'000 £'000 £'000 £'000 1. Prudential Borrowing 23,438 95,812 119,250 2a General Capital Grant 16,039 600 16,639 2b. Specific Capital Grant 1,786 2,186 3,972 3. Usable Capital Receipts 530 29,917 30,447 4. Contribution From Current Revenue (CFCR) 3,924 1,936 517 6,377 5 Total Resource Availability 29,678 145,890 1,117 176,685 B. CAPITAL PROGRAMME 6. Resources Available 29,678 145,890 1,117 176,685 7. Current Programme 29,678 100% 145,890 100% 1,117 100% 176,685 100% C. ACTUAL EXPENDITURE VS PROJECTED 8. Resource Availability 29,678 145,890 1,117 176,685 9. Cash Spent at 23 June 2023 2,583 9% 10,717 7% 218 20% 13,518 8% 10. Cash to be Spent by 31 March 2024 27,095 135,173 899 163,167 D. ACTUAL RECEIPTS VS PROJECTED 11. Current Programme (total receipts expected) 2,316 48,142 600 51,058 12. Actual Cash Received at 23 June 2023 826 36% 6,405 13% 99 17% 7,330 14% 13. Receipts to be received by 31 March 2024 1,490 41,737 501 43,728 RENFREWSHIRE COUNCIL 2023/24 CAPITAL BUDGETS MONITORING SUMMARY REPORT TO 23rd JUN 2023