Item 17 - HRA Revenue BCR - Period 3
West Dunbartonshire Council · 21 August 2024
Back to Housing & Communities Committee — 21 August 2024 and its agenda
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WEST DUNBARTONSHIRE COUNCIL Report by the Chief Officer - Resources Housing and Communities Committee: 21 August 2024 ___________________________________________________________________ Subject: Housing Revenue Account Budgetary Control Report to 30 June 24 (Period 03) 1. Purpose 1.1 The purpose of the report is to provide members with an update on the HRA revenue account financial performance at 30 June 2024 (Period 03) 2. Recommendations 2.1 Members are asked to: i. note the HRA revenue account is forecasting an adverse variance of £0.082m. The adverse variance will be offset by using £0.082m of HRA reserves. ii. note that the use of HRA reserves to address the projected adverse variance will lead to a closing HRA reserves balance of £0.886m which is below the prudential target of £1.064m. iii. note that work will continue to identify efficiencies across all areas of the HRA revenue account budget to allow HRA reserves to replenished and maintained in line with the prudential target, while ensuring that services are still delivered and that there is not a corresponding reduction in service provision. 3. Background Revenue 3.1 The Council approved a £53.218m HRA revenue budget for 2024/2025 on the 6th of March 2024 4. Main Issues Revenue 4.1 The budgetary position for HRA revenue account is provided in Appendix 1 with information on projected variances valued at more than £0.050m being provided as Appendix 2. ITEM 17
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Budget Overspends Loan Charges - £2.353m 4.2 The main pressure on the HRA revenue account continues to be elevated borrowing costs leading to higher interest and expense payments on new borrowing and debt refinancing. The HRA loan charge budget 2024/2025 of £22.092m assumed an HRA debt interest rate of 4.20%. Local authority interest rates have not reduced to the extent anticipated when the Council went to rent consultation in the last quarter of 2023 and drafted the 2024/2025 HRA budget. The current forecast is for the HRA debt interest rate to be 4.75% in 2024/2025 and for loan interest and expense costs to be £1.577m more than 2024/2025 budget. 4.3 A further pressure on the HRA loan charge budget is higher than planned debt repayments. The HRA repays capital borrowing over the expected economic life of the asset invested in. (E.g. heating systems – 20 years, new build properties – 60 years). The HRA debt repayment period has decreased (leading to higher annual debt repayment) as the Council has recently reprofiled capital expenditure on housing stock to increase the condition of the asset to allow a quicker turnaround of void properties – more information is provided at paragraph 4.10. Furthermore, the Council has also restructured its borrowings to reduce its exposure to higher interest debt. This debt restructuring is beneficial over the medium / longer term but incurs higher debt repayment costs in the short term. Debt repayments are forecast to be £0.776 more than the 2024/2025 budget. 4.4 Officers are currently reviewing the Council’s HRA loan charge accounting arrangements to explore options to reduce expenditure in the short term and to alleviate the financial pressures on the HRA account. The findings of this review will be reported in a future budgetary control report to this committee. Council Tax on Void Properties - £0.097m 4.5 Council tax payments for longer term void houses are forecast to exceed budget. The main factor behind HRA properties incurring a council tax liability are delays resolving issues with debt on meters and with meter reconnections. The poor performance of the utility companies is adversely impacting on the length of time properties are void and leading to more empty properties incurring a council tax liability. Officers continue to work with utility companies to drive sustainable improvement in this challenging area and to minimise the number of longer-term voids and the attendant council tax liability. Other Expenditure - £0.068m 4.6 The key adverse variance is a forecast rent abatement overspend of £0.050m. Demand is exceeding the new reduced abatement budget. There has been considerable progress in reducing this area of spend with the 2024/2025 rent abatement spend forecast to be more than £300,000 less than the 2023/2024 spend. Officer will continue to tightly control this budget to minimise spend.
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Budget Underspends 4.7 The HRA cost pressures detailed above present significant financial challenges for the Housing Revenue Account. Officers have reviewed the HRA spend to explore any efficiencies and to identify the scope to reduce short term HRA cost pressures. Two key areas have been identified that are forecast to deliver an offsetting budget underspend of £2.434m Employee Costs - £0.400m 4.8 The HRA employee cost budget is £7.649m. The spend against this budget is influenced by staff turnover, staff overtime spend and the success in recruiting to posts as they become vacant. Management is targeting additional staffing efficiencies to deliver a £0.400m underspend against budget in 2024/2025, including tighter controls on staff recruitment and overtime together with a review of the HRA staff recharge the HRA capital account and the General Fund account. Repair & Maintenance – £1.996m 4.9 The HRA repair and maintenance budget is £15.058m. This budget primarily funds reactive repairs, void repairs, planned maintenance, compliance works, and environmental works. 4.10 The Housing senior management team reviewed the repairs spend and identified a potential £1.977m saving against the 2024/2025 repair and maintenance budget by identifying revenue spend that qualifies for capitalisation. A review of specific workstreams assessed that some works extend the lifespan of assets, specifically work conducted in void properties to bring properties back to relet standard are significant and include component renewals. Furthermore, the completion of an Electrical Installation Condition Report (EICR) is complementary to the environmental sensor installation programme. 4.11 Housing Servies staff are also in discussion with Greenspace colleagues to identify and deliver a £0.062m saving by revising work specifications and by placing tighter controls over the work instructed by Housing staff. 5. People Implications 5.1 There are no people implications. 6. Financial and Procurement Implications 6.1 Other than the financial position noted above, there are no financial implications of the budgetary control report. There are no procurement implications arising from this report.
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7. Risk Analysis 7.1 The main financial risks to the ongoing financial position relate to unforeseen cost being identified between now and the end of the financial year. This can affect all service areas. 8. Equalities Impact Assessment (EIA) 8.1 The report is for noting and therefore no Equalities Impact Assessment was completed for this report. 9. Consultation 9.1 The views of both Housing management and Legal Services have been requested on this report and both have advised there are neither any issues nor concerns with the proposal. 10. Strategic Assessment 10.1 Proper budgetary control and sound financial practice are cornerstones of good governance and support Council and officers to pursue the five strategic priorities of the Council’s Strategic Plan. This report forms part of the financial governance of the Council. This report is for noting and, therefore, does not directly affect any of the strategic priorities. Laurence Slavin Chief Officer – Resources Date: 21 August 2024 ___________________________________________________________________ Person to Contact: Jim McCarron - Business Unit Finance Partner 16 Church Street, Dumbarton, G82 1QL, Telephone: 07772 322055 e-mail james.mccarron@west-dunbarton.gov.uk Appendices: Appendix 1 - Budgetary Position (Revenue) Appendix 2 - Variance analysis (Revenue) Background Papers: None Wards Affected: All