Financial Position February 2021 - Report for the Year Ending 31st March 2021
Councillor Joyce Plummer, Portfolio Holder for Resources, provided a report informing Cabinet of the financial spending of the Council up to the end of February 2021 and the financial forecast outturn position for the Accounting Year 2020/21.
Councillor Plummer highlighted key elements of the report, as follows:
- The adverse variance forecast for February 2021 had been reduced to £188,000, which was an improvement on the forecast as at January 2021;
- This was a welcome direction of travel and reflected both the amount of Government grants received and widespread efforts of staff to contain expenditure;
- Any overspend was unwelcome, but the gap was continuing to narrow. There was a possibility that the authority would break even, or even have a positive variance at year end;
- The Council had handled more monies than ever before, which raised the possibility of any variance being significant. However, Hyndburn’s variance was in fact very small compared to the overall turnover.
Councillor Peter Britcliffe expressed disappointment that the report had not been available sooner, as this had given little time to analyse the information. The Leader of the Council responded that officers were currently stretched, but that the positive message in the report reflected the hard work of all staff.
Approval of the report was not deemed a key decision.
Reason for Decision
The spend for the first 11 months of the financial year to the end of February 2021 was £9,469,000 compared to a Budget of £11,204,000, giving a positive variance of £1,735,000 over the first 11 months of the year.
The current forecast spend to the end of the financial year in March 2021 was £11,415,000 compared to a Budget of £11,227,000. This forecast produced an adverse variance of £188,000 by the end of the financial year. The adverse variance across the Council was attributable to the impact of COVID 19 on the Council’s overall financial position, requiring it to spend additional sums to address the impact of the pandemic while at the same time suffering a reduction in its income, due to the downturn in economic activity stemming from the pandemic.
The predicted level of variance against the Budget could be managed within the Council’s overall reserves.
The financial detail was set out in a table at the end of the report. The report also included a more detailed commentary about expenditure in the following service areas:
- Environmental Services;
- Culture and Leisure Services;
- Planning and Transportation ;
- Regeneration and Property Services;
- Policy and Corporate Governance; and
- Non Service Items.
The figures for service areas included estimated losses in income due to the pandemic, less additional specific Government funding to help offset some of the losses incurred. Overall, the authority had estimated a loss in income across the Council of £1,033,000 and had assumed that the Government would provide a grant of £588,000 to offset those losses. The estimate was based around the Government guidance issued in this area. This process was subject to further review and a year-end reconciliation under the Government’s rules around this grant, so the figures were subject to confirmation and revision. This would only take place after the financial year-end. As such the figures could move upwards or downwards as a consequence, potentially by significant amounts as the scheme was new and untested.
The estimates around expenditure necessary to fight COVID 19 were subject to more uncertainty than in the normal forecasting of expenditure, given the unprecedented demands and changing nature in this area and, therefore, these forecasts were subject to larger variance than usual within a local authority Budget.
The authority expected a substantial increase in the non-payment of Council Tax and Business Rates, as well as a large rise in the numbers of Council Tax Support Claimants due to the pandemic. Due to the statutory requirements around accounting for these transactions, the losses in these areas this year would not manifest themselves until future year budgets and would be dealt with by adjustments to the Council’s revenue levels in later years.
The Government had potentially indicated that it would ensure all Tier 3 Councils were able to balance their 2020/21 and 2021/22 Budgets and, therefore, funding might be available to reduce the adverse variance to zero by the end of the year. However, at this stage no details had been provided around this potential extra financial support that might be available and, therefore, this funding was not included within this Budget forecast.
The level of adverse variance currently predicted would need to be funded from existing reserves if the extra funding did not materialise. The existing level of Council Reserves would be able to absorb such an adverse variance without a major impact on the Council’s overall financial position.
There were no alternative options for consideration or reasons
Resolved - That Cabinet notes the report on the financial position as at February 2021 and asks Corporate Management Team to continue to reduce costs and increase income over the remaining weeks of the financial year.