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The Committee considered a report giving it the opportunity to hold Service
Managers and Portfolio Holders accountable for their budgets, and which provided a
further opportunity to assess progress against budget targets and income levels, and
any resulting necessary action to mitigate any forecast budget variance will be
considered.
Paul Cook, Head of Finance, attended the meeting to introduce the report and assist
the Committee with its deliberations. The Officer’s report set out the position as at
the end of September 2022, and the Committee heard that it had been a particularly
difficult year to control expenditure due to increasing inflation. The position presented
to the Committee represented a lot of work which services had undertaken to control
expenditure, and although the position was a developing one, it was considered that
likely overspend was at a level which could be contained through use of the
Council’s reserves. Some gains had been realised due to investment interest rates
which were significantly higher than had originally been budgeted for.
In response to questioning from the Committee, Paul Cook confirmed that the
proposed level of reserve usage was acceptable, although not ideal. Very careful
consideration would be given to the reserve position when setting the budget for
2023/2024, but the Committee was assured that current reserve usage was not
unacceptable, and that much more detail on the position would be provided in
budget reports to Cabinet in January 2023 in relation to the budget for 2023/2024.
A Committee member noted that the underspend on the Council’s Capital
Programme, combined with favourable interest rates on investments had been
fortuitous for the Council this year, but sought confirmation that £68m was the right
figure to have in short term investments. Paul Cook explained that the underspend
on the Capital Programme had been well documented, and it was accepted that
there may be a better method of managing projects within the Programme. Because
of the delays to the Capital Programme, the level of investments was higher than
may have been expected, but the treasury position would be reset as part of the new
Treasury Management Strategy, and it was felt that Officers were very well aware of
any current issues, which would be addressed when setting the budget for
2023/2024.
Councillor King, Leader of the Council, attended the meeting remotely, and, with the
permission of the Chair, addressed the Committee. He confirmed that the Council’s
Capital Programme was undergoing a thorough review, and the results of this review
were expected in January 2023. The Committee heard that there was a struggle
across Council services to manage a situation without precedent including rising
energy costs, an interim pay award for staff, and Waste Service and Sports and
Leisure Service pressures, which were detailed in the Officer’s report. The Council’s
management team were working extremely hard to manage the situation in the light
of these difficulties and additional inflationary pressures.
Councillor Cory, Portfolio Holder for Resources, attended the meeting remotely, and,
with the permission of the Chair, addressed the Committee. The review of the
Capital Programme had allowed the Council to make more short term investments
taking advantage of higher interest rates, however, ongoing costs and inflationary
pressures meant that the Council’s position remained a very difficult one. Councillor
Cory assured the Committee that the Council had a historic record of maintaining the
right level of reserves, and making good use of shorter term borrowing to balance
the costs of longer term borrowing. The long term impact of staff costs and pay rises,
coupled with inflationary pressure and rising energy costs would, however, continue
to have a long term effect on the Council and would require very tight budgeting in
future years to address these costs.
Commenting on the continued delay in receiving the audited statement of accounts
for 2021, a Committee member requested that the draft accounts for 2022 be
presented to the Committee, considering that it was essential that sight of the draft
accounts was essential to allow the Committee to carry out its governance role.
The Chair reminded the Committee that the problems with local authority accounts
were widely known, and it was not just Colchester City Council that was blaming its
external auditors for the delay, but also the Local Government Association (LGA),
and sadly the Council’s auditors had the worst record of all the auditors for local
authorities. The Council’s auditors, BDO, had been required to write to him by 30
November 2022 to explain the reason for the delay, and had done so on this
deadline without giving any indication as to when the work would be completed. It
was considered that the draft accounts could be made available to the Committee,
possibly as an exempt item, as they were in draft form only.
Councillor Cory assured the Committee that he was very aware of the position with
regard to the outstanding statement of accounts, and considered that it was
extremely poor that the Council had been placed in this position by the actions of its
auditors. He received regular updates from Officers on the situation, and work was
ongoing to ensure that the Council was not placed in this position in the future. Paul
Cook confirmed that work with BDO was ongoing, and it was expected that the 2021
statement of accounts could be presented to the January meeting of the Committee
with audit opinion, although no reliance should be placed on this date. The
Committee was reminded that 2021/2022 outturn had been reported to it earlier on in
the municipal year. There were potentially technical issues associated with
publishing the draft statement of accounts prior to the completion of the previous
year’s audit, not least of which would be the commencement of public rights to
inspect the accounts. If there were specific issues which the Committee sought
clarification on with regard to the 2021/2022 outturn, then these could be dealt with
without the need to publish draft accounts.
In discussion, the Committee considered whether the public would indeed have a
right to inspect the draft accounts, if these were treated as an item which was
exempt from publication when considered by the Committee. The Chair agreed to
consult with the Group Spokespersons and the Leader and Deputy Leader of the
Council on how best to seek sight of the draft accounts at the next Committee
briefing meeting, taking legal advice if necessary.
A Committee member noted that issues with the late submission of audited accounts
had been a problem for the past few years, across a number of Council
administrations. They considered, however, that there was nothing within the figures
that had been presented to the Committee during this period which had caused any
concern, although considered that the extreme dissatisfaction of the Committee in
relation to the delays was wholly justified.
Clarity was sought by the Committee on the impact which increased inflation actually
had on the outturn figures, was this a good or a bad thing? It was noted that although
the Council would potentially benefit from favourable rates on long term loans, the
higher than anticipated inflation rates placed the Council under particular pressure
on account of its high energy usage and staffing costs.
A Committee member commented on the £691,000 forecast overspend in respect of
Neighbourhood services for Waste Staff, and queried a statement which the Portfolio
Holder had made at Full Council indicating that winter contingency expenditure
would be covered by the existing budget; how was this possible given the volume of
overspend which had already been recognised? Paul Cook explained that the
position would be carefully monitored and would become clearer when the quarter 3
and 4 figures were known, when updates would be provided. Officers were asked to
explain the 48% overspend on banking charges, noted in the Officer’s report, and
Paul Cook agreed to provide a detailed explanation to the Committee after the
meeting, together with more information about the possibility of recovering the costs
of planning appeals.
Returning to the subject of the 2021/2022 accounts, Councillor Sunnucks, who is
named in these minutes at his request, requested that the draft accounts be
distributed just to the committee as a confidential item, as these would be far more
useful to consider than the management accounts which were presented to the
Committee. Clarification was sought on the rules around publishing draft accounts,
and whether or not the Council was in breach of these by failing to publish. Paul
Cook confirmed that the primary Regulations were the Accounts and Audit
Regulations 2015, which had been amended in 2021 and 2022 delaying the required
publication dates. The Council was not in breach of any Regulations, as the
Regulations provided that if the Council was not able to publish accounts on time, it
simply had to explain the reason for the delay on its website. It was not considered
that presenting the draft accounts to the Committee would present a particular
problem, however Officer workload and the potential demands of work in relation to
the completion of the 2020/2021 accounts meant that the draft accounts would be
better presented to the March meeting of the Committee. In discussion, the
Committee considered whether it would be better to circulate the draft accounts via
email, but it was considered that publication of the document as an exempt item at
the next meeting was probably preferable. Paul Cook suggested that it was possible
that the draft 2021/2022 accounts could be presented as an open item to the
meeting of the Committee in January 2023 as these accounts were substantially
complete.
A Committee member sought assurance that the Council’s risk management process
was responsive and under constant review in the light of potential changes to the
financial landscape or issues in the future such as further interest rate rises. The
Committee was advised that the Council’s Treasury Management Strategy was an
important document in terms of managing financial risk which set out risks on
interest rates, both on borrowing and investments. The Risk Register would be
updated to ensure that current issues were covered.
In response to a question form the Committee, Paul Cook would provide an
assurance outside the meeting that the noted underspend on the Housing Revenue
Account on services and supplies had not been caused by holding back on
delivering essential repairs to tenants.
RESOLVED that:
- The financial performance of General Fund Services and the Housing
Revenue Account (HRA) for the first six months of 2022/23, had been
considered;
- the forecast budget overspend of £392k on the General Fund be noted.