Agenda item

To receive a report by the Head of Finance and Audit on the revised financial position and progress on the budget strategy for setting the budget for 2024/25 (copy enclosed).

The Chair welcomed Liz Thomas the Head of Finance and Audit to the Committee. He wished the Head of Finance and Audit best wishes in her new role.

 

The Lead Member for Finance, Performance and Strategic Assets presented the report (previously circulated) to Members. She stressed to Members the financial situation Denbighshire along with all other authorities across Wales was unprecedented in terms of the financial void. Thus meaning the process of setting a balanced budget was to be far more difficult than previously witnessed.

A number of discussions had taken place and would take place to review and monitor the situation of balancing the authorities budget.

 

The Head of Finance and Audit echoed the comments made by the Lead Member. She expanded by saying the report was presented to committee to update and provide assurance on the processes on setting the budget for 2024/25.

The first section of the report provided details of where the authority currently was in relation to the financial position. Members were guided to the table included in appendix 1 of the report, provided the latest forecast. It demonstrated the difficulty in forecasting the potential level of funds. An additional column had been included in the table with the latest estimate figures which the team were working towards.

The table indicated the authority had budgetary pressures for 2024/ 25 totalling a predicted £26 million. The majority of those pressures were pay and inflation related, from demand led services. The majority of the risks were due to inflation and an increase in pay. Officers were constantly monitoring the inflation predictions and current figures.

The authority had not been required to find such a high balance void in recent years, it was stressed the council had a good history of making efficiencies and savings.

Officers were assuming Welsh Government would provide 3% to support the funding gap. Which was not in keeping with the high levels of inflation and demand. It was stressed the working assumption; officers were working to a council tax increase figure of 7%. No decisions had been made yet. With all these initial assumptions that would leave a funding gap of £15 million to find.

 

The strategy to review ways to close the gap was detailed in the appendix. An increase to fees and charges in line with the fees and charges policy would appropriately made. Heads of Service and Corporate Directors had put forward large scale savings proposals for consideration. Those proposals were being reviewed by the Corporate Executive Team. If any proposals were deemed a possible savings a formal process would begin with a number of stages before any formal decisions are made.

There were a number of nonstrategic savings proposals put forward which were being reviewed. All areas of overspends within authority were being reviewed to review those areas to prevent future overspends.

 

Discussions with schools in relation to the position had taken place. The authority would continue to fund inflation increases within schools but there would still be a requirement for schools to source savings of between 2-4%.

All the suggested savings put forward would save an additional £8 million which would leave a remaining gap of £7.5 million to balance the budget. A lot of work and communication was being done to discuss options and potential savings had taken place. A number of meetings were taking place to review potential savings area.

Members heard a staff suggestion scheme had been initiated. That scheme had resulted in 150 suggestions submitted by employees which were being reviewed by finance officers and Heads of Service. The Lead Member along with Head of Finance and Audit were due to meet with all political group leaders to consider and develop and suggestions.

All staff, schools and trade unions were kept abreast with the changing situation and figures.

Going forward officers were working of a revision to the forecast which would be provided to members in the new year. It was stressed 2024/25, 2025/26 and 2026/27 were all looking equally as challenging.         

 

The Chair stressed the Governance and Audits role was to review the process of the budget process and balancing the budget. Assurance was needed that all was being done to achieve a balanced budget in 2024/25 and subsequent years. Assurance was also needed that all saving proposals were achievable and were being achieved. Monitoring and tracking of those savings would be required.

The Committee would want to be made aware of any impacts on the governance of the authority as a result of the savings measures. 

 

Following the detailed introduction, the Lead Member and Officers expanded on the following points raised:

·         Members appreacited the difficulties faced by the authority over the coming years to balance budgets. They noted the large funding gap that was needed to be filled. Concerns were raised that certain serivce areas were currently over budget and would struggle to find savings they could commit to. Officers stressed there would have to be a process set over the medium term to review and monitor balancing the budget.

·         Officers were working through the savings proposals, some were further ahead than others with some being developed and progressed. There would need to be a savings tracking process in place to ensure savings are being met.

·         The savings ientified to date identified a saving of £8million it was hoped that during the process additional savings would be identified.

·         Services that currently were experiencing overpends were areas of high demand, they would also be required to assess any savings that could be made to reduce overspends and make savings propsals.

·         The gap of £7.5 million reported today was not how officers intended to propose to balance the budget. Work was needed and further discussions to reduce that by the close down of accounts.

·         Internal Audit would be reviewed and how best to work going forward. It was felt internal audt would need to work closely with the Head of Finance and Audit to monitor the proposed savings and completing savings proposed during the next months and years. Any issues would be presented to members in the audit reports preseted to committee.

·         A number of savings proposals were being put forward. One of those was looking at the roll in which City, Town and Community Councils could play in some of the savings proposals. Officers needed to review and assess going forward.

·         The staff suggestion process had been extremely worthwhile. The level of engagement had been good with a number of suggestions offering areas that could be progressed to reduce the funding gap. It was important to ensure all staff felt involved and able to suggest areas for savings.

·         It was confirmed the Section 151 Officer within the authority served the Section 114 notice on the authority and the external auditor. The Governance and Audit Committee was a prime link to the relationship between the external auditor and the authority.

·         In recent years there had been no Welsh Authorities that had issued a Section 114 notice. When looking at services in the authority that would continue, officers would look at those services that were statutory and those non-statutory.

·         Members heard the Medium Term Financial Plan covered three years and was currently being developed. Officers would look beyond the three-year plan to project future budget but it was stressed the further ahead you look the less reliant you can be on events.

·         A budget mitigation reserve would cover the overspend for the financial year 2023/24.

·         Capital programme was one of the major savings proposals that was being considered. In the report a savings figure of £500,000 was provided for investments and borrowing this was directly linked to new borrowing for capital projects.

·         Data on the Capital proposals and projects going forward in terms of the authority’s ambition was available. It may need to be reviewed to align what can be delivered and what was affordable to manage expectations.

·         All areas including service delivery were under review and considerations when reviewing potential savings.

·         The authority operated a housing revenue account which was reported to Cabinet as part of the budget monitoring report. The housing revenue account activity was reported to Cabinet and Communities Scrutiny and potentially Performance Scrutiny depending on the nature of the report. Officers confirmed it would look at the role of the Governance and Audit Committee in relation to the Housing Revenue Account to see where the role of the Committee would be.

 

Members asked if any variations or issues arose during the course of the coming months the committee were made aware of those issues and a report be presented at a meeting for discussion before the next scheduled update in June 2024.

 

RESOLVED that Governance and Audit Committee note the contents of the budget strategy agreed by Cabinet for setting the budget 2024/25. Members requested any significant events or deviations from the current projection be shared with the Committee.