Agenda item

To consider a report by the Head of Finance and Audit (copy enclosed) updating Governance and Audit on outstanding matters relating to 2025/26 budget, sets the scene for budget setting in the medium term (2026/27 – 2028/29), and updates the self-assessment of the Council’s level of financial resilience and sustainability.

The Chair introduced the report (previously circulated). He welcomed the Head of Finance and Audit to guide members through the papers. Members heard the report had been presented to Cabinet on 29^th April before Governance and Audit Members.

Members were guided to appendix 1 which detailed the final version of the savings tracker for the financial year 2024/25. When the budget was set for 2024/25, savings proposed were categorised including major savings proposals which totalled £2.7m of which £2.2m (82%). Some of the saving proposals detailed were still being worked upon. Some savings were delayed hence not reaching the potential saving for a full financial year this would be reflected in the 2025/26 savings. Details also included the smaller non-strategic saving category which totalled £5.3m with having achieved £4.9m of that total. Emphasis was given to the hard work and considerable changes the authority had made to achieve those savings.

A review of savings that had not been achieved was conducted when setting the 2025/26 budget to consider the impact on the 2025/26. A review of each budget and actions had been noted with details included in appendix 1.

Members were guided to appendix 2 which was the updated medium term financial plan covering the period 2026/27 to 2028/29 financial years. It was a high-level estimate of known pressures, including a range of assumptions providing a low, medium and high estimate of costs for each pressure. It illustrated the uncertainty of the figures and the amount of work still required to refine the projections. It was stressed there remained a great deal of uncertainty around the figures.

The 2026/27 financial year illustrated a low indication of pressure of £14m, medium pressure of £21m and a high level of £26m. Similar figures had been projected for 2027/28 and 2028/29 financial years. Members heard the importance of noting the financial challenge the authority faced remained for the forthcoming years.

The impact on the estimated increases in Council Tax and funding from Welsh Government were included in the report. Included were working assumptions with no decisions having been made on Council Tax. Members were informed an error was made in appendix 2 stating it had come from the Wales Fiscal Analysis which it had not the figures were the working assumptions officers based on the absence of other data.

The balance to bridge the gap for financial year 2026/27 would be £8m at the low, £11m middle and £12m high.

Appendix 3 provided details of the medium term financial strategy. Which provided details of the authority’s strategic approach to the management of finances and outlined some of the financial issues which may be faced over the next 3 years. The paper was an early version and would be refined over the financial yar 2025/26. It provided details of workstreams that required progression to achieve balanced budget in 2026/27 and future years.

Appendix 4 was the annual self assessment of financial resilience and sustainability. As a request of the committee a stress test of the council’s budget processes was conducted.

The Chair thanked the Head of Finance and Audit for the detailed run through the appendices to the report.

Following the introduction the Chair opened the discussion; the following points were discussed in greater detail:

·       One of the difficulties with the savings tracker was several of the savings were related to individuals. Thus, making it difficult to provide too much detail to ensure the identity of the individuals remained anonymous. The Head of Finance confirmed she could provide further detail to members outside of the meeting.

·       The forecast for the increase in car park fees along with other fee increases and cost reductions were included in the savings target. Reports which provided detail of the shortfall in savings had been presented to Performance Scrutiny. The report provided details and assurance of the process that was in place. It was stressed the savings proposal on car park fees continued to be monitored.

·       One of difficulties found had been as the categorisation of proposed savings for 2024/25 had taken place it was difficult to go back and change the categorisation. Going forward for any savings proposed in 2025/26 it had been listed by category with income being listed as a category. There was savings in relation to collaboration for 2025/26, if it was a future possible saving it could be added.

·       As part of setting the 2025/26 budget the saving proposals were reviewed. To ascertain any risks of saving targets not being met for the current financial year. Services and departments along with members had to challenge the plan when balancing the budget.

·       Staff were reviewing and updating figures regularly to ensure up to date data was available.

·       Open engagement with staff to ensure discussions around saving proposals continued. It provided all with knowledge and understanding of what was required by the council.

·       All members of the committee applauded the work undertaken to reach the savings made to date.

·       There was a fees and charges policy within the authority. Within that policy it was delegated to Heads of Service to annually increase any fees and charge in line with the rate of inflation. It also stated the authority should be at cost recovery where it could be. The need for a piece of work around fees and charges had been noted. It was confirmed a scope for a review on fees and charges had been presented to the Budget and Transformation board and approved to commence.

·       If members requested a figure could be set within the Council Tax and budget gap table for a specific council tax band. The reason for adding just a percentage had been it could be applied to all bands.

·       It was early to dictate what the revenue support grant would be for future years. There were several national events that would influence the figure this year.  

·       The annual pressure line on graph detailed in appendix 3 related to an assumption that inflation would fall and work from the transformation programme to reduce demand on services. The reason for the line not being solid was due to the level of uncertainty. The figures were high level forecasting and would be refined.  

·       The Head of Finance and Audit stated she was still awaiting clarity on the NI situation. Discussions were ongoing between Westminster and the Senedd which had caused delays.

·       Members noted the risk around National Insurance contributions and Denbighshire Leisure Limited.

·       The ear-marked revenue reserve of –£2.5 m against schools had been forecast for the year. Each school had a delegated budget and was allowed to retain any surplus budget. It could go into a deficit only with a licence signed off by local authority officers. There were several schools going into a deficit budget. It demonstrated the pressures faced by schools to balance their budget. Ach school was required to have a recovery plan in place. The Internal Audit team had conducted a piece of work on schools in financial difficulty.

·       The centrally earmarked reserves were closely controlled. Cabinet was in control and made decisions in relation to those funds.

·       Members heard the stress test of the budget process was not too onerous on officer time. It permitted reflection and a review at a given time. She had no objection to continue the process. Members agreed to continue with the report on an annual basis.

·       It was felt that the Performance Scrutiny gave the appropriate time and discussion to the agenda item. It had been included in the forward work programme for the Performance Scrutiny.  

·       The new financial system had been a considerable change, bringing numerous systems together. A review and update of Financial Regulations by Finance would need to be done, considerable thought to when that review could be conducted had to take place. It was stressed it would need to be done thoroughly and not rushed. The Head of Finance stated she would discuss with the Chief Internal Auditor as to include in the Annual Governance Statement.

·       It was felt the new financial system was a major change to several systems. The implementation went as well as it could have. It was stressed this was the first year the closure and end of year processes would be completed under the new system. Good progress on moving forward with the new system had been made. The system was cloud based, with no expected expiry date.

·       The new system was not the reason for the delay in 2022/23 and 2023/24 it had compounded the issue.

·       Members raised concern and issues around the level of funding received from Welsh Government against the level of resources and services offered by the authority. It was a difficult balancing act to maintain a level of service against increase in costs whilst offering the same level of service. It was suggested that a possible line of discussion when setting Council Tax around the fundamental issues faced by Local Governments and the level of services provided was made available to the public including the potential to significantly increase council tax to bridge the gap. The Monitoring Officer confirmed he would feed back comments to Cabinet. It was suggested Members have some consideration to the discussion and provide feedback to the Head of Finance and Audit.

RESOLVED, The Committee considers, approves and provides feedback on the updates listed in 2.1 of the report cover.