Agenda item

Financial Monitoring

Minutes:

The Director of Corporate Services advised that this report set out the current budget position in respect of the 2022/23 revenue and capital budgets. 

 

Revenue Budget

The overall position at the end of September was an overspend of £0.5m, largely as a result of price increases associated with energy, fuel and property maintenance costs. 

 

The year-to-date positions within individual departments were set out in the report with major variances relating to non-pay spends and variances on the pay budget being shown separately in the table below: -

 

Area

Overspend / (Under spend)

Reason

 

£’000

 

Fleet & Technical Services

147

The increase in fuel prices was reflected in the overspend to date. The budget allowed for 12.5% increase in fuel costs, but the actual increase was significantly higher than this, approx. 50%, which equated to approx. £125k. In addition, usage was higher this year than in previous years, reflecting increased activity post pandemic. This gave an overall overspend to date of £75k.

In addition, repair costs had increased, reflecting works needed in the first quarter of the year and the increase in costs due to inflationary pressures, currently standing at £75k overspent.

Both these areas would remain overspent throughout the remainder of the year, with the latest estimates showing a year end forecast overspend of approx. £275k.

Information Technology

71

The overspend to date was attributable to a combination of the timing of expenditure, with software licenses being paid up front, and a general increase in costs, again reflecting inflationary pressures.

This situation was likely to remain throughout the remainder of the year, with a current year end forecast overspend of £100k.

Property

242

The increase in energy prices was reflected in the overspend to date. The budget allowed for 25% increase in fuel costs, but the actual increase was significantly higher than this, approx. 100% in the first half of the year, giving a current overspend of £130k. However, price increases in the second half of the year had again increased significantly, with the current forecast showing an increase of approx. 200%. As such a very significant increase would be seen in the overspend in the second half of the year and currently the year end forecast was an overspend of approx. £700k, although it was not clear what impact the Government energy cap would have on this.

In addition, the in-year maintenance programme had been ‘front loaded’, and this coupled with increases in maintenance costs aligned with inflationary pressures, had led to a current overspend of £100k. As a result of the increase in costs and on-going maintenance requirements this was another area that was looking at a year-end overspend, currently forecast at £150k.

Wholetime Pay

15

This was broadly in line with budget, retirements and leavers were broadly in line with forecast, with a slight shortfall in recruit number been offset by increased overtime.

Whilst this was broadly in line at the present time, any allowance for the final pay award exceeding the 2% budgeted allowance had not been built in. Based on the existing 5% allowance, this would see an overspend of approx. £750k

On Call Pay

12

This was broadly in line with budget.

Whilst this was broadly in line at the present time, any allowance for the final pay award exceeding the 2% budgeted allowance had not built in. Based on the existing 5% allowance, this would see an overspend of approx. £125k

Support staff (less agency staff)

50

The budget was adjusted to take account of the increased level of vacant support posts within the Service. Whilst a number of posts remained vacant, agency staff had been utilised to support some key technical roles within the organisation, resulting in an overspend to date. This would slow down in the second half of the year as vacant posts were recruited thereby reducing the reliance on agency staff.

The current position did not allow for the green book pay award, which had now been agreed at £1,925 per full time equivalent. This was significantly higher than the budgeted allowance of 2% and would increase costs over and above budget by approx. £250k by the end  of the year.

Apprentice Levy

(20)

The apprentice levy was payable at 0.5% of each month’s payroll costs with expenditure slightly less than budgeted.

 

As highlighted in the report, inflationary pressures were causing costs to increase in several areas, most notably fuel, energy and property costs, approx. £1m of additional pressures. However, more significant than that was the potential costs associated with pay awards, approx. £1.1m more than budgeted. This was partly offset by increased returns on investments, which was currently anticipated generating a surplus of £0.5m. Other areas for delivering savings continued to be reviewed, however it was clear that there would be a very significant overspend at year end, of between £1.0m and £1.5m.

 

As such reserves would need to be utilised to offset this. £6.0m of general reserves was currently held, having agreed a minimum level of £4.0m, and as such £2.0m of this could be utilised to offset any in year pressures, although clearly this was a short-term measure only.

 

It was noted that utilising reserves in this manner would also limit the ability to offset financial pressures in 2023/24 and future years.

 

Capital Budget

Following the slippage agreed at the last Resources Committee the capital budget now stood at £3.3m. Spend to date was just £0.6m as set out in the table below: -

 

Spend to 30 September

Year End Forecast

 

 

£m

£m

 

Operational vehicles

-

0.9

As reported previously whilst a significant number of operational vehicles had been ordered (13 pumping appliances, 2 Command Units and an ALP) lead times were such that expenditure had not been incurred in the year to date and were only likely to incur £0.69m by the year end (reflecting agreed staged payments).

Support vehicles

0.1

0.4

This budget allowed for the replacement of various operational support vehicles, whilst some of these had already been delivered, the shortage of raw materials was affecting both the timeframe for delivery and the cost of vehicles. Latest predictions indicated that approx. 50% of the original programme would be completed in year, at a cost of £0.4m.

Operational Equipment

0.1

0.3

Spend to date was attributable to the replacement of light portable pumps. An additional £0.2m was anticipated would be spent on CCTV for pumping appliances in-year.

Building Modifications

0.3

0.8

Spend to date was associated with:-

  • Enhanced facilities at Hyndburn fire stations, where works had commenced and would be completed by October, with costs to date standing at £0.1m.
  • The replacement of drill towers, where one tower, Blackpool, was completed in June, and where work on replacing two towers, Tarleton and Bolton le Sands, was underway (both were completed and handed over in November), with costs to date of £0.2m.

IT systems

-

0.9

Approximately 50% of the budget related to the placement of Vehicle Mounted Data Systems on appliances, where an order had been replaced but no costs had been incurred at the end of September.

The balance of the budget related to the replacement of various systems and ICT hardware, in line with the ICT asset management plan. Whilst no costs had been incurred in the year so far, it was highlighted that contracts for several of the systems had been awarded.

Total

0.6

3.3

 

 

The costs to date would be met by revenue contributions.

 

It was noted that significant cost increases across various supply chains continued to be seen, particularly in construction projects and this would affect some of the capital projects as they progressed through the procurement stage.

 

In response to questions raised by County Councillor Woollam and County Councillor S Rigby regarding the difficulties in recruiting staff and a timely recruitment process, the Director of Corporate Services advised that this was due to a shortfall of people with the expertise needed to fill some specialist, technical support vacancies.  The process of agreeing any changes to the job description, starting the job evaluation process, advertising, recruitment and selection took time and sometimes the process needed to be repeated.  In the meantime, agency staff had been used which was more costly.  County Councillor O’Toole added that increases in levels of vacancies appeared to be more across the public sector, with Lancashire County Council also experiencing the same problems with recruitment.

 

In response to a comment from County Councillor S Rigby regarding the level of reserves falling year on year, the Director of Corporate Services advised that this year the Authority was in a strong position.  Future years would be more challenging and would depend on the financial settlement and referendum level for council tax.   He advised that in addition to general reserves the Authority also held earmarked reserves and capital reserves.  Holding reserves gave time to plan for change such as the Emergency Cover Review.  A 5?year financial strategy would be presented to the Authority in February 2023. 

 

RESOLVED: - That the Committee:

i)    Noted and endorsed the current financial position; and

ii)   Noted the anticipated year end forecast overspend of between £1.0m and £1.5m.

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