Agenda item

[To report on the Council’s revenue budget outturn position for 2014/15 compared with approved budgets and targets]

Cllr Andrew Johnson reported on the main areas of the report, particularly the overall net underspend of £6.991 million achieved against the General Fund net budgets; the resilience within the Council’s finances as a result of the revenue outturn and the receipt of additional Business Rates Support grant totalling £3.4 million; the good performance of the recruitment agency, Yoo Recruit Limited whereby the Council had made a £137,000 saving by not paying fees to recruitment agencies. Yoo Recruit also realised savings in excess of the £50,000 target that was built into the 2014/15 approved budgets. Cllr Johnson congratulated all those involved in establishing Yoo Recruit and those working at the agency.  He also reported on the Collection Fund outturn that was a £7 million deficit during 2014/15. The outturn was primarily owing to the impact of appeals against business rates over which the Council had no control. For this reason it was proposed to establish a Business Rates Equalisation Reserve to equalise the impact of appeals on the Council.

Resolved:

1.  That it be noted that:

a     The revenue outturn position for 2014/15 for the General Fund; a net underspend of £6.991 million (2.82%) was achieved against the net budget requirement of £247.6 million. This, combined with the receipt of additional Business Rates Support grant totalling £3.4 million, had resulted in the Council not needing to draw down £9.9 million of general fund reserves to balance the budget, as originally budgeted for.

b     That a significant element of the underspend arising within the 2014/15 General Fund outturn is already factored into the Council’s Medium Term Financial Strategy, including savings arising as a result of changes to the Council’s Minimum Revenue Provision (MRP) Policy, as approved by Full Council on 4 March 2015. Whilst the underspend against budget during 2014/15 would help to support the Council’s short term financial position, it does not address the challenging financial position that the Council finds itself in over the medium term; namely identifying an additional £46.3 million of savings. Further to this, it is anticipated that the financial challenge could potentially be worse once the Autumn Spending Review is announced. An update on progress to date with the savings strategy for 2016/17 would be reported to Cabinet at this meeting in the Draft Budget and Medium Term Financial Strategy 2016/17 – 2018/19 report.

c.      That this outturn position takes into account a number of proposed transfers to and from reserves and provisions for which approval is sought in the Reserves, Provisions and Balances 2014/15 report to be presented at this meeting.

d.      That  significant underspends against the General Fund budget have been achieved during 2014/15 as a result of savings arising from a change in the Council’s Minimum Revenue Provision (MRP) Policy, the early implementation of approved savings and the improved financial management and control achieved from the implementation of Agresso. A comprehensive review of all service areas, which is being led by Finance, is currently being undertaken to challenge all areas of underspend and identify any recurring savings which may contribute towards the savings strategy for 2016/17. The results of this review would be reported to Cabinet in October as part of the Draft Budget and Medium Term Financial Strategy report.

e.      That due to the level of underspend, instead of spreading the cost of pension strain over a period of up to three years, all sums due to the West Midlands Pension Fund relating to pension strain have been fully accounted for in 2014/15, in order to secure savings against the Council’s pension liabilities.

f.       That schools contributed £1.4 million to reserves during 2014/15, taking the total accumulated reserves to £15.7 million at 31 March 2015.

g.      That the Housing Revenue Account revenue outturn position for the year was a surplus before allocations of £20.5 million, compared to a budgeted surplus of £11.9 million. The underspend would help with the adverse impact that would arise as a result of the recent budget announcements regarding a 1% reduction in rents for four years.

h.     That the draft financial statements of Yoo Recruit Limited will be subject to external audit.

i.       That as a result of recruitment through Yoo Recruit Limited the Council has been able to avoid fees which would have otherwise have been incurred, including approximately £92,000 in relation to the permanent recruitment of individuals who had been previously employed on a temporary basis through the agency, and approximately £45,000 through a reduction in use of the Birmingham Gateway Framework arrangement.

j.        That the outturn against the Collection Fund for 2014/15 is a £7.0 million deficit. As a result of the adverse outturn against the Collection Fund, primarily owing to the impact of appeals against Business Rates, over which the Council has no control, it is proposed that a Business Rates Equalisation reserve be established to equalise the impact of appeals on the Council. Approval for the establishment of this reserve will be sought in the Reserves, Provisions and Balances report to be presented to Cabinet at this meeting. Furthermore, a review of the Collection Fund assumptions built into the Medium Term Financial Strategy will be undertaken to take account of the issues faced as a result of appeals.

2.  That a loan of £300,000 to Yoo Recruit Limited to be repaid within 12 months at market interest rate be approved , to aid cash flow purposes for the company now that they are turning over such a significant sum of money. The loan would be funded from Corporate Contingency within the Capital Programme, and the subsequent repayment of the loan would be treated as a capital receipt.

3.  That a virement totalling £300,000 from Corporate Contingency to the Temporary Staffing Agency project within the Capital Programme, to facilitate the loan to Yoo Recruit Limited be approved.

4.  That the net profit after tax of £7,000 of Yoo Recruit Limited be retained by Yoo Recruit to enable business development.

5.  That the write off of four sundry debts that individually exceed £5,000, as a result of liquidation, deceased debtors and debts uneconomical to pursue, as detailed in Appendix F of the report be approved.