A report of the Deputy Chief Finance Officer was presented to provide an update to the Committee on the value and composition of the debts owed to the Council.
The Corporate Affairs and Audit Committee had previously requested detailed information as to the amount of debtors that had been reported in the Balance Sheet of the Statement of Accounts for 2014/2015.
The report provided a detailed analysis and comparison of the debtors figures provided in the 2014/2015 audited accounts and the draft accounts for 2015/2016.
The Assistant Director Interim, Finance and Investment, explained that all public sector and private organisations had money owed to them for services they had provided and for which they were yet to be paid. This constituted normal business activity. In relation to neighbouring Tees Valley Councils, all had comparable amounts of short term debtors at 31 March 2016.
Included in the Balance Sheet there were two figures for debtors: long term and short term. Long term related to monies owed to the Council which were not due to be paid within less than one year, whilst short term debtors related to monies that were due to the Council within one year.
The majority of the amount in long term debtors for Middlesbrough Council related to the hotel loan which was £5.8 million. The loan would be repaid to the Council over the next nine years, with interest payable at a commercial rate, as well as repayment of the initial advance of £5.8 million. The Council was able to borrow money at a cheaper rate and loan at commercial rates and therefore on full repayment of the hotel loan there would be net benefit to the Council.
In terms of the Councils short term debtors, more money had been collected in 2015-2016 than in previous years, so the overall position on debt was improving. In addition the creditor balance had also been reduced. Details of the four largest areas of service included within the short term debtors were included in the report.
With regard to the collection of Council Tax the overall collection rate remained at 98%. In year collection rates, at around 94/95%, had fallen due to the introduction of Council Tax Reduction which had imposed a requirement on people who had not previously had to pay Council Tax, to pay 20% of their total Council Tax bill. It was noted that whilst some residents chose not to pay their Council Tax, others were simply unable to pay. The Assistant Director Interim, explained that the Councils Council Tax Reduction (CTR) Scheme would be revised with the aim of creating a hardship fund to assist those people who did not have the means to pay their bill. The revised CTR Scheme would be presented to Council for approval.
The debt outstanding on the debtors system at 30 June 2016 of £11.7 million represented 1.36% of the total debt raised over the period from 2004/2005 to 2016/2017 of £862 million. If the most recent debt for 2015/2016 and 2016/2017 was excluded, the amount of outstanding to total debt raised reduced to 0.25%.
The Councils policy for bad debt provision was to provide a 50% provision for any debt aged between one and two years old and 100% for debts over 2 years old and this provision was reviewed annually at the end of each financial year. The Council continued to chase payment to recover amounts owed and would only write debt off when it was deemed to be un-recoverable.
The Assistant Director Interim confirmed that Middlesbroughs debtor provision and processes for collection were comparable with other local authorities. Whilst Middlesbrough perhaps did not make as much use of bailiffs as other authorities, this was in line with the policy not to add further debt to those people who could not afford to pay.
A Member queried the amount owed to the Council by Central Government departments under the short term debtors heading. The Assistant Director Interim explained that the Council had to spend the money first and then submit a claim to the Government. It was anticipated that the claims would be paid within two or three months but sometimes they were not paid before the year end. Sometimes the Council had not provided the right information at the right time but there was usually no penalty for late repayment. The Assistant Director Interim was not aware of any claims not having been recovered.
In relation to Council Tax and unpaid Council Tax it was highlighted that with the implementation of four year budgets the Government had set some parameters for Council Tax to suggest a 2% annual increase along with a 2% levy for Adult Social Care. The Assistant Director Interim explained that whilst this formed the basis for the Councils claim to Central Government for the next four years funding, Council would still have the opportunity to approve Council Tax setting on an annual basis.
AGREED as follows that:
1. The Committee noted the report and the improvement in the short term debtors position between 31 March 2015 and 31 March 2016.
2. The Assistant Director Interim, Finance and Investment, agreed to provide details of the top ten largest areas of service within the Others section in the Councils short term debtors.