A summary of the financial elements of the Budget and Balanced Score Cards: Quarter Three 2017/18 report was provided. It was noted that the report was brought to OSB slightly later than normal due to previous Call-In meetings. The information presented would be updated for year-end in the near future.
The reports summary of recommendations were outlined for the Board. With regard to recommendation 2 it was noted there was a small budget underspend for the Council of £7,000. The table in paragraph 8 demonstrated the Councils overall financial position at Quarter 3.
With regard to recommendation 3, it was noted that projected capital expenditure was £37.652m against a revised budget of £36.552m which equated to 103% of the budget. It was explained this should be seen as positive due to projects being re-profiled faster.
With regard to recommendation 4, it was noted that the Council had reserves that totalled £41.1m which was in line with expectations. The Senior Finance and Business Partner invited questions from the board.
A Member stated that underspending was not necessarily a positive indicator and could lead to questions about why budgets had not been spent. The officer commented that the overall underspend of £7,000 was minor. The Member felt that underspending in particular departments, for example by £640,000 in Public Health, was not minor.
It was confirmed the underspending identified was to be brought into the Medium Term Financial Plan going forward, despite it being an underspend in-year. The officer clarified underspending was being carried forward to help fund next years budget.
A Member queried why there was underspending in some departments. The Boards attention was brought to paragraph 25 of the report which provided explanations which were, primarily, one-off savings in the year. For example, one-off staff savings of £383,000 were from posts that were vacant for a short period of time in the year.
A Member queried why, if budgets had been planned and departments were under strain, there was such large underspending in some departments.A discussion took place that culminated in a decision that relevant Service Directors should attend a future OSB meeting to explain underspending in their departments.
A Member queried what would happen should there be repeated underspending in the next financial year, as money being saved against planned budgets could be used to assist departments that were facing pressures.
It was commented that in the next budget monitoring cycle, attention should be paid to reoccurring underspending which would need to be fed into the Medium Term Financial Plan at a later date. It was confirmed that the financial information presented to the Board had been consistent throughout the year.
A Member commented, in relation to paragraphs 21 through 24 of the report, that it was understandable why there had been overspending in Childrens Services and asked for further explanation regarding paragraph 24, that read "A one-off underspend of (£107,000) on the Prevention Budget was projected at the end of Quarter Three, mainly due to savings from staff not yet being at the top of their grade following a service review".
It was confirmed the underspending referred to staff previously based in the Stronger Families Services before moving to Childrens Services. After a recent review staff salaries began at the bottom of the respective pay grade. However, when budgets were set the top of pay grades were always factored in. It was also noted that underspending in Childrens Services would be detrimental to service provision.
A Member queried if the underspending was indicative of new staff in the department, however it was confirmed it was associated with the service review. The one-off underspend of £70,000 from the Troubled Families Grant was also queried. It was explained that in addition to the Grant the Council also received a payment by results, for example payment being made based on how many families successfully completed the process. It was commented that there may be a slight pressure in this area in the next financial year.
A Member queried if the £6.6 million held in school reserves, identified in paragraph 4 of the report, was managed by the School Management Forum and if the underspend included only Local Authority schools or if they included academies as well.
It was confirmed the figure only included Local Authority schools and the number of the Local Authority Schools in Middlesbrough would be provided to the Board.
A Member expressed concern at the high level of underspending, which could be even higher if academies were taken into consideration. A query was posed concerning what mechanisms were in place to challenge the current position, especially given a decrease in Local Authority schools versus an increase in the amount held by them in reserves.
The officers commented that the high levels of reserves were reported at the School Management Forum and that the Department for Education was now meeting with Local Authorities to advise them about high levels of school reserves.
It was also noted that a paper was required to explain what mechanisms were available to the Council in these circumstances and for a request be made for the Director of Education to attend OSB to explain the situation in full.
The Chair of Health Scrutiny queried if the issue of high levels of school reserves was a Scrutiny topic in its own right and it was agreed that a determination would be made on this after the Director of Education had appeared at OSB.
A Member commented that, if possible, it would be beneficial if the reserve levels of academies could be brought to the attention of Scrutiny. It was also commented that OSB should dedicate considerable time to the end of year financial report when it was produced.
The quarter 3 performance information to the Board. It was commented there was a marginal reduction from the position at quarter 2 where 8 out of 9 directorates achieved 75% or more of their performance targets. This had dropped to 7 directorates in quarter 3 and was related to financial considerations.
It was also noted there were reoccurring performance issues in Childrens Services, largely due to capacity. However, there was an increase in performance within the Regeneration area largely driven by minor financial savings.
The officers commented that other performance issues were those that had persisted over the longer term, including local employment issues and anti-social behaviour.
The Boards attention was brought to the Councils Strategic Risk Register and the introduction of a new risk in the form of Ofsted inspections, and noted this was integrated into the budget process.
A Member commented that in relation to Adult Social Cares performance, cited at paragraph 64 in the report, this had decreased and could be linked to the previous discussion around underspending in departments.
The officers commented that further details about this correlation would need to be provided by the relevant Service Areas.
A Member made reference to paragraph 60 in the report, concerning Public Health and Public Protection, where again there had been a reduction in performance. It was commented that performance indicators in this area showed travel in the wrong direction, for example a widening gap between rich and poor in the town and other health inequalities. For these reasons there should not have been any underspending in that area.
A Member commented that it was not beneficial to underspend on budgets. It was also commented that there was a review of Public Health services underway and that going forward there may be a request for further funding for Public Health.
The officers commented that the levels of underspend witnessed were unlikely to be repeated going forward.
OSB felt it unusual that service areas would seek additional funding when underspending was evident.
The officers commented that Public Health services were slightly different in nature and, as such, their benefits would be likely seen over the longer term and see cash back in the year. However, a Member commented that may not be an excuse for current levels of underspend.
A Member suggested that the Director of Public Health attend a future OSB to provide an update on the current situation.
A Member commented that in cases where services had longer term objectives, these should be integrated into future reports to see potential trends. The officers confirmed there was a piece of work being carried out to examine historic underspending in all Council departments.
A Member queried if there was anything else OSB should be aware of but it was confirmed the main issues from a performance perspective were longer terms issues facing the Council, such as social regeneration.
ORDERED: That the number of the Local Authority Schools in Middlesbrough be provided to OSB.
ORDERED: That the Director of Education produce a paper for OSB to explain what mechanisms were available to the Council regarding school underspending.