Agenda item

With reference to article 12 of the minute of its previous meeting, the Committee had before it a report by the City Chamberlain which detailed the projected outturn and current financial position for the Council for the financial year 2009/10, and advised on areas of risk and management action that had been highlighted by the Directors.

Appendix A to the report provided a summary on the overall Council projected position, which showed a favourable net position, before exceptional items, of £2.445 million against the budget.  This was a favourable movement of £4.920 million on the position last reported.

The report highlighted that the detail behind the favourable movement revealed improving financial projections from within Services, in particular the Social Care and Wellbeing budget, where projections in the last report of almost £6.5 million over budget had been reduced to £2.1 million. This was due to specific and one off savings opportunities that had been identified by the Service and which were intended to have an impact of saving up to £3.1 million in the last quarter of the year.

The report continued that the projections overall would have been more favourable had it not been for the winter conditions in recent weeks, the additional cost of which so far had been calculated at approximately £0.5 million. This was a value that was beyond the budget provision, and it was highlighted that should there be further snow or ice in the remainder of the financial year, the Council would incur extra costs.  In addition, there was a clear requirement for road repairs and maintenance to be undertaken in subsequent weeks, as potholes and surface damage were revealed and assessed.  Taking this into account, a further provision of £0.5 million had been built into the projections to take account of unknown but anticipated and potential road and winter maintenance costs.  These projections were included under the Enterprise, Planning and Infrastructure section in appendix A.

The report advised that despite the improving position, overall, the pressure on the operational budget remained clearly visible, with underlying costs in Social Care, and reductions in income streams relating to planning and building application fees, and sports centre activities. The Service forecast outturns reflected these pressures in the current economic climate, and the report highlighted that short term and one off cost reductions could not address the underlying trends and provide sustainable solutions for the future. 

The report further advised that that the projected outturn figures reflected progress on achieving approved budget savings of £27 million, which were incorporated into the budget.

The report continued that it had been assumed that the corporate contingencies, set aside in the budget would be fully utilised in the year, but the possibility remained that the contingencies would not be required, and therefore the potential for further improvement to the projected outturn figures remained. This figure could amount to over £1 million at the year end depending on the circumstances during the last quarter.

The report further advised that HMRC had unexpectedly settled a further claim relating to leisure activities from 1990-1994, and this had resulted in a further £2.297 million (net) being received by the Council. The total net value, including interest and after the deduction of fees, now received by the Council was £5.997 million.  Officers had sought further advice on the limited number of claims still to be assessed but had been advised that it was now unlikely that there would be any high value receipts, although some smaller value claims may be paid in due course.

While this provided a very positive impact on the Council’s financial position, the exceptional nature of this meant that the Council could not rely upon this in any other year.  The report continued that it therefore remained important that the Council worked continually to address the financial challenges that it faced in service provision and delivery.

As a direct result of the overall impact of these favourable projections, the General Fund balance would benefit to the value of £8.442 million (net revenue budget surplus £2.445 million plus exceptional items £5.997 million).

The report then detailed the management actions being taken across and within services currently, to address the unfavourable operational budget positions, and outlined these as follows:-

(a)       vacancy management (the filling of all vacant posts was being scrutinised and authorised by the Corporate Management Team);

(b)       reviewing and limiting payments for overtime;

(c)        reviewing the use of agency staff;

(d)       minimising discretionary expenditure on supplies and services;

(e)       tightening spend controls across all purchasing decisions;

(f)         the Director for Social Care and Wellbeing would authorise and agree with the Head of Service any admissions for older people, those with learning disabilities and children;

(g)       the Head of Procurement was identifying further opportunities for procurement savings that could be realised in the current year;

(h)        there would be no recommendations for external placements of children and firm gate keeping arrangements would be maintained;

(i)         travel outside the city would be approved on an exceptional basis only; and

(j)         bringing forward the 2010/11 budget savings proposals to 2009/10 wherever possible.

The report further advised that in November, 2009, the Scottish Government had introduced a scheme for local authorities in Scotland whereby they could seek consent to borrow for one off equal pay costs.  In response to this Aberdeen City Council had made an application to the scheme.  The application was still being considered, and a response was due in the near future, subject to Ministerial approval and the impact of the outcome of this application would be included in a future report to this Committee. 

The report continued that on the basis of a similar scheme that the Council applied to last year, there was currently in place consent to borrow for some specific equal pay costs (cleaners, caterers and carers) in financial year 2009/10. In relation to these costs, the Council had already incurred £4.2 million of expenditure to which borrowing could apply. After taking account of the cost of borrowing this would enable the release of £3.6 million into the General Fund, over and above any of the financial projections contained within report.  It was therefore anticipated that the release of £3.6 million could be made available to support the funding of the one off exit costs for the staff reduction exercise. 

Appendix B to the report outlined a summary of the consent to borrow currently approved, and the value applied for.  The report highlighted the costs that this course of action would be likely to incur, and the fact these were spread over a period of ten years.  The report continued that this was not the ideal choice, but provided an alternative tool where financial commitments were significant and all funding options were important.  The aim was for the Council to have sufficient resources to enable it to pay for all the costs it was expected to meet from its own reserves and balances; however, to have in place consent to borrow for specific one off costs would provide an opportunity for the Council to assess the alternative courses of action available to it, if these proved necessary.

Further approval from the Scottish Government could offer the option of borrowing to increase the General Fund reserve and balances, and in so doing could provide another opportunity to earmark sums for specific one off costs. The report suggested that in the absence of any additional notification from the Scottish Government, the Committee approve the earmarking from the General Fund reserve and balances of a further £4 million to support the workforce reduction exercise, plus the sum already able to be released through consent to borrow arrangements (£3.6 million). This would amount to a total of £7.6 million for staff exit costs. Officers confirmed this included any pension payments that would be associated with this exercise.

The report advised that as applications for voluntary severance and early retirement were approved, this sum would have to be reviewed, and was therefore subject to revision in the future.

The report concluded by summarising the net revenue position of the Council.

The Committee resolved:-

(i)         to note the report and the implications of the projected figures on the general fund balance;

(ii)        to instruct Directors to continue to take cost reduction opportunities during the remainder of the year, in order to move the estimated position back in line with the approved budget;  and

(iii)       to approve the earmarking of £7.6 million from the General Fund balance for the costs associated with the staff reduction exercise.