Council predicts £5.5m budget overspend after a single month
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A Midlands council is predicting a £5.5m overspend on its 2019/20 budget – just one month into the financial year.
In a report to Peterborough City Council’s cabinet, Peter Carpenter, acting director of corporate resources said the council had included some savings in its resource budget without a plan in place of how to achieve them.
This means that the council is already forecasting a £5.5m overspend – 3.7% of its £150.8m budget for 2019/20.
Carpenter’s report said: “The main variances being reported within resources are in relation to the shared services savings targets included in the budget, where there is currently no plan in place to achieve these savings.”
Figures included in the report show that the budget for the Peterborough Serco Strategic Partnership (PSSP) – which covers back office services – was originally budgeted for spending of £4.2m.
This figure, at the end of April, had already jumped to £7.4m – a rise of 76% on the original budget estimate.
The report said that there is no plan in place to achieve £1.85m of predicted savings within PSSP and £634,000 within financial services.
Predicted savings within the council’s highways service partnership with Skanska “are not currently achievable”, generating a pressure of £160,000, according to the report.
This means the budget for highways is already predicted to be overspent by £410,000 – 10% of the original budget.
One source within the local government finance sector said that the revised figures raised questions about the original budget setting process.
The source, who did not want to be identified, said: “Remembering that the budget was approved in March, it is very unusual to come up with large deficits so early in the year.
“It seems a bit odd to carry those savings forward to 2019/20 if they were even then doubtful.
“Although never tested in the courts, a balanced budget is generally taken to mean income equals expenditure and blank provisions not subject to detailed planning should not be in a balanced budget.”
In a separate report, Carpenter said that it “should be noted that this is an early forecast for 2019/20, and where risks are highlighted within this report, CMT are putting plans in place to mitigate these as far as possible.”
Another report to the meeting contained minutes from a cabinet meeting in February, which revealed that councillors had been warned that £3m was needed to balance the 2019/20 budget, with an expected deficit of £18m and £20m for the following two years.
It said that reserves had decreased from £41m in March 2019 to £19m in 2020, with only £8m of reserves left to fund the council’s change programme and unforeseen issues.
The minutes revealed that councillors had been warned that “there was a significant risk that, if the ongoing deficit was not balanced, that the section 151 officer would need to submit a Section 114 notice.”
A statement from the council to Room 151 said “a significant portion of the savings link to shared services, with the remainder linked to specific areas where pressures have been identified at an early stage of the year.
“Early identification gives the council the longest possible time to mitigate within the financial year and steps are already in place to do this.”
It said that the medium term financial strategy published in February allocated £2.3m of 2019/20 shared services savings to a specific workstream.
However, a further £2.2m of savings options are yet to be identified, the statement said.
“Work will continue on the development of full business cases and an updated position will be included within the MTFS 2020/21-2022/23 Tranche One report in the summer,” the council said.
“This monitoring report is in advance of the Tranche 1 report and as such needs to reflect this position.”
The statement said that shared service savings targets in the 2018/19 budget were dependent on factors including closer back-office working with Cambridgeshire County Council and “rationalisation and automation” of services being delivered with private sector partners.
The council said: “Although work is under way in both areas, there are associated timing and redundancy risks that require further consideration and agreement before savings can be realised.
“Therefore at the moment the full amounts are shown as pressures in this report and once programmes are put in place these pressures will reduce.”
Local government finance consultant Chris West, said: “While it’s a large variation, it is a month one report, and there are 11 months to settle down and or take corrective action.”
He said: “The variation is on the resources department, which suggests some central problem.
“If it was in children or adult services it would be more of a concern.”
The Ministry of Housing, Communities and Government told Room 151 that it is still investigating claims made earlier this year relating to the way the council accounted for spending of its capital receipts in 2018/19.
