The report of the Section 151 Officer is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) – copy attached to the signed Minutes – which provided details of Shropshire Council’s 2022/23 financial performance for revenue and capital.  The Executive Director of Resources (Section 151 Officer) introduced and amplified his report.  He explained that the report had already been to Cabinet and would be going to Council in July and sat alongside the Statement of Accounts. The report provided a suite of information in relation to the financial position and the overall assurance that could be taken in relation to the last financial years’ accounts and followed the format of the quarterly monitoring reports which were considered by Cabinet and Scrutiny.

The Executive Director of Resources (Section 151 Officer) informed the Committee that the Council had ended the financial year better than expected with an overspend of £8.5m, which was £1.5m better than previous estimates and although not ideal, showed that the underlying control framework demonstrated a strong grip on the projections for the Council’s financial position which showed a strong governance approach and showed that the estimates being used were based on a solid foundation.  He then drew attention to the appendices to the report which set out the detail of the under/overspends, levels of reserves etc.

In response to an earlier query, the Executive Director of Resources (Section 151 Officer) explained that reserves were used to cover any overspend in order to ensure there was not a negative balance sheet.  The overspend in 2022/23 had depleted the reserves significantly however that was the position as at 31 March 2023 and on the 1 April 2023 the new budget kicked in and as part of that there was an inbuilt allocation to the general fund balance which became £23m a day later.

In response to a query the Executive Director of Resources (Section 151 Officer) explained the approach taken to setting a balanced budget and what the consequences would be of not doing so, as set out in statute, including stopping all discretionary spending.  The Government could also take over the running of the authority and could use special powers such as being able to use capital for revenue purposes, increasing Council Tax above the referendum level, in order to bring the budget back into balance, however that was extreme and had not happened in many cases and was not something that was considered relevant to Shropshire Council. 

In response to a query, the Executive Director of Resources (Section 151 Officer) confirmed that the £51m savings was a base budget reduction, it was not about transferring money into reserves although there were a number of elements that had been transferred into reserves but fundamentally, the budget was built up around a plan based on assumptions around government funding and any increase in that government funding would be put into reserves.  The £1.965m were the savings that were rated as Red and had been carried forward into 2023/24.

In response to a query in relation to whether the slippage in the capital programme had led to any savings in interest, the Executive Director of Resources (Section 151 Officer) explained that there would be a series of capital projects to be delivered in the year which often took a number of years to deliver however the Council did not constantly borrow money as it was spent but would look at the overall cash position and as some borrowing became due to be paid off, the Council would decide whether it required to borrow more money now or not.  The Council had recently had a period of really high cash balances with no need to borrow.  Moving forward however, if the capital programme was delivered in line with the assumptions, there would be no need to borrow unless the overall programme was expected to cost more, in which case Full Council would be asked to approve the additional expenditure.

The Executive Director of Resources (Section 151 Officer) explained that Shire Services had a trading account that had to balance to £0 every year however if they made a deficit in one year, they would have to make a surplus in future years to repay it.  The deficit was therefore charged to the General Fund until due to be repaid by Shire Services to bring it back into balance over time.

The Executive Director of Resources (Section 151 Officer) explained that a review of the capital programme had been discussed by the Transformation and Improvement Overview and Scrutiny Committee.  He informed the Committee that a briefing was being prepared and task and finish groups being set up over the summer to consider the capital strategy where a review of all the schemes would be undertaken.  An update report was due to the Transformation and Improvement Overview and Scrutiny Committee in October/November to which all Members were able to attend and ultimately to Full Council for approval in March 2024.

In response to a query, the Executive Director of Resources (Section 151 Officer) explained the updated financial management training being arranged for budget holders.

RESOLVED:

In respect of the revenue budget:

a)    Note that the outturn is an overspend of £8.499m.

b)    Note the consequent level of the General Fund balance is £7.093m.

c)    Note the service-related use of £33.192m of Earmarked Reserves & Provisions.

d)    Note that the combination of earmarked and un-earmarked (General) reserves is below a level that would be regarded as safe, taking into account local circumstances. The MTFS sets out an agreed plan to restore these balances to safer levels.

Relating to ringfenced funding:

e)    Note the performance of the Housing Revenue Account (HRA) – £0.768m (4%) surplus outturn for 2022/23 on £19m turnover, and the resulting level of the HRA reserve of £12.359m. The level of the accumulated surpluses held as a reserve should be reviewed and an appropriate action plan brought forward.

f)     Note that the level of school balances has increased by £2.296m, from £8.191m in 2021/22 to £10.487m. The level of accumulated net surpluses in schools’ balances is considerable, and schools should identify the rationale for holding balances at those levels. 

In respect of the capital programme:

g)    Approve net budget variations of -£4.007m to the 2022/23 capital programme (in Appendix 11) and the re-profiled 2022/23 capital budget of £111.112m.

h)    Approve the re-profiled capital budgets of £26.575m for 2023/234, including slippage of £10.747m from 2022/23, £110.787m for 2024/25 and £56.264m for 2025/26 as detailed in Appendix 15.

i)     Accept the outturn expenditure set out in Appendices 12 and 13 of £100.365m, representing 90.3% of the revised capital budget for 2022/23.

j)     Approve retaining a balance of capital receipts set aside of £17.465m as at 31st March 2023 to generate a one-off Minimum Revenue Provision saving of £0.572m in 2023/24.