Report to: Council Date



Download 0.72 Mb.
Page4/9
Date conversion21.11.2016
Size0.72 Mb.
1   2   3   4   5   6   7   8   9

APPENDIX C

COUNCIL RESERVES
The report includes a section on Reserves which explains how any potential use of them needs to be considered. An analysis of the revenue reserves expected to be held by services are shown below. A more detailed analysis can be found in the Third quarter monitoring Reports.
Analysis of Reserves £m
Reserves we are legally required to maintain (Balances, Schools, Insurance) 46

Reserves with an existing commitment (Capital, Waste, Property, budget

balancing) 60

Reserves to cover key areas of known future spend

(ICT replacements, redundancy/redeployment) 51

Reserve to cover key areas of risk 17

Service general contingencies to meet overspend/one-off demands 1

-----


175

-----


Revenue Impact of not holding key Reserves
If we were not to hold these Reserves then there would be a direct impact on the Revenue Budget in the order of £6m. This would be from having to provide a Contingency Budget to meet certain risks or additional costs that the Council will be facing in the future. These are set out below:-
£m
ICT replacements (would need an annual contribution to meet these

costs) 2.0


Redundancy/redeployment (if we did not hold Reserves

we would have to capitalise these costs – if Government agree) 2.0


Equal Pay (if we did not hold Reserves we would have to

capitalise these costs – if Government agree) 0.5


Corporate contingencies – Energy etc. (would need a specific

Contingency provision) 0.5


Service contingencies (would need a specific contingency provision) 1.0

-----


6.0

----


APPENDIX D



Report to:

The Cabinet







Date:

16th February 2015







Report of:

Borough Treasurer

Report No:
















Contact Officer:

Sue Johnson

Tele No:

Ext 1502







Report Title:
General Fund Balances/Financial Risks







Non -Confidential:

This report does not contain information which warrants its consideration in the absence of the press or members of the public









Purpose:

To outline the Borough Treasurer’s advice on the Financial Risks facing the Council and the appropriate level of Balances to be maintained






















Recommendations:

That the minimum level of Balances for 2015/16 should be £10.0m or higher if possible.






1. INTRODUCTION
The council maintains two types of Revenue reserves, earmarked reserves and general reserves (Balances). Earmarked reserves are set aside for specific purposes/ commitments whereas general Balances are maintained to support the overall Council’s cash-flow and meet any unforeseen contingencies/demands.
This report considers the current level of general Balances, evaluates the reasons why Balances are maintained (i.e. the general financial risks facing the Council) and provides advice on the appropriate level of Balances to be maintained by the Council in the light of Guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA). Appendix D sets out the Council’s current position in respect of Reserves.
2. NEED FOR GENERAL BALANCES
Whilst the Council’s annual Budget provides resources to meet any known liabilities or expenditure requirements, Balances are amounts which are set aside to meet unexpected changes in the Budget and to finance demands for resources which cannot be predicted and are assessed on the basis of the general financial risks facing the Council.
The requirement for Balances is acknowledged in statute with Section 32 of the 1992 Local Government Finance Act requiring Authorities to have regard to the level of Balances needed to meet estimated future liabilities when calculating their Budget requirement. The Chief Finance Officer has the responsibility to ensure that the Council maintains a balanced Budget with powers under Section 114 of the 1998 Local Government Finance Act to report to the Council should its liabilities be in danger of exceeding its resources. Equally, the External Auditor has a responsibility to review and report on the Council’s financial standing. Further requirements within the 2003 Local Government Finance Act reinforce the above with additional monitoring and reporting responsibilities.
In drawing together the Council’s capital and revenue budgets and four year financial strategy, the level of general Balances and Financial Risks are always carefully considered. The provision of an appropriate level of Balances is therefore a fundamental part of prudent financial management.
3. MINIMUM LEVEL OF RESERVES
The Audit Commission recommends that Authorities should maintain Balances equivalent to 3% of their Budget, for 2015/16 this would amount to approximately £15m. However, whilst this is recommended guidance, the decision on the appropriate level of Balances is one for the Council, with advice from its Borough Treasurer, to determine. There are several factors/financial risks that need to be taken into account in considering what is a prudent level of Balances:
i) Revenue Contingencies
The Council does not maintain a general contingency within its revenue budget but relies on in year savings and Balances to meet any unexpected demands. For example, a pay increase of 0.5% more than that allowed for in the Budget would cost £650,000, excluding Teachers. A price variation of 0.5% would cost £1.25m.
ii) Interest
In recent years the Council has been successful in managing the interest that it pays out/receives and savings in this area have generally added to Balances. However, fluctuations in interest rates cannot be totally forecast and given the Council’s overall debt of approximately £83m an unexpected increase in interest rates would increase the Council’s costs.
iii) Capital
The Council now has a capital programme in the order of £66m per annum. Within the capital programme there are no contingencies and whilst the programme is actively monitored and managed, there is the potential for a demand on Balances from any capital overspend. In addition because of the economic climate there may be difficulties in generating the level of Capital Receipts assumed in the capital programme. For 2015/16 this has been included at £2m.
iv) Economic Climate
The current downturn in the general economic climate is creating pressures for the Council in several ways. Demand for services, particularly those to support business, support those who are unemployed and to process benefits are increasing. In addition, several of the income/revenue streams may be affected by reduced demand/take up. Both the above items have been reflected in the budget but the change in demand cannot be absolutely forecast and therefore there may be changes in cost/income levels during the year.
v) Council Tax Support Scheme
From 1st April 2013 the Council introduced a Local Council Tax Support Scheme. The full risk of increasing numbers of claimants and greater individual claimant eligibility remains within the Council. This is a major risk to the Council’s resources, particularly in the early years of the new schemes.
vi) Local Business Rates
From 1st April 2013 Business Rates were changed from a National to a Local scheme. This means that the Council faces 49% of the risk of non-collection due to businesses failure to pay or going into Administration. In the current economic climate this risk is significant. The Business Rates assumptions provide a £0.5m provision against such losses and the Government provides an overall safety net. However, this safety net is based upon losses amounting to 7.5% of the total Business Rates threshold. Overall therefore the Council faces having to meet any losses between £0.5m and £8.5m from General Balances.
vii) Un-predictable Demand Led Expenditure
Major parts of the Council’s Budget, particularly in Social Care Services and Education are “demand led” and as we have seen in previous years, can create significant demands for increased expenditure during the year. Services maintain modest Reserves of their own, currently £1.0m to meet minor Budget variations.
viii) Emergencies
The Council is required to maintain provision to meet the cost of emergencies that cannot be met from main Budgets or by Insurance. Significant costs on emergencies are met by Central Government under the “Bellwin Scheme” but these are only triggered once the Council’s expenditure has exceeded a pre-determined limit (0.1% of the revenue budget which is currently £446,350). Costs above this limit are covered by Central Government but only up to 85%.

ix) Unexpected Demands


Balances also need to provide sufficient resources to meet unexpected demands, particularly those that result from a legal decision, a change in Government legislation or a determination of Government legislation. In the past the Council has had to fund several major issues of this nature.
x) Service Deficits
Balances are also required to offset any Budget deficits carried forward or generated during the year by services as allowed under Financial Regulations.
xi) General Risks
It is also important to weigh up the general risks facing the Council and evaluate what any potential financial impact may result from these risks. The Borough Treasurer and the Head of Internal Audit and Risk have undertaken a review of these risks. The areas with a potentially significant financial impact are as follows:
Economic Climate

Changes in Government Funding

Potential Legal Claims

External Suppliers going into Administration



These have been taken into account in the overall evaluation of the minimum level of Balances to maintain.
4. REVIEW OF 2015/16 RESERVES POSITION
The last quarterly report estimated available Balances at 31st March 2015 at £10.7m. The review of the last 12 months does not suggest that there are any additional factors to take into account in 2015/16, other than those referred to in this note, although it is difficult to predict whether the economic climate will add further to the demands on the Council’s services or reduce the income we receive. On this basis I am recommending that the current minimum level of Balances remain at £10.0m in 2015/16.
5. BOROUGH TREASURER ADVICE ON THE MINIMUM LEVEL OF BALANCES
Section 25 of the Local Government Act 2003 requires the Section 151 Officer (Borough Treasurer) to report to the Council when it is setting its Budget/Council Tax on the “robustness of the estimates” and the “adequacy of the reserves”.
Equally the Council should not hold usable Balances at too high a level as this would not be making the most effective use of the Council’s overall resources when faced with significant demands for increased levels of service. However, Balances at up to £18m would not be regarded as inappropriate.
At this point in time, bearing in mind the above and the size of the Council’s Budget at approximately £700m, I would recommend that a minimum level of Balances for the Council to maintain would be £10m (but if possible should be at a higher level).
Use of Balances
Any future use of Balances above the recommended level are best used to support “one off” initiatives/investment. Any significant use of Balances to meet the on-going costs of services should only be considered on the basis of providing a Revenue contribution for the period of the Medium Term Financial Strategy.

6. SUMMARY
The report has set out the various factors that influence the level of Balances which must be maintained to meet any unexpected increases in expenditure or shortfall in income during the year. The Borough Treasurer’s advice is that as a minimum Balances should be maintained at £10m but if possible should be at a higher level.


APPENDIX E

GENERAL FUND SUMMARY





2014/15

2015/16




Original

Original




Estimate

Estimate




£000

£000










Service Controllable Budgets
















Children’s Services

274,934

278,371

Adults

65,560

68,285

Public Health

18,906

18,790

Environment

24,777

25,621

Development and Regeneration

6,572

10,742

Housing

2,057

2,186

Central etc.

29,696

27,875

Financing & Investing

11,390

11,584

Levies

43,067

43,364

Miscellaneous

499

1,871

Savings

0

-23,590


Net Expenditure

477,458

465,099

Parishes

364

370










Sub Total

477,822

465,469










Income
















Direct Grants to Schools

226,481

229,036

Public Health Funding

18,906

18,790

Education Services Grant (ESG)

5,456

4,250

New Homes Bonus

3,371

4,036

Use of Reserves

2,000

2,000

Retained Local Business Rates

41,888

43,541

Collection Fund Surplus

400

400

Council Tax

88,662

89,954

Council Tax “Freeze” Grant 2015/16

0

1,071

RSG

73,420

53,219

Business Rates Top-Up

18,813

19,172










Total

479,397

465,469








1   2   3   4   5   6   7   8   9


The database is protected by copyright ©dentisty.org 2016
send message

    Main page