Agenda item

RESOLVED:

To note the update on the Council’s financial position.

6.1 The Chair stated that there now concerns around long term government support for local government which had developed over the previous month. The Committee would need to review the corporate risks faced in light of any changes. The Chair had also asked for a report on IT following the recent outage and because it was one of the corporate risks that the Council faced.

6.2 Ian Williams presented on the overall financial position highlighting the following:

· Chancellor may move budget to January with the current threat of a second wave of COVID-19

· The spending review would be three years for revenue and four years for capital – Hackney would submit its own submissions by 24 September

· A review of business rates and business rates revaluation

· Third tranche of funding had been received of £3.5m

· Total support received approximately £21m

· Details on the scheme for compensation for loss of income had been recently circulated

· Guidance circulated on collection fund deficits

· Overspend on the General Fund of £64m with £61m relating to COVID-19

· Compensation for loss of income was £9.575m

· Pay award proposals slightly above what was budgeted for

· Pressure on the HRA in the current financial year with proposals to balance the budget for 2021/22

· The position on schools continued to be challenging behind the headline increases. The Council would continue to manage the local schools formula but beyond that there were proposals for the government to manage this centrally

· High needs funding continued to be a challenge. Hackney will benefit from additional £730m in high needs funding in 2021/22

· A number of schools recording significant schools deficits

· Work to review latest forecast and end of July position

· Further review to challenge agency spend

· Deep dives into emerging cost pressures including on PPE spend/ Rough sleeping/ council tax/ business rates rent/ capital etc. 

· 2021/22 Forecast budget position: range of forecasts in the face of uncertainty

· Structural impact of Covid pressures on MTFP currently under review

· Forecast on revised 2023/24 gap - £51.161m

· In relation to the Pension Fund, funding levels had dropped significantly between late february and late march, from 95% to 7.5.8 %. The fund was now recovering to levels nearing 90%

· Next steps:

- Continuing review of the use of agency staff

- Review of the capital programme

- Continuing review of the underlying assumptions in Covid-19 related forecasts

- Challenge of budget and essential spend

- Budget setting timetable

- Staff engagement

- Future of the Finance Scrutiny and Audit Group 

6.3 Councillor Rennison reported to the Committee on next steps. She told the Committee that the Council’s position was largely stable but that there may be increasingly worrying headlines over the coming weeks. Work would be ongoing with other Local Authorities to call for additional government funding. In relation to compensation for income shortfall, the government was asking for costs to be shared. Councillor Rennison confirmed that one of the greatest risk was any government decision on local government funding. Going forward, everything was evidenced based at Hackney with tightly managed financial forecasts. Making forecasts presently was difficult and the work with the audit and scrutiny chairs group would continue, identifying with the Mayor any areas that would require deep dive work. There would be a need to set a balanced budget and the Government had improved some of the rules for next year. Work was ongoing on figures for the Budget next year.

6.4 The Chair said that by the end of the year the Council will need to have come to a view about a balanced budget and that there were varied forecasts with serious impacts on future savings.

6.5   Councillor Lynch asked if the potential of a further lockdown and its impact had been built in to current financial planning and asked whether options in relation to future action had been considered. She asked if the financial update was submitted to Cabinet regularly. Ian Williams confirmed that on forecasts, particularly on income, a range of modelling scenarios had been carried out. Whilst a second lockdown similar to the first was not anticipated a view had been taken on the sustainability and resilience in relation to the fall off in the Council’s tax income and the recovery of business rates. As more data came it was becoming possible to firm up the estimates. He confirmed that Cabinet received he overall financial position each month. Ian Williams confirmed that throughout the process different tools were available should positions materially change, including re-phasing the Capital Programme and there were levers around agency spend and investment into new commitments. These measures had not been necessary, in any significant way. Councillor Rennison stated that the working group was working to the normal budget schedule and would openly share developments with members, working together. The Chair said that he endorsed the openness with which the process had been approached and it was important to understand the risks.

6.6 Ian Williams presented on the corporate risk update:

· A summary of the Corporate risk and RAG score with the addition of COVID-19, economic downturn and Brexit

· Headline corporate risks

· Other high scoring risks included: SEND funding, temporary accommodation and universal credit

· Internal Controls Assurance/ The Council’s response

· Governance, Accounts and Risk Management

6.7 Councillor Clare Potter asked for further detail on the risks involved in Brexit and the Council’s thinking on this and whether settlement schemes were ongoing. Ian Williams stated a lot of work had been carried out in preparation for Brexit including in relation to staff. At presence it was not clear what the government expected Local Authorities to do but that more information was expected over the coming months from central government in relation to preparations. The Management team was keeping abreast of external developments and locally preparations were updated and refreshed. He confirmed that Registrars were operating and would report on whether the settlement schemes were up and running.

 Action: Ian Williams

6.8  Ian William reported on the Redmond report, proposing that it was dealt with in more detail at the next meeting. The findings related to concerns about the resilience of the external audit market under current arrangements which arose from the imbalance between price and the required quality of the audit, recommending that a new regulatory body be set up to coordinate external audit procurement, contract management, regulation and oversight. It recommended that consideration should be given to including an independent member on the Audit Committee to help ensure that the necessary expertise and knowledge to consider reports is available. It recommended that the annual external audit report is submitted to Council by the external auditors and that the financial accounts reporting deadline should be moved to 30 September to allow sufficient time for external audit review. It recommended a new simplified Statement of Service Information and Costs should be prepared. The Chair added that the recommendations would impact on how the Council runs its internal audit function. A more detailed report would be made to the next Audit Committee. 

RESOLVED:

To note the update on the Council’s finance

RESOLVED:

To note the update on the Council’s financial position.