The Head of Financial Services introduced the report.  He said that the City Executive Board agreed the recommendations in June.  He highlighted that 78% of the original capital budget agreed in February 2016 had been spent although the capital programme had been monitored monthly and adjusted during the year.  The reasons for the variances were given on page 43.  He also advised that there was one red risk on the corporate risk register which related to the governance of new Council-owned companies.

In response to a questioned, the Head of Financial Services confirmed that the £220k that had been transferred to the capital financing reserve was not earmarked and was a relatively small sum in the context of a £60m capital programme.

The Panel asked what the latest situation was regarding cladding on tower blocks in light of the Grenfell disaster and how any additional costs would be met.  The Head of Financial Services said that it was unclear whether government would provide additional funding to local authorities so it would be a case of looking at reserves generally.  The Council was quantifying what the precise cost of removing cladding from two tower blocks would be but a figure of £1.6m had appeared in the press.  By the next Panel meeting the situation would be clearer.

The Panel asked for a comment on the red risk and the Head of Financial Services said that there was lots of work to do such as creating client side monitoring arrangements for the trading company.  The housing company was more established but was still finding its way.  The Council’s internal auditors would be reviewing company governance arrangements in the coming months.

The Panel noted the report and responses.

The Management Accountancy Manager introduced the integrated performance report.  She explained that all financial targets had been achieved including efficiency savings and income generation targets.  There was a General Fund under-spend of £0.5m which represented 2% of the gross budget requirement.  The Panel noted that £0.5m was the net underspend after new schemes requests (£0.361m) and slipped schemes (£1.024m), giving a gross under-spend of some £1.879m.  The Panel also noted that a recommendation in the report sought approval for the new bids to negate the need for separate reports to go to the City Executive Board and Council.

The Panel heard that the capital outturn position of £33m represented 95% of the latest budget and questioned whether the presentation of this outturn spend was overly positive given that slippage had taken place during the year, including due to a 4-month moratorium on many capital schemes.  The Panel heard that unlike the general fund budget, the capital budget was reviewed and updated every month to take account of variations during the year.  The overall capital budget was a moving target but Officers were well aware of the state of the capital programme.  The outturn position did not come as a surprise and explanation was provided in paragraphs 16-18 of the report.  The Panel also questioned the status of particular line items in the capital programme.

The Panel heard that the Housing Revenue Account (HRA) had a £10m underspend which was largely due to revenue contributions to capital not being used due to the moratorium. 

The Panel noted that due to the timing of the first panel meeting of the Council year, the recommendations in the report had already been agreed by the City Executive Board.  The Panel agreed that the following observations would be relayed to full Council:

·         That the General Fund under-spend of £0.5m was net of carry forwards and new bids that were not yet agreed and, excluding these, the total under-spend was close to £1.9m;

·         That the under-spend was partly a result of over-achievement against income targets, for which officers should be commended;

·         That the Council’s earmarked reserves had increased significantly over the last year (from £38.7m to £51.4m) and this increase was largely due to slippage in HRA capital projects;

·         That risks to the Council should be reviewed in light of the leave result in the referendum on Brexit (British exit from the European Union).