On 15 July Cabinet will consider the Integrated Performance Report 2019/20 Q4.

Nigel Kennedy, Head of Financial Services and Anna Winship, Management Accountancy Manager, will be presenting the report.

The Panel is recommended to consider the report and agree any recommendations it wishes to make to Cabinet regarding it.

Anna Winship, Management Accountancy Manager, introduced the Integrated Performance Report to the Panel, providing financial and service level performance, and risk management information to 31 March 2020.

The overall financial figures were reported as follows:

-     A surplus on the General Fund of £2.770 million (12% of the Net Budget Requirement of £23.205 million) with a recommended carry forward of unspent budgets of £0.077 million. It was highlighted that a further recommendation is made to transfer the remaining balance of £2.693 million of the surplus to earmarked reserves, of which £1.658 million to the Capital Financing reserve and £1.035 million to the NDR Retention reserve. 

-     A favourable variance in the Housing Revenue Account of £4.809 million, after allowing for carry forward of unspent budgets of £0.722 million against the original budgeted deficit of £1.205 million, the recommendation being that the Council transfer the  balance into the HRA projects reserve to fund future capital commitments 

-     The outturn spend for the Capital budget was reported to be £42.776 million, a favourable variance of £7.255 million against the latest budget forecast in February 2020. 

Regarding performance, 58% (7) of the Corporate Performance targets were

delivered as planned, 8% (1) was below target but within acceptable tolerance

limits and 34% (4) were short of target. The measures identified to the Panel as being under below target were:

-     Number of jobs created or safeguarded in the city as a result of the City Council’s investment and leadership

-     Amount of employment floor space permitted for development

-     The number of people taking part in our youth ambition programme

-     Number of people from our target groups using our leisure facilities

Concerning corporate risk management, one red corporate risk in relation to

Housing was identified.

General Fund Earmarked Reserves and Working Balance

The General Fund Earmarked Reserves as at the 31 March 2020 would stand at £36.451 million. The biggest components of these were 24% relating to funding of the Capital Programme, and 26% relating to Business Rates Retention reserve and 11% relates to External Grants reserve pending their use on projects.

General Fund Variations

At the year end the General Fund service areas spend showed an adverse variance of £0.895 million.  The most significant of these variances  were explained as follows:

-     Housing Services – year end favourable variance of £0.118 million, due to a number of variances across the service.  Property services ended with an outturn of £0.336m favourable variance due to the capitalisation of some repairs costs associated with the Town Hall and other Council building. 

-     Regeneration and Economy – year end favourable variance of £0.258 million, due to higher levels of commercial property income than originally budgeted for and the ability to recharge additional project and development manager time to their associated capital schemes than originally expected;   

-     Oxford Direct Services client – The Council had budgeted for the delivery of a dividend from Oxford Direct Services of £1.552 million. The impact of COVID19 from March 2020 has resulted in considerable financial challenges for the Company for 2020-21 and beyond and in assessing its financial position for the year end the Board agreed that no interim dividend would be declared for the shareholder in 2019-20.

-     Law and Governance - year end favourable variance of £0.105 million, due to additional unbudgeted income from Oxford City Housing Ltd -OCH(L) service level agreements and vacancies within the team.

Company Financial positions

The financial positions of the Council’s companies were reported as follows:

-     OSDL and ODSTL both made a surplus in 2019/20, however this was less than originally budgeted and led to the companies being unable to pay an interim dividend to the Council. 

-     OCHL group made an operating loss of £0.060 million for the year 2019/20.

-       OxWed made an operating loss of £1.758 million due to financing costs in servicing the loans from the shareholders mainly in respect of land assembly. 

Housing Revenue Account

The HRA was reported to be showing favourable variance of £4.089 million

above the original budgeted deficit of £1.205 million.  This was after allowing for carry forward requests, totalling £0.722 million. The carry forward requests for the HRAwere detailed as £0.080 million for CCTV  for the Tower Blocks; £0.153 million for staffing costs in the incomes and tenancy management teams to deal with backlogsdue to COVID-19; £0.103 million to fund the QL support team for 6 months from Go Live and £0.300 million to build a team for development within the HRA.

Capital

The Panel was reminded that Cabinet agreed a revised budget for its capital

programme on 19 December 2019 of £59.962 million following a thorough

review of project spend. The final outturn for capital spend is £42.776 million

– a  favourable variance of £17.186 million. 

The notable sources of slippage in capital spending were identified as:

·         Museum of Oxford Development - £1.220 million slippage delays due to asbestos removal works being required

·         Barton Park – purchase by Council - £0.531 million slippage due to delays in hand over of new dwellings

·         Barton Park loan to OCHL - £0.491 million slippage due to delays in line with the purchase by Council in connection with the above

·         Motor Transport vehicle replacement programme - £2.476 million slippage due to delays in agreeing the specification for the ordering of diesel and electric vehicles

·         Seacourt Park and Ride - £1.88 million of slippages due to adverse weather conditions and the COVID pandemic (due to delays in the supply chain.)

·         Loans to Housing Company - £5,791 million. The need to socially distance following the outbreak of the COVID pandemic together with problems with ground conditions resulted in delays on a number of schemes including Rose Hill, Elsefield/ Cumberlege, Harts Close, Bracegirdle and the extensions programme.

Panel’s areas of questioning focused primarily on the level of capital

spending over the last year. The fact of slippage was actually deemed to be beneficial to the Council in light of Covid-19’s financial impacts. The Panel asked questions about levels of reserves; it was suggested to the Panel that the Cabinet’s agreed plan was to cover the current-year deficit through use of reserves, but to reset the budget beyond that point. The Panel also sought explanations on and specific areas of significant variance between outturns and budgeted figures, the majority of which were bringing forward spend in multi-year projects. These projects included IT overspends, and the ODS depot rationalisation.

The Panel discussed in detail paragraph 19 of the Cabinet report, and

specifically the favourable variances reported in relation to service charges and management and services within the HRA. In particular, the question was raised over how the Council might know if it were making a profit from service charges. It was noted that a significant majority of the favourable variance in service charge levels related to costs passed to leaseholders, a heavily regulated area designed to stop overcharging. It was also explained, however, that the mechanism for setting service level charges for tenants was considered within the broader context of contributing towards a balanced HRA and was not regulated in such defined terms. Panel members suggested that in light of the surplus shown in the HRA it was possible, therefore, (though not guaranteed) that the mechanism may not be working to ensure the charges levied to tenants matched the costs incurred. It was AGREED to make the following recommendation to Cabinet:

That the Council reviews the service charges it makes to Council housing tenants to ensure current levels reflect actual costs.