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LONDON BOROUGH OF WALTHAM FOREST

Meeting / Date Cabinet 05 December 2019

Report Title FINANCIAL MONITORING: MONTH 7 (October)

Cabinet Portfolio Councillor Clare Coghill

Leader of the Council

Report Author/ Contact details

Brian Moldon, Strategic Finance Advisor - Corporate

Finance & Governance Directorate

020 8496 4477

brian.moldon@walthamforest.gov.uk

Wards affected None specifically

Public Access OPEN

Appendices 1 - Savings schedule 2 - Quarterly update of Capital 2019/20

1. SUMMARY

1.1 This report presents the forecast year-end position in respect of the Council’s revenue and capital expenditure. The Month 7 monitor currently identifies net pressures of £4.110 million, although the current forecast for the overall General Fund outturn is anticipated to be in line with the budget. Pressures identified at month 7 are:

Strategic Director of Families £3,334,000

Strategic Director of Residents Services £352,000

Strategic Director of Corporate Development £264,000

Strategic Director of Economic Growth £160,000

1.2 Clarification from strategic directors is being sought to establish how these will be managed within year but these clearly remain budgetary risks. Importantly they must be managed and eliminated either by the service or overall within each directorate as per the financial ground rules approved by Cabinet at the beginning of the year.

1.3 The current view by the Strategic Director of Finance and Governance is that overall outturn will be in line with budget using predominantly one-off corporate items. However, directorates must first explore managements actions to mitigate overspends within their directorates as per paragraph 1.2 and ensure that any problem budgets are resolved for 2020/21.

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2. RECOMMENDATIONS

2.1 Cabinet is recommended to:

2.1.1 Agree that Strategic / Executive / Service Directors will provide the Director of Financial Services with plans on how the pressures identified will be mitigated, in line with financial ground rules agreed by Cabinet in Month 2 budget monitoring report.

2.1.2 Agree a budget allocation of £120,000 to fund the digitisation of the Council’s archive held at Lockwood Way. This would release the property to be rented on a commercial basis which would repay this investment and then contribute towards the MTFS efficiency target. This will be funded from the BSR Investment Fund.

2.1.3 Agree a budget allocation of £175,000 to fund the implementation of Power BI software to improve the production of performance information by the Business Intelligence Team. This will be funded from the BSR Investment Fund

2.1.4 Note that the anticipated outturn at month 7, will be in line with budget following the MTFS refresh (as reported to Cabinet in September 2019), service mitigation / plans provided (agreed in 2.1.1), and the potential use of corporate resources to maintain a balanced position at year-end.

2.1.5 Agree the restricted use of contingency budgets for new initiatives for the remainder of this year with the remaining contingency budget being used to manage directorate pressures.

2.1.6 Note the capital financial position at month 7, as detailed in Appendix 2.

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3. REPORT

3.1 For 2019/20, the projected outturn will be in line with budget. The increase pressure in the month will be mitigated by directorates through identifying plans to eliminate within the directorates, in line with the financial ground rules.

* The £1,378m increase in Corporate management actions to be identified are first being explored within each service to bring their budgets back on budget as per the financial ground rules. Corporate resources will provide a backstop for the outturn to balance should any residual pressures remain at year-end.

Gross Year End Forecast Month 7

£’000

Use of balances

£’000

Mgt Action to

be identified

£’000

Net Year End

Forecast At Month

7

£’000

Adverse / (Favourable)

change in Net Forecast

£’000

Chief Executive 0 0 0 0 0

Economic Growth - Property & Asset Management

160 0 0 160 160

Economic Growth – Regeneration & Growth

0 0 0 0 0

Economic Growth total 160 0 0 160 160

Care & Support 2,897 0 (2,009) 888 106

Wellbeing & Independence 1,576 0 (430) 1,146 882

Communities 2,135 0 (1,085) 1,050 0

Strategic Director of Families 0 0 0 0 0

Strategic Commissioning (Adults)

0 0 0 0 0

Education Services 250 0 0 250 0

Families total 6,858 0 (3,524) 3,334 988

Resident Services (including Housing)

352 0 0 352 (34)

Corporate Development 264 0 0 264 264

Finance & Governance 0 0 0 0 0

Sub-total 7,634 0 (3,524) 4,110 1,378

Corporate 0 0 (4,110) (4,110) (1,378)*

TOTAL 7,634 0 (7,634) 0 0

HRA 58 0 0 58 58

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Redefining Waltham Forest Savings Programme

3.2 The total value of savings currently programmed for delivery for 2019/20 to 2020/21 is £8.682 million. The value of delivered proposals (i.e. closed with no further action required to achieve the saving) remains unchanged at £2.555 million or 29.4% of the total requirement. The value of proposals RAG rated “Green” has increased by £256,000 to £1.821 million and RAG rated “Amber” has reduced by £256,000 to £2,302 million. The level of proposals RAG rated “RED” remains unchanged at £2.004 million or 23.1% of the total requirement.

3.3 For 2019/20, savings of £2.555 million have been secured against at target of £6.248 million.

3.4 The table above includes the savings reprofiled for delivery of £2.434 million for Families and this was reported to the June 2019 Cabinet as part of the update on the Families Financial Sustainability plan. This reprofiled savings is contributing to the Families overspend in 2019/20 and will be one-off only, to ensure the Council can maintain an ongoing balanced budgetary position.

3.5 The level of savings RAG rated “RED” reflects the level of risk in delivering the Families savings proposals and this is consistent with the position reported within this budget monitor. As reported in previous months, an action plan is being developed to address these pressures.

ECONOMIC GROWTH – Stewart Murray

Economic Growth has a £160,000 pressure forecast at month 7. The service will need to manage this within the whole directorate to achieve a breakeven position.

Property and Asset Management (Aiden McManus) – forecast £160,000 pressure

3.6 Property is forecasting a £160,000 pressure at month 7. This is due to an additional legal charge of £80,000 which is being examined to identify whether any can be capitalised plus a pressure on premises expenses of £80,000. These pressures will need to be contained within the service directorate as a whole and the service will report management actions back to the Director of Financial Services to bring back to budget.

Regeneration and Growth Services (Ian Rae) – forecast nil variance

3.7 At month 7, Regeneration & Growth is forecasting to breakeven assuming spending plans would be managed within service budgets.

2019/20

Savings

2020/21

Savings

Total

Savings

Previous

MonthChange

£'000 £'000 £'000 £'000 £'000

Total Proposals in Delivery 6,248 2,434 8,682 8,682 -

Closed Savings (Delivered) 2,555 - 2,555 2,555 -

Green 1,721 100 1,821 1,565 256

Amber 1,092 1,210 2,302 2,558 (256)

Red 880 1,124 2,004 2,004 -

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3.8 Statutory trading accounts are projected to breakeven although it is recognised that there are income pressures due to the current economic climate.

FAMILIES – Heather Flinders

Families has a net £3.334 million pressure forecast at month 7, a net increase of £0.988 million since month 6. Management actions from the use of grants and contingency are now reported within the gross forecast. The remaining pressure is being addressed within the directorate to achieve a breakeven position.

The Families financial sustainability plan was externally reviewed by PPL, who confirmed the broad viability of the proposals. The implementation is now being led by the Change Agency service in the Corporate Development Directorate.

Summary position for Families

Month 7 – Net Forecast C&S W&I TOTAL

£’000 £’000 £’000

Adults 707 1,059 1,766

Children’s 182 87 269

Communities 1,050

Education 250

Sub Total 888 1,146 3,334

Care and Support / Wellbeing and Independence (Adults – Daniel Phelps and Darren McAughtrie) – forecast £1.766 million pressure.

3.9 Adult Social Care is forecasting a £1.766 million adverse variance as at month 7 which is an increase of £346,000 from the previous month across both service streams. The variance can be broken down as follows:

Adults Social Care – Month 7 Gross

Year End

Forecast

Mitigations Net Year

End

Forecast

£’000 £’000 £’000

Care & Support 2,715 (2,009) 707

Wellbeing and Independence 1,489 (430) 1,059

Sub Total

Care & Support

4,204 (2,438) 1,766

3.10 There continues to be risks from the increase in demand observed from the

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start of the financial year and changes in costs. The service continues to investigate and monitor the movements in placements to identify any patterns or trends. There also continues to be pressure on staffing costs due to agency costs outstripping budgeted salaries and one-off transitional costs of re-structures. The mitigation shown in the table above assumes:

Part delivery of the remaining 2019/20 savings of £0.648 million

Management of demand £1.790 million – under review

3.11 There continue to be significant risks attached to these remaining mitigations and will continue to be monitored closely to ensure they are achievable, currently alternatives are being worked on by the service.

3.12 The graph shows all external placements, service user numbers and forecasts including a snapshot at the end of 2018/19. Although the volume has levelled the average cost of packages has continued to rise.

Children’s Care & Support (Amana Gordon) - £0.182 million pressure

3.13 Children’s Social Care is reporting a pressure of £0.182 million (a £610,000 increase on month 6 forecast) comprising:

£0.709 million – placement costs

£0.231 million – families deemed intentionally homeless

£0.294 million – legal costs

(£0.052 million) – smaller underspends

(£1.000 million) – corporate support

3.14 The budgetary pressure on placements increased during the month by

£54.0m

£55.0m

£56.0m

£57.0m

£58.0m

£59.0m

£60.0m

£61.0m

£62.0m

2500.00

2550.00

2600.00

2650.00

2700.00

2750.00

2800.00

2850.00

2900.00

2950.00

3000.00

Co

st o

f se

rvic

es

(£)

Pac

kage

s o

f C

are

(V

olu

me

)

Adult social care packages of care against gross cost of services

Volume of service users Gross placements cost (£)

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£407,000 of which £285,000 relates to residential placements. This is principally due to two new high cost placements and increases to the packages of two others. Fostering increased by £125,000 with a net four new placements and an addition of £10,000 for fees for the new Hub carer. The increase in the average weekly costs and increase in numbers is demonstrated in the graph below.

3.15 The number of unaccompanied asylum seekers increased by seven during the month and there were three new Remands to Secure Youth Justice service. This pressure will be neutralised through the usage of the Youth Justice Reserve to leave a zero-net impact in 2019/20.

3.16 As part of the Leyton Green Partnership delivery the new residential children’s home is due to open in March 2020 and this will provide three additional placements in borough and the North East London Eight Borough Residential partnership is expected to provide a further five placements for Waltham Forest children. The Care Plans of our current cohort of children in residential settings will be reviewed to identify if they would benefit from moving to these new settings. Savings are expected to be realised in 2020/21.

Children’s Wellbeing & Independence (Daniel Phelps) forecast £87,000 pressure

3.17 The Early Help Division are reporting a £87,000 shortfall which is £18,000 increase in on month 6. This principally relates to staff costs for maternity and sickness cover. This assumes that the service will receive a £60,000 reduction in fees and charges relating to Queens Road Centre.

460470480490500510520530540550560570

£490

£500

£510

£520

£530

£540

£550

£560

£570

£580

Vo

lum

e o

f p

lace

men

ts

Wee

kly

cost

s

Placement numbers v weekly cost

Average Weekly Cost Total Childrens Placements

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Communities (David Kilgallon, Sal Asghar and Joe McDonnell) - forecast £2.135 million pressure

Special Educational Needs and Disability Service (David Kilgallon) – forecast £2.135m pressure

3.18 Special Educational Needs and Disability Service (previously Disability Enablement Service or DES): forecast £2.135 million gross adverse variance.

3.19 Although a review of the assumptions made previously that pressures of £1.085 million could be offset in part by mitigations concluded that these were not deliverable in 2019/20, the service is actively reviewing seeking to implement alternative mitigations.

Public Health (Joe McDonnell) – forecast nil variance

3.20 Public Health (ring-fenced) division continue to forecast a break even position as at month 7. The grant for 2019/20 is £15.511 million. Any changes to the forecast that results in an under or over spend will be transferred to the ringfenced Public Health reserve.

3.21 The non-ringfenced element of the Public Health division includes the Strategic Boards function and CAMHS funding, as at month 7 this area continues to forecast to budget. However, there is an ongoing pressure in Strategic Boards relating to an income from external partners shortfall (around £60,000). This pressure will be managed within the service.

Connecting Communities Grant (Sal Asghar) – forecast nil variance

3.22 This is continuing to forecast to break even as at Month 7. The grant available for 2019/20 is £2.4 million. The grant is expected to be fully spent, however any underspends will be able to be carried forward into the following year.

Learning – (David Kilgallon) - forecast nil variance

3.23 There continues to be a pressure of £60,000 at Snowberry Nursery from underachievement of fees from parents and £24,000 in Trade Union Facility Time from a shortfall in school and academy contributions. It continues to be assumed that these two areas will be offset by underspends in School Improvement services.

Traded Services - (David Kilgallon)

3.24 Following a thorough review of the summer term trading position and an extensive programme of management action, the risks in Traded Services are projected at an overall deficit of £43,000 excluding a further £127,000 as a result of the temporary closure of Suntrap while the site is being improved and £40,000 from the cost of the two extra days annual leave. It is assumed that these risks will be contained by management actions.

Education Services - £250,000 pressure

3.25 There is projected pressure of £250,000 on the Education Services Grant (ESG) exit strategy for 2019/20 comprising a reduction in the DSG Central Schools Services Block which funds the retained duties of the local authority; a reduction in the number of maintained schools, reducing the contributions for services to maintained schools; and a reduction in the number of schools and

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academies contributing towards services formerly funded by the ESG.

CORPORATE DEVELOPMENT – Rhona Cadenhead – forecast £264,000 pressure

Corporate Development has a £264,000 pressure forecast at month 7. This will need managing within the directorate to achieve a breakeven position.

Strategy & Change – Emily Cherry – forecast £200,000 pressure

3.26 The forecast includes £200,000 pressure on Business Intelligence staffing, which is under review. Plans are in place to put in place the review but will not take effect until 2020/21 so, control over existing budgets where possible to contain the pressure are being explored.

Employee Experience – Melanie Medley – Forecast £64,000 Pressure

3.27 The remaining £64,000 is due to an additional legal cost. Management action will be taken to deal with this.

3.28 All other services within Corporate development are anticipated to spend within budget.

RESIDENT SERVICES – Michele Moloney – forecast £352,000 pressure

Resident Services has a £352,000 forecast at month 7. This will need managing within the directorate to achieve a breakeven position.

3.29 Within the former Neighbourhood & Commercial Department mitigating actions are planned as necessary. Spending is anticipated to be managed within service budgets.

Highways and Traffic Management – Vala Valavan – forecast £281,000 favourable variance

3.30 Highways and Traffic Management is forecasting a favourable variance of £281,000.

Neighbourhood Services - Jarlath Griffin – forecast £290,000 pressure

3.31 Neighbourhood Services is forecasting a pressure of £290,000. There is a risk of a pressure due to the food waste trial £91,000 and a shortfall in income collection. Management are putting a plan in place to mitigate action.

3.32 Sports and Leisure anticipate a breakeven position although there are risks on income generation which the service is reviewing.

Commercial Services – John Hubbard – Forecast £15,000 favourable variance

3.33 Commercial Services is forecasting a favourable variance of £15,000.

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Customer Services and Business Support – Louise Duffield – Forecast breakeven

3.34 Customer Services and Business Support anticipate a breakeven position.

3.35 Facilities Management is currently undergoing a transformation review and consequently any budget pressures identified will be offset by management action. Any overspend is being actively managed during the review to contain within budget.

Housing General Fund (Darren Welsh) – forecast £358,000 pressure

3.36 The Housing General Fund (HGF) is projecting an overspend position of £358,000 in 2019/20 which is a favourable movement of £5,000 to that reported in month 6. The inherent pressure is mainly due to reduction of Flexible Homelessness Grant by £1 million, hence causing the swing from 2018/19 reported outturn of £500,000 underspend.

3.37 The homelessness budget remains the most challenging area in the HGF, where demand and increasing cost of accommodation continues to put pressure on the services. The number of acceptances were lower in 2018/19 (354 in 2018/19, 570 in 2017/18) which allowed overall homelessness cases to stabilize (2,021 at October-end 2019 compared to 2,256 in March 2018), However, this is still dependent on the use of incentive schemes to discharge duty through More Homes Waltham Forest, and Local Space etc. Therefore, any delays in the acquisition schemes can adversely impact the projections going forward.

3.38 The ‘true cost’ of placements (being the difference between payments to landlords and the housing benefit caps) remains a budget risk and has increased to over £65 per week, having started the previous year at approximately £52. The increase is due to market influences on the rental sector and is forecast to reach £75 by the end of the financial year; this will likely impact base budget costs by approximately £450,000 in 2019/20 and will require central contingency support. The net unit cost pressure is highlighted by the graph as below. The table also shows that demand has reduced during the year.

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2019/20 Estimate Homelessness numbers and unit loss per placement

Housing HRA (Darren Welsh) – forecast pressure of £58,000

3.39 The Housing Revenue Account (HRA) is forecasting a slight overspend of £68,000 against the agreed budget as at month 7.

3.40 Similar to previous year, the HRA continues to benefit from the use of hostels and regeneration properties at Marlow and Montague Rd for Temporary Accommodation. This provides increased rental income to the HRA. Rent collection rate achieved its target at 98.45% (97.94% in 2017/18) last year and is in line with target for first part of the year (95.05% versus profiled target of 95.01%).

3.41 Universal Credit was introduced during the previous year and there are approximately 1,240 cases as at September-end 2019. Whilst arrears for such cases are higher than average, the service has managed to keep overall arrears within the set target (3.05% against 2.9%).

3.42 Other significant areas of spend include the repairs and maintenance budget, where Morgan Sindall have been procured to provide the responsive maintenance and building service from April 2019 onwards. The new arrangements are based on price per property models and should provide more certainty of costs, although there are some pre-contract works and TUPE bonuses that need to be funded. There also remains a material cost dispute with the previous contractor with regards to indexation and final accounts, but a budget provision has been set aside for this.

3.43 There also remain further risks that may impact the HRA budget, which include Water Rate Commission and the increased landlord duties as result of the Grenfell fire Hackitt Review. Whilst these matters are being progressed, some provisions have been maintained within the HRA Medium Term Financial Strategy (MTFS).

£58.00

£60.00

£62.00

£64.00

£66.00

£68.00

£70.00

£72.00

£74.00

£76.00

0

500

1,000

1,500

2,000

2,500

Projected Overall TAnumbers

projected True Loss (£ perweek)

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FINANCE AND GOVERNANCE – John Turnbull – forecast nil variance

3.44 Finance & Governance is forecasting a breakeven position as at month 7, no change from previous month.

Corporate Expenditure, Non-Service items and Contingency

3.45 This heading includes interest costs, capital charges and other costs not directly attributable to services such as members’ allowances and is projected to spend to budget. Contingency is forecast to be fully utilised. If there is any call on reserves for one-off items, then this must follow the financial ground rules.

3.46 There is a £1 million opportunity of increasing interest income from cash balances. As the capital programme is monitored later the year this will be noted in the outturn as a true favourable variance.

3.47 Any remaining budget pressures may be resolved from corporate resources to achieve a balanced budget at year-end. This will only be used after directorate mitigating management actions have been exhausted.

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Council Tax / NNDR Collection

3.48 The 2019/20 forecasts are broadly in line with 2018/19 figures and are both expected on this basis to achieve their targets of 97.7% for business rates and 96.2% for council tax collection. The tables below show the performance of both Council Tax and Business Rates collection.

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Capital Programme

3.49 The table below shows the capital budget monitoring summary as at month 7. Further detail is shown at Appendix 2.

3.67 The table above shows the projected outturn based on latest capital profiles, which shows year-end forecast to be £127 million against a budget of £167 million. The following changes have been approved since the last capital monitoring report in month 4.

As detailed in the month 4 report, a capital budget of £3.426 million has been approved by Cabinet to fund the project management, design and procurement required to deliver the new Low Hall Depot. This will be financed by a combination of capital receipts and from existing revenue budgets.

An allocation of £140,000 from existing revenue budgets for enabling works for the temporary modular building at Queens Road.

Executive decisions were approved regarding Housing Association schemes which increased budgets by £3.001 million. These will be funded by retained RTB receipts.

A re-profiling of TfL schemes has resulted in a budget reduction of £501,000.

Further funding of £1 million for the Forward Maintenance Plan and funding of £89,000 to purchase two graffiti vehicles were approved at CSAMG. Both will be funded from borrowing.

4 OPTIONS & ALTERNATIVES CONSIDERED

4.1 Much of this report is concerned with provision of information, for which alternative options is not a relevant consideration.

5. SUSTAINABLE COMMUNITY STRATEGY PRIORITIES (AND OTHER NATIONAL OR LOCAL POLICIES OR STRATEGIES)

5.1 The entire content of this report contributes to the corporate priority to Achieve Excellence and Ensure Value for Money.

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6. CONSULTATION

6.1 Executive Directors and Portfolio Holders have been consulted.

7. IMPLICATIONS

7.1 Finance, Value for Money and Risk

7.1.1 The whole report is of a financial nature. The key purpose of the report is to monitor the Council’s overall financial performance against the assumptions contained in the MTFS. To maintain the robustness of the Council’s finances and budget plans, effective budgetary control by services will continue to be essential and will help the Council to maximise the resources available to meet its priorities.

7.1.2 The current forecast for the DSG outturn is a deficit of £2.1 million. This is predominantly the impact of emerging high needs/special educational needs and disabilities (SEND) pressures. The DSG is outside of the General Fund. The DfE does not consider that any deficit should be met by the General Fund (although technically this is possible). Councils are expected to put in place recovery plans as part of the school funding process. The capacity to do this will be dependent on the 2020/21 settlement, which will include additional higher needs funding to support deficits.

7.2 Legal

7.2.1 There are no direct legal implications.

7.3 Equalities and Diversity

7.3.1 An initial equality analysis was undertaken, and it determined there was no negative impact arising from the information or changes proposed in this report on the advancement of equality. The support of No Recourse to Public Funds clients are areas that continue to contribute to the Council’s commitment to protecting the most vulnerable and help meet the equality duty.

7.4 Sustainability (including climate change, health, crime and disorder)

7.4.1 A stable financial position means that the Council is more able to fund urgent health priorities as they arise. Services to older people experienced pressures and needed careful management.

7.5 Council Infrastructure (e.g. Human Resources, Accommodation or IT issues)

7.5.1 There are no direct council infrastructure implications.

7.6 Brexit

7.6.1 As part of the budget monitoring process, the risks will be monitored by services and any necessary action put in place in line with the Council’s Ground Rules for Financial Control.

BACKGROUND INFORMATION (as defined by Local Government (Access to Information) Act 1985)

None