Agenda item

The Executive Member for Financial Sustainability introduced the report which gave an overview of the expected outturn at the year-end based on current expectations. He said that a revenue forecast at the end of Quarter 2 was provided in Appendix A, but had been superseded by the forecast at the end of Quarter 3, which was in Appendix B.

 

The Executive Member for Financial Sustainability said that the overall overspend was now expected to be £955,000. He said that this was made up of an overspend on services of just over £2 million, plus savings in interest payments and investment income of £561,000, and a reduction in reserves contributions of £486,000 making up most of the balance.

 

The Executive Member for Financial Sustainability referred Members to Appendix C of the report which detailed a list of key variances in the cost of services. He said that BEAM made up almost 75% of the total differences.

 

The Executive Member for Financial Sustainability said that the change in accounting policy (to allow the capitalisation of interest during the build phase of major construction projects) had resulted in a reduction of interest payments in the expenditure account of £340,000. He said that updates to the capital spending programme were provided in Appendix D, with key changes being the reprofiling into 25/26 of the reduced budget for Refuse and Recycling vehicles and containers, which was now anticipated in Quarter 1 of 2025/26.

 

The Executive Member for Financial Sustainability referred to paragraph 2.7 of the report which outlined the work being done to tackle outstanding debt. He said that debt aged over 180 days stood at £2.27 million, with a few key accounts responsible for at least half of this.

 

The Executive Member for Financial Sustainability said that the mitigations being considered for the overspend were discussed at paragraphs 2.8 – 2.11 of the report.

 

The Chair thanked the Executive Member for Financial Sustainability for the report.

 

Councillor Deering referred to the council’s debt, saying that this was significant and old, and asked what was being done to address this, and how procedures would be improved to avoid debt occurring in the first place.

 

The Executive Member for Financial Sustainability said that the detail of the debt was being looked at. He said that key accounts had been identified for around half of the total debt, but there were delicate issues surrounding some of these. He said that a dedicated team was now in place to deal with debt, but this was an ongoing project which would take time and would prioritise large debts first. He added that transformation, in the shape of automated payments, would help. 

 

The Interim Head of Strategic Finance said that direct debit collection would be used for the garden waste charge, and that this could be extended to other services to enable payments upfront or when due, and flag problems more quickly. 

 

Councillor Deering asked how long the debt team had been in place and when it was constituted.

 

The Executive Member for Financial Sustainability said that the team was put in place approximately 4/5 months ago under the previous Section 151 Officer. He said that training of the team was ongoing with the help of the Interim Head of Strategic Finance.

 

The Interim Head of Strategic Finance said that he had been working with the Debt Team Leader since November 2024, and that a forensic examination of the debt was being undertaken, with data collated. He said that there would be debt written off, but that he had seen improvements in the team, with old debt now being recovered due to new working methods.

 

Councillor Deering said that he accepted that new processes were now underway, but he was concerned at the delay between the election and the debt team being put together. He asked how much of the £2.8 million debt would be classified as bad debt. 

 

The Interim Head of Strategic Finance said that there was a £900,000 provision for bad debt in the accounts, but he expected more, He said that an exact figure could not yet be given as this was still being worked through.

 

Councillor Willcocks referred to the rise in the cost of BEAM’s domestic rates and asked why this increase was sevenfold.

 

The Executive Member for Financial Sustainability said that the increase was due to the rates review, and that the figure was the best available estimate as no final settlement had been given. He said that there were some plans for authorities to appeal the rates.

 

The Interim Head of Strategic Finance said that the figure of £200,000 was the best guess post advice, with the earlier figure used underestimated.

 

Councillor Nicholls asked how much of the debt was estimated to be due to incorrect invoices etc.

 

The Interim Head of Strategic Finance said that this was trying to be established, and that there were no current figures. He said it was estimated that £200,000 of debt should possibly not have been raised.   

 

Councillor Nicholls asked for further information as to how the net cost of services had increased, referring to the increase in centrally managed costs from £97,000 to £686,000, and the increase of £249,000 for Communication, Strategy and Policy.

 

The Interim Head of Strategic Finance said that he would obtain and provide this detail for Councillor Nicholls. The Executive Member for Financial Sustainability said that key variants could be found in Appendix C of the report.

 

Councillor Deering referred to Appendix C of the report and asked why the council retained £300,000 of business rates and utilities liabilities for Charringtons House post its disposal.

 

The Executive Member for Financial Sustainability said that the council was advised that it would no longer be liable for business rates once the development agreement was signed. He said that this original information was not accurate, for which he apologised. 

 

Councillor Willcocks asked for further clarity regarding the IT infrastructure at BEAM.

 

The Executive Member for Financial Sustainability said that once Wi-Fi was in place at BEAM there would no longer be the need for overnight security at the venue. He said that he would follow up on this issue.

 

Mr Sharman asked for implications of the savings proposals being less than anticipated, in particular the overspend of £1 million so close to year end. He also referred to the department forecasting changes from Quarter 2 to Quarter 3 and asked how good the council’s forecasting skills where.

 

The Executive Member for Financial Sustainability said that while savings had not been achieved, many were still likely next year, therefore being delayed and not cancelled. He said that more focus was being placed on these savings, with Leadership Team meeting fortnightly to keep them on track. He said that the overspend would come from the council’s reserves, and that forecasting was challenging.

 

The Interim Head of Strategic Finance said that mitigations, the accounting policies, and advice from Arlingclose would also help going forward. He said that he could see areas for improvements, but a good process was evolving. He added that as the year moved on information would become more accurate.

 

Mr Sharman said this was encouraging, especially as culture change in an organisation was difficult. He said that unforeseen things did happen and that there was no implication of mismanagement. He said that a contingency was needed for headroom when things went in the wrong direction. 

 

Councillor Hart questioned how realistic the anticipated savings were, asking if these were always unachievable.

 

The Executive Member for Financial Sustainability said that this was a good point, but savings targets were agreed in advance with Heads of Service. He said the targets required close management to enable mitigation at the earliest opportunity.

 

The Interim Head of Strategic Finance said that some of last year’s targets were too ambitious, but there were now new steps in place with Leadership Team for robust monitoring.

 

Councillor Deering said that the perception was that East Herts was adrift on its savings targets, which was concerning. He reiterated that Leadership Team needed to ensure delivery of the targets.

 

The Interim Head of Strategic Finance said that Leadership Team were taking ownership of the targets, taking robust steps to ensure that these were achievable.

 

The Chair asked if the council’s debt had stopped it being able to do anything tangible.

 

The Executive Member for Financial Sustainability said that it had not. The Interim Head of Strategic Finance agreed, he said that it would be preferable for the council to not have debt, as this would mean less borrowing and less interest costs.

 

It was moved by Councillor Nicholls and seconded by Councillor Willcocks, that the recommendations, as detailed, be approved. After being put to the meeting and a vote taken, this motion was declared CARRIED. It was noted that Councillor Deering abstained from the vote.

 

RESOLVED – that (A) the reasons for the net revenue budget end of year projected overspend of £955k be considered: and.

 

B) that the capital programme forecast outturn of £9.083m, carry forward of £7.835m be considered.