Report of The Head of Finance
To
Overview and Scrutiny Committee (Corporate Resources)
On
17 February, 2021	

Revenue and Capital Forecast Year-End Position, at Quarter 3

1.	SUMMARY

1.1	This report provides the Council’s forecasted year end position for the revenue and capital budgets for the 2020/21 financial year at the end of the third quarter (December 2020) of the financial year, and the impact on both the General Fund and Housing Revenue Account (HRA) level of general Balances.

1.2	Where there have been significant variations between budget and the actual forecasted position for each service, the explanations have been provided.

2.	RECOMMENDATION

To be noted by the Portfolio Holder for Corporate & Finance:

(i)	That the General Fund and Housing Revenue Account Revenue forecasted outturn position for the 2020/21 financial year, at quarter three, be noted.

(ii)	That the General Fund and Housing Revenue Account Capital forecasted outturn Position for the 2020/21 financial year, at quarter three, be noted

3.	BACKGROUND

3.1	The Council approved its revenue and capital budgets for the 2020/21 financial year at its full Council meeting on 22 January 2020, and this report sets out the forecasted outturn position against the budget, taken at the end of quarter three (December 2020).

3.2	A summary of the outturn position for each of the General Fund and Housing Revenue Account (HRA) revenue budgets and capital programme is contained within this report with a breakdown of significant variances (over £50,000) contained within the relevant Appendices.

3.3	Covid-19 

3.3.1	Council approved the 2020/21 financial year budget for both the General Fund and the Housing Revenue Account (HRA) on 22 January 2020 (agenda item 20/06).  Whilst information was starting to emerge regarding Covid-19 at the time at which the budgets were approved, no one could have foreseen the impact it would have on the country and everyday life in the months that would follow.

3.3.2	Like other local authorities, Mansfield District Council has played a vital role in supporting people during this time of crisis, and as a result this has meant that the Council has incurred expenditure outside the normal course of its business; expenditure which was not anticipated when setting the budget.

3.3.3	In addition, as service delivery has been effected, it has meant that income that the Council would have received through fees and charges has also been impacted on.

3.3.4	The Council has been monitoring the impact of Covid-19 on its financial position, and providing monthly updates to Central Government.  The information contained within this report is based on the financial position provided as part of the Covid-19 return to Central Government as at 30th December (updated for any known key changes). 

3.3.5	The Council has been allocated a total Covid-19 grant to date of £2.096million, over four tranches.  The Council has used this grant to meet additional expenditure incurred as a result of Covid-19.

3.3.6	As at the end of the third quarter of the 2020/21 financial year, the Council is anticipating incurring additional expenditure of £2.086million against the 2020/21 financial year, which was not included within the original approved budget. This figure is likely to change as the effects of the second wave of the virus, and local lockdown restrictions, impact upon residents and businesses in the District.

3.3.7	It is clear that the cost of the pandemic and related restrictions will continue to be felt for the remainder of the financial year, as we are currently in a third national lockdown, and there is no set date to come out of all of these restrictions as at the time of writing, although it is hoped that schools will reopen in March. The Council continues to complete monthly returns to Central Government highlighting the ongoing costs, and lost income, incurred due to Covid-19.

3.3.8	Central government have confirmed that local authorities will be reimbursed for Sales, Fees & Charges losses as a result of the pandemic and the required lockdown. The Council is anticipating receiving £1.039m from Central Government as part of this compensation scheme. However, it is likely that an element of this reimbursement will be returned to Central Government, as part of a reconciliation exercise at the end of the financial year. This is because further information has come to light on income from sources such as Trade Waste, since the first claim was submitted in September; this has been factored into the Quarter 3 forecast. Also, certain elements of income, such as investment property income, or losses where a local decision was made to keep a service closed after central government permitted reopening, cannot be claimed for. 

3.3.9	Loss of income due to Covid-19 is currently expected to be in the region of £3.270million for the 2020/21 financial year (after estimated reimbursement from Central Government for Sales, Fees & Charges losses discussed above), including:
•	Sales, fees and charges – this is the result of certain services not being operational due to measures put in place by Central Government, such as the Palace Theatre, parks, swim development and waste collection (although the latter has now resumed), and certain services being made free to aid people during the current situation, such as car parking across the District.
•	Commercial income – this relates to properties within and outside the District, where businesses have asked for rent free periods to help them through a period whereby they have been unable to operate due to Central Government restrictions that have forced them to remain closed.
•	Bank deposit interest – the Bank of England base rate had been holding steady since August 2018 at 0.75%, which was used in the budget assumptions relating to investment income earned by the Council on its cash balances.  In March 2020, the Bank of England cut the base rate twice in quick succession down to 0.1% in order to lessen the shock on the economy of Covid-19; this will result in less interest being received by the Council.	

3.3.10 A total of £851,000 has been identified from within Earmarked Reserves which could be used to help the increased unforeseen costs and income losses due to the pandemic. 

3.4	General Fund Revenue – Forecasted Year-End Position (at the end of Quarter 3)

3.4.1	The General Fund contains all services that the Council is responsible for providing, other than services in relation to delivering its responsibility as a landlord to Council tenants.

3.4.2	For the 2020/21 General Fund budget, the Council set a balanced budget which relied on resources being taken from balances and reserves, and a corporate Transformation Programme aimed at generating additional income and delivering efficiency savings and cuts against Council services totalling £2.617million. This was reduced to £1.948million at the end of Quarter 2 due to the impact of Covid-19 on savings planned for the first half of the year.

3.4.3	At the end of the financial year, the General Fund is expected to break even against its budget position, which will mean the amount of general balances held will remain the same.

3.4.4	Table 1 shows a breakdown of the position by Council’s Head of Service structure, with further information provided within the Appendices to this report of the significant variances by each of the Portfolios:
Table 1 – General Fund – Quarter 3, Budget Forecasted Position
Head of:	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	
Corporate Transformation Savings	-669	-639	30	
Finance	-12,160	-12,391	-231	
Health and Communities	4,869	4,650	-219	
Housing	883	855	-28	
Law and Governance	2,834	2,819	-15	
Neighbourhood Services	4,553	4,732	179	
People and Transformation	2,950	3,001	51	
Planning and Regeneration	-3,260	-3,027	233	
Total	0	0	0	

(Where a (-) negative variance indicates a surplus against the budget, and a positive variance indicates a deficit against the budget).
3.4.5	As a result of the forecasted position, General Fund Balances are expected to remain the same as at 31st March 2020, as set out in the following Table:

Table 2 – General Fund Balances Forecasted to 31 March 2021 at Quarter 3

General Fund General Balances	£000	
Balance at 1 April 2020	-2,347	
		
Forecasted year-end position 2020/21	0	
		
Forecasted Balance at 31 March 2021	-2,347	

3.4.6	It is forecasted that by the 31 March 2021, General Fund Balances will stand at £2.347million which is £247,000 above the minimum level of balances the Council approved as part of the budget setting process. This position is in line with that which was reported at Quarter Two.

3.5	Housing Revenue Account (HRA) Revenue – Forecasted Year-End Position (at the end of Quarter 3)

3.5.1	The Housing Revenue Account contains all the transactions relating to the provision, maintenance and management of the Council’s housing stock in its role as landlord.

3.5.2	The Council set a balanced budget for the Housing Revenue Account whereby all expenditure is paid for by dwelling rents and other fees and charges relating to its landlord duties. 

3.5.3	Table 3 shows the forecasted year end position at the end of quarter three for the Housing Revenue Account which is forecasting a year-end deficit of £704,000. However, £599,000 of this deficit was forecasted at Quarter 2, and is now shown within the budget for Revenue Appropriations, as this amount was known to be required from HRA reserves at the end of the financial year. This means that the change in forecast position since Quarter 2 is £105,000.

Table 3 – Housing Revenue Account – Quarter 3, Budget Forecasted Position

Service Area:	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	
Corporate Transformation Savings	-530	-265	265	
Head of Finance	10,014	10,478	464	
Head of Housing	-9,484	-9,509	-25	
Total	0	704	704	

(Where a (-) negative variance indicates a surplus against the budget, and a positive variance indicates a deficit against the budget).

3.5.3	As a result of the forecasted deficit position, Housing Revenue Account Balances are expected to decrease at the end of the financial year, as set out in the following Table:

Table 4 – Housing Revenue Account Balances forecasted to 31 March 2021, at Quarter 3

Housing Revenue Account Balances	£000	
Balance at 1 April 2020	-28,538	
2020/21 forecasted deficit at year end	704	
Balance forecasted at 31 March 2021	-27,834	

Balances at 31 March, of which are:		
Allocated	-26,123	
Unallocated	-1,711	

3.6	Transformation 

3.6.1	The current 2020/21 budget includes £1.948million of transformation savings to be achieved for the General Fund, and £786,000 for the Housing Revenue Account. These savings are being achieved through a variety of workstreams, which will also reduce the target for 2021/22, as shown in Table 5.

	Table 5 – Transformation Savings achieved, at Quarter 3

 	2020/21	2021/22	
 	Budget	Achieved 	Target 	Budget	Achieved 	Target 	
 	£000	£000	£000	£000	£000	£000	
General Fund Transformation Target:	-1,948	-1,277	-670	-3,403	-1,485	-1,918	
To be met from:	 	 	 	 	 	 	
Establishment Saving	-1,504	-1,247	-257	-2,547	-1,454	-1,093	
Transformation Reviews	-444	-31	-413	-856	-31	-825	
 	 	 	 	 	 	 	
HRA Budget Shortfall:	-786	-256	-530	-1,179	-303	-876	

3.6.2	The Council will continue to progress its transformation programme in the final quarter of the financial year, which will reduce the savings target left to find, in both this financial year, and future years. The transformation budget was amended after Q2 monitoring, as the impact of Covid-19 meant that planned transformation works could not take place in the first half of the financial year.
	 
3.7	Capital Outturn Position – Forecasted Year-End Position (at the end of Quarter 3)

3.7.1	The current approved capital programme for 2020/21 is £28.390 million. Table 6 shows how the programme is split between the General Fund and the Housing Revenue Account and the current forecast position.

3.7.2	Due to the Covid-19 pandemic and subsequent economic restrictions, there has been slippage in the capital programme, which has affected both the General Fund and Housing Revenue Account. It is expected that a number of further carry-forwards to the 2021/22 financial year will be required at the end of the financial year, which are documented in section 3.7.3.1 of this report, and in Appendices 13 and 14.

Table 6 – Capital Programme – Quarter 3, Budget Forecasted Position

Fund:	Approved Budget (£000)	Quarter 3 Forecast 2020 (£000)	Carry Forward Request to 2021/22 (£000)	Variance
(£000)	
General Fund	21,940	6,661	4,221	-10,658	
HRA	6,450	6,088	362	0	
Total	28,390	13,149	4,583	-10,658	

3.7.3	Estimated Capital Carry Forward

3.7.3.1	Due to the timing of this report being close to the year end, there are no requests for carry forwards to 2021/22 at this stage. However it is expected that there will be carry forwards to the 2021/22 capital programme which will be included in the 2020/21 outturn report.  Appendix 13 sets out the estimated carry-forwards for the General Fund Capital Programme and Appendix 14 the carry forwards estimated for the Housing Revenue Account and the reasons for moving budget into the next financial year (2021/22). These carry-forwards are predominately expected as the Covid-19 pandemic and economic shutdown has prevented programmes of works starting as planned. The final carry forward figures will be included in the 2020/21 Outturn report and it is likely that there will be additional carry forwards.

4.	OPTIONS AVAILABLE

This report is for information only.	

5.	RISK ASSESSMENT OF RECOMMENDATIONS

	There are no Medium or High risks associated with this report

6.	ALIGNMENT TO COUNCIL PRIORITIES

6.1	This report shows the outturn in respect of the budgets approved by Council which reflected the Council’s priorities at that time.

7.	IMPLICATIONS

(a)	Relevant Legislation: The Council has prepared the General Fund Accounts and Housing Revenue Account in accordance with the Statement of Recommended Practice and nationally approved Accounting Standards and Principles. This report indicates the outcome of these processes. 

(b)	Human Rights: No impact.

(c)	Equality and Diversity: No impact.

(d)	Climate change and environmental sustainability: No impact.

(e)	Crime and Disorder: No impact.

(f)	Budget / Resources: This report is to note the out-turn position on the General Fund Account and Housing Revenue Account.  Financial implications are contained within the report.

8.	COMMENTS OF STATUTORY OFFICERS

Section 151 Officer – Own report

Monitoring Officer – No specific comments

9.	CONSULTATION

9.1	Heads of Service and Service Managers have provided details and explanations for variances.

10.	BACKGROUND PAPERS

	None

Report Author	-	Chloe Edlin	
Designation	-	Group Accountant	
Telephone	-	01623 463145	
E-mail	-	Cedlin@mansfield.gov.uk	

Appendix 1
General Fund – Corporate Transformation – Significant Variances
Service Area	Latest Approved Budget
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Establishment Savings	-257	-257	0	On-going work being carried out to identify savings	
Transformation Savings	-412	-382	30	On-going work being carried out to identify savings	

Appendix 2
General Fund – Finance – Significant Variances
Service Area	Latest Approved Budget
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Benefits Administration	110	36	-74	Vacancy Savings. 	
Housing Benefit Subsidy	29	-54	-83	Extra Discretionary Housing Payments received and extra benefit subsidy from previous year following audit subsidy claim.	
Covid-19	-1,935	-1,777	158	Additional spend related to the pandemic that has come to light since the Quarter Two forecast, due to national lockdowns in November and at the start of 2021.	
PWLB Interest	3,061	2,846	-215	Additional borrowing not required due to slippage on Capital Programmes due to Covid19.	
Other	-13,425	-13,442	-17	Other smaller variances	
Appendix 3 
General Fund – Health and Communities – Significant Variances 

Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Mansfield District Leisure Trust	1,153	1,325	172	Increased costs due to leisure centre closures and subsequent reopening at reduced capacity.	
Environmental Health & Safety & Food	303	112	-191	Income received from a court case from previous years, which was not known about at the time of previous forecast.	
Neighbourhood Wardens	521	423	-98	Vacancies 	
Other	2,892	2,790	-102	Other smaller variances	

Appendix 4
General Fund – Housing – Significant Variances 

Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Other	883	855	-28	Other smaller variances	

Appendix 5
General Fund – Law and Government – Significant Variances 

Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Other	2,834	2,819	-15	Other smaller variances	

Appendix 6
General Fund – Neighbourhood Services– Significant Variances 

Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Refuse Trade Waste	-266	-459	-193	Impact on income from Covid-19 not as high as originally anticipated.	
Refuse Garden Waste	-504	-574	-70	Impact on income from Covid-19 not as high as originally anticipated. Sales of bins to Newark and Sherwood. 	
Car Parks	-170	146	316	Loss of income from Covid-19 higher than anticipated due to additional lockdowns and restrictions.	
Other	5,493	5,619	126	Other smaller variances	

Appendix 7
General Fund – People and Transformation– Significant Variances 

Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Other	2,950	3,001	51	Other smaller variances	

Appendix 8
General Fund – Planning and Regeneration – Significant Variances
Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Investment Properties	-2,597	-2,356	241	Additional running costs at commercial properties	
Other	-663	-671	-8	Other smaller variances	

Appendix 9
Housing Revenue Account – Corporate Transformation Savings – Significant Variances
Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Service Reviews	-530	-265	265	On-going work being carried out to identify savings	

Appendix 10
Housing Revenue Account – Housing – Significant Variances
Service Area	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Landlord Services/ Housing General	248	125	-123	Unanticipated gas refund	
Landlord Services/ Repairs	7,012	6,901	-111	Vacancy Savings	
Depreciation – Dwellings	4,489	4,678	189	Increase in depreciation charges due to increase in the value of properties following 19/20 revaluation. Netted off by decreasing the contribution to new build reserve.	
Other	-21,233	-21,213	20	Other smaller variances	

Appendix 11
Housing Revenue Account – Finance – Significant Variances
Service Area	Latest Approved Budget
(£000)	Quarter 3 Forecast 2020 
(£000)	Variance
(£000)	Explanation	
Capital Expenditure	2,009	1,905	-104	Contribution to Major Repairs Reserve reduced due to expected higher than budgeted depreciation charge which also contributes to the MRR.	
Revenue Appropriations 	-599	-33	566	Covid-19 additional costs and loss of income	
Other	8,604	8,606	2	Other smaller variances	

Appendix 12
Capital Programme – General Fund – Significant Variances
Scheme:	Latest Approved Budget 
(£000)	Quarter 3 Forecast 2020 
 (£000)	Carry Forward Request to 2021/22
(£000)	Variance
(£000)	Explanation	
Commercial Property Acquisition	10,658	0	0	-10,658	No purchases in progress	

Appendix 13
General Fund Capital Programme – Estimated Carry Forwards to 2021/22
Scheme:	Carry Forward Requested (£000)	Reason for Carry Forward	
Four Seasons Public Conveniences	53	To be used for future scheme	
Town Centre Gateway Bridge	133	To allow adoption of bridge in future year	
Disability Access Works	50	Programme of works to continue in to 2021/22	
Berry Hill Cliff Face	380	Programme of works to continue in to 2021/22	
Berry Hill Quarry Phase 1	1,955	Programme of works to continue in to 2021/22	
Towns Fund	950	To deliver works being designed	
Walkden Street Cladding Refurb	55	Programme of works to continue in to 2021/22	
Berry Hill Park 	50	Programme of works rescheduled for 2021/2022	
Civic Centre Fire Dampers 	60	Programme of works rescheduled for 2021/22	
Four Seasons Concrete Repairs 	80	Programme of works rescheduled for 2021/22	
Disabled Facilities Grants	100	On-going scheme	
Private Sector Housing Assistance	80	To provide grants in 2021/22	
Discretionary Assistance	200	On-going schemes	

Appendix 14
HRA Capital Programme – Estimated Carry Forwards to 2021/22
Scheme:	Carry Forward Requested 
(£000)	Reason for Carry Forward	
Town View New Build	135	Final payments expected to be made in 2021/22	
Contract Management Fees	100	To be used for design of new build schemes in 2021/22	
Unallocated HRA	50	To be used for a special project in 2021/22