Agenda item

Resolved:

·         That the report be noted.

·         That additional information be provided about the loss of income from volume purchasing in children and young people’s services.

·         That advice be provided by officers about the attendance of Cabinet Members at scrutiny meetings and that the Chair of the Audit Panel should continue with his enquiries in this regard.

·         That further information be provided to Members about the interim management structure in children and young people’s services.

·         That the Committee receive additional information about the underreporting of over expenditure in the first three quarters of 2017-18.

6.1 Selwyn Thompson (Head of Financial Services) introduced the report, the following key points were noted:

·         The report provided the financial results for 2017-18 and highlighted the key areas of the Council’s activity – including the general fund, the dedicated schools grant, the housing revenue account, council tax collection business rates collection and the capital programme.

·         The financial year finished with an overspend of £16.5m, which was reduced to £15.2m after applying an amount held in the budget for contingencies and risks.

·         The overspend represented a 7.1% variance on the general fund, which was significantly higher than in previous years and indicated that the pressures on Council budgets were of an order that had not been previously seen.

·         The Children and Young People (CYP) directorate had overspent by £15.6m, which was higher than had previously been seen.

·         Additional resources and management attention had been allocated to reviewing finances in the CYP directorate in the final quarter of 2017-18.

·         Children’s social care had overspent by £12.6m. There were also pressures in placements budgets, including fostering and residential care for looked after children. This was a result of the weekly costs being higher than had been budgeted for and higher than expected volumes of cases.

·         The main causes of the £2.2m overspend in the Partnerships and Targeted Services budgets were as a result of the costs of assisted transport as well as pressures in the budget for the Youth First contract. Further work was taking place to explore the reasons for the pressure in the Youth First budgets.

·         In the Community Services budget, the majority of divisions had spent to budget or had underspent. An exception was in the adult social care budget, which had overspent by nearly £1m. The main costs related to pressures in the deprivation of liberty safeguards (DOLS) and placements budgets, which were compounded by increasing costs as a result of cases transitioning from children’s social care.

·         The Customer Services budget was overspent by £5m. Strategic housing was overspent by £0.2m and public services was overspent by £0.3m. These overspends related to staffing costs and underachievement of budgeted income.

·         The main pressures in Customer Services were in Environmental Services as a result of the late introduction new waste collection services and increased vehicle hire costs.

·         The technology and change division was overspent by £1.3m – the service delivered £1m in savings in 2016-17 in 2017-18 the reduction in the budget, combined with the costs of new software licenses and unachieved savings resulted in the overspend.

·         The Resources and Regeneration budgets were underspent by just under £2m.

·         There were pressures on schools budgets. Nine schools ended the year with licensed deficits. Three schools were granted loans in excess of £0.5m.

·         The Housing Revenue Account reported expenditure to budget - after transferring surpluses to reserves in preparation for the funding of the new homes programme.

·         The Council tax collection fund was slightly lower than target.

·         Business rate collection was also lower than expected.

·         The Capital Programme spent £87m, representing 86% of its revised budget (which was revised over the year according to expenditure).

·         There were also sections in the report on pensions fund balances and treasury management.

·         The Council’s accounts would be presented to the Audit Panel later in the week. The Council’s full accounts would be presented to full Council on 18 July 2018.

6.2 Selwyn Thompson, Yusuf Shaib (Group Finance Manager, Children and Young People) Janet Senior (Executive Director for Resources and Regeneration) and David Austin (Head of Corporate Resources) responded to questions from the Committee, the following key points were noted:

·         The anticipated overspend at the end of the third quarter of 2017-18 was £12m. At the beginning of 2017-18 the overspend was £7.8m.

·         There were a number of things that changed in the course of the year that added to the overspend in children and young people’s services including: the underachievement of £1.3m of savings in social care; £2m of commitments to anticipated contingencies that actually materialised and loss of expected income from volume purchasing.

·         There had been a significant increase in the use of agency staff, this was as a result of: difficulty in recruiting and retaining staff; national shortages of qualified social workers and increases in demand.

·         Plans were in place to control costs in foster caring (by bringing it ‘in house’) there was also a business case being reviewed to develop Lewisham’s own residential children’s home for six children.

·         Senior officers regularly challenged directorates about their budget assumptions. Over the summer of 2017, there were indications that the children’s services budget overspend would exceed £12m. As a result, work was carried out to reassess the assumptions in the budget and to assure the accounting process.

·         Further spending during the course of 2017, combined with some atypical accounting of expenditure in the directorate that became apparent towards the end of the financial year, had resulted in the reporting of the overspend position at the end of March 2018.

·         The overspend position in children’s services could not be managed within the course of a single year. It might require the use of one off resources and a further review of budgets to contain expenditure over a number of years.

·         The new Chief Executive was carrying out a diagnostic review of support services, accounting, human resources and management practices to ensure that appropriate resources and support were in place for directorates to manage their budgets.

·         It was recognised that controls in the organisation needed to be reviewed and strengthened. This included the controls that were in place to oversee staff joining and exiting the organisation – as well as the link between human resources and financial services.

·         A review of transport had taken place over two years. It was designed to lower the level of taxi use and manage the costs of Lewisham run bus services.

·         Usage of taxis had increased because recognised requirements for transport had to be met. In some cases, the use of taxis was cheaper than the use of Lewisham’s own bus service.

·         There had been a significant increase in the reported overspend for children’s services between quarter three and quarter four of 2017-8, it was acknowledged that this was because some expenditure had not been accurately reported during the year.

·         There was no deliberate policy of underspending in the Community Services budgets in order to cross subsidise adult social care.

·         Further information could be provided about variances the Community Services budgets, especially where there were significant variations in small budgets.

·         The value of the improved better care fund was known at the beginning of the year – most of it had been allocated – but an amount of £900k had remained unallocated during the year and was used to offset overspends in the budget at the end of the year.

6.3 In the Committee’s discussion, the following key points were also noted:

·         Members of the Committee expressed different opinions about the importance of the Cabinet Member for Finance, Jobs and Skills being in attendance. The Chair confirmed that he had invited her to answer questions about the Council’s budget but requested that clarification be provided from officers about the recommendations made in a parliamentary report on practice in local authority overview and scrutiny.

·         Members were concerned about the quality and robustness of the assumptions being made in financial reports.

·         The Committee was concerned about the statement in the outturn that the budget pressures were ‘…of an order never seen previously in Lewisham.’ There was particular concern about the clarity of the phrase at 6.1 in the financial forecasts report that ‘…the last quarter (of 2017-18) has been witness to the most significant month-on-month increases since the year began.’ Given that officers had acknowledged that reporting of over expenditure throughout 2017-18 to the Committee had not been wholly accurate.

6.4  Resolved:

·         That the report be noted.

·         That additional information be provided about the loss of income from volume purchasing in children and young people’s services.

·         That advice be provided by officers about the attendance of Cabinet Members at scrutiny meetings and that the Chair of the Audit Panel should continue with his enquiries in this regard.

·         That further information be provided to Members about the interim management structure in children and young people’s services.

·         That the Committee receive additional information about the underreporting of over expenditure in the first three quarters of 2017-18.