To consider the recommendations from the meeting(s) of the Cabinet held on 13th March and 27th March 2019.
Any recommendations in respect of 27th March will be tabled at the meeting.
Cabinet Recommendations 13th March 2019
Finance Monitoring Quarter 3 Report
The recommendations from Cabinet in respect of the Finance Monitoring Quarter 3 Report were proposed by Councillor B. Cooper and seconded by Councillor G. Denaro.
In proposing the recommendations Councillor Cooper advised this report outlined the Council’s financial position at the end of quarter 3 in December 2018. He commented that the Council was well on target to achieve a comfortable underspend for the full year. There were four financial matters relating to this report which needed Council’s approval.
The first matter was in respect of £120k which had been earmarked for replacement parking machines, and which currently sat in the vehicle replacement programme budget. Council was asked to approve a virement of this into its own budget in 2018/19. This was an accounting exercise to aid clarity.
Councillor K. May confirmed that the current machines were due to be replaced and that a review was being undertaken of all machines, which included their location and how residents paid for car parking.
The second was in respect of increased grant funding received from the government for Disabled Facilities Grants, following the Budget announcement in Dec 2018. Council was asked to approve an increase in the 2018/19 capital budget of £102k for the Disabled Facilities Grant budget.
Councillor C. Hotham raised concerns that the funds for Disabled Facilities Grants seemed to be increasing and there was an urgent need for these funds to be spent.
The third asked Council to approve an increase of £390k in the 2018/19 capital budget for Bromsgrove combined footpath and cycleway network. The money had come from a grant from Worcestershire County Council.
The final recommendation was in respect of the existing sports hall, which was closed last month as it was no longer usable due to health and safety issues. The background to this was detailed in para 6.4 of the report. Members were reminded that they had agreed last July to release £734k for its demolition. The work had been put out to tender and the successful tender in terms of price and quality was for £1.05m, which was £346k more than was allocated in the budget. The reasons for the higher costs were outlined in para 6.4.2 of the report. Council is asked to approve an increase in the 2019/20 capital budget of £346k for the demolition of the Dolphin Centre including the sports hall and carrying out of associated car park work. It was confirmed that of the £346k, £202k was to be funded from capital receipts and £144k from balances.
Councillor M. Thompson asked if the recommendations could be taken individually rather than en bloc, which was agreed. He further suggested that the figures in respect of the demolition of the Sports Hall simply confirmed what had been discussed at previous meetings in that the option of either building a new Sports Hall or refurbishing the current one should have been the preferred option. He also questioned why this increased amount had not been included in the budget setting discussions at the previous Council meeting. Councillor Cooper advised that this could not have been included as it had ant been agreed by Council at that time.
Members discussed a number of areas in more detail, this included the following:
· The increase in the cost of the demolition compared to the original quote and whether the original contractors were asked to provide an up to date quotation for the work. Councillor Cooper drew Members’ attention to paragraph 6.4.2 of the report which provided details of the cost and reasons for the increase.
· The Executive Director, Finance and Resources also confirmed that the tender process had been undertaken by MACE on behalf of the Council.
· Members continue to be disappointed with the size of the increase as Members had made a decision based on the original business case presented to them, if the revised figures had been in that business case then Members may well have reached a different decision.
· Members questioned whether the revised costs would be measured against any future profit for the new Leisure Centre.
· Councillor Cooper confirmed that the business case had not been reopened but the matter could be scrutinised though the usual channels should Members so wish.
· The impact of the loss of the Sports Hall together with the additional cost and services that additional cost could have been used to support.
· By delaying the demolition this has enabled contractors to see how much was originally estimated for the cost and given them the opportunity to resubmit at a higher price. The business case should therefore have been resubmitted and new quotes obtained.
Councillor Thompson proposed an amendment, as this was such an important area, for recommendation d) of the report to be deferred until the next meeting of Council in order for a full and detailed business case to be prepared. The proposal was seconded by Councillor P. McDonald. Councillor McDonald explained he supported the deferral as it would give the Council the opportunity to revisit the business case and have the opportunity to save the Council some money.
A number of Members spoke in support of the amendment and commented that the cost was now over £1m which appeared excessive for the work that was being done. The matter had been going on for a long time and the original plan had been not to have a sports hall, but this had changed and Council had then been asked to consider whether it wanted a sports hall or not. Again it was reiterated that when the decision was made, if the current cost had been made available then, the decision made by Council may have been different.
Councillor Cooper advised Members that there had been a number of complaints from the public in respect of the parking around the current sports hall site, which was impacting on the car park usage and also the developer from the new Leisure Centre had raised concerns that the old site and its condition was having an impact on usage of the new centre.
Councillor Thompson reminded Members that the Save Our Sports Hall group continue to campaign for the facility which had been a great loss to the community and this was an opportunity for the Council to reconsider its decision and take account of its residents’ views.
On being put to the vote the amendment was lost.
The substantive motion was then considered and after a short debate it was
a) that the virement of £120k in 2018/19 for replacement parking machines currently held within the vehicle replacement programme budget be approved. This is to ensure clarity of the current spend under these project headings;
b) that an increase in the 2018/19 Capital Budget of £102k for the Disabled Facilities Grant budget be approved. This is due to additional grant funding being received following the budget announcement in December 2018;
c) that an increase in the 2018/19 Capital Budget of £390k for a Bromsgrove combined Footpath and Cycle Way Network funded from a grant from Worcestershire County Council be approved; and
d) that an increase in the 2019/20 Capital Budget of £346k for the demolition of the Dolphin Centre to be funded from Capital Receipts (£202k) and balances (£144k) following receipt of tender quotations be approved
Treasury Management and Capital Strategy
The recommendations from Cabinet in respect of the Treasury Management and Capital Strategy were proposed by Councillor B. Cooper and seconded by Councillor G. Denaro.
Councillor Cooper advised Members that the Capital Strategy report was a new requirement for 2019/20, due to changes in guidance from the Chartered Institute for Public Finance and Accountancy (CIPFA) and the Ministry of Housing, Communities and Local Government (MHCLG).
The reports were required by central government and were written in a prescribed format which made them very technical. The strategies set limits and indicators that embody the risk management approach that the Council believed to be prudent. The strategies were set against the Council’s Medium Term Financial Plan, the context of the UK economy, and projected interest rates. The reports set treasury investment criteria and limits, which were (largely) unchanged. The investment strategy pulled together information on commercial property and loans to show the Council’s risk management approach in those areas.
Each year, the Council was required to approve a Treasury Management Strategy, which concerned the management of the Council’s cash flows, borrowing and investments and associated risks. The report included the Treasury Management Policy statement in appendix C to the report and the Annual Minimum Revenue Provision statement in appendix D.
Council was also required to approve the Capital Strategy report. This was a high-level overview of capital expenditure, capital financing, and treasury management activity that contributed to the provision of local public services, along with an overview of how associated risk was managed and the implications for future financial sustainability. A very important part of this report was the authorised limit and operational boundary for external debt set out. Appendix E contained the policy for the flexible use of capital receipts, which was a new requirement. The Treasury Management half yearly report was also included in the report and noted by Cabinet, but did not need approval at this meeting.
a) that the Capital Strategy as an appropriate overarching strategy for the Council be approved and the flexible use of capital receipts as per appendix E; and
b) that Council approve the Treasury Management Strategy for 2019/20 and the associated limits, MRP policy and treasury management policy (appendices C and D) and specific indicators included in this report.
Investment and Acquisition Strategy 2019/20
The recommendations from Cabinet in respect of the Investment and Acquisition Strategy 2019/20 were proposed by Councillor B. Cooper and seconded by Councillor G. Denaro.
Councillor Cooper advised Members that this was a new report for 2019/20, which met the requirements of the statutory guidance issued by the Government in January 2018. Members noted that some aspects of the Investment Strategy had also been covered in the Treasury Management and Capital Strategy reports that had just been approved by Council. Councillor Cooper confirmed that the Council invests its money for three broad reasons:
· It had surplus cash as a result of its day-to-day activities, for example when income was received in advance of expenditure. These were known as treasury management investments.
· To support local public services by lending to or buying shares in other organisations. These were service investments.
· To earn investment income. These were known as commercial investments where income was the main purpose.
It was confirmed that the strategy was relatively flexible, allowing the Council to invest for commercial activity, regeneration and development.
Councillor Thompson questioned the use of loans and whether this was linked to the proposed Housing Company to be set up for the Burcot Lane site redevelopment. It was also noted that investment in commercial property was highlighted but this was not referenced within the Medium Term Financial Plan. Councillor Cooper confirmed that as such matters would be commercially sensitive, it would not be appropriate to provide full details of any potential investments within it.
Members also briefly discussed the potential impact of Brexit on the work of the Council and any investments it made, which it was agreed was difficult to quantify at the current time.
RESOLVED that the Investment Strategy Report 2019/20 be approved and adopted.
Cabinet Recommendations 27th March 2019
ERP Finance System
The recommendation from Cabinet in respect of the ERP Finance System Report was proposed by Councillor B. Cooper and seconded by Councillor G. Denaro.
In presenting the report Councillor Cooper reminded Members that this system was scrutinised by the Finance and Budget Working Group in June 2018 and discussed by Council in July. The background information provided was that over recent years, weaknesses had been identified in the financial management, planning and forecasting capabilities of the systems that were currently in place in the Council. It had been reported by officers, by external and internal audit, and within the Corporate Peer Challenge, that the Council’s finance systems did not enable the Council to make decisions based on accurate, timely or easily retrievable information. This would become increasingly important if the Council was to meet the future challenges in the commercial environment.
It was also recognised that there were a significant number of manual processes that had to be undertaken in payroll, payments and Human Resources to facilitate access to data that officers and external partners may require. Furthermore, there were no seamless links between systems and so, information had to be manually transferred between systems. This could cause problems related to data loss, consistency and reliability. It was worrying that managers were unable to see their budgets on the existing financial systems and had to rely on spreadsheets to undertake budget monitoring. This could lead to lack of ownership and accountability, and to poor forecasting and financial monitoring. Councillor Cooper advised that the Council’s systems for finance and human resources were no longer fit for purpose. Another important consideration was that the licences for a number of the existing systems were due for renewal in the coming year.
Councillors were reminded that in July 2018, they had approved implementation of an Enterprise Resource Planning solution to provide an integrated Financial and Human Resources system for the Council, and had approved that the 2018/19 capital programme be increased by £198k to cover the implementation costs of the new system, which was to be paid from capital receipts. The Resources system was put out to tender and the process was summarized in paragraphs 3.2 – 3.4 of the report. As a result of the procurement process, a preferred supplier was identified.
The preferred system would cost a total of £736k for both Bromsgrove and Redditch Councils, and this Council would have to pay £368k an additional £170k above the amount already allocated. It was thought to be wise to add a contingency of 10% for unexpected costs, so that the total additional cost to Bromsgrove Council would be £207k. The preferred supplier’s price included an implementation cost based on the number of days that it estimated would be required for implementation of what was a complex system. If less implementation days were used by the supplier than were budgeted for by the Council, then there would be a consequential reduction in implementation costs. The Enterprise Resource Planning system would be funded by using capital receipts so there was no need for borrowing or a requirement for a return on the investment. No savings from implementation of the system were built into the current Medium Term Financial Plan, although it was anticipated that resources would be realigned to support the commercial and financial activities of the Council once the new system was fully functioning.
In the discussion at the Finance and Budget Working Group, there was focus on organisational change and potential job losses. It was acknowledged that this was an ambitious programme of change for the Council. However, no redundancies were planned. At present there were two vacant posts in the Finance Department whose salary costs would be used towards offsetting implementation costs. It was not likely that those posts would be filled when the new system was operational. It was envisaged that some roles within finance could change as indicated earlier. It was envisaged that implementation would start early in the new financial year and would be completed within 18 months.
Councillor L. Mallett as Chairman of the Overview and Scrutiny Board and its Finance and Budget Working Group clarified that from the information available the Working Group had raised concerns at the significant increase in the cost of the system and that further information on the reasons for this was needed before a decision could be made, together with details of the impact on jobs within the various teams. Concerns had been raised as to the cost of the system in comparison to the “turnover” of the Council particularly in light of the significant increase. The Working Group had not been provided with clear detailed information around exactly what the system could do and whether the benefits of it outweighed the cost of it.
Councillor Cooper reiterated his previous comments in that all concerned had considered the initial report, which had agreed the system going forward. He appreciated that the savings to be made from the system were important, but as the current system was no longer fit for purpose it was more important to get a system in place which would carry out all the functions that were needed taking the Council forward. A Project Group had been set up, including staff from the IT team, who had initially given estimates on the potential cost of such a project. Councillor Cooper provided detail around the soft market testing which was carried out which had highlighted that the cost of a system to meet the Council’s needs would take more time to implement than had been anticipated. Although there was the potential for any reduction in the implementation time to be refunded to the Council. The introduction of the system would allow for much tighter budgeting and control of the Council’s finances, which was something that had been highlighted a number of times through both the internal and external auditors.
A number of Members spoke in support of the system and the need for improvements going forward into a commercial environment, but continued to be concerned about the significant increase in the cost. It was felt that much more detail should have been included within the report in order for Members to make an informed decision. Further concerns were also raised that as the costs had already increased that once the work began, it would increase further. Councillor Cooper, whilst acknowledging this point, said he was not aware of the potential need for further funds, and that a 10% contingency had been built in to the amount now requested.
Councillor P. McDonald reminded Members of a previous project which had cost the Council dearly and suggested that it would be useful for the Overview and Scrutiny Board to receive regular updates on progress of the scheme to ensure that there were no additional cost incurred, without Members being aware of them. Members asked for this to be minuted to ensure that this was carried out.
RESOLVEDthat additional capital receipts to the value of £207k as detailed at 3.6 of the report be approved, to fund the system in 2019/20 and that the Capital Programme be updated to reflect this expenditure.