To receive a presentation and verbal update.

The Chairman welcomed Colleen Warren (PSPS) Head of Finance (Client) to provide an introduction and present Members with an update on the 2024/2025 Budget Setting Process.

Members received a presentation (a copy is attached at Appendix B to the Minutes), following which Members were invited to put their comments and questions forward.

• A Member requested clarification on Section 113 of the Local Government Act. In response, the Assistant Director (Corporate) explained that Section 113 allowed local authorities to share its workforce. For example, the role of Assistant Director (Corporate) was shared between the three Councils across the Partnership and the salaries were apportioned between them, whilst overall employment was maintained by East Lindsey District Council.

• A Member requested an update on Internal Drainage Board (IDB) levies. In response, the Assistant Director (Corporate) provided an update that the Deputy Chief Executive (Corporate Development) and Section 151 Officer was currently in London speaking at the All-Party Parliamentary Group on Sustainable Flood and Drought Management at the invitation of the Association of Drainage Authorities. Local authorities continued to face challenges due to the funding mechanism and IDB costs. At present the Council were trying to secure a meeting with the Treasury to enable further discussions, and an update was expected from the Local Government Association on whether a request for a Special Interest Group (SIG) was successful. Early indications was that the LGA would endorse the SIG and a 15-member group to be established who would elect a Chairman at its first meeting early in November. Conversations would continue and more authorities had signed up and wanted to be part of the SIG.  A meeting was scheduled with the Lincolnshire and Welland Drainage Boards, and more councils were being encouraged to become part of the group.

• A Member requested clarification on the role of Head of Finance (Client) and queried how many officers worked directly for PSPS. In response, the Assistant Director (Corporate) explained that within PSPS there were accountants for PSPS finances and accountants for client finances, with ELDC being the clients as a Council. The Section 151 Officer was the Client Lead and was employed by South Holland District Council and shared across the three councils. The Section 151 Officer was responsible for the finances across the three authorities.

• A Member queried how financial success was measured for job roles such as those working in Environmental Services.  In response, the Head of Finance (Client) stated that schemes were set up on the basis of full cost recovery. At the end of the financial year, the measure was to establish if the income targets had been met or to offset all or some of the costs.

• In relation to salary costs, a Member queried what percentage of the total budget was made up from salaries and how that compared with other councils with similar demographics. In response, the Head of Finance (Client) stated that although comparisons were not specifically performed, experience of other local authorities would reflect a similar percentage, varying between 90 and 92% of the overall budget. Staffing would always be the biggest part of the budget for a local authority.

• A Member stated their recognition of the challenges faced by the finance team in relation to the short-termism of planning and predicting the Council’s finances. 

N.B. Councillor Dick Edginton left the Meeting at 11.22am

In response, the Head of Finance (Client) explained that there was always a level of uncertainty when building budgets and assumptions could be wrong. The main challenge faced was building budgets with a level of accuracy.

N.B. Councillor Dick Edginton returned to the Meeting at 11.26am

·        A Member highlighted concerns with cutting staff numbers and queried the need for the large number of assistant directors at the higher level.  In response, the Assistant Director (Corporate) stated he was not aware of recruitment requests being refused for replacing existing posts, and that the workforce was not currently shrinking. There were positive improvements from sharing several contracts across the partnership enabling money to be saved. For example, a shared mobile phone contract which had been secured would save circa £0.25m over three years. Aligning more contracts for all three councils would enable savings to continue.

·        A Member queried the increase in audit fees and the financial impact for the Council. In response, the Head of Finance (Client) advised that the reason for the price increase was due to under-pricing of the contract that was originally agreed five years ago.  The prices had now increased to rebalance the under-pricing with a 100-150% increase in audit fees expected for next year.  Audits that did not complete in time were still outstanding, and that had created additional work. Highlighting the example of pensions, further work had been required to reopen the accounts and update the pensions. Resubmitting the accounts has impacted on the finance department which in turn had impacted on work for the current financial year.

Additionally, there had been a greater emphasis on valuations during audits, which had become more challenging every year.  Valuations for the asset register were previously on a rolling five-year programme and there was now a yearly market or impairment review which required additional work. Both pensions and valuations had shown a significant impact on revenue and the balance sheet, and annual changes continued to create additional pressures.

·            A Member queried if being a debt free authority made a difference to the audit and valuation process.  In response, the Head of Finance (Client) confirmed that the debt did not make a difference to the level of valuation work. Properties were the majority of the local authority’s assets and the auditors would especially want to look at and verify everything in depth to ensure everything was correct.

·            A Member enquired if there were any comments or concerns in relation to Kingfisher Caravan Park. In response, the Head of Finance (Client) stated that issues had been identified around income generation and in the valuation of assets which had impacted upon the 2021-2022 accounts.  The auditors were currently challenging the Council’s valuation methods. The difficulty was establishing whether the caravans were valued as investment property, or as Property, Plant and Equipment (PPE) which would be valued at resale value.

·       A Member queried if the Council would be cutting back on how much funding was provided to Magna Vitae. In response, the Assistant Director (Corporate) stated it would depend on the contract that was negotiated and approved. Finance would be involved in the process, but it would not be performing scrutiny of the Magna Vitae contract as that would rest with the Council.

N.B. Councillor Neil Jones left the Meeting at 11.40am

Further to a discussion on specific areas that might impact on the 2024/25 budget, a Member highlighted waste management and car parking, following which it was agreed that the Committee would invite Councillor Martin Foster, Portfolio Holder for Operational Services to the next meeting.

N.B. Councillor Neil Jones returned to the Meeting at 11.42am