Agenda item

Consider report by Director – Finance and Procurement. (Copy attached.)

There had been circulated copies of a report by the Director – Finance and Procurement which provided an update on the progress of the 2023/24 Capital Financial Plan and sought approval for virements and the reallocation of funds.  The monitoring tables contained in the report provided the details of actual expenditure to 30 June 2023.  The June month end position reflected a projected outturn of £130.365m with a net budget variance of £4.827m.  That included net timing movements from 2023/24 of £7.881m.  Further, more significant, movements from 2023/24 were likely as the year progressed and there was further clarity on the timing of major projects.  The construction material supply chain had continued to experience disruption, which was likely to cause delays in sourcing essential materials and impact on project timelines.  Spend projections within the report were only to be treated as indicative.  Recent experience had demonstrated significant slippage at outturn when compared to initial budgetary estimates by managers.  A number of macro-economic factors continued to affect the Capital Plan in 2023/24.  Unprecedented levels of inflation combined with disruption in the construction materials supply chain continued to impact on the wider economy and the Council.  A surge in demand coupled with constraints on supply had led to price increases, shortages, and longer lead times.  The impact of that on tender prices for major projects and the wider Capital Plan continued to be assessed.  Current legally committed projects had a small risk of impact and block programmes of work could operate within a cash constrained budget and were considered lower risk. However, it would impact on the scale of project delivery from the blocks.  The most significant risk lay in contracts being tendered this year which could result in a budget pressure as had been highlighted through reports taken to Scottish Borders Council in May and June 2023 in respect of Earlston Primary School and Galashiels Academy.  Any financial implications from those market conditions would be reported through the regular budget monitoring cycle, with any longer-term impacts reflected in the financial planning process.  In anticipation of inflationary pressures, an inflation contingency was established in the 2021/22-year end to support potential budget pressures.   During the 2023/24 budget setting process a Planned Programming Adjustment budget line was added to the Financial Plan. That was offset where unspent project budgets became available through the year.  The remaining balance to address in 2023/24 remained £0.833m.  Identified pressures in new build projects at Earlston Primary School and Galashiels Academy had increased the Planned Programming Adjustment in future years of the plan.  The funding of those pressures would be considered as part of the 2024/25 financial planning process. Appendix 1 to the report contained a list of the block allocations approved for the year and the various approved and proposed projects to be allocated from them within the 2023/24 Capital Plan. A list of estimated whole project capital costs for single projects which would not be completed in the current financial year was contained in Appendix 3 to the report.  The latest version of the CIPFA Prudential Code, published in December 2021, required from financial year 2023/24 onwards that quarterly monitoring of prudential indicators should be reported by Councils.  In order to meet that, quarters 2 and 4 of each financial year would continue be reported through existing treasury management reports.  Quarters 1 and 3, which were not previously reported, would now be included in monitoring reports.  Appendix 4 to the report contained the first monitoring report and provided an updated position on key treasury indicators as at the 30 June 2023 quarter end.  The information provided was a snapshot at the end of quarter 1.  There were no concerns to highlight at this stage of the year.  The Director – Finance and Procurement, Mrs Suzy Douglas, presented the report and responded to Members questions.  In response to a question regarding the reporting of projects at risk, Mrs Douglas explained that the amber ratings in the report were highlighting that there were some concerns regarding the budget to fund the relevant project.  If specific projects were at risk of not proceeding, then they would be highlighted appropriately.  Regarding payments from the Scottish Government for free school meal provision, Mrs Douglas explained that the Council was aware of what it was receiving for the current financial year and confirmed that the sum was less than anticipated.  In response to a question regarding budget pressures arising from iPad purchases, Mrs Douglas explained that there was no increased budget pressure as a result from the iPad purchases, and that the budget had been increased to take account for the expected sale of iPads.  The Chief Executive clarified that the Council had a purchase and lease back deal in place for the iPads. 

DECISION

(a)       AGREED the projected outturn contained in Appendix 1 to the report as the revised capital budget and approved the virements required.

(b)    NOTED:-

(i)        the budget virements previously approved by Directors, detailed in Appendix 2 to the report, under delegated authority;

(ii)       the list of block allocations in Appendix 2 to the report;

(iii)      the list of whole project costs detailed in Appendix 3 to the report; and

(iv)      the update on key Treasury indicators at 30 June 2023 in Appendix 4 to the report.