City finance chief reveals council’s financial state is ‘worrying’
ONE of Derby City Council’s leading officers has said the authority’s financial position is a cause for “concern”.
Alison Parkin, director of financial services, revealed the state of the council’s finances were “worrying” during an update following the first quarter of the 2021/22 financial year.
A city council report states that the authority is already forecasting an overspend of almost £12 million against its revenue budget of over £255million for 2021/22. The precise figure of overspend is £11.68million.
However, the council report says around half of the predicted overspend has been covered by reserves pots so the actual overspend is now at £6.4million.
Council leaders say the reason for the overspend figure is due to pressures arising from Covid-19.
An executive scrutiny meeting held on Tuesday heard how the council’s reserves were running “dangerously low”. The report says the council has earmarked reserves of just over £12million.
The forecast comes following the end of quarter one – April to June – prompting fears the overspend amount could escalate higher as the financial year progresses. An updated report is expected in November.
The financial monitoring report states: “The council is currently forecasting a pressure of £11.683 million against our base budget requirement of £255.973 million.
“However, this is being mitigated by use of the Covid Reserve, Covid placeholder budgets and the Business Rates smoothing reserve to give a forecast out-turn pressure on the budget risk reserve of £6.412 million.”
Speaking at Tuesday’s executive scrutiny meeting, Ms Parkin said: “There were two pots of money that were specifically put aside for Covid pressures this year so were not from general reserves.
“Yes I acknowledge the council’s financial position is quite worrying and as we see the demand for our services going forward, it is a concern.”
Labour councillor Alison Martin, who chaired the executive scrutiny, said she was very worried by the figures.
She said: “The £11.68million pressure is an enormous amount of money in the budget frankly in the first three months. That is very worrying.
“And we can also see that the reserves are getting quite low as well compared to where they have been in recent years – they seem to be becoming dangerously low in fact. This is very concerning, without those specific Government support money we would be looking at more drawing on standard reserves.”
“The budget was set when we knew there would be pressures and that is a very high amount within three months.”
Cabinet member for finance, Nicola Roulstone, said in a statement: “Recovery from the pandemic is a challenge and to address this we made financial provisions as part of our financial planning for the year.
“In responding to the needs of the city, we are forecasting an overspend of £6.4 million for the current financial year.
“It’s extremely important that we act now to protect the future finances of the council and we have mitigation plans in place across the board.”
The council’s financial position is quite worrying and as we see the demand for our services going forward, it is a concern.
Alison Parkin