Your Councillors


APPENDIX II

Budget Strategy Risks

Summary

The risk matrix below provides a summary of the key budget risks.  The risk register that follows provides more detail on each risk.

 

Likelihood

5

 

 

 

 

4

 

B

3

 

C

H

2

E

F,G,
I,L,M

A, D, J

1

 

K

 

 

 

1

2

3

4

5

 

 

Impact

A.    Failure to contain expenditure within agreed budgets

B.    Fees and Charges fail to deliver sufficient income

C.     Commercialisation fails to deliver additional income

D.    Planned savings are not delivered

E.     Shared services fail to meet budget

F.     Council holds insufficient balances

G.    Inflation rate predictions underlying MTFS are inaccurate

H.    Adverse impact from changes in local government funding

I.       Constraints on council tax increases

J.       Funding the capital programme

K.     Increased complexity of government regulation

L.      Collection targets for Council Tax and Business Rates missed

M. Business Rates pool fails to generate sufficient growth

 

 

 

 

 

 

Budget Strategy Risk Register 2017/18

The following risk register sets out the key risks to the budget strategy 2017/18 onwards. The register sets out the consequences of each risk and the existing controls in place.

Ref

Risk (title & full description)

Consequences

Key Existing Controls

Overall Risk rating

I

L

A

Failure to contain expenditure
within agreed budgets

The Council overspends overall against its agreed budget for the year

Failure to meet the budget makes it more likely that the Council will have to rely on short term expedients to balance the budget from year to year, rather than following a coherent long term strategy.

 - Embedded and well established budget setting process

- Medium Term Financial Strategy

- Balanced budget agreed by Council for 2017/18.

 

-          Strong controls over expenditure and established process for recovering from overspends

4

2

8

B

Fees & Charges fail to deliver sufficient income

Fee charging services may be affected if there is a downturn in the economy, resulting in Fees and Charges failing to deliver the expected level of income.

The total value of all Council income from fees and charges is in excess of £16 million. A loss of income for service budgets will require restrictions on expenditure levels and delivery of all objectives may not be met.

- Fees and charges are reviewed each year, paying careful attention to the relevant market conditions

- Where the Council is operating in a competitive market, the aim is to ensure price sensitivity does not lead to a loss of income.

- Procedures are in place to ensure that fees and charges are billed promptly (or in advance) and that collection is maximised.

3

4

12

C

Commercialisation fails to deliver additional income

The commercial activities currently being delivered and projected in the MTFS do not deliver the expected level of income.

The medium term financial strategy includes a contribution from commercial opportunities, so any shortfall would have an impact on the overall strategy.

Income generation from commercial activities supports the revenue budget and is required in ordered to pay back capital investment.

- The Council set aside a provision of £0.5m against losses from activities that do not deliver. This provision is cash limited but available to cover short term losses.

- Individual risks associated with specific projects within commercialisation strategy will be assessed, both as part of the project appraisal process and during the course of delivering the projects.

- Decision made to outsource the management of the Mote Park Café from Autumn 2017.

3

3

9

D

Planned savings are not delivered

Failure to deliver savings and / or failure to monitor savings means that the Council cannot deliver a balanced budget

The level of saving required to achieve a balanced budget is significant and non-delivery of these savings will have a major consequence on managing financial viability of the organisation.

 

Not achieving savings will impact the overall delivery of the Medium Term Financial Strategy and would require appropriate action, which might include the suspension of some Council services, redundancies, etc.

 

- The risks associated with delivery of savings proposed in the current Medium Term Financial Strategy have been reviewed as part of the budget setting process. 

 

- Savings proposals are separately identified and monitored in the Council’s general ledger.

- The ability to achieve the targeted savings is reported quarterly to Corporate Leadership Team and to Service Committees.

4

2

8

E

Shared Services

Shared services, which are not entirely under the Council’s control, fail to perform within budgeted levels.

Failure of a shared service to manage within the existing budget will have the same consequences as for any overspending budget, ie it would require appropriate action, which might include the suspension of some Council services, redundancies, etc.

The arrangements governing shared services include a number of controls that minimise the risk of budget overspends and service failure, including quarterly reporting to a Shared Service Board comprising representatives of the authorities involved.  The shared services are required to report regularly on financial performance and key indicators.

2

2

4

F

Insufficient Balances
Minimum balance is insufficient to cover unexpected events

OR

Minimum balances exceed the real need and resources are held without identified purpose with low investment returns

Additional resources would be needed which would result in immediate budget reductions or use of earmarked reserves.

 

The Council would not gain best value from its resources as Investment returns are low in the current market.

 - The Council has set a lower limit below which General Fund balances cannot fall of £2 million. 

- At the beginning of the 2016/17 financial year General Fund balances stood at £4.6 million.

3

2

6

G

Inflation rate predications underlying MTFS are inaccurate

Actual levels are significantly above or below prediction

Unexpected rises will create an unbudgeted drain upon resources and the Council may not achieve its objectives without calling upon balances.

 

Services have supported the budget strategy through savings. Levels below those expected would result in an increase in balances or unused resources that could be used to achieve strategic priorities.

- Allowances for inflation are developed from three key threads:

o    The advice and knowledge of professional employees

o    The data available from national projections

o    An assessment of past experience both locally and nationally

- Current inflation projections are in line with the Bank of England and economic commentators.

3

2

6

H

Adverse impact from changes in local government funding

Unexpected shocks lead to changes in Local Government funding. Government strategy fails to address economic challenges, such as those which could arise from Brexit.

The Council will no longer receive Revenue Support Grant (RSG) after 2016/17, but will be subject to ‘negative RSG’ in 2019/20 and the amount of this negative RSG – effectively a government tax on the Council – could increase if public finances come under pressure.

- The medium term financial strategy to 2021/22 has been developed to allow for a significant impact on the Council’s resources,

- The Council has developed other sources of income to ensure it can maximise its resources while dealing with the consequences of government strategy.

3

4

12

I

Constraints on council tax increases

The limit on Council Tax increases means that the Council must manage expenditure pressures even if these potentially give rise to cost increases greater than 2% per annum.

The limit on Council Tax increases means that additional pressures, such as those arising from providing temporary accommodation, have to be absorbed by making savings elsewhere.

- Planning for the budget 2017/18 has been based upon a £4.95 (2.06%) increase, as agreed by Policy and Resources Committee at its meeting on 29 June 2016 and by full Council at its meeting on 1st March 2017.

- No issues have been raised in relation to the proposed increase through consultation.

3

2

6

J

Funding the capital programme

Reduction or total loss of funding sources means that the capital programme cannot be delivered

The main sources of funding are:

o    New Homes Bonus

o    Capital Grants

o    Prudential borrowing

o    Developer contributions (S106)

A reduction in this funding will mean that future schemes cannot be delivered.

- Council has been able to fund the capital programme without recourse to borrowing,

- Council has confirmed in the past that borrowing is acceptable if it meets the prudential criteria.

- Local authorities continue to be able to access borrowing at relatively low cost through the Public Works Loan Board and our treasury advisers expect this to continue being the case.

- Council remains active and aware of Housing White Paper to incorporate ‘right to buy’ – and the impact on the Housing investment programme.

 

4

2

8

K

Increased complexity of government regulation

Complexity of financial and other regulations along with increasing delays in providing guidance reduce the ability of the Council to identify risks at an early stage.

On a small number of occasions the financial consequences of future events are likely to be significant. Failure to provide adequate warning would leave the council little time to prepare through the medium term financial strategy.

In general these events bring consequences to other agencies and external relationships.

 

- The Council has formal procedures for monitoring new legislation, consultations and policy / guidance documents.

- Our relationships with organisations such as the Council’s external auditor provide access to additional knowledge regarding relevant future events.

2

1

2

L

Business Rates & Council Tax collection

Council fails to maintain collection targets for business rates and council tax

 

Failure to achieve collection targets will reduce the level of key resources to ensure a balanced budget. This will mean further cuts in other budgets or the cost of financing outgoing cash flow to other agencies in relation to taxes not yet collected.

Business rates due are in excess of £60 million for 2017/18.

Council tax due is in excess of £80 million per annum.

 

 

- The Council has a good track record of business rates and Council Tax collection. 

- Steps are taken to maximise collection rates, such as active debt collection, continual review of discounts, etc.

 

3

2

6

M

Business Rates pool

Changes to rateable value (RV) or instability of business rates growth within the pool means that members require support from the Council

Membership of Business Rates Pool precludes access to the central government safety net.

Changes in RV or instability in growth will result in a reduction in income from business rates and a potential consequence for the Council.

- Provisions exist so any loss of income would relate to the excess over the provision already made.

- The pool is monitored quarterly Kent wide and Maidstone is the Pool administrator. Projected benefit of pool increased from £5.1m to £7.5m.

- The Council has the ability to exit the pool on 1st April in any year by giving notice by the previous September.

3

2

6

 


 

Impact & Likelihood Scales

 

 

Our A-Z

If you cannot find what you are looking for in our search facility, you can use our A-Z index to find the service you require.

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z