The financial situation at West Sussex County Council has been described as ‘rocky’ amid plans to use reserves to cover an overspend of more than £7m.
A report presented to the Conservative cabinet on Tuesday (December 3) described how a failure to deliver £6.6m of savings planned for 2019/20, coupled with extra pressure on services, had led to an overspend of £7.355m on the revenue budget.
The revenue budget is used to pay for day-to-day costs, and the council will need to use money from the budget management reserve to balance things.
The overspend was some £8m less than had been projected in June, with reserves and the ‘flexible’ use of capital receipts used to bring that £15.9m figure down.
Katharine Eberhart, director of finance, said the need to use reserves would put West Sussex ‘far down’ the Chartered Institute of Public Finance and Accountancy’s financial resilience index.
The index compares how each local authority is performing when it comes to financial risks. West Sussex had been a mid-table team until now.
When asked if there was a resilience ‘red line’ that should not be crossed, Ms Eberhart said that point had already been passed.
She told the meeting: “We should never be in this position.
“We understand why we’re there, but we have crossed the line that moves us from an authority that is considered with really good financial control to one that goes rocky, because we need our reserves to balance our in-year position.”
The report to the cabinet said £23.4m of savings had been planned for 2019/20 but £6.6m would not be delivered. More work would be needed to deliver another £1.6m while £15.2m of savings had been achieved or were on track.
The use of more than £7m would see the budget management reserve fall from £26m to £18.6m – and members were told it was important to build it back up to make sure the county was financially stable.
One of the biggest pressures placed on the council has been the poor Ofsted report into its children and young people’s services. Cabinet members were told £11.3m more had been spent on that portfolio than had been allowed for in the budget, including a £1m increase in child care legal costs.
The highways and infrastructure portfolio was £2.25m more than expected, and there had been £1.14m of extra staffing costs in the adults and health portfolio.
Ms Eberhart said other authorities which had faced similar pressure due to poor children’s services reports, had learned that a failure to keep financial management and control up to scratch was ‘a path that leads you down a wrong way’.
She told members this point had been highlighted as an issue in reports following the financial crisis at Northamptonshire County Council, which was branded the ‘worst run’ local authority in the country.
She added: “It’s really important that we recognise the situation that we’re in and ensure that, as well as funding to get us to the right place, we are implementing sufficient control to make sure we’re making the right purchasing decisions, to mitigate the costs where it is reasonable to do so.”