In this year’s Annual report, Cllr Roulstone ( Cabinet member for Finance) stated:
A casual reader of this would be led to believe that the Council had set a balanced budget at the beginning of the financial year and that this was then delivered, on plan – with no surplus and no deficit.
This is simply not true!
What is a balanced budget?
When income equals expenditure and there is no surplus and no deficit, then the budget is balanced. If there is a need to dip into savings to make up for a shortfall in income, then that is not balanced.
Did the Council set a balanced budget?
At the Council meeting on 27 February 2019, the budget was presented for 2019/20. This was for income ( Council Tax, Business rates, and Government grants) of £220.609m. Expenditure was planned at £228.101, thus resulting in a planned deficit of £7.492. This imbalance was made up by a transfer from reserves, giving the illusion of a “balanced budget”.
What actually happened in 2019/20?
Also from the Annual report.
This chart would imply to the casual reader that the Council had overspent by just £6.195m
This is not true.
The right hand “pie” is the total expenditure net of in-year “trading” income e.g. car parking charges, commercial waste, planning application fees etc etc. – totalling £230.8m. Buried within the Cabinet report (15th July 2020) is more detail
This highlights that the unspent portion of the special Covid-19 grant ( £7.142m) has been “transferred to reserve” which it has, but it has also been used to offset the “Corporate” costs such that the 2019/20 spend is no longer ~ £9.5m but an income of nearly £1m. This serves to significantly understate the expenditure costs in 2019/20.
The benefit of the £7.142m grant has been counted twice.
The cost of the services provided in 2019/20 was not £230.797m but £237.939m
What was the income for 2019/20?
The left hand “pie” in the chart above shows that actual income was less than the planned £220.609m. In fact it was £217.1m!
Was a balanced budget delivered?
Income was £217.1m, and the expenditure was £237.939m – a loss of £20.839m,
The Annual report is supposed to be a document that communicates to the general public, and should not be an opportunity to mislead the reader by hiding behind financial technicalities.
After accounting for the £7.142m increase in reserve from the Covid-19 grant, there has been a £24m hit to revenue reserves, which is broadly consistent with a £21m deficit in the year.
So, a balanced budget wasn’t delivered, savings might have been achieved in certain areas, but they were massively offset by overspends in others, throughout the Council.
The Annual Report is simply “airbrushing” reality…
Who’s kidding us? The Councillors or the Officers?
Categories: Derby City Council