Agenda item

Grant Thornton Report on the Value for Money Conclusion

[Report To Follow]


The report on the Value for Money Conclusion was introduced by the Grant Thornton Director. This focused on two risks: 1) ongoing financial stability and 2) the OFSTED inspection of Children’s Services.


Ongoing Financial Stability

The overspend in the Dedicated Schools Grant (DSG) was highlighted as having an impact on reserves which was not sustainable, requiring a recovery plan schedule. This was being further exacerbated by the gap in funding for Unaccompanied Asylum Seeking Children (UASC).


Ongoing pressures linked to low reserves were limiting the ability to manage the budget which it was noted assumed no impact from overspends in previous years.


OFSTED Inspection of Children’s Services

Whilst the good progress being demonstrated through monitoring visits was noted, until the OFSTED reinspection had taken place, Grant Thornton’s qualification of the Council’s Value for Money Conclusion had to remain in place.


It was explained that Grant Thornton had given an adverse conclusion because of the reduced level of reserves and Children’s Services remaining under an ‘Inadequate’ OFSTED rating.  It was advised that there was a need to focus on managing the overspend in the DSG and increasing the general fund reserves. It was noted that Croydon had the lowest general fund and earmarked general fund reserves (excluding schools) as a percentage of net service revenue expenditure when benchmarked against all other London Councils. Against this it was noted that Croydon had a high level of business rate collection and that management had responded well to all the issues.


In response to Member questions, it was clarified that:

                 i.          The budget needed to consider spending plans and the use of reserves based on what was considered sustainable. Grant Thornton stressed that the approach being taken was not sustainable;

                ii.          Whilst reserves were used towards the end of the 2018/19 financial year in anticipation of the collection of rates, they had been repaid at the start of the 2019/20 financial year;

               iii.          The DSG overspend was a historic deficit. As required, a recovery plan had been submitted to the Department for Education (DfE) and this had been reviewed through the scrutiny process. Additionally, the Government’s Spending Review in September 2019 recognised the impact of the high needs block on the DSG with additional Government funding being put in place; this was estimated to be £5m a year over and above the budget submitted in the recovery plan to the DfE;

              iv.          It was agreed that the level of reserves should ideally be gretaer. The impact of inadequate funding from the Home Office over three years for UASC was noted. This was valued at around £20m. If this was addressed, this would fundamentally change the Council’s financial position. It was described how work was already underway through the Medium Term Financial Strategy to deliver a budget that would gradually rebuild reserves over three years despite additional pressures;

                v.          It was described how the overspend in the DSG was being addressed by working with schools to reduce the costs of high needs. The example of the new Special Educational Needs school that was being built was given; this would reduce costs as well as provide better opportunities for young people. Additionally, a lot of work was happening to reduce costs in year alongside cross party lobbying of Government to address the UASC funding gap;

              vi.          Clarification on the additional funding for the high needs block within the DSG announced as part of the Government’s Spending Review in September 2019 would be provided in the settlement announcement anticipated in December 2019. The figure of an additional £5m of funding was calculated based on estimates;

             vii.          The scale of the shortfall in UASC funding had increased over the last 2 - 3 years. Previously, the Council had received a gateway payment valued at £6m. This had been replaced by an increased daily payment valued at half a million pounds. Therefore, this was a fundamentally different situation. It was described how the situation was being proactively managed but that this would change significantly if a fair settlement was provided. However, it was not being assumed that this would happen. Therefore, the DSG and the high needs block was being taken into account in budget planning; the budget was determined on realistic assumptions;

            viii.          Brexit was described as one of the major unknowns in the budget which was reflected in the risk register. Other unknowns were also acknowledged such as the impact of the Green Paper on social care integration. It was described how the budget was being refreshed on an ongoing basis, with proactive management resulting in planning for different scenarios; and

              ix.          A dividend from Brick by Brick was assumed in the 2019/20 and subsequent budgets resulting from the sale of properties.  These assumptions were described as prudent. It was also noted that there would be a benefit from the provision of more affordable homes reducing the financial pressures arising from homelessness.


Officers committed to provide additional information to Members outside of the meeting on projected UASC numbers against actual figures and the corresponding budget figures.  Members noted that they would retain their focus on reserves and the UASC funding gap to ensure both were being addressed.


RESOLVED: The Committee AGREED to note the report.


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