The Council operate two main accounts. The majority of the Council’s services are accounted for within the General Fund Account and are funded from a number of sources including Council Tax as outlined below. The second account is the Housing Revenue Account, this can only be used for the provision of Council Housing and is funded by Housing Rents. This statement refers to the Council’s General Fund only.
In summary the Council's budget forecast shows that we are spending more money per year on services than we get in tax and other income.
To balance our budget we are using our reserves to meet that shortfall. As professional officers employed by the Council our assessment is that this situation will continue for some time into the future and require Ashfield District Council to cut costs and to maximise its income if it wishes to remain financially viable. The main cause of this financial pressure is down to reductions in grant from central government and increases in our costs.
The funding gap
- Ashfield District Council receives income from a number of key sources including;
- Our share of the Local Council tax
- Our share of non-national domestic business rates
- New Homes Bonus (government grant)
- Revenue Support Grant (government grant
- Locally generated income – commercial rents/fees and charges
Over the next five years our forecasts show that the Council's income will not meet its expenditure and that the Council could be faced with a budget shortfall of between £2.65m and £4.5m depending on what changes are made by the government to our funding.
The Council’s net budget to be financed from the sources listed is circa £15m, which means that a reduction of £4.5m would be very difficult to manage and affect services
Due to the complexity of local government accounting requirements it is not always easy to understand the Council's position in regards to its reserves.
However it should be noted that I and other senior officers of the Council are concerned about the level of our reserves and whether they will be sufficient.
The Council holds:
- A General Fund Reserve to underpin our annual revenue budget but this is not sustainable in the long term.
- Earmarked Reserves are set aside to fund specific projects or initiatives. It is sensible for the Council to put money aside to (when it is able to) in order to pay for things coming down the line.
The Council is projected to hold £4.3m in Earmarked Reserves by 31st March 2018. The General Fund Reserve is predicted to fall below its lowest acceptable balance (set by the Council at £1.35m) by March 2021 or sooner if changes are made to local authority finances, unless a saving strategy is adopted.
In terms of Capital Reserves, these include grants from a number of funders plus developer contributions and can only be utilised in accordance with set conditions. It is projected to have £2.3m by 31st March 2018.
Housing Revenue Account
In addition to the General Fund the Council also has a Housing Revenue Account (HRA). This is necessary to meet the statutory obligation to account separately for local authority housing. The main source of funding for the HRA is council housing rent.
Housing rents can only be used to pay for the delivery of council housing. These rents cannot be used to pay for non-housing services and therefore cannot be used to subsidise Council Tax.
In addition to the delivery of housing services, the HRA pays for the investment in council housing improvements such as new roofs, kitchens and bathrooms. It is also utilised to develop new housing within the District. Previously this has included such developments as Brook Street and Darlison Court.
The projected HRA balance as at 31st March 2018 is £24.3m. The Council’s minimum balance for this account is £2.5m. It is also projected to have Earmarked Reserves of £1.06m which have been set aside to cover pressures from the introduction of Welfare Reform, the need for IT investment and restructuring within the Housing Directorate.
The above are projections based upon information available at the time. The Council's actual position as at 31st March 2018 will be reported within the Statement of Accounts which will be presented to the Audit Committee in July 2018.
Robert Mitchell, Chief Executive
Sharon Lynch, Corporate Finance Manager
(All above information correct as of March 2018)