We asked questions at last week’s full Council Meeting. Unfortunately, we got a lot of excuses and not much in the way of concrete information. In summary:
- Apparently, they were told by the Government to budget for the full amount due under the leisure contract in order to qualify for compensation. Now they’re sitting on a £700K loss year-to date. Apparently, they expect to lose the entire £1.4m they budgeted for the full year. This loss was not even identified as a risk in the budget that was signed off by Council in February 2021.
- They are transferring £1.393m from reserves to cover the Leisure Centre losses. This reserve apparently comes from a VAT refund received some time ago. We tried to press to ask what sports facilities will not now be delivered. Apparently, spending this money doesn’t affect anything else. We remain to be convinced because it was the Cabinet minutes that revealed what the funds were earmarked for:
- The excuse for producing an Infrastructure Delivery Plan where 72% of the projects are not costed is that the IDP is “a living document”. The last version we can find is dated February 2018. It may be just about be alive, but it’s been in hibernation since then. It’s disgraceful that they are producing such shoddy documents. We have been assured a further version will be produced after the CIL consultation has been completed.
The full Q&A session can be found here (p5 onwards)
Hart Makes Excuses Details
- According to the FY21/22 budget book (account 91019), the track record of actual and budget for income from the Leisure Centres is:
- FY18/19: £828K actual
- FY19/20: £1,268K actual
- FY20/21: £633K budget
- FY21/22: £1,407K budget.
What was the thinking behind setting the budget at that level and what plans were made to deliver record revenue from the Leisure Centres during a pandemic?
Answer: Hart District Council has a contractual arrangement with Everyone Active (EA); for robust commercial reasons this was used as the budget for 21/22. The Government recognised the contractual position for Local Authorities and to
mitigate the worst adverse impact introduced a compensation scheme. The scheme is linked to the published Budget Book. The 20/21 Budget Book reflects the contracted management fee with Sports Leisure Management Ltd.
The budget accounts for the management fee contractually agreed with EA, it is not directly dependent upon Leisure Centre usage. A new contractual arrangement is being entered into moving forward which takes account of the anticipated pandemic recovery trajectory.
Supplementary: If the budget was set at £1,407k and government support was expected to that level,
why is income down £700k at the halfway point.
Supplementary Answer: The government compensation scheme does not cover for the full amount, but is based
upon the set budget, which reflected the contractual agreement with EA. The government gives some of the money based the budget not all, which is why it has fallen short. The amount entered into the budget book was correct as that it is what we would expect under the contract with EA in normal circumstances.
The Q2 Monitoring report shows that the Leisure Centres are reported to have a shortfall in income of £700K YTD and Cabinet papers indicate that this shortfall will be made up from reserves earmarked for Sports Facilities. However, note 5.11.1 in the draft accounts sets out the details of earmarked reserves and does not explicitly mention a reserve for Sports Facilities. Can you please explain exactly how much is being transferred and where the money is coming from?
Answer: There is an earmarked reserve with funding set aside from a historic VAT refund on leisure services to the value of £1.393k. This reserve forms part of Corporate Services earmarked reserves. The reserve will be used as needed depending on our review of open book income and expenditure on the contract with Everyone Active.
To be clear this is revenue budget money and is not taking away from any leisure services capital reserves or Section 106 funding.
Supplementary: What risk is there of a further reserve transfer next year?
Supplementary Answer: The budget to be approved in February anticipates the contractual amount we will receive from EA, so there should be no need for a further transfer, as we are producing a balanced budget.
Hart Makes Excuses Question 3:
The recently published Infrastructure Delivery Plan (IDP) shows a funding gap of £57.9m. However, 72% of the projects identified remain un-costed. What is the realistic estimate of the full infrastructure funding gap and when will a complete IDP be published?
Answer: The Infrastructure Delivery Plan is a living document, which is reported to Cabinet and Overview & Scrutiny at regular intervals. The report referenced in the question is the one presented to those committees in November. The next iteration of the Infrastructure Delivery Plan is due to be presented in the spring. This will have an updated estimate of
the funding requirements and the shortfall.
Supplementary: The indication in November was that there is that the CIL contribution will meet of ¼ of
the IDP funding. What is the impact on the CIL consultation if you are to republish a ‘proper’ IDP in three months’ time?
Supplementary Answer: The results of the CIL consultation will inform the next iteration of the IDP, but government mandates that the IDP must be set up with a shortfall to allow for developer contributions and other funding mechanisms to operate. The next iteration of the IDP will be published after the CIL consultation is complete, and then we will be able to establish the estimates of funding and shortfall at that time.
Hart Makes Excuses Question 4:
Which sports facilities will now not get delivered because of the transfer from reserves to cover the hole in the Leisure Centre budget?
Answer: The money that is being used to subsidise EA is coming from a revenue fund not S106 money or Capital Reserves, so there will be no impact on future provision leisure facilities or services.
Supplementary: Something must be losing money somewhere. If you making unplanned use of reserves on the leisure centre, what would that money have been spent on?
Supplementary Answer: The Council has reserves earmarked for specific purposes and a general reserve built
up that balances the ebbs and flows of our revenue streams. It is built up in good years to deal with difficult years, it is basically a ‘balancing reserve’. The last two years have been especially challenging because of the pandemic, so it has been a natural decision to use some of the reserves put away for a ‘rainy day’ for a couple of ‘rainy years’ and we would seek to add to the reserves again in good years. The money is there for that purpose. No one has lost out; it is simply good financial management.