Medium Term Financial Strategy (MTFS) 2020/21 - 2024/25
Risk assessment
A comprehensive financial risk assessment is undertaken for the revenue and capital budget setting process to ensure that all risks and uncertainties affecting the council's financial position are identified. These are reviewed each year as part of the refresh of the MTFS. The key strategic financial risks to be considered in developing the MTFS are as follows:
| Risk | Likelihood | Impact | Risk management |
|---|---|---|---|
| 1. Future available resources are less than assumed | Possible | High | Annual review of reserves and reserves policy to identify future resources. Assumptions on funding for 2020/21 and beyond are based on best estimates at this time. A prudent approach has been adopted based on previous years' experience as well as using regional network contacts to inform modelling. |
| 2. Volatility of Business Rates funding given uncertainty around impact of appeals | Likely | High | Volatility of funding stream outside of council control but impact mitigated by establishment of specific earmarked reserve and financial monitoring framework. Modelling of potential impacts is used to inform internal financial planning. |
| 3. Public Health funding is insufficient to meet responsibilities | Possible | Medium | Funding confirmed for 2019/20 but not in future years. The lack of certainty of continuation of grant going forward is a significant risk. Public Health responsibilities will be rolled into the new system under the move to 75% rate retention. |
| 4. Pay Awards, fee increases and price inflation higher than assumed | Possible | Medium | Impact of potential increases mitigated by central contingency budget for pay, price increases and care fees. Where pay awards have been agreed these are factored into the estimates where affordable. |
| 5. Future spending plans are underestimated | Possible | Medium | Service planning process identifies future budget pressures and these have informed the indicative budget forecasts. An effective budget monitoring framework is in place to identify in year and potential future cost pressures. |
| 6. Anticipated savings/ efficiencies are not achieved | Possible | High | Regular monitoring and reporting takes place but the size of the funding cuts increase the likelihood of this risk. Nonachievement of savings would require compensating reductions in planned spending within services. Greater scrutiny of savings has taken place since 2017 through the revenue monitoring process. 2019/20 budget will see dedicated senior officer sessions on budget issues and greater adherence to the escalation framework. |
| 7. Revenue implications of capital programmes are not fully anticipated | Unlikely | Low | Capital bid approval framework identifies revenue implications and links to Council priorities. Full analysis of revenue implications assessed and considered in scenario planning. |
| 8. Income targets are not achieved | Possible | Medium | Current economic climate likely to impact. This forms part of the regular monitoring and reporting that takes place. Full review of fees and charges is undertaken on an annual basis. |
| 9. Budget monitoring not effective | Possible | High | Regular monitoring and reporting in line with corporate framework. Action plans developed to address problem areas. Regular reports to CMT and Cabinet. Track record of delivering budget. |
| 10. Exit strategies for external funding leasing/tapering not met | Unlikely | Medium | Regular monitoring and reporting. |
| 11. Loss of principal deposit | Unlikely | Medium | Limited by the controls in the Treasury Management Strategy which prioritise security of deposit over returns. Impact limited due to the strategy of a diverse portfolio with top rated institutions. |
| 12. Collection rates for retained business rates and council tax lower than anticipated | Possible | High | Impact mitigated by the review of bad debt provisions. Proactive approach to stimulating economic growth. Monitoring of Collection Fund is formally incorporated into the revenue monitoring process and key performance indicators. |
| 13. Changes to Government policy including Health and Social Care integration and Welfare Reform | Likely | Medium/high | Best estimates of impact of government policy on funding factored into MTFS. Estimates are prudent and based on recent experience. Specific areas of uncertainty identified and subject to focussed actively, close monitoring and review. Risks of Better Care Fund are managed through the joint Council/CCG Better Care Fund Programme Board. The impacts of welfare reform continue to be planned for and monitored through the Council Scrutiny Framework. |
| 14.Financial budget impacts of potential Brexit | Likely | Medium/high | Continue to work collaboratively with treasury advisors to assess potential budget impacts whilst the Government attempts to ensure an effective transition to a new economic relationship between the U.K. and the EU, including clarifying the procedures and broad objectives that will guide the process. |
| 15. All MTFS risks not adequately identified | Unlikely | Low | Council's Risk Management Framework ensures all operational and strategic risks are identified as part of the annual service planning process. Regional networks such as SIGOMA , ANEC provide ability to assess and compare strategies to ensure assumptions are comprehensive. |