Quarter 3 Financial Monitoring Report
Summary
Board Report Number: SEPA 11/23
A detailed paper was presented for consideration and scrutiny at the Audit and Risk Committee Workshop on 9th February 2023. The paper was recommended for submission to the Board for approval.
The year-end forecast has been prepared based on returns from all areas however, this may be subject to change from additional income such as further debt recovery; higher staff churn and the year-end requirement for annual leave/flexi adjustments.
Following the Board agreement in 2022 for the Audit Committee to become the Audit and Risk Committee (ARC), the ARC discussed the financial risks in detail at its workshop in February 2023. It is proposed that this continues going forward with any escalation coming to the Board as required.
Resourcing and staffing implications are outlined in the financial risks presented to ARC Workshop in February 2023.
The Board is asked to consider the contents of this report and approve.
The Board is asked to note the approach for consideration of risks as outlined above.
- Ian Bryce, Deputy Head of Finance
- Rosaleen Burke, Head of Finance
- Sponsor: Angela Milloy, Chief Officer, Finance
Income & Expenditure Account 2022-23
Table 1 – Year to date actuals and full year forecast
| Period Ended 31st December 2022 | Year to date | Full year | ||||
|---|---|---|---|---|---|---|
| Description | Actual £'000 | Budget £'000 | Var. £'000 | Outrun £'000 | Budget £'000 | Var. £'000 |
| Grant in Aid | 21,500 | 21,500 | 0 | 40,610 | 40,610 | 0 |
| Charging Schemes | 41,650 | 41,892 | (241) | 43,622 | 43,651 | (29) |
| Other Income | 2,233 | 2,074 | 159 | 5,159 | 5,222 | (63) |
| Total Income | 65,384 | 65,466 | (82) | 89,391 | 89,483 | (92) |
| Staff Costs | 45,150 | 46,022 | 872 | 63,376 | 64,953 | 1,577 |
| Other Staff Costs | 494 | 204 | (290) | 746 | 430 | (316) |
| Transport Costs | 698 | 762 | 64 | 1,014 | 1,070 | 56 |
| Supplies & Services | 6,316 | 8,163 | 1,847 | 12,876 | 14,286 | 1,410 |
| Property Costs | 2,769 | 2,676 | (94) | 3,887 | 3,444 | (443) |
| Depreciation/impairment | 3,975 | 3,975 | 0 | 5,300 | 5,300 | 0 |
| Total Operating Costs | 54,402 | 61,802 | 2,399 | 87,199 | 89,483 | 2,284 |
| Operating Surplus/(Deficit) | 5,982 | 3,664 | 2,318 | 2,192 | 0 | 2,192 |
Net results
In terms of revenue spend, the full year forecast reported to Scottish Government in December was a one-off underspend of £2.192m with a range of £2.0m to £2.5m.
The one-off underspend is due to:
- £1.4m for bad debt release of provision as a result of being able to recover debt dating from prior to the cyber-attack.
- £0.7m additional funds provided by Scottish Government in response to a request to support a 5% pay award in line with the rest of public sector but higher than the 2% budgeted. However, due to actual staff churn and vacancy management increasing to higher levels, SEPA were able to fully fund the pay award for this year. These monies will be returned to Scottish Government as part of the underspend.
There is some risk of potential movement to the reported forecast estimates due to:
- Staff leaver rates being higher than trend used as part of the forecast.
- Income movement due to large applications(s) or changes in bad debt being recovered.
- Staff cost adjustments for annual leave and flexi as required under FRS 102.
It should be noted that the 2022-23 budget was set net of £2.6m savings by budget reductions in Staff Costs (£1.8m) and Supplies & Services (£0.8m).
Capital
SEPA’s capital budget provided by SG for the year is £4.5m. Due to supply chain issues and procurement timelines, we are currently managing a capital programme of £5.1m. This over commitment has been risk assessed by the Capital Working Group in recent weeks and will be carefully managed to guard against the risk of overspending. The risk adjusted forecast brings the overspend down to £0.1m. Much of the risk assessment has been focussed on the additional lead in times for delivery of equipment and is being reassessed at regular intervals.
Balance sheet
| Period Ended | Actual | Actual |
|---|---|---|
| 31st Dec 2022 | Year End 31st Mar 22 | 31st Dec 2022 |
| Description | Balance £'000 | Balance £'000 |
| Non-current assets | ||
| Capitalised Assets | 41,511 | 39,167 |
| Assets under construction | 1,304 | 3,693 |
| Right of Use Asset | 11,561 | |
| Total non-current assets | 42,815 | 54,421 |
| Current Assets | ||
| Debtors & Prepayments | 7,068 | 1,569 |
| Cash at Bank & In Hand | 2,146 | 11,241 |
| Total current assets | 9,214 | 12,810 |
| Creditors & Accruals | (8,988) | (6,149) |
| Deferred Income | (489) | (52) |
| Net current liabilities | (9,477) | (6,201) |
| Total assets less current liabilities | 42,552 | 61,030 |
| Lease Liabilities | (11,306) | |
| Provision for Liabilities & Charges | (2,148) | (1,864) |
| Decommissioning Provision | (3,286) | (3,286) |
| FRS 17 Pension Provision | (120,967) | (120,967) |
| Total assets less liabilities | (83,849) | (76,393) |
| Financed By: Taxpayers’ Equity Reserves | ||
| Income & Expenditure Account | 0 | 7,456 |
| Accumulated Income & Expenditure Account B/F | (104,473) | (104,473) |
| Revaluation account | 20,624 | 20,624 |
| Total Capital Employed | (83,849) | (76,393) |
The Year-to-Date balance details the addition of SEPA’s leases which are now required to be recognised on the Balance Sheet as a requirement of Accounting Standard IFRS 16 where organisations account for leased assets and corresponding liability more than 12 months.
Recommendation
The Board is asked to consider the contents of this report and approve.
The Board is asked to note the approach for consideration of risks as outlined in the risk section.