It is predicted Medway Council will overspend by £8 million this financial year unless further cuts or savings can be found – and it risks being forced to effectively declare itself bankrupt.
The authority has reduced the gap in its finances from £11.2m to £8.4m.
However, it still needs to cut costs or find funding for the remaining overspend by the end of the month to balance the books.
If not, the council could be forced to issue a section 114 notice, otherwise known as effective bankruptcy.
The greatest improvement was in the regeneration, culture and environment department which reduced its overspend by £1.9m, bringing it to £144,000 over its budget.
This was down to underspends on heritage and tourism, which officers attributed to reduced spends on staffing, supplies and services, amounting to £202,000.
However, the department also saw problems as it did not gain the revenue from the Safer, Healthier Streets programme it had expected.
The scheme includes initiatives such as as red routes, school streets and the enforcement of yellow boxes and other moving traffic offences which see fines issued to drivers breaking the rules by using automatic number plate recognition cameras.
The council says it has made £957,000 less from these schemes than it had budgeted for – however it did gain £567,000 more in parking fees than it had anticipated.
The business support and central services department has increased its underspend, totalling £2.3m in savings, which is largely attributed to lower borrowing costs for the authority than had been expected.
The council’s adult and children’s social care directorate remains under the most pressure financially, with an overspend of £10.5m predicted – an increase of more than £800,000 since the last review in November.
The costs for adult social care have increased by £1.5m, coming to £7.1m more than what had been budgeted for, which is due to increased costs for the care packages the authority provides.
The report from officers says good management of cases has meant the number of clients has remained static, despite increases in demand, but newer packages are costing more.
Similarly, the overspend for children’s services has also increased, reaching £1.9m when it was £955,000 in November. This was also put down to increased costs for placements, as well as the cost of agency staff to meet demand.
Additionally, there had been an expected saving of £513,000 with the Eden House children’s home supposed to come into use, however the opening was delayed and so the savings were not as great as hoped.
The education department is predicted to overspend by £3.3m because of costs of employing agency staff to deal with educational psychology assessment backlogs.
Work is continuing to find more savings and reduce overspends, or to find greater sources of funding to cover them, in time for the budget setting for the next financial year.
In previous years, the council has used reserves to pay off overspends, however this is unlikely to be an option this year.
The authority has £10m in reserves which could cover the overspend, but £10m is also the minimum it should have in reserves.
Paying off £8m with reserves would see the council dip well below that minimum threshold.
In November, the authority asked the government for £11.2m in exceptional financial support (EFS) to cover the projected overspend – on top of the £26.2m for balancing the budget for the next financial year.
The council expects a response to those requests sometime this month before the budget setting meeting on February 27.
Should the council not find enough savings or receive the EFS from the government to cover the overspend, it will be forced to issue a S114 notice.
Similarly, if the council does not receive the £26.2m in EFS to make up the shortfall for next year, it will not be able to create a balanced budget for the 2025/26 financial year and would also have to declare effective bankruptcy.
The financial report and the draft budget for next year – which is yet to be released – are to be discussed at the cabinet meeting on Tuesday (February 11) next week.
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