Falkirk Council will almost certainly end the financial year with an overspend of over a million pounds – leaving it with dwindling reserves of just over £9m.
The council’s executive heard that officers had hoped to save £1.7m by renegotiating the terms of the contracts for new high schools that were built across the district from 2006.
But officers have now been forced to admit defeat in their efforts to refinance the NPDO (non-profit distributing organisation) schools – “due to the complexity of the project”.
Chief finance officer Bryan Smail gave councillors the bad news when he presented the council’s projected financial position for 2019/20 to the executive meeting on Tuesday.
He had previously warned councillors there was a possibility that the refinancing would not happen – but now, he said: “We have reached a tipping point where it won’t happen.”
Labour councillor Joan Coombes said: “It’s unfortunate that the negotiations haven’t come to fruition but it is not a good idea to have a budget that is dependent on a negotiation where they’re going to lose and we’re going to win.
“Putting it in the budget was optimistic to say the least.”
The council has previously reported the projected overspend in Children’s Services – education services alone are over budget by £3.113 million, while social work is also over budget by £1.269 million – but they had hoped it would resolve itself by the end of the financial year.
The social work part of the overspend is mostly due to the fact that councils have been told they must now care for looked after young people until the age of 26, although they have not been given any extra funds to cover the costs.
Council officers are confident that this cost will be reduced as a new supported accommodation service in Grangemouth is now open and several young people have moved in and are “settling well”.
Underspends in other departments have helped the financial position but there was further bad news for the accountants with news that council tax is £300,000 below its target budget.
Mr Smail reported to councillors that “there is no doubt” that Brexit uncertainty is having a negative impact on the yield as the volume of new houses being built and their value is linked directly to financial uncertainty.
The council has to ensure its reserves do not drop below a floor of £7.5 million.