The authority will this week publish its budget outturn report for the last financial year which will be considered by Cabinet councillors next month (July).
It shows that by the end of the financial year, the authority had reversed a forecasted overspend of £2 million, to finish with a net underspend of £2 million.
The money will be used to address what continues to be an extremely challenging financial climate for local authorities – which is forecast to get worse due to Covid-19.
Councillor Louise Miles, City of Wolverhampton Council’s cabinet member for resources, said: “We will publish our outturn report for 2019 to 2020 this week which shows that prudent and tight financial management resulted in a net underspend of £2 million.
“It is important to stress that this is a one-off and while it is undoubtedly extremely useful, it only equates to less than 1% of our overall revenue budget and needs to be seen within the context of the ongoing challenges we face.
“As we have previously stated, the council was already forecasting budget deficits of £15.5 million in 2021/22, rising to £20.2 millon by 2022/23 before the coronavirus pandemic. We now think that the ongoing costs of Covid-19 will raise that forecast deficit still further - potentially by around £17 million based on our calculations.
“The underspend is primarily the result of contingencies and projections for certain areas of the budget being made last year which, while reasonable at the time, were not ultimately needed.
“An example of this is money that was set aside as we anticipated more council staff would join the pension fund than ultimately did. We have no control over this, we can encourage staff to join the fund but can do no more than that – so predicting the costs at the start of the year is challenging.
“Due to the ongoing pressures we face, we also held certain senior management roles open during the year to save money.
“Tight control over budgets during the year enables us to transfer unspent sums into specific essential earmarked reserves which is part of our financial strategy to deliver priorities and invest in areas which will deliver future savings and efficiencies.
“Finishing the year with a net underspend of £2 million will enable us to transfer £1.8 million into the Budget Contingency Reserve and £200,000 to a new specific reserve which will be used to support investment in service recovery following the Covid-19 pandemic.
“There are many unknowns, we don’t know what the full impact of the pandemic will be or what future resources Central Government will make available to councils.”