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ITEM EX5

EXECUTIVE – 23 JULY 2002

BUDGET MONITORING

Report by Director for Business Support & County Treasurer

Introduction

  1. This report sets out the budget monitoring position for 2002/03 to the end of June. Anticipated variations are set out, together with potential variations for later in the year.

    2. 2002/03 Budget Monitoring

  2. The position for each of the Executive Budget Areas is discussed below. Individual reports prepared for the service areas form the background documents to this report and are placed on file in the Members’ Resource Centre and are on public deposit.

  3. The capital programme is being updated for the September 17 meeting of the Executive when a coordinated review of both revenue and capital positions will be undertaken.

    4. Learning & Culture

  4. The Learning service block of Learning & Culture is forecasting an underspend of £414,000 on Standards Funds, to meet commitments for the extended spend period (now 17 months) up to the end of August 2003. In addition, planned overspends of £3.440m in relation to the City Schools Re-organisation and £308,000 in respect of transport days will be carried forward to 2003/04.

  5. It is anticipated that there will be under spends to carry forward at 31 March 2003 of £78,000 for Culture. This is accounted for by recruitment difficulties (£56,000) and village hall grants (£22,000) where some schemes approved this year will not be completed by March.

    6. Social & Health Care

  6. The latest report to the Social Services Budget Working Group for the position to the end of May 2002 shows a potential forecast overspending of just over £4m. This is in the context of delivering £9m of service reductions and a £1m higher overspend than anticipated in 2001/02, (£5m was planned for in the budget against an outturn of £6m).

  7. Cost and demographic pressures combined with a limit on available resources account for the projected overspend. The latest assessment shows that the service is on target to deliver £5.3m of £9m reductions. Officers are working towards delivering the remaining £3.7m; however this is no easy task, particularly as some of the proposals are subject to consultation.

  8. The current budget monitoring takes account of all budgets, not just those targeted for reduction. The expectation is that the actions being taken to deliver the remaining £3.7m of service reductions will reduce the overall level of overspend below the current £4m projection. However, there are still a number of uncertainties and spending pressures that will need to be considered. Further updates will be given to the Social Services Budget Working Group as the year progresses and will be subsequently reported to the Executive in the monthly Monitoring Reports.

  9. The Youth Offending Team budget is forecast to overspend by £75,000 at 31 March 2003. This arises as a result of drop out in grant from the Youth Justice Board, and inadequate contributions from other partners to make up the shortfall.

    10. Environment, Roads & Transport

  10. The estimate at this stage is that the carry forward will be around £210,000 at 31 March 2003. The majority of the carried forward underspending from 2001/02 (£1.734m) is planned to be spent in year. No further information is available at this stage.

  11. There are anticipated costs of £279,000 for storage and handling of fridges which are being funded from the prior years underspending.

    12. Community Safety

  12. No variations have been identified to date on the Retained Firefighters Budget or the Firefighters Pension Budget. Variations on these budgets are met from or repaid to balances.

  13. There were small overspendings in 2001/02 on Trading Standards, Emergency Planning and the Registration Service. These are all expected to be repaid in 2002/03. Early predictions are that the Carry Forward Reserves will be spent in year.

  14. The Firefighters pay award for 2002 is outstanding. Each 1% pay increase awarded above 3% will cost the Council an extra £38,000 in 2002/03 with full year costs of £91,000.

    15. Corporate Governance

  15. At this stage it is anticipated there will be underspendings in 2002/03 of £306,000 on the central directorates. The underspends mainly relate to - £50,000 on Personnel and Performance Review Units, - £50,000 on the partnership and external policy budgets, and -£206,000 on LAFIS and Purchasing Unit to be transferred to the Management Information System (MIS) project for the continuing implementation of phases one and two of the project.

  16. There are combined unallocated balances of £152,000 on the Modernisation and Innovation Funds which are likely to form one overall fund. However these are subject to bids from departments during the year, and therefore are not assumed to under spend at this stage.

  17. The property and repairs and maintenance budget area had a carry forward of £850,000 at the end of 2001/02, due to a slowing down of spending towards year end. It is assumed that this will be fully spent. Further updated information will be made available in year.

    18. Virements

  18. Each of the Directorates and the Fire Service have contributed £25,000 to pay towards the cost of the Oxfordshire County Council Magazine (£175,000) and a further £10,000 towards the OCN/Broadband project (£70,000). These amounts, excluding Strategy’s contributions, have been actioned as virements.

  19. There are two further small virements from the staff restaurant carry forward from 2001/02 to Education (£3,000) and Property (others) (£17,000) to fund enhanced facilities at the Common Hall Café.

    20. Budget Area Carry forward Reserves

  20. The projected Budget Area Carryforward Reserves at 31 March 2003 as outlined in the report above are shown at Annex 1. (Download as .rtf file). The estimated position at 31 March 2003 amounts to a potential deficit of £6.566m excluding school balances and including the Social Services projected overspending of around £4m and the City Schools Re-organisation planned overspend of £3.4m.

  21. Annex 2 sets out the overall position at 31 March 2002, where the overspend on Social Services of £6m is offset by under spends on other services. It is clear that as in 2001/02 the other service areas will need to ensure that they underspend cumulatively by at least an amount commensurate with any emergent pressures on Social Services.

  22. Annex 3 (Download as.rtf file) shows the trend in carry forwards since 1998/99. The trend data suggests that an improved outturn position is likely, but the position needs careful monitoring.

    23. Balances

  23. The estimated position on County Council Balances at 31 March 2003 is shown below. No further variations have been identified since May.

    24.  

     

    Provisional County Fund Balance at 31 March 2002

    Previously Identified Variations

    Civil Defence Grant

    VAT Mileage Reclaim

    Contingency Provision in 2002/03

     

    Contribution from Revenue Budget in 2002/03

    Estimated County Fund Balance at 31 March 2003

    £m

     

     

     

    0.045

    0.120

    -0.023

    £m

    3.210

     

     

     

     

    0.142

    3.000

    6.352

  24. We are expecting to receive some rate refunds during the year in relation to libraries and fire stations. School appeals are listed for late 2003/04. The Executive will be kept informed of the income received from revaluations as they arise.

    25. Consolidated Position

  25. The overall position on reserves and balances based on the latest projections shows that we may have very little available in reserves to meet all other potential pressures arising in year.

    26. 31 March 2003 £m
    Revenue Balances 6.3
    City Schools planned overspend -3.4
    Projected Committee Carry Forward -3.1
    Potential year end position -0.2

    Potential Pressures later in the year

  26. There are a number of significant potential pressures which could fall later in the year. The major areas likely to impact on balances are listed below.

    27. Local Government Pay Claim

  27. There was a strike on 17 July in support of the Local Government Pay Claim. The offer in respect of the claim was 3% which is in line with our budget provisions. Each 1% increase above 3% will cost the Council £1.1m in a full year. The Executive will be kept informed on the progress of the pay claim. The Firefighters pay claim has been referred to earlier in the report.

    28. Broadband Network

  28. At the time of setting the budget in February, there was an identified shortfall of funding for the Broadband Network of £0.9m in 2002/03 which was anticipated to be met from additional income to be generated externally. The County Council recently appointed a business manager part of whose role will be to generate new income for the Broadband Network. The current position is that there are no firm commitments from new sources or potential partners to date .The Executive will be kept updated on this position in future monitoring reports. It is intended that the OCN project will operate a trading account through which it will carry forward its surplus or deficit at year end to future years.

    29. Asylum Seekers

  29. The County Council has a contingent liability in its accounts for disputed asylum seekers invoices. It is not possible to quantify this, since it may be the subject of litigation.

    30. Administrative Holdback

  30. The pressures outlined above are assessed at around £1.9m (see Annex 2) with some areas awaiting further information. It is apparent from the consolidated position outlined above that we cannot be sure there will be enough left in general balances to meet all of the further potential pressures outlined.

  31. Therefore, we are continuing to operate a managerial administrative holdback. There is £1.4m available additionally held back towards alleviating potential pressures later in the year. Social Services have their own internal holdback of around £550,000 to help them manage their pressures in-house.

  32. An additional potential source of finance to ease the situation is around £1m in school balances held on account by the County Council, not needed on latest forecasts to help the capital cash flow on City Schools. Although capital receipts on the City Schools project will require close monitoring. This would need to be repaid in subsequent years.

  33. We are continuing to update our assessment of financial risks facing the CountyCouncil, carried out as part of the normal budget process.

    34. Strategic Advice

  34. The overall position based on information to date is set out at Annex 2. I consider it appropriate that Directors be asked to maximise their under spends wherever possible without impacting on service provision, and look again carefully at their assumptions around slippage. Also the opportunity should be taken prior to appointing new or replacement staff, to re–evaluate the need for the post. Directors are requested to report back to the Executive at the meeting of 17 September with their best estimate of the year end position. Having assessed all of the returns, and taking into account updated information on the situation in Social Services and the outcomes of other areas of potential pressures (like the pay awards) I will recommend what further action if any needs to be taken.

    35. The Capital Reserve

  35. The following assessment has been made on any flexibility within the capital reserve. The capital programme report to the Executive in April showed the capital programme as being oversubscribed at 31 March 2003 by £0.2m. This is after allowing for £2m of natural slippage on payments. It is therefore most probable that the capital reserve will be fully utilised at 31 March 2003.

  36. The provisional outturn for 2001/02 showed some £14.9m of slippage. Of this £9.6m was matched by slippage in grants and contributions etc and £2.3m by under utilisation of credit approvals. Natural slippage in payments therefore only accounts for around £3m. Compared to 2002/03 there appears to be little scope for assuming any further slippage.

  37. We may achieve better capital receipts than expected which would provide some extra finances, but it is too early to predict with any certainty what the position is likely to be. The situation is being closely monitored.

    38. Conclusion

  38. It is clear that the combined effect of the City Schools planned overspend in conjunction with potential overspending on Social Services is putting finances under strain. Whilst I would not wish to overstate the case at this point, given that further under spending and slippage are likely in the other budget areas, at the same time I will need to be reassured by the measures suggested at para. 34 above that overall finances will remain stable. I will be looking to review the position on both revenue and capital balances in September, so that I can ascertain any future action I need to recommend.

    39. Changes to Monitoring Information

  39. Cultural Services have undertaken an exercise to produce monthly monitoring information which shows actual to date. The exercise involves profiling budgets in line with prior years spending comparing with actuals and investigating variations. The results of the exercise are attached at Annex 4 (Download as .rtf file) or consideration by the Executive, as an alternative approach to improve the quality of monitoring information. This approach is being explored with the other service areas.

    40. RECOMMENDATIONS

  40. The Executive are RECOMMENDED to:

          1. note the report;

          2. ask Directors to report back to the Executive in September with their projected outturn position, having considered how best they can maximise their carry forward;

          3. make any comments on the budget monitoring format produced by Cultural Services and attached at Annex 4.(Download as .rtf file)

CHRIS GRAY
Director for Business Support & County Treasurer

Background papers: Nil

Contact Officer: Mike Petty Tel. 01865 815622

Jenny Hydari Tel: 01865 815401

July 2002

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