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ITEM SH5

SOCIAL & HEALTH CARE SCRUTINY COMMITTEE – 11 DECEMBER 2002

2002/03 BUDGET MONITORING – INFORMATION TO THE END OF SEPTEMBER

Report of Director for Social & Health Care

1. This report covers budget monitoring to the end of September. It is based on actual expenditure to the end of September and information on forecast year-end positions as presented to DMTs and SMT during the third and fourth weeks in October.
2. Annex 1 (download as .xls file) to this report shows a full breakdown of variances, with detail for each Division. Annex 2 (download as .xls file) shows expenditure against budgets included in the holdback arrangements.
3. Graphical representation of overall divisional variances is included at Annex 3 (download as .xls file) . These graphs must be treated with some caution, as occasionally variations may reflect improvements to the quality of the financial information presented rather than a true underlying trend in expenditure. However, they do offer a reasonable indication of the direction of travel in terms of variances.
4. At the last Scrutiny Committee, there was a request to include monitoring information on the pooled budget. Due to the timing of this meeting in relation to the Budget Working Group, it has not been possible to include information on the pooled budget in this cycle of reports. A full report on the pooled budget will be included with future monitoring reports. A seminar on the first 9 months of the pooled budget is being arranged for the morning of Friday 24 January 2003.

Latest Forecast

5. The latest forecast indicates a potential year end overspend within services of £4.884m. Annex 1 indicates that the potential overspend is still high in services for children and families (£1.535m), and clients with a Learning Disability (£2.102m). In addition, this month has seen deterioration in the forecast year-end position of all service areas except Physical Disabilities and Children & Families.
6. Annex 1 continues to report the contingency funds available to offset any potential overspend £900,000. Annex 1 also shows the unallocated preserved rights grant of £1.005m. As stated in previous reports, there is a risk that the Department may not be able to legitimately claim the unallocated element of this grant to offset other costs. However, whilst the position of the Department of Health remains unclear, there is a reasonable degree of confidence that the guidance does allow for such an offset.
7. Allowing for the unallocated grant and the contingency, the potential overspend is currently estimated at £2.979m. This is a deterioration of £130k on the forecast reported last month after the adjustment for the pay award is taken into account.
8. It should be noted that the pay award was added as a bottom line adjustment to the report to Budget Working Group last month. This month, the award is incorporated in the detail of individual forecasts.

Issues by Service Area

Children and Families

9. The projected overspend for Children and Families Division is £1.535m. This is an improvement of £96k from last month’s position.
10. A key area of improvement is around the Children’s Community Support Budget (CCSB) and the Family Support Workers budget. Previously, it was assumed that the forecast underspend on Family Support Workers would be offset by the anticipated overspend on CCSB at year-end. These budgets are now being considered separately and there is an assumption that CCSB will break even. This creates a forecast saving of £55k overall in this area.
11. There have been a number of other small changes in forecasts in various service headings within Children and Families.
12. There are still a number of outstanding issues remaining from the residential review. As stated previously, the size of the eventual saving will depend on the ability to successfully integrate the children and staff into vacancies within our remaining homes, and/or provide lower cost alternative provision. In the meantime, the need to employ staff above the approved establishment level continues. The full savings from closing Warwick House, and redeploying staff to Thornbury, will not be realised until all these temporary arrangements are concluded.
13. There are no detailed plans to make further savings on residential services within the current financial year. It is also clear that the £500,000 saving resulting from the closure of the resource centres will not now materialise in the current financial year. The forecast overspend continues to include a prudent assumption, that payments from Trusts to offset a potential shortfall of £129,500, may not be forthcoming.
14. Despite the improvement in this month’s position, there remains considerable pressure to increase expenditure, and the scope for further reductions this year are limited.

Older People

15. Services for older people are showing a projected overspend of £725k. This is an increase of £179k from last month.
16. The main problem is still the overspend on external home care which has increased by £179k to a forecast overspend of £1,029k. This increase is due to 40 new clients obtaining care packages since the time of the last report.
17. The division is looking at ways of slowing the increases in client numbers, but it is accepted that this will be difficult. Most of the gains from the reassessment exercise will now have been achieved. The increase in costs this month has occurred despite the staff working within the new eligibility criteria.
18. There has been some smaller scale changes in forecast in other areas within older people’s services, which have offset each other.

People with a Physical Disability

19. Services for people with a physical disability are currently showing a potential underspend of £318k. This is an improvement of £64k from last month.
20. There are two main reasons for the improvement. The first is a further reduction in the external residential forecast because of 5 clients leaving the system. The second is a reduction in forecasting spending on staff in sensory impairment teams based on the current spending pattern.

People with a Learning Disability

21. Services for people with a learning disability are still the area of the greatest concern in terms of budget management. This forecast overspend is now £2.102m which is an increase of £148k from last month.
22. A key issue last month was significant increases in spending on external home support. It is positive to see that the division has managed to halt the increases this month. Despite the arrest of the growth in spending in this area, it remains the largest forecast overspend in learning disabilities at £998k.
23. A large element (£100k) of the change this month is due to a decrease in the forecast underspend on external residential services. Three new clients are now receiving services and the cost of one existing client’s package has increased. All decisions were made to prevent crisis situations developing for the individual clients concerned. The residential service is still underspent overall.
24. There has been a £70k increase in the forecast spend on Care Management. A new commitment was identified relating to the cost of a secondment and agency costs have increased in some teams.
25. There are still concerns about the forecast shortfall of income relating to supporting people of £300k. The issue around supporting people income and transitional housing benefit is complicated and work is ongoing to clarify the situation. At this time, it is felt that £300k is a reasonably prudent estimate of the year-end position.
26. The overspend on agency staff reflects significant staffing difficulties within the division. The need to allocate management time to the number of crisis situations has put further pressure on staff. There has been limited management time available to work on the planned reductions in expenditure. It is likely that there will still be a significant overspend at year end.

People with Mental Health Needs

27. Services for people with a mental health need are projected to underspend by £183k. This is a reduction in the underspend of £128k from last month.
28. There is now an assumption that the forecast underspend of £87k on Mental Health service agreements will need to be committed when additional pressures hit the service later in the year. These pressures relate to a number of ongoing projects, including the user involvement centre. In all cases, any decision not to invest would have serious implications on service provision and resources already committed. Reducing the underspend creates a more prudent forecast in this service area.
29. In addition, the position around Rehabilitation services is uncertain because of problems in agreeing funding from DAAT. A prudent estimate has been included in the report, but discussions are ongoing in this area and this figure may change when further information is forthcoming.

Strategic Planning and Support Services

30. The forecast underspend on Support Services has decreased by £83k to £237k. The biggest area of change is a reduction of £55k in the underspend on administration support, because a number of vacancies have been filled.
31. There is an ongoing problem with regard to buildings repair and maintenance at Children’s Homes and particularly Thornbury House. Disruptive behaviour has resulted in the need for significant repairs over the past few months. The total spending on repairs and maintenance at Thornbury mainstream unit in the year to date is £27,648. There has been £47,651 spend on Children’s Homes in total since the start of the year. This compares to £25,947 in all other establishments. Failure to respond to the repair and maintenance needs would result in the closure of the homes.

Across Client Groups

32. There is still a small (£85k) underspend on services across client groups.

Holdback Budgets

33. Annex 2 (download as .xls file) shows the data on holdback. Whilst most of the holdback areas are remaining stable, it is fair to say that it has not been possible to effectively holdback all of these categories of spend. The building’s maintenance example has already been mentioned in the support services section above. At this stage (6 months through the year), 84% of the budget on buildings maintenance has been committed. This spending is justified through operational necessity to keep the establishments open.

Conclusion

34. The increase in overspend this month is a cause for concern. Once again, staff are finding it difficult to restrict demand in pressure areas. It is clear that it is becoming more and more unlikely that the Department will finish the financial year in a balanced financial position. As stated above, allowing for full use of the contingency, and the surplus preserved rights money, we are currently heading for a potential overspend this year of £2.979m.
35. The trends in service area forecasts over the last couple of months would seem to indicate that the Directorate may have achieved most of the savings possible from the agreed action plans. There is likely to still be some further savings to come from the Children’s residential review and there is some further work to be done on transitional housing benefit. Work is also on-going to review the commissioning of services for people with a learning disability. It is unlikely that the combined impact of all these measures will deliver savings approaching £3m.
36. Staff are now focussing attention on the need to contain the demands for services, so that the predicted overspend does not increase. Seeking short term measures to bring about new savings will detract from this work. A more fundamental approach to reducing expenditure in the medium term, in line with the service and budget plans being developed for 2003/04, is seen as a better course of action.
37. Meanwhile, there are other initiatives and developments that will help the overall management process. These include the development of Trading accounts, SWIFT development, cost centre management training, etc. However, these initiatives will not achieve actual savings in isolation. They merely improve the tools available to understand the current problems.

RECOMMENDATION

38. The Budget Working Group are therefore RECOMMENDED to consider the report and note the latest forecast of the year end financial position, and the limited scope for further action to improve the position this financial year.

CHARLES WADDICOR
Director for Social & Health Care

Background Papers: None

Contact Officer: Sean Collins, Assistant County Treasurer (Social Services), Tel: (01865) 815370

November 2002

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