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DRAFT
ITEM CH10

CABINET – 18 OCTOBER 2005

COUNTY MUSIC SERVICE

Report by Director for Learning & Culture and Director for Resources

1. On 19 April 2005 the Executive received a Learning & Culture Scrutiny Committee report on the County Music Service budget, and asked the Directors for Learning & Culture and Resources to consider the implications, particularly in relation to:
   
   

1. the accounting arrangements for the Service;
2. the future funding of the Service, including the potential for increasing its income;
3. the handling of the accrued deficit;
4. the future management remit of the Music Service House Committee.
   
   
2. This was in the context of the Service having had an accumulated deficit attributed to it of £210,000 over the two years 2002/03 and 2003/04, but uncertainty as to the reason for this apparent variation from budget. Subsequent work has included a review by an external accountant, appointed by the Director of Resources, looking at historical accounting data to determine whether the accumulated deficit was accurate and, if so, its cause.

Accounting arrangements for the Service

3. The review of past financial data revealed some specific instances of anomalies in the recording of transactions at various stages in the financial management process, which may have had some effect on the accuracy of the picture presented. However none was of sufficient scale or consistent impact to result in any significant distortion. There was some evidence that some costs and income falling around the end of a financial year may have been attributed to the wrong financial year. Again this would not have had an effect on the on-going financial standing of the Service, but it could account for apparent fluctuations in financial performance in successive years.
4. The two-year period during which the Service appeared to overspend coincided with two relevant events. The first was the introduction of the SAP financial management system, which presented all services to a lesser or greater extent with some difficulties in recording and monitoring financial activity. In an outposted service such as the Music Service, which had its own stand-alone accounting system, the transition was particularly difficult.
5. The second event was the two-stage relocation of the Service to its new base at Bayards Hill School. This has had an impact upon costs of the Service which are discussed in paragraph 13.
6. Action has been taken to avoid repetition of the anomalies referred to in paragraph 3 above. Progress has also been made in making sure that the SAP system can be used more effectively to monitor expenditure. At the same time the Director of Music has worked closely with Finance Section colleagues to update budget structure and descriptions so that the Music Service budgets relate more recognisably to the actual planned performance of the Service.
7. A restructuring of the management of the Service has led both to a reduction in management posts, and to a more efficient use of management time.

Future Funding of the Service

8. The Scrutiny Report concluded that Oxfordshire’s Music Service is excellent, bearing good comparison with other services nationally with regard to outcomes, but more importantly in the value placed upon it by children, parents and schools in the county. However, although the Report also concluded that there was no reason to believe that such quality could be delivered more economically, it also came to the view that there was more that the Service can do to increase earned income.
9. The Music Service budget for 2005/06 is £2,437,000, composed as follows:

County Council net expenditure	£534,900	22%
Government grant	£424,000	17%
Earned income	£1,478,100	61%

 

10. The Director of Music has worked with the Service’s House Committee in updating the Service aims, in order to assist in determining priorities for the use of resources, including the County Council contribution. The majority of the work undertaken by the Service is with children, and the aims here will relate to achieving the outcomes of the outcomes required by the Children and Young People’s Plan.
11. The Service also offers music tuition to adults. It does so in consultation with the Adult Learning Service, and some further work is being undertaken to ensure both that there is consistency of approach, and also that the best use is being made of available funding opportunities.
12. A review of charging policy is currently being considered by the House Committee, which will also support the Director of Music in exploring new opportunities for earned income.
13. The Service is facing two significant new financial pressures. Firstly, the move to Bayards Hill School site has resulted in the need to reimburse the school for a number of costs such as repair and maintenance and caretaking. At the Service’s former premises at Oxford Community School, no such recharges were required, and there is no provision in the Music Service budget to meet these. They are estimated to be about £30,000 a year.
14. Secondly, Music Service tutors are employed on teachers’ pay and conditions. As a result of the national Workforce Remodelling agreement, they are now entitled to 10% of their working week as non-contact time. As a result the Music Service’s capacity to provide lessons will drop with a consequent loss of income. This is estimated to equate to a loss of £120,000 in a full year, and is a pressure of some £70,000 in 2005/06.

Accrued Deficit

15. The reported outturn position for the five years 2000/01 to 2004/05 is as follows:

	2000/01	2001/02	2002/03	2003/04	2004/05
Overspend/ (underspend)	(£89,897)	£76,900	£122,500	£75,900	(£101,000)
Cumulative deficit*			£122,500	£198,400	£97,000

* from 1 April 2002.

16. The review commissioned by the Director of Resources was unable to identify any widespread misallocation of costs or income which might have resulted in incorrect reporting of overspends in 2002/03 and 2003/04. It is possible that allocating transactions to the wrong year at year end could have led to apparent variations in performance from year to year.
17. Given that there appears to have been an in-year underspend in 2004/05 which halved the accumulated deficit, and that there are some early tentative indications of an underspend in 2005/06, "repayment" of the deficit may become less of an issue.
18. It will take some time – certainly until the end of the current financial year – before it can be confidently asserted that the improvements which have been put in place (including any additional income generation) have enabled the Music Service financial performance to be demonstrably in balance with its budget.

Remit of the Music Service House Committee

19. Appended at Annex 1 (download as .doc file) is a proposed revised constitution for the Service’s House Committee. Essentially it proposes that the Committee should have a scrutinising and consultative role, recommending to the County Council overall policy for the Service, and working with the Director of Music and other officers to ensure its efficient direction, particularly with regard to annual service and budget planning, and monitoring of financial and other performance throughout the year.

RECOMMENDATIONS

20. This report was considered by the Children’s Services Scrutiny Committee on 27 September 2005. They commented ….
21. The Cabinet is RECOMMENDED, subject to consideration of the views of the Children’s Services Scrutiny Committee, to:

1. note the progress which has been made in improving financial management systems and practices with regard to the Music Service;
2. require the inclusion of explicit reports on the Music Service within monthly financial monitoring reports to Cabinet;
3. await completion of the current financial year before determining either how any outstanding accumulated deficit should be treated, or whether the net level of County Council expenditure on the Service should be varied from 2007/08;
4. include the financial pressures described in paragraphs 13 and 14 of the report in its consideration of priorities during the budget-setting process for 2006/07;
5. approve the draft constitution for the Music Service House Committee in Annex 1 to the report.

KEITH BARTLEY
Director for Learning & Culture

JOHN JACKSON
Director for Resources

Background Papers: Nil

Contact officer: Richard Munro, Head of Cultural Services (01865 810191)

September2005


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