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ITEM CA6
CABINET
– 21 JUNE 2006
FINANCIAL
MONITORING
Report by
Head of Finance & Procurement
Summary
- This is the first
financial monitoring report for the 2006/07 financial year and covers
the period up to the end of April 2006 for revenue and capital. Given
the difficulties involved in forecasting year-end outturn based on a
single month’s actuals this report is largely on an exceptions basis,
focusing on key risk areas identified as part of the budget process
and picking up issues arising from the 2005/06 outturn position.
- The 2006/07 revenue
budget was approved by Council in February 2006. Subsequent budget reallocations
to reflect directorate changes, including realignment, and other factors,
are being considered by Cabinet on 6 June and Council on 20 June. Once
approved, these will be used for the Council’s published budget book
and form the base for future monitoring reports. Proposed 2006/07 revenue
budgets for each of the Directorates are as follows:
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£000
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Children,
Young People & Families
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72,411
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Social
& Community Services
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139,827
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Environment
& Economy
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57,618
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Community
Safety
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22,831
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Resources
& Chief Executive’s Office
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8,210
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300,897
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- Information relating
to Directorates is summarised within this report and individual reports
for each Directorate are in the Members’ Resource Centre.
Annexes
- The following
annexes are attached:
Revenue Annex
1 Forecast Revenue Balances at Year End (download
as .doc file)
Capital Annex
2 Project Appraisal ED650 (download
as .doc file)
Resource Appraisal (download as .doc
file)
PART 1
- REVENUE
- The main issues
on the revenue budget for each directorate are set out below:
Children,
Young People & Families
- Across the Children,
Young People & Families Directorate the impact on budgets following
realignment requires extensive budget monitoring to ensure sustained
service delivery and budgetary control. A realignment sub-group consisting
of the two directorates’ business managers and officers from both directorates
is in place to identify potential financial and service delivery risk
areas.
- The Home to School
Transport budget represents a high financial risk in 2006/07 and rigorous
monitoring arrangements have been implemented. Any reductions in the
number of Out of County placements may put pressure on the Home to School
Transport budget and the relationship between these two budgets will
be closely monitored.
- For Early Years
& Family Support a review is currently being undertaken to identify
the full year effect of current levels of commitments. The review will
also help to identify and develop more accurate forecasting and management
information. The second part of the review will undertake a benchmarking
exercise on our statistical neighbours to identify accurate cost comparisons.
This budget area represents a high financial risk for 2006/07 and rigorous
monitoring arrangements are in place.
- The Provisional
Outturn Report includes proposals to carry-forward an overspend on the
former Children & Families service. A supplementary estimate of
£0.094m is requested to meet the element of the overspend not provided
for within the 2006/07 budget or met from the virement of underspends
carried-forward on other budget heads.
- The Premature
Retirement Compensation (PRC) budget is cash limited for 2006/07 and
therefore no early retirements on grounds of ‘efficiency of the service’
will be approved once this level is reached. However, redundancy cases,
whether voluntary or compulsory, are a statutory entitlement and have
to be paid in accordance with the Council policy for early retirement
and redundancy and this could therefore lead to a pressure within this
area. The majority of redundancies will be received by the end of July
and early indications are that the budget will be sufficient to meet
the claims. It may therefore mean that no new applications for early
retirement on ‘efficiency of the service’ grounds can be considered
from teachers and other staff for this financial year. In addition,
schools are now required to pay for the employer lump sum element of
‘efficiency of the service’ early retirements, either by paying for
the actual employer lump sum costs or by paying through an insurance
scheme based on the number of teaching staff within the school. This
contribution will supplement the budget available.
Social
& Community Services
- For the Social
& Community Services Directorate the area of greatest concern at
this stage is Cultural and Adult Learning Services, with a forecast
overspend of £0.994m. No material pressures have been identified yet
in Cultural Services or the Music Services. However, Adult Learning
is experiencing significant pressures as a result of the reduction of
the Learning and Skills Council grant. A report on proposals to bring
the expenditure in line with income is elsewhere on this agenda.
- The Provisional
Outturn Report includes proposals to carry-forward an overspend on the
Adult Learning service. A supplementary estimate of £0.188m is requested
to meet this overspend.
- Within Adult Services
one of the main risks is meeting the efficiency savings for the Older
People service. A key part of this is the significant savings to be
made in the negotiations of Home Care and Residential contracts. A new
schedule has been developed to highlight any potential problems early
in the financial year in order that corrective action can be taken.
Arrangements for close monitoring of the achievement of efficiency savings
have already been put in place. There may also be risks around the new
pooling arrangements for Learning Disabilities but at this stage these
are unquantified.
- Achieving the
cuts on the Supporting People budget required to manage within the reduced
funding levels is giving rise to pressures for this area. Plans are
in place to address these and the success of these will be reflected
in future reports.
Environment
& Economy
- At this stage
the Environment & Economy Directorate is predicting to deliver its
services within budget this year, but recognises that there are areas
of risk that must be managed.
- The Highways Management
service has to realise efficiency savings of £0.527m in 2006/07 by increasing
contract efficiencies and generating additional income. There is a possibility
that income targets may not be met, but until a reasonable trend in
income realisation is available it is difficult to quantify the size
of any shortfall.
- After recent experience
of large increases in energy costs, this is a potential risk area. At
the time of writing this report energy contracts are in the process
of being signed. It is anticipated that any additional costs over and
above that allowed for in the budget will be quantified for the financial
monitoring report to the Cabinet in July.
- The Waste Management
service has a potential risk of materially under or overspending by
the year end, although action will clearly be taken to manage this down
as far as possible. A carry-forward of £0.148m has been requested in
the Provisional Outturn Report to support the waste treatment procurement
process, which also received an additional £0.200m in the budget setting
round for each of the three years from 2006/07 to 2008/09. The renegotiation
of the Dix Pit contract is expected to realise £0.100m savings, however
hazardous waste spending is increasing, a pressure that is over and
above those identified in the 2006/07 budget setting process.
- The service underspent
by £0.440m in 2005/06, principally in Waste Recycling Centres. In the
2006/07 budget there is a reduction of a similar amount for reduced
tonnage. Expected tonnage levels of 2006/07 will need to be reviewed
in the light of 2005/06 experience. Any savings arising from landfill
tonnages will be transferred to the Waste Management Reserve, subject
to achieving an overall breakeven position for the service.
Community
Safety
- After allowing
for variations to budgets which are recognised under the Council’s budget
management arrangements to be outside the control of the Directorate,
the Fire & Rescue Service underspent by £0.165m in 2005/06. £0.160m
of this related to previously reported commitments, namely Radio Replacement/Fire
Control Project Manager (£0.050m), delay in delivery of breathing apparatus
replacement sets (£0.080m) and Fire Control data cleansing (£0.030m).
- Work is on-going
to identify any potential budget risks as a consequence of the increased
number of retained fire-fighters recruited in the past 12 months, taking
into account the continual turnover of staff.
- With effect from
1 April 2006 the Department for Community and Local Government has introduced
new arrangements for financing of fire-fighters pensions, the details
of which have been built into the 2006/07 base budget. One effect of
the new financial arrangements is that there will no longer be major
fluctuations to the cost of fire-fighter pensions on the budget, thus
reducing the need for calls on council balances. The only call on council
balances will relate to contributions for ill health retirements.
- An overspend of
£0.308m has been carried forward into 2006/07 for the Community Safety
Team. The 2006/07 budget includes £0.252m to offset this (the amount
relating to the 2004/05 carried forward overspend) and it is proposed
to vire £0.026m from other carried forward underspends elsewhere within
the Directorate to leave £0.030m to be recovered in this financial year.
Resources
and Chief Executive’s Office
- The key risk areas
identified so far in the Resources Directorate are in ICT, Human Resources,
Property Services, Shared Services and the Coroner’s Service. There
are no significant areas of risk at this stage within the budget for
the Chief Executive’s Office.
- The net outturn
for ICT in 2005/06 was an underspend of £0.091m but this included large
underspends in ring-fenced budgets. Removing these leaves an overspend
in the core ICT budgets of £0.165m to be managed this year. In order
to live within the existing budget, including the carried forward overspend,
and manage pressures due to demand for more and better functionality,
the Head of ICT has introduced a regime of tight budgetary control including
restricting the use of contractors and careful management of vacancies.
The funding and phasing of projects is also being reviewed, in particular
the data centre. Additional one-off funding of £0.337m has been allocated
this year from Local Authority Business Growth Incentive income to be
used for development work on the universal payments system. The Capital
Steering Group has recommended that the Cabinet approve the provision
of £0.221m to the data centre project from the capital programme (see
paragraph 44). Additionally, subject to Cabinet approval (see paragraph
32), additional £0.375m funding will be made available through release
of part of the Pensions Reserve.
- In order to improve
the management of the Council’s property portfolio, premises budgets
are now held centrally by Property Services rather than by directorates.
This may put pressure on the property budget when rent reviews increase
rents significantly above the rate of inflation or where there are demands
to acquire new properties. However, at this stage of the year it is
expected that, with careful management, spend will be kept within budget.
- Excluding the
ring-fenced Modernisation Fund money carried-forward, the HR budget
has carried forward an overspend of £0.084m from 2005/06. This has arisen
largely because efficiency savings have only been partly achieved. The
Head of HR is producing an action plan for managing this overspend and
ensuring that this year’s efficiency savings are achieved. This plan
will be reported next month.
- On 21 February
the Cabinet agreed funding arrangements for the Shared Services Project
including £4.384m in 2006/07. The project will be temporarily financed
from a reserve created using cash surpluses on the capital programme,
with repayments finishing in 2010/11 when the project begins to generate
positive cash flows. Clearly this is a complex, major project with significant
financial risks and in its early stages. The budget is currently being
reviewed and any changes, together with progress of spend against the
budget, will be included in the next and subsequent monitoring reports.
- In respect of
the Coroner’s Service, the backlog of inquests into the deaths of military
personnel in Iraq is being addressed but it is likely that additional
deputy assistant coroners and administrative support will be required
to clear it fully over the next few months. The Department of Constitutional
Affairs has now confirmed that it will fund in full the cost of two
assistant deputy coroners (to be employed by the Council) and additional
coroner’s officers and administrative support (to be employed by Thames
Valley Police).
Strategic
Measures
- At this point
in the financial year it is too early to assess any variations on the
strategic measures budget. A fully updated capital programme will be
brought to Cabinet on 18 July 2006, and by that time a detailed balance
sheet position at 31 March 2006 will be available. These provide essential
information on which to base a forecast for strategic measures and it
is anticipated that an initial forecast on the outturn position will
be available for the 18 July meeting of Cabinet.
Pensions
Reserve
- In the February
Monitoring Report the Cabinet was asked to release part of the funding
put aside in the 2006/07 budget to reflect the changes arising from
the revocation of the 85-year rule. A decision on how to use the funding
available was deferred pending clarification of the Minister for Local
Government’s statement that half of the savings arising would be recycled.
- There has recently
been a consultation produced by the Department for Communities and Local
Government (DCLG) which if enacted would extend the protection offered.
However, due to the need for certainty and planning within the services,
it is proposed that of the £1.5m set aside in 2006/07, half should be
released to fund schemes this year, given the Minister’s statement.
It is proposed that the funding available is allocated equally between
the planned major carriageway and footway reconstruction scheme in Oxford
High Street and the funding of certain ICT Projects as defined in the
Council’s decision in February approving the budget and capital programme.
- The position of
the pension change will need to be kept under close review and the financial
implications assessed once the latest consultation is concluded. If
there are further financial implications from this they will need to
be considered as part of the 2007/08 budget planning process.
Revenue
Balances
- The 2006/07 revenue
budget provides for net additions to balances of £1.820m. Based on the
provisional outturn for 2005/06 the opening balances figure is £15.961m
(£12.863m net of the City Schools reorganisation carried forward overspend).
- Notification of
the Council’s Flood Defence Levy charge was received after the budget
was agreed by Council on 14 February. The charge for the Thames region
is lower than budgeted, and as under the budget management arrangements
this is a budget outside the control of the directorate, the surplus
budget of £0.166m for 2006/07 will be transferred into balances.
- As reported above,
there are proposed supplementary estimates for overspends on realigning
services totalling £0.282m. These would be the first calls on a sum
set aside to manage risks within the budget of £3.1m during 2006/07.
- The forecast position
is detailed in Annex 1 to the report.
Efficiency
Savings
- The Annual Efficiency
Statement (AES) system requires all local authorities to meet efficiency
targets that are broadly 2.5% of their 2004/05 adjusted budgets each
year up to 2007/08. Oxfordshire’s target for 2006/07 is £8.062m. At
least half of the target must be cash releasing AES savings – where
cash can be released from service budgets without affecting service
outputs and quality.
- The 2006/07 revenue
budget includes £4.679m efficiency savings allocated across Directorates
and these savings can generally be counted towards the AES cash releasing
savings required. It is important that the Council ensures that the
planned savings are being made and are not being compromised by overspending
elsewhere within services. Corporate reports monitoring efficiency savings
in terms of both cash and performance will be produced on a quarterly
basis. In addition, the projected year end position for budgets which
have been allocated savings targets will be considered each month as
part of the normal financial monitoring process and details of any discrepancies
that may affect the achievement of the savings will be included in future
monitoring reports.
Best Value Performance
Indicator (BVPI) 8
- BVPI8 measures
performance in relation to the prompt payment of invoices. The Council’s
target for 2006/07 is for 95% of invoices to be paid within 30 days
of receipt. The most recent figures available (to the end of April 2006)
show an overall position for the Council of 95.6%, a significant improvement
on the March position. Some areas are still not achieving the target
though and more work is planned to bring all areas up to the proposed
level.
Conclusion
- This initial monitoring
report for the year highlights a number of areas in each directorate
where there are likely to be pressures within the year. Each directorate
will continue to monitor those positions, and where necessary come up
with proposals to ensure that overall budgets are managed.
PART 2
– CAPITAL
- At this point
in the financial year it is too early to assess the likely position
in delivering the capital programme. The only areas where significant
changes have been identified relate to Social & Community Services
where it is anticipated that slippage is likely on the Homes for Older
People project and the Day Centre projects. A more detailed position
will be included in the updated Capital Programme Booklet to be brought
to Cabinet on 18 July.
- The Capital Steering
Group considered a proposal to provide a central data centre at Clarendon
House. The project will contribute significantly to the efficiency of
IT provision across the Council and improvement in services to ICT customers.
The provision of a data centre is a service priority within the ICT
service plan for 2006/07.
- The costs of the
project are £0.521m. The ICT revenue budget can meet £0.300m of the
cost. The Capital Steering Group recommends that the Cabinet approve
the funding for the balance of £0.221m to be met from capital resources.
- The Cabinet’s
recommendations on the use of the unallocated balance of capital funding
carried over from the February Council meeting, due to be considered
by Council on 20 June, include a £1m contingency "for any future urgent
projects which arise up to 2008/09". Approval to the allocation of £0.221m
of this available funding will leave around £0.8m still available for
high priority projects occurring in the next three years.
School
Kitchens
- There has been
a steady deterioration in the condition of school kitchens over a number
of years. It is proposed to provide short term interest free loans to
schools who have decided to take delegated arrangements for school meals
to improve their school kitchen facilities. It is recommended that £1m
be made available to schools, which will be repaid to the Council in
the following two years.
- A project appraisal
in support of the project is attached at Annex 2 for the Cabinet to
approve. There will be a loss of interest in cash flow to the Council,
but the investment will enable significant improvements to the quality
and standard of school meals provision.
Chipping
Norton Town Partnership
- The Council set
aside £0.400m from a capital receipt in Chipping Norton to fund projects
in Chipping Norton. This was a recommendation of the Capital Steering
Group and was reported to the Cabinet on 7 February. The aim is to help
ameliorate the community and economic consequences of the closure of
the Parker Knoll factory. It is recommended that £0.005m of the set
aside be released to the Chipping Norton Town Partnership to develop
a website which is a key part of developing and marketing a positive
identity for the Town.
RECOMMENDATIONS
- The Cabinet
is RECOMMENDED to:
- note
the report;
- approve
a supplementary estimate of £0.094m to offset part of the carried-forward
overspend on the former Children & Families service;
- approve
a supplementary estimate of £0.188m to offset the overspend
carried-forward on Adult Learning;
- agree
the proposal to release £0.750m of the Pensions Reserve funding
to be allocated equally between the planned major carriageway
and footway reconstruction scheme in Oxford High Street and
the pressures relating to certain corporate ICT Projects, as
specified in the Council’s 14 February resolution of approval
in respect of the Budget and Capital Programme;
- subject
to the Council’s agreement to the allocation of a £1m contingency
as described in the report, approve the provision of £0.221m
from the Capital Programme to fund part of the costs of a central
data centre for the Council;
- approve
project appraisal ED650 and accordingly agree the allocation
of £1m available capital resources to provide short term borrowing
support for improvements to school kitchens as set out in the
appraisal, subject to contractual arrangements with any participating
school to the satisfaction of the Director for Children, Young
People & Families and County Solicitor in consultation with
the Cabinet Member for Schools Improvement;
- approve
the payment of £0.005m to the Chipping Norton Town Partnership
to fund the setting up of a website.
SUE
SCANE
Head of Finance
& Procurement
Background
papers: Directorate reports deposited in the Members’ Resource Centre
Contact
Officers
Stephanie Skivington, Strategic Financial Manager (Part 1) Tel 01865 815426
Mike Petty, Strategic Financial Manager (Part 2) Tel 01865 815622
June 2006
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