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ITEM CA5

CABINET – 19 SEPTEMBER 2006

FINANCIAL MONITORING

Report by Head of Finance & Procurement

1. This report covers the period to the end of July 2006 for revenue and capital. As the Cabinet did not meet in August there was no opportunity for the position at the end of June to be considered separately and changes to the forecast outturn are reported against the position at the end of May 2006. The consolidated revenue forecast for the year-end shows a balance of £13.421m, (paragraph 98). This is made up of £15.902m general balances and a forecast Directorate overspend of £2.481m (net of City Schools and after allowing for the proposed additional contribution to the Older People’s Pooled Budget).

Revenue

Directorate: Children, Young People & Families

2. The current forecast outturn position for Children, Young People & Families is an in year overspend of £2.052m, an increase of £1.736m from the last report in May (paragraph 26). The majority of the increase relates to Early Years & Family Support (£0.918m).
3. The Children & Young People service now predicts an overspend of £0.338m, of which Transport is £0.200m and Disabled Children Agency Placements is £0.138m.
4. Early Years and Family Support forecast an overspend of £1.369m, of which £1.399m relates to the budget for Agency Placements (paragraph 31). There is a great amount of uncertainty regarding the outturn for Asylum Seekers, but it is not possible to quantify the position at this stage (paragraph 36). It is proposed to vire the £0.500m contingency retained centrally within the service to partially offset the overspend on Agency Placements (paragraph 39).
5. An overspend of £0.345m is forecast for Strategy & Performance, which relates in the main to the Premature Retirement Compensation budget (paragraph 41).

Directorate: Social & Community Services

6. Pending the Council’s decision on an increased contribution of £1.2m to the Older People’s Pooled Budget (paragraph 47), the forecast outturn for Social & Community Services is an underspend of £1.166m (excluding Supporting People). After adjusting for the increased contribution the forecast outturn would show a £0.034m overspend.
7. Social Care for Adults predicts a £0.075m underspend, pending a decision on the increased contribution to the Pool. Within this, the budget for Older People currently forecasts an underspend of £0.095m. Savings of over £0.300m for the equipment contract and £0.125m reductions in staffing costs for Internal Home Support have been offset by a £0.200m pressure due to underachievement of rental income from the Order of St John. A significant (£0.777m) overachievement of residential and nursing income has been forecast due to increased client number projections. It is proposed that this is passed on to the Pooled Budget, together with a further £0.423m additional contribution to meet the extra costs of these clients falling on the Pool. After the proposed contribution, Social Care for Adults would show an overspend of £1.125m the proposal to vire part of the Directorate contingency of £1.076m would largely offset this.
8. The Partnerships & Planning forecast overspend has reduced from £0.428m to £0.021m overspend (paragraph 54), due to improved income projections based on actual performance to date.
9. Within the Directorate Management Team, there is a forecast underspend of £1.198m (paragraph 56). This primarily relates to the contingency (not yet allocated) and Council approval is sought to vire this budget to service areas to meet identified pressures (paragraph 56).
10. The forecast for Supporting People has changed from a £0.358m underspend to a breakeven position following a review of contractual commitments (paragraph 57). This forecast assumes savings will be found in year.
11. The Pooled Budget for Older People, Physical Disabilities and Equipment is forecasting an overspend of £1.308m, before the proposed additional contribution (paragraph 58). A pressure of £0.972m would still remain within the County Council’s elements of the Older People’s Pool even after taking into account the additional contribution. The Learning Disabilities Pooled Budget is now projecting an overspend of £0.300m (paragraph 60).

Directorate: Environment & Economy

12. The current forecast outturn is an underspend for Environment & Economy of £0.190m (paragraph 61).
13. The majority of the underspend relates to Sustainable Development (£0.123m). Waste Management remains the highest risk area in terms of a variation to budget. Current forecasts indicate an overspend of £0.760m for hazardous waste, offset by underspends for Recycling Centres and Landfill Sites, giving an overall year-end forecast of £0.023m underspend. An underspend of £0.100m is now forecast for Planning Implementation due to project slippage.

Directorate: Community Safety

14. There is no change to the Directorate forecast underspend of £0.050m (paragraph 66).

Directorate: Resources & Chief Executive’s Office

15. The forecast Directorate overspend is £0.400m, an increase £0.090m since the last report which all relates to Property Services (paragraphs 76 and 77). £0.300m of this overspend relates to the budget for SAP Revitalisation and will be managed by a corresponding underspend next year.
16. The forecast spend for the Shared Services Project is £0.645m below the initial forecast included in the Business Plan approved by the Cabinet on 21 February 2006. This is largely due to timing issues arising from delays in acquiring a building and the consequential impact on operating costs and revisions to the calculation of staff savings as project details are firmed up. The Shared Services Project is being temporarily funded from an earmarked reserve (Annex 4) created using temporary cash surpluses in the Capital Programme and therefore the reduced spend does not form part of the £0.400m Directorate variation.

Council Balances

17. The forecast year-end position for general balances has increased by a net £0.212m from the previously reported position to £15.902m (paragraph 94).

Capital

18. There is a reduction in estimated payments of £0.858m in 2006/07. Over the period of the Programme there is an increase in payments of £4.374m.
19. Within Children Young People & Families there is estimated slippage of £2.0m on devolved formula capital into 2007/08, and by an allocation of £0.242m in 2006/07 for School Travel Plans funded by a capital grant received through the Standards Fund. Schemes at Gosford Hill School and Headington Quarry have been brought into the main Programme from the forward plan as has a scheme at Faringdon School.
20. The variation in the Community Safety Programme is due to an increase in payments of £0.480m representing a scheme for refurbishment of traveller sites.

Introduction

21. This report covers the period up to the end of July 2006 for revenue and capital. The detail for each Directorate is summarised within the report and individual reports for each Directorate have been placed in the Members’ Resource Centre.

Annexes

22. The following annexes are attached:

Revenue

Annex 1 Estimated Year End Position Directorate Summary
Annex 1a-1e " " " by DirectorateAnnex 2a Summary of Virements
Annex 2b Summary of Supplementary Estimates
Annex 3 Latest Grants Position
Annex 4 Earmarked Reserves
Annex 5 Forecast Revenue Balances at Year End

(Annexes 1 - 5 - download as .xls file)


Capital

Annex 6 Capital Monitoring
Annex 6a-g Capital Monitoring by Directorate

(Annex 6 - download as .xls file)


PART 1 - REVENUE

23. Annex 1 shows the forecast revenue outturn position at the end of July and the movement from the position as at the end of May. The overall projected variance for the Council, (net of City schools) is set out in the table below (positive variances represent overspends and negative variances represent underspends):

	May 2006	July 2006	Change
	£m	£m	£m
Children, Young People & Families	3.084	4.820	1.736
Less City Schools Reorganisation	2.533	2.533	0
	0.551	2.287	1.736
Social & Community Services (excl. Supporting People)	0.266	-1.166	-1.432
Supporting People	-0.358	0	0.358
Environment & Economy	0	-0.190	-0.190
Community Safety	-0.050	-0.050	0
Resources & Chief Executive’s Office	0.310	0.400	0.090
Total Variation per Annex 1	0.719	1.281	0.562
Proposed additional contribution to the Older People’s Pooled Budget		1.200	1.200
Total Variation after additional contribution	0.719	2.481	1.762

24. The main issues on the revenue budget for each Directorate are set out below.

Directorate: Children, Young People & Families (£2.052m in-year overspend)

25. The current forecast outturn position shows a projected overspend of £4.820m. Of this £2.052m relates to the current financial year and £2.768m to be recovered in future years.
26. The Cabinet on 18 July 2006 agreed that for the purpose of dealing with any overspends on central Schools Block items, they would adopt the option to carry forward the overspend to the next financial year and fund from the non-schools element of the Dedicated Schools Grant (DSG) for that year. Of the current year variation, £0.023m relates to the DSG and would need to be carried forward.

	May 2006	July 2006	Change
	£m	£m	£m
Children & Young People	0.071	0.338	0.267
Early Years & Family Support	0.451	1.369	0.918
Educational Effectiveness	0	0	0
Strategy & Performance	0.029	0.345	0.316
Total in year variation	0.551	2.052	1.501
Variation in Transport Days	0	0.235	0.235
City Schools Reorganisation	2.533	2.533	0
Total Variation	3.084	4.820	1.736

Service Area: Children & Young People (£0.338m overspend, £0.573m including the variation in transport days)

27. Within the Schools Block, temporary virements of £0.100m from Statementing and £0.296m from Out of County placements to the Special Educational Needs Support Service (SENSS) budget are requested, to replace ad-hoc recharges to provide SENSS with a greater level of security. Although this is a change affecting the configuration of services, as it is not a permanent virement, Council approval is not required.
28. The service for disabled children is currently forecasting an overspend of £0.138m. This is as a result of disaggregation of the agency placements budget, which led to a small reduction in the overall budget (£0.033m) and three young people being charged to the budget whose costs had previously been charged to Leaving Care. Whilst there are uncertainties about Health Service contributions to the Resource Centre redesign project this budget is currently projected to balance.
29. The transport budget provided for 3% inflation on the 2005/06 base budget together with additional resources of £0.833m. However, this represents only a 2% increase above the actual 2005/06 expenditure level. Expenditure rose by 6.5% in 2004/05 and 14.8% in 2005/06, so there is a high risk that actions being taken following new management arrangements may not achieve a balanced budget by year-end. Every 1% increase in the level of cost above inflation represents a potential pressure of £0.160m. Current projections indicate a £0.200m overspend. This is as a result of two sets of re-tendering routes since the forecast that was made during the 2006/07 budget process, with costs being higher than originally anticipated together with cautious assumptions made in relation to the third due in December 2006. This is subject to further review following route changes in September. The following permanent virements are requested to allocate the additional funds provided in the 2006/07 budget to the most appropriate headings:

Budget Book Reference	Narration	Change £m
CYPF1-11A	Mainstream Transport	0.462
CYPF1-11B	SEN Transport	0.065
CYPF1-11C	Home to College Transport	0.232
CYPF1-11D	Other Transport Costs	-0.759

30. The Youth Service is forecasting a balanced budget following a thorough review of the forecasts for geographical teams. However, the budget is dependant on a high level of external income, and continues to be identified as a risk area. The following permanent virements are requested to restructure the budget in line with the new management structure:

Budget Book Reference	Narration	Change £m
CYPF1-31	Central Staff Costs (Youth Support)	0.279
CYPF1-32	Geographic Teams	-0.045
CYPF1-33	Support Services	-0.287
CYPF1-34	Projects	0.066
CYPF1-35	Staff Development & Training	-0.013

Service Area: Early Years & Family Support (£1.369m overspend)

31. The budget for Agency Placements is forecast to overspend by £1.399m, an increase of £0.758m since the previous report. The main elements of the increase are new long-term residential placements coupled with the inclusion of a provision for future additional placements. The average cost of a residential placement is £0.200m per year and an Independent Fostering Agency placement is around £0.045m per year (but these frequently involve families of 2 or more). This means that at this stage in the year small changes in numbers can lead to large changes in cost. New arrangements for accessing and gate-keeping entry into the Looked After System and entry into Agency Placements are being established. The expected outcome of the changes is to reduce further the rates of entry to care and to reduce reliance on the high-cost independent sector. In order to reduce the overspend, the Cabinet is asked to recommend Council approve the permanent virement of £0.500m held in contingency within this service area to this budget head (paragraph 39).
32. The Children’s Homes budget is forecast to overspend by £0.150m as a consequence of a savings target resulting in insufficient budget to provide adequate cover for leave and sickness absence. It was originally assumed it would be possible to provide this cover with the existing staff, but this has not proved the case. This is a provisional position pending further refinement of budgets following reorganisation of the service.
33. Within the Schools Block, the budget for Nursery Education Funding to Private, Voluntary and Independent settings predicts a £0.023m overspend based on the outturn for the Summer Term. The current forecast also includes the recovery of £0.085m overpayments to providers in 2005/06 giving an ongoing pressure of £0.108m.
34. An overspend of £0.050m on Social Work Staffing Budgets reflects the continued use of agency staff in the City Assessment team following the recommendations of the Commission for Social Care Inspection (CSCI) inspection. These will be replaced by permanent staff for the second half of the year. The overspend will be reduced by managing vacancies across the service where appropriate.
35. Forecast expenditure for the element of the Leaving Care budget covering the cost of placements has changed as the number of children in agency placements has reduced, partly as a result of transferring to the disabilities budget and others leaving. This reduction has been largely offset by an increase in foster care expenditure and a reduction in income from the Department for Education & Skills (DfES) Safeguarding Children Grant outlined in paragraph 36 below. The budget is currently forecast to be in balance, although may come under pressure later in the year due to the numbers of young people likely to leave care and the level of support required.
36. Asylum Seekers – no variation is forecast at present, although there are significant uncertainties highlighted below.

• Over the past year there has been a significant reduction in the numbers of asylum seekers supported following the transfer of responsibility for new families and adults to the National Asylum Seekers Service (NASS). The County Council service now supports only Unaccompanied Asylum Seeking Children (UASCs). The service is grant funded and the grant is paid per asylum seeker supported per week. A reduction in grant funding has led to a situation where the current structure is no longer financially viable. Staffing costs have already been reduced and longer term restructuring is being undertaken to address this problem. Managers continue to work to ensure staffing and support activity reflects the claimable grant for under 18 UASCs.
• There is a potential additional pressure as a result of changes in DfES grant funding for UASCs who are over 18 and to whom the Council has a responsibility to provide support under the Children (Leaving Care) Act. All of the local authorities that are supporting UASCs are facing a similar pressure, and are working together to address this with the Government. For 2005/06 the estimated DfES Safeguarding Children Grant in respect of UASCs leaving care was £0.619m. The final amount of the grant, notified at the beginning of July 2006, was only £0.229m, as a result of changes to numbers being eligible. The net reduction of £0.390m falls to be met in this financial year. The position for the 2006/07 grant has yet to be determined, but initial estimates suggest a reduction of £0.337m compared to the amount included in the budget. The 2006/07 reduction (£0.337m) can be accommodated within the Leaving Care budget as indicated at paragraph 35. However, the reduction of grant relating to 2005/06 is likely to remain a pressure to the extent it is not offset by any compensation due (see final bullet point below).
• The Home Office grant funding the majority of the service (approx £2m in 2006/07) has not been subject to a full audit since 2001/02 due to problems with Home Office data matching systems. Any disputes over eligibility for support may impact on the amount of grant receivable. Ten or more cases not being deemed eligible for support could potentially result in our grant entitlement being reduced to a point where it was less than our actual expenditure.
• The hearing in respect of compensation arising from the recent court case is due in September. It is currently assumed that any additional income due to the County Council over and above what has been accrued for in the 2005/06 accounts would be used to offset the reduction in the 2005/06 Safeguarding Children Grant.

37. An overspend of £0.079m is forecast for Assessment and Family Support. The cost of residence orders currently committed exceeds the budget by £0.029m and an overspend of £0.050m for Legal Charges is likely if spending remains in line with the first quarter.
38. The Homelessness budget now predicts a £0.069m overspend based on a review of existing and likely commitments. The current budget of £0.236m is sufficient to support on average seven families whilst actual expenditure indicates an average of nine.
39. A £0.400m underspend is forecast for the centrally held budgets for this service area. This is the net position inclusive of a £0.100m overspend due to the anticipated difficulty in realising a target saving through greater health contributions to placement costs for children with mental health problems. It also includes £0.500m allocated in the 2006/07 budget round for "increased numbers of children looked after" held in contingency. It is proposed to vire the latter to Agency Placements (Paragraph 31).

Service Area: Educational Effectiveness (no variation forecast)

40. There is currently a potential shortfall of £0.219m against the income target for the Oxfordshire Quality Schools Association which is not included in the forecast at present. This is being investigated and possible actions to redress this are being identified. County Facilities Management (CFM) are forecasting to achieve a break-even position for the financial year.

    Service Area: Strategy & Performance (£0.345m overspend)

41. The variation for this service area relates primarily to the Premature Retirement Compensation budget. The forecast overspend is £0.367m, representing current commitments (including contributions received from schools). In 2006/07 81 new cases have been agreed at a net cost of £0.829m. The ongoing annual commitment of existing and new cases is £3.391m compared to a budget of £4.041m. Following the recent age discrimination legislation it is expected that the Council’s existing PRC policies will be revised this autumn. This will also provide an opportunity to review the cost implications of the policies with a view to establishing effective budgetary control.

Service Area: Delegated Schools’ Budgets

42. Three-year budget plans for 2006/07 to 2008/09 have been received from all 293 schools, of which 278 (95%) have been approved. Taking the approved and unapproved budgets together indicates year-end balances for 2006/07 of £1.945m.

Directorate: Social & Community Services (£1.166m underspend before proposed additional £1.2m contribution to the Older People’s Pooled Budget and excluding Supporting People)

43. The forecast outturn for Social and Community Services is an underspend of £1.166m before the proposed additional £1.2m contribution to the Older People’s Pooled Budget. A significant element of this is the forecast of £0.777m additional residential and nursing income relating to Older People, together with a more optimistic forecast of £0.281m increased income within Partnerships and Planning reported this month. The proposed £1.2m additional contribution to the Pooled Budget is made up of the £0.777m income outlined above and the balance (£0.423m) is part of the proposed allocation of the Directorate contingency. After adjusting for the proposed contribution the forecast outturn shows a £0.034m overspend.

	May 2006	July 2006	Change
	£m	£m	£m
Cultural Services & Adult Learning	0.000	0.016	0.016
Social Care for Adults	0.954	-0.075	-1.029
Partnerships & Planning (excl. Supporting People)	0.428	0.021	-0.407
Business Support & Performance Management	0.047	0.070	0.023
Directorate Management Team (incl. contingency)	-1.163	-1.198	-0.035
Social & Community Services Subtotal	0.266	-1.166	-1.432
Supporting People	-0.358	0.00	0.358
Total per Annex 1	-0.092	-1.166	-1.074
Adjustment for additional contribution to the Pool		1.200	1.200
Adjusted Total	-0.092	0.034	0.126
Memorandum Accounts
Older People, Physical Disabilities & Eqpt Pooled Budget	0.317	1.308	1.066
Learning Disabilities Pooled Budget	0	0.300	0.300

Service Area: Cultural Services & Adult Learning (£0.016 overspend)

44. Within Cultural Services energy costs and audio-visual income targets remain areas of concern. The latest projections indicate an overspend of £0.040m on energy in 2006/07, offset by a planned underspend of £0.026m relating to additional income from negotiated VAT exemption on audio visual loans.
45. So far there is no indication that the cost containment in Adult Learning is off target.

Service Area: Social Care for Adults (£0.075m underspend before the proposed additional £1.2m contribution to the Older People’s Pool)

46. The budget for all client groups is forecasting an underspend of £0.354m. This is mainly due to projected savings in the equipment budget as a result of recent re-tendering of the contract to supply equipment for clients’ homes. The Cabinet is asked to recommend Council approve a permanent virement of £0.250m from this budget to Internal Home Support. The virement requested would offset the pressure in paragraph 48 and would enable the service to expand provision slightly, helping to keep delayed transfers of care from acute hospitals at acceptable levels.
47. The budget for Older People is currently forecast to underspend by £0.095m. Of this a significant (£0.777m) overachievement of residential and nursing income is forecast due to increased client number projections within the Older People’s Pooled Budget. The Cabinet is asked to recommend that Council approve the transfer of this additional income to the Pool through an increased contribution from the County Council, together with a further contribution of £0.423m funded from the Directorate’s contingency (paragraph 56) to help meet the additional costs falling on the Pool as a result of the increased client numbers.
48. The year-end forecast for Internal Home Support has moved from a £0.478m overspend to a £0.110m overspend after taking in to account staff savings as a result of detailed analysis of budgets in June. The virement requested in paragraph 46 would offset this pressure.
49. The year-end projection for External Home Support shows a £0.014m underspend, compared to £0.177m previously reported. This movement is caused by increased client numbers, together with an increased use of higher cost providers to ensure capacity.
50. The care management team budget continues to show a significant pressure and is now forecasting an overspend of £0.232m. This is due to difficulties in achieving the vacancy factor together with the recruitment of extra staff to deal with the changeover of clients to new external home support providers. It is proposed to vire £0.154m from the contingency fund to offset the transitional costs of the new home care contracts and £0.161m for vacancy targets for Older People as a whole (paragraph 56).
51. A pressure of £0.200m has been identified in relation to underachievement of rental income from the Order of St John as a result of phasing between buildings ceasing to be operational and new premises brought into use. The forecast for the underachievement of Fairer Charging income for Older People remains at £0.200m.
52. The Physical Disabilities budget is predicted to overspend by £0.301m the underlying reason being the projected shortfall in Fairer Charging income. It is proposed to address most of this (£0.289m) using part of the Directorate contingency.
53. No significant variances are forecast for the Integrated Mental Health Service (£0.003m underspend) and Learning Disabilities (£0.081m overspend).

Service Area: Partnerships & Planning (£0.021m overspend)

54. An improved position this month is mainly as a result of improvements in fairer charging income projections by £0.267m and residential income by £0.046m.

Service Area: Business Support & Performance Management (£0.070m overspend)

55. Budget pressures within Facilities Management and Finance continue as vacancy targets are proving difficult to meet. Funding in contingency has been earmarked for pressures related to vacancy factors (see paragraph 56), and a budget virement is requested.

Service Area: Directorate Management Team, Central Recharges and Contingency (£1.198m underspend)

56. As previously reported this relates in the main to the £1.313m contingency ring-fenced to meet identified pressures. The Cabinet is asked to recommend Council approve the permanent virement of the contingency to the relevant service areas as the pressures have now been confirmed as set out below:

	Year End Variation £m
Contingency budget	1.313
Proposed Virement:
All Client Groups – Vacancy targets	0.025
Older People:
– Increased contribution to the Pool	0.423
– Transitional cost of new home care contracts	0.154
– Vacancy Targets	0.161
Physical Disabilities:
– Vacancy Targets	0.008
– Fairer Charging income	0.289
Mental Health – Vacancy Targets	0.016
Commissioning Planning & Partnership – Vacancy Targets	0.111
Business Support – Vacancy Targets	0.120
Directorate Management Team- Vacancy Targets	0.006
Balance of contingency	0.000

Service Area: Supporting People (no variation forecast)

57. The forecast for Supporting People has changed from a £0.358m underspend to a breakeven position following a review of contractual commitments for 2006/07 and slippage on renegotiation of contracts for this year. This forecast continues to require savings to be found in year. Indications are that grant reductions for future years will be lower than originally anticipated.

Pooled Budgets Memorandum Accounts

58. The forecast overspend of the County Council element of the Pooled Budget for Older People, Physical Disabilities and Equipment is £2.172m. If Council approves the additional contribution of £1.2m as set out in paragraph 47 to this pool, a pressure would still remain of £0.972m in relation to the Council’s element of the pool. When both PCT and County Council elements are taken together, the pool is broadly projected to be in balance at the year-end. In order to address these pressures the number of placements could be reduced. The Oxfordshire Commissioning Partnership will be asked in September to consider the implication for the whole health and social care system of taking this course of action. Pending the outcome of this review a further contribution to the pooled budget may need to be considered.
59. The purchase of beds in the Older People’s Pool is the most sensitive area to changes in outturn forecast for the Directorate due to the size of the budget. A 1% increase in the number of beds purchased throughout the year (15 beds) or a 1% increase in the price (£5/bed per week), would each lead to a year-end overspend of around £0.450m. These risks are mitigated by good procedures for monitoring the purchase and prices of beds.
60. The Learning Disabilities Pooled Budget is forecast to overspend by £0.300m (the County Council’s element is £0.234m overspend). This variance is due to the need to make five emergency residential placements this month for clients and the need to offer care to a further twenty-one clients who met the criteria. A management review is scheduled to consider how to re-balance the budget whilst considering the risks to clients and the County Council. The main pressure on the Learning Disabilities Pooled Budget remains the achievement of £1.2m efficiency savings. These savings continue to be carefully monitored.

Directorate: Environment & Economy (underspend £0.190m)

61. The current forecast position shows a projected underspend of £0.190m, the main movement being for Sustainable Development.

	May 2006	July 2006	Change
	£m	£m	£m
Transport	0	0.012	0.012
Sustainable Development	0	-0.123	-0.123
Trading Standards & Registration	0	-0.025	-0.025
Business Support	0	-0.054	-0.054
Total Variation	0	-0.190	-0.190

Service Area: Transport (overspend £0.012m)

62. The forecast overspend of £0.012m is identified as a low risk area. However, due to extraordinarily high temperatures this summer damage has occurred to some of the County’s roads. The cost for the repair is not included in the forecast position for transport, and it is likely that the Directorate will bring forward a request for additional funding to support this work in a future report.

Service Area: Sustainable Development (underspend £0.123m)

63. The year-end forecast for Planning Implementation is an underspend of £0.100m, this movement is mainly due to slippage in the West End Strategic Sites Project and will need to be carried forward.
64. Waste management represents the highest risk area in terms of a variation to budget. Progress on the procurement of a technology neutral treatment facility to mitigate the risk of Landfill Allowance Trading Scheme (LATS) fines in the future is going to plan. The procurement budget for the current year will not be spent as the bulk of the estimated costs are expected to fall in the next two years. An estimated underspend of £0.218m would need to be carried forward.
65. The underspends forecast for Recycling Centres (£0.090m) and Landfill Sites (£0.483m) are offset in the main by the continuing higher costs of hazardous waste, predicted to overspend by £0.760m. Virements to better reflect the allocation of budget will be requested once assumptions underlying the forecast become more certain. Within Waste Management the current prediction for Landfill Sites is that tonnage will be down by 8% in comparison to budget but actual unit costs up by 2% on budgeted costs. However, a movement of 4% on activity levels (or 6,900 tonnes) would generate a variance of £0.264m, producing a significant impact on the forecast year-end outturn.

Directorate: Community Safety (£0.050m underspend)

	May 2006	July 2006	Change
	£m	£m	£m
Fire & Rescue Service	-0.050	-0.050	0
Emergency Planning Service	0	0	0
Community Safety Team	0	0	0
Travellers’ sites	0	0	0
Total Variation	-0.050	-0.050	0

Service Area: Fire & Rescue Services (£0.050m underspend)

66. The £0.050m relates to a planned carry-forward of funding for the Radio Replacement Project Manager post as reported in May.
67. As a result of the Fire fighters’ pay award being settled at 2.7% against a budgeted settlement of 3% there will be a saving of £0.022m in 2006/07. This will be returned to Council Balances.
68. The principle change to the variation reported last month relates to a projected overspend of £0.220m on the retained fire fighters budget, which will be a call on Council Balances. The nature of the retained fire service means that it is sensitive to staff turnover and activity levels. In order to determine the cost of its provision it is being recommended for inclusion in the Programme of fundamental reviews. The retention of retained fire fighters in service is also subject to a separate report to the Cabinet later this year.

Service Area: Community Safety Team (no variance forecast)

69. The previous budgetary problems affecting the Community Safety Team have been brought under control and it is forecast that the current years budget will come in on target.

Directorate: Resources and Chief Executive’s Office (£0.400m overspend)

70. Resources and the Chief Executive’s Office are forecasting a combined overspend of £0.400m for the areas set out below:

	May 2006	July 2006	Change
	£m	£m	£m
Financial Services & Procurement	0	0	0
Human Resources	0	0	0
Legal Services	0	0	0
Information Communications & Technology	0	0	0
Business Support	0	0	0
Property Services	0.030	0.120	0.090
Coroner’s Service	0	0	0
Shared Services	0.300	0.300	0
Chief Executive’s Office	-0.020	-0.020	0
Total Variation	0.310	0.400	0.090

Service Area: Financial Services & Procurement (no variation forecast)

71. The volume of debts being raised through SAP has more than doubled in 2005/06 and will continue to increase following SAP Revitalisation and on-going improvements to internal financial control. Taken with the commitment to enhancing debtor information to service managers to ensure debt collection is maximised the current level of resource is insufficient. Permission is therefore sought for an additional full-time employee, at an ongoing cost of £0.026m per annum. This increased resource will allow proactive debt management reducing debtor days outstanding and the improvement in cash flow will be sufficient to fully finance this new post. The Cabinet is asked to approve a permanent virement of £0.026m from interest on balances (paragraph 81). The new post will be filled on a temporary basis initially, until the function is moved to Shared Services.

Service Area: Human Resources (no variation forecast)

72. Now that the Occupational Health Unit is operating as a trading account, the loss of the Probation Service contract of approximately £0.010m puts a pressure on the Unit that will require careful management, including seeking new customers and tight control of expenditure.

Service Area: Legal Services (no variation forecast)

73. The final payment of legal fees arising from the Trap Grounds case totalling £0.026m has now been made. If this cost cannot be met by Legal Services it may be necessary to request that it is met from balances.

Service Area: Information Communications & Technology (no variation forecast)

74. ICT continues to forecast that it will spend to budget this year although the position remains very tight.
75. The Cabinet is recommended to approve the allocation of the additional £0.060m of Local Authority Business Growth Incentive (LABGI) funding received (see paragraph 94) to ICT to fund corporate ICT projects. If approved, this gives ICT one-off funding this year of £0.772m for the list of projects agreed by Council in February.

Service Area: Property Services (£0.120m overspend)

76. The price of energy is currently very volatile impacting on the accuracy of forecasting spend to the year-end. However, based on known price changes, an overspend of £0.060m on central buildings is currently forecast. This extra cost will be difficult for Property Services to absorb.
77. The overspend forecast for the Castle Project has been increased to £0.060m as it now seems likely that the Oxford Preservation Trust will be unable to pay an insurance premium of £0.030m. There will also be some additional legal costs but these cannot yet be quantified. As previously reported, any overspend on completion can be met by using part of the £0.150m included in the Capital Programme for the Castle Education Centre, which is no longer required.

Service Area: Shared Services (£0.300m overspend)

78. As previously reported, the budget for the SAP Revitalisation Project forecasts an overspend of £0.300m, to be managed by a corresponding underspend next year. The position may improve following a recent decision on the continued use of consultants.
79. The table below compares the current forecast spend this year against the business plan for the Shared Services Project. Variances to the original plan are to be expected given the complexity and size of the project and are largely due to timing issues, for instance delays in acquiring a building, revisions to project costings and to revisions to the calculation of staff savings as project implementation documents are developed and improved.

	Business Plan (£m)	Forecast (£m)	Variance (£m)
Set up and transition costs	4.325	3.498	-0.827
Operating Costs	0.783	0.309	-0.474
Staff savings	-0.724	-0.068	0.656
	4.384	3.739	-0.645

Note: the variance will have no effect on the Resources Directorate revenue budgets this year and does not show as part of the Directorate’s outturn position as the project is being temporarily funded by an earmarked reserve created using temporary cash surpluses in the Capital Programme. The estimated cash flows for subsequent years indicate that net savings may be delayed until 2011/12, which means the effect on the Capital Programme, will need to be carefully monitored and assessed.

Service Area: Chief Executive’s Office (£0.020m underspend)

80. There continues to be a planned underspend this year in the Scrutiny budget of £0.020m to cover pay costs in 2007/08. The estimated cost of by-elections this year is £0.012m. The balance of the £0.120m elections budget will be transferred into a reserve to build up a fund for the main election in 2009.

Strategic Measures

81. The strategic measures budget has been reviewed, taking account of the increase in the base rate from 3 August 2006 and the latest forecast for the Baxter index used to pay interest on certain developer contributions. It is now estimated that there will be a surplus of £1m in 2006/07. This compares to £0.650m reported to cabinet in July. The extra £0.350m will be added to balances.
82. The Council has a potential borrowing requirement of around £40m in 2006/07 to fund part of the Capital Programme. In the Treasury Management Strategy for 2006/07 approved by Council in February 2006 our policy for 2006/07 was to take our borrowing using Lender’s Options Borrower’s Option Loans (LOBO’s).
83. Market conditions for LOBO’s have been favourable during July and the Council arranged £20m of LOBO loans with the terms shown below:

Loan Amount	Initial Period	Terms beyond initial period	Interest Rate	Commencement Date
£5m	5 year	Semi-annual calls	3.80%	Drawdown – 31 July 2006
£5m	5 year	Five year calls	3.84%	Drawdown – 31 July 2006
£5m	6 year	Five year calls	3.825%	Drawdown – 2 October 2006
£5m	13 year	Five year calls	4.01%	Drawdown – 2 October 2006

84. These rates compare to 4.8% used in the Council’s Medium Term Service and Financial Plan. This will bring savings of £0.108m in 2006/07 and £0.186m in a full year. The 2006/07 savings forms part of that added to balances (paragraph 81).
85. The Council has undertaken the following debt restructuring activity in early August 2006:

Loan Amount	Interest Rate	Repaid at	Discount	Replacement Loan	Interest Rate
£5m	4.75%	4.8%	£0.030m	£5m	4.65%
£4m	4.625%	4.65%	£0.013m	£4m	4.50%
£4m	4.625%	4.65%	£0.013m	£4m	4.50%
£2m	4.625%	4.75%	£0.030m	£2m	4.60%
£10m	4.625%	4.75%	£0.134m	£10m	4.60%
£5m	4.45%	4.5%	£0.034m	£5m	4.35%

86. The savings obtained by reducing the interest rate on our debt go into the revenue account. The savings accruing from the discount received have to be credited to the revenue account pro-rata to the period of the replacement loan. The savings in 2006/07 will be incorporated in next months update.

Government Grants

87. Details of specific grants are shown in Annex 3 and summarised below:

	£m
Specific grants received in 2006/07 (as per published Medium Term Service & Financial Plan)	399.113
New grants/changes previously reported	-0.138
New grant changes this month	3.246
Total grants for 2006/07	402.221

88. The main changes are an increase of £4.353m in a number of elements of the Standards Fund, final notification of the Dedicated Schools Grant, and a reduction in Leaving Care Unaccompanied Asylum Seekers grant (paragraph 36). The Children’s Fund Grant under Community Safety has been removed as it is counted elsewhere and final notification has been received for Positive Action for Young People and U Project grant.

Earmarked Reserves

89. Details of Earmarked Reserves are shown in Annex 4 and summarised below:

	2006/07
	Balance at 1 April 2006	Forecast Movement		Forecast Balance at 31 March 2007
		Contributions from Reserve	Contributions To Reserve
	£m	£m	£m	£m
Children Young People & Families	17.063	-18.832	13.826	12.057
Social & Community Services	1.550	-1.420	0.321	0.451
Environment & Economy	4.397	-3.085	1.559	2.871
Community Safety	0.923	-1.374	0.794	0.343
Resources & Chief Executive’s Office	1.448	-0.795	0.618	1.271
Corporate	14.530	-11.989	0.037	2.578
Directorate Total	39.911	-37.495	17.155	19.571

90. Children, Young People & Families reserves have been amended to reflect the indicative year-end forecasts of schools’ balances.
91. The year-end position forecast for Environment & Economy has reduced by a net £2.745m from that reported in May. The key changes are the contribution of £2.6m being made to support the capital works at Thornhill Park & Ride, a notional surplus on LATS allowances of £0.420m and a contribution of £0.350m to the On-Street Car Parking reserve. An update to the Waste Management fund is expected to be made next month to reflect the agreement with the district Councils entered into under the Oxford Waste Partnership.
92. The movement on Community Safety reserves relates in the main to the vehicle replacement Programme. An annual revenue contribution is made to the reserve. The reserve is drawn down to fund the cost of purchases, which may vary from year to year. In 2006/07 the revenue contribution is £0.782m and planned purchases for 8 vehicles is £1.354m.
93. The Corporate figures include an indication of drawdown on the Carry Forward Reserve, Capital Reserve and the Shared Services Reserve (based on initial spending forecasts as detailed in paragraph 79).

General Revenue Balances

94. The forecast position for general balances has increased by £0.212m as shown below. This is as a result of a savings predicted on interest payable in respect of LOBO loans 0.108m, additional interest on cash balances of £0.242m, LABGI funding final determination of 0.060m, and actual fire fighters’ pay award being £0.022m less than budgeted and an overspend of £0.220 on the retained fire-fighters budget.

	£m
Forecast position per last report (net of City Schools)	15.690
Savings on interest payable on LOBO loans	0.108
Additional interest on cash balances	0.242
Local Authority Business Growth Incentive grant determination	0.060
Fire-fighter’s pay award saving on budgeted settlement	0.022
Retained fire-fighters budget forecast overspend	-0.220
Net forecast position (net of City Schools)	15.902

95. Recommendations set out in this report would reduce the general balances position to £15.842m.

Efficiency Savings

96. Within Resources it is currently predicted that the saving of £0.028m included in this year’s budget for cleaning central offices will only partly be met, this is pending the outcome of new contracts in autumn. A number of risk areas have been identified, particularly within Social & Community Services and Children Young People & Families, which will be closely monitored.

Best Value Performance Indicator (BVPI) 8

97. BVPI8 measures the percentage of undisputed invoices paid within 30 days of receipt. The Council’s target for 2006/07 is for 95% of invoices to be paid within 30 days of receipt and the performance for the year to the end of July is as follows:

	%
Children, Young People & Families	95.3
Social & Community Services	89.5
Environment & Economy	97.4
Community Safety	94.2
Resources	91.4
Chief Executive’s Office	95.0
Mouchel Parkman	79.7
	91.9

98. July has seen a considerable improvement by almost all Directorates on the previous month. Social & Community Services are expecting that a new report, soon to be operational, will assist in identifying the source of late payments so corrective action can be taken. Community Safety have identified, and taken corrective action, where invoices had not been categorised on SAP as being in dispute. Equally within Children Young People & Families a number of input errors have been identified which will be picked up in next month’s figures.

Conclusion

99. Directorates have identified a number of potential budget pressures leading to a total forecast overspend of £1.281m (net of the City Schools overspend). After adjusting for the proposed additional £1.2m contribution to the Older People’s Pooled Budget this gives a forecast overspend of £2.481m. The forecast for general balances stands at £15.902m, giving a consolidated balances position of £13.421m. There are a number of emerging pressures notably within Children Young People and Families where the need for a review has been identified and a number of uncertainties highlighted which will, on resolution, affect the forecast year-end position. In this report some initial consideration has been given to sensitivity of key risk areas and the potential impact on the resulting predicted year-end position and it is expected that this will be expanded on in subsequent reports.

PART 2 – CAPITAL

100. The Capital Monitoring for July is attached in Annexes 6 – 6g. The report shows a reduction in estimated payments in 2006/07 of £0.858m as compared to the Capital Programme Booklet. Over the full period of the Programme there is an increase in payments of £4.374m. Overall there are no funding issues within the changes to the Programme.

	Latest Booklet		July 2006		Change
	2006/07	Total	2006/07	Total	2006/07	Total
	£m	£m	£m	£m	£m	£m
Children, Young People & Families
-Main	53.034	211.954	52.086	215.790	-0.948	3.836
-City	0.802	48.500	0.802	48.500	0.000	0.000
Environment & Economy	36.085	176.626	36.051	176.592	-0.034	-0.034
Social & Community Services	7.813	31.792	7.905	31.884	0.092	0.092
Corporate Governance	8.312	37.758	7.864	37.758	-0.448	0.000
Community Safety	0.570	1.210	1.050	1.690	0.480	0.480
TOTAL	106.616	507.840	105.758	512.214	-0.858	4.374

101. The variations are explained below:

Directorate: Children Young People & Families

102. There has been a reduction in estimated payments in 2006/07 of £0.948m since the last Capital Programme booklet was published in July. Over the term of the Capital Programme estimated payments have increased by £3.836m. The main changes are as follows:
103. There is estimated slippage of £2.0m on devolved formula capital into 2007/08. Added to the Capital Programme is an allocation of £0.242m in 2006/07 for School Travel Plans funded by capital grant received through the standards fund.
104. Schemes at Gosford Hill School (£1.727m) and Headington Quarry (£0.421m) have been brought into the main Programme from the forward plan to start in 2006/07. Similarly a scheme at Faringdon School now comes into the Programme from the forward plan totalling £1.214m. Fees on these new projects total £0.232m.
105. There are financial pressures emerging on some projects. The main pressure is in relation to the Orchard Fields scheme. Officers are working with the contractor and Mouchel Parkman and intend to reduce any overspend to the minimum, but the current estimate is in the order of £0.250m. An update on this position and the other emerging pressures will be reported in detail in next months report.

Directorate: Environment & Economy

106. There is a reduction in payments of £0.034m on the Capital Programme, which represents a number of small variations.

Directorate: Social & Community Services

107. There is an increase in estimated payments of £0.092m on Social & Community Services Capital Programme. The main change (£0.083m) relates to a provision necessary for fees on capital projects.

Directorate: Community Safety

108. There is an increase in payments of £0.480m on the Community Safety Programme. This represents a scheme for refurbishment of traveller sites. The funding is £0.360m from grant and £0.120m from revenue.

Capital Programme Update

109. The last Capital Programme booklet update (July 2006) was circulated with the Financial Monitoring Report on 18 July 2006.

RECOMMENDATIONS

110. The Cabinet is RECOMMENDED to:

1. note the report;
2. approve the permanent virement to allocate funding within Home to School Transport budget (paragraph 29);
3. approve the permanent virement to restructure the Youth Service budget in line with the new management structure (paragraph 30);
4. approve a permanent virement of £0.026m to Financial Services and Procurement from interest on balances to fund an additional post in respect of income management (paragraph 71);
5. approve the allocation of additional Local Authority Business Growth Incentive to ICT to fund Corporate projects (paragraph 75);
6. approve the temporary virement to transfer £0.100m from Statementing and £0.296m from Out of County to Special Educational Needs Support Service (paragraph 27);
7. RECOMMEND Council approve the following permanent virements:

1. the transfer of £0.500m from the Early Years and Family Support contingency to Agency Placements (paragraph 31);
2. of £0.250m from the equipment service to Internal Home Support (paragraph 46);
3. an additional £1.2m permanent contribution to the Older People’s Pooled budget (paragraph 47);
4. of the Social & Community Services contingency of £1.313m as detailed in paragraph 56 of the report.

SUE SCANE
Head of Finance & Procurement

Background papers: Directorate reports
Contact Officers: Stephanie Skivington, Strategic Financial Manager (Part 1) Tel 01865 815426
Mike Petty, Strategic Financial Manager (Part 2) Tel 01865 815622

September 2006

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