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Cabinet
Wednesday, 20 June 2007

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ITEM CA6

 

CABINET – 20 JUNE 2007

 

FINANCIAL MONITORING

 

Report by Head of Finance & Procurement

 

Introduction

 

1.                  This is the first financial monitoring report for the 2007/08 financial year and covers the period up to the end of April 2007 for both revenue and capital.  Given the difficulty in forecasting year-end outturn based on a single month’s actuals this report is on an exceptions basis, focusing on key risk areas identified as part of the budget process and picking up issues arising from the 2006/07 outturn position.

 

2.                  The 2007/08 revenue budget was approved by Council in February 2007.  Subsequent changes, which represent a different allocation between Directorates and Services or changes in gross expenditure and income, were reported to Cabinet on 15 May.  Cabinet recommended Council to approve the changes on 19 June.  Once approved, these will be used for the Council’s Service & Resource Planning – Financial Plan publication and form the base for future monitoring reports.  Proposed 2007/08 revenue budgets for each of the Directorates are as follows:

 

                                                                                                    £’000

Children, Young People & Families                          79,136

Social & Community Services                                 143,472

Environment & Economy                                            57,524

Community Safety                                                       24,838

Corporate Core                                                              8,686

Strategic Measures                                                     31,849

 

345,505

 

3.                  The following annexes are attached: (download as .xls file)

 

Revenue

 

Annex 1a Summary of and requests for Virements

Annex 1b Summary of and requests for Supplementary Estimates

Annex 2   Forecast Revenue Balances

 


PART 1 - REVENUE

 

4.                  The key issues on the revenue budget for each Directorate are set out below:

 

Directorate: Children, Young People & Families

 

5.                  When setting the 2007/08 budget, the Home to School Transport budget represented a high financial risk in 2007/08.  The rigorous monitoring arrangements, which proved effective in managing the budget and containing risk in 2006/07, will be continued.  In addition, an underspend from 2006/07 of £0.136m will be carried forward to reduce the risk within this area.  At this stage it is difficult to assess and quantify the impact that pending legislation and the results of any retendering of contracts will have throughout the course of the year.

 

6.                  Within Early Years and Family Support, Agency Placements is the highest budget risk area in the Directorate with an overspend carried forward of £0.425m.  This will reduce to £0.152m on agreement of proposals within the Provisional Outturn report to vire underspends of £0.273m from elsewhere in the Directorate.  A supplementary estimate of £0.152m is requested to address the remainder of the carry forward, reflecting the corporate agreement reached in late 2006 to support the Directorate management of this budget pressure.  The introduction of the new placement duty and support service in March 2007 will impact positively on the pressures in this budget in 2007/08.  A separate analysis of this budget is being undertaken to assess the impact for the full year of placements, future trends and the age profile of the current cohort.

 

7.                  The Asylum Seekers budget represents a high financial risk for 2007/08 and an overspend of £0.291m is brought forward from 2006/07. The reduction in numbers of new arrival Asylum Seekers continues to make the current service levels difficult to sustain.  The service reduced the number of employee posts in 2006/07 in an attempt to address the pressure.  However, young people under 16 who arrive need similar levels of support for at least 3 years, and have a legal entitlement to receive support, yet the amount of grant received reduces as they get older.  The Council receives no funding for the costs of Unaccompanied Asylum Seeking Children (UASC’s) over 18 who have exhausted all rights of appeal but whom the Council is obliged to support and this forms an additional pressure on the budget.  The Home Office has stated that it will consider “special representation” claims where authorities can show that their costs exceed their standard unit costs and Oxfordshire’s claim is due to be submitted by the Council in July.

 

8.                  As the Home Office have introduced a policy that they will only pay for UASCs who they have matched to their own database and it is a long and difficult process to match them there is also significant additional risk in relation to current and previous years’ claims. 

 


9.                  The Legal Services budget within Early Years & Family Support has seen a reduction of 50% in the number of care proceedings but costs have still increased.  Analysis confirms that each care case now requires more legal time and there has been a rise in cases where the service has been asked to report on children’s welfare in private law cases.  If the volume of care proceedings remains in line with the pattern of spend in 2006/07, this budget will forecast an overspend at the year-end of £0.180m.

 

10.             The efficiency saving of £0.1m allocated to Children’s Homes prior to realignment was unachievable in 2006/07.  It is not expected to be achieved in 2007/08 so the risk of an overspend is high and management action will be needed to contain this pressure.

 

11.             The Premature Retirement Compensation (PRC) budget has undergone a thorough review.  Following the recent age discrimination legislation, the Council has revised its existing PRC policies for teachers and Green Book staff.  A revised redundancy policy for school staff was presented to Cabinet on 20 February.  These new policies are partly designed to ensure that the pressures on this budget are eliminated from 2007/08.  As in previous years it is anticipated that the majority of redundancies will be received by the end of July and early indications are that the budget will be sufficient to meet claims.

 

Directorate: Social & Community Services

 

12.             At this early stage in the financial year, Social & Community Services is anticipating a balanced year-end position, though a number of efficiency savings have been identified as at risk of not being fully achievable in 2007/08.  The main efficiency savings identified where there is high risk of slippage are in relation to Learning Disabilities supported accommodation service redesign (£1.06m), skills mix savings within Older People’s Care management (£0.2m) and savings arising from the Fundamental Service Review of Internal Home Support (£0.6m).  The Directorate has set up detailed arrangements to monitor progress against all its efficiency savings targets.

 

13.             The Provisional Outturn report includes a proposal to carry forward an overspend of £0.255m relating to the balance of the write-down of Audio Visual stock.  It is planned to address this in the Fundamental Service Review of Cultural Services; however, any delay with the Review could impact on the extent to which savings can be achieved in year.

 

14.             Some volatility in income is expected in the Music Service as a result of a Government scheme to give all Key Stage 2 pupils the chance to learn a musical instrument free of charge. The proposed underspend (£0.130m) carried forward from 2006/07 together with grant allocations should be sufficient to offset the resulting income shortfall.

 

15.             At the year-end the combined variation when Internal and External Home Support budgets are taken together is an overspend of £0.071m illustrating that the combined spend of Home support owing to the high turnover of clients is relatively controllable.  During 2006/07 there was some volatility experienced in the forecasts for External Home Support.  The Directorate will seek to introduce a mechanism to monitor the home support hours allocated each week so that corrective action can be taken as soon as possible.

 

16.             The disappointing outcome to the Joint Working initiative in 2006/07 means that a shortfall in Fairer Charging income compared to budget is anticipated in 2007/08.  Conversely an overachievement of residential and nursing income is also forecast, so some realignment of these budgets will be proposed in a later report.  A small working group has been set up to review income and ensure that income is maximised.

 

17.             The Mental Health service underspent by £0.07m in 2006/07 due to a combination of a decrease in client numbers and the cost of their placements over the year.  Whilst numbers requiring Mental Health services are relatively small and therefore fluctuate over time, the opening commitments for this budget in 2007/08 do not give cause for concern.  Of the £0.383m efficiency savings built in to the 2007/08 budget for these areas, £0.015m is flagged as medium risk; the rest are low risk.

 

Directorate: Environment & Economy

 

18.             At this time of the year the Directorate expects that it will spend within budget both in capital and revenue terms, although based on previous experience there could be some slippage.

 

19.             The key risk service areas identified as part of the budget process were Waste Management and Highways Maintenance; the former was managed within approved budgets last year and there is no reason why this should adversely change this year.  On Highways Maintenance, further work will continue in 2007/08 on repairing heat damaged roads funded through budget reprioritisation and additional funding such as Local Authority Business Growth Incentive (LABGI).

 

Directorate: Community Safety

 

20.             After allowing for variations to budgets which are recognised under the Council’s budget management arrangements to be outside the control of this Directorate, the Fire & Rescue Service underspent by £0.361m in 2006/07.  Proposals to carry this amount forward to meet cost commitments arising from project slippage in 2007/08 are contained in the Provisional Outturn report.

 

21.             The main risk areas identified as part of the budget setting process and based upon the 2006/07 outturn position were around Service Delivery, namely costs of retained firefighters and the improvements required to command and control procedures.  In 2006/07, £0.219m relating to the costs of retained firefighters was met from balances.  Additional funding of £0.665m agreed as part of the 2007/08 budget will alleviate these pressures.

 

22.             The Cabinet is asked to approve two permanent virements between Community Safety and Social & Community Services; £0.046m to realign the Trading Standards budget and Registration Services employee budgets and £0.024m to realign the efficiency savings.

 

Directorate: Corporate Core

 

23.             The budgets for the former Resources Directorate and Chief Executive’s Office have been realigned to form the Corporate Core.  The Cabinet is asked to approve the permanent virement of £1.376m (as set out in Annex 1a) to give effect to this realignment in the budget.   There will be some further realignment of budgets to be reported next month.  The Property Services budget is now within Environment & Economy and the Translation & Interpretation Service has transferred to Social & Community Services.

 

24.             Pressures on the Corporate Human Resources (HR) and Organisational Development budget were managed last year by maintaining vacancies but this year vacancies will need to be filled.  An action plan to contain spend within budget is being developed.  Within Corporate HR the Occupational Health Service is, at this time, forecast to break even.

 

25.             The Coroner is continuing to reduce the backlog of military inquests.  The government is providing further funding for a deputy assistant coroner to deal with the inquests in connection with the deaths of those personnel whose bodies had been flown to RAF Brize Norton by 31 March 2007 , after which bodies are being flown to RAF Lyneham and the Wiltshire Coroner takes responsibility.  All other related costs will still have to be met by the Council.  The overspend against this budget in 2006/07 was £0.082m and in 2007/08 it could be in the region of £0.05m.  Any overspend against this budget will be met from balances.  A Scrutiny Review of the service is being undertaken and will include a review of the budget and identification of possible efficiency savings.

 

26.             The Corporate Core financial monitoring report will continue to include Shared Services.  Expenditure last year on the project amounted to £1.151m, leaving a balance of £4.899m against the budget of £6.05m in the business case.  Most of this is programmed to be spent this year with the balance in 2008/09.

 

27.             The Cabinet is asked to approve the virement totalling £2.733m (as set out in Annex 1a) to transfer budgets from Directorates to the Shared Services Funding Reserve.  Although this is a permanent virement it does not represent a policy plan change.  A proportion of these budgets for Shared Services will be vired directly to meet the operational requirements and the balance will be retained as the efficiency saving and returned to the Shared Services Reserve.  A detailed analysis of these savings and forecast for the remainder of the year and beyond will be included in the May monitoring report.  At this stage there is no change to the business case forecast of payback by 2010/11.

 

28.             The Cabinet is also asked to approve a permanent virement (not representing a policy plan change) of £0.335m to transfer HR partner budgets to Corporate HR from the other Directorates.

 

29.             The Cabinet is asked to approve a temporary virement of £0.255m from the Corporate Core ICT budget to Social & Community Safety of the 2007/08 Project Link budget.

 

30.             The Cabinet is also asked to approve a permanent virement of £0.056m to transfer the Oxfordshire Council for Voluntary Action (OCVA) grant service agreement to the Partnerships Unit in the Corporate Core from Social & Community Services.

 

Strategic Measures

 

31.             At this stage of the financial year it is anticipated that there will be a surplus of £1.0m on Strategic Measures for 2007/08.  This is due to a combination of factors including bank rate being above the estimated level and higher balances than estimated, partly due to capital slippage in 2006/07.

 

Debt Restructuring

 

32.             The Council has repaid two loans totalling £6.0m as the first stage of a debt restructuring exercise.  It is hoped to replace these loans in 2007/08, at which point the saving will be reported to Cabinet.

 

Revenue Balances

 

33.             Based on the Provisional Outturn for 2006/07 the closing balances figure is £22.933m (net of the City Schools reorganisation carried forward overspend).  Taking into account the budgeted changes to balances (£0.576m planned repayment relating to the City Schools ’ Reorganisation and £0.972m planned use of balances) set out in the Medium Term Financial Plan (MTFP), balances at 1 April 2007 are £22.537m.

 

34.             Included in balances at 1 April is £3.709m relating to the Local Authority Business Growth Incentive (LABGI) grant and the PSA Performance Reward Grant.  The LABGI grant totalling £0.965m will be utilised in 2007/08.  Proposals for the use of the grant were agreed by Cabinet on 17 April and Council will consider the Cabinet’s recommendation to approve the allocation of the grant on 19 June.  The revenue element of the Performance Reward Grant - £2.744m - was confirmed in the 2006/07 year-end accounts; – half of the grant cash was received on the 30 March and the balance will be paid to the Council in 2007/08.  Funding will be allocated in the current year in accordance with the schedule agreed by the Council in February.  After taking into account these two items which are due to timing, balances available are £18.828m.

 


35.             The estimated position on balances at 1 April 2007 as set out in the Head of Finance and Procurement’s commentary on the budget to Council in February was £13.601m.  This is £5.227m less than the actual position and is mostly explained by surpluses on the Insurance Reserve and further surpluses on the strategic measures budget.

 

36.             The forecast balances position is set out in Annex 2.  As set out in paragraph 6, there is a proposed supplementary estimate this month to Agency Placements of £0.152m.  The estimated calls on balances during 2007/08 as set out in the Head of Finance and Procurement’s commentary on the budget was £2.0m, however the financial risk surrounding the unmatched claims for UASC’s suggest that a draw down on balances in excess of the planned £2.m may transpire during the year.  Paragraph 31 sets out an estimated surplus on strategic measures of £1.0m in 2007/08.  Assuming that this surplus is added to balances and that calls on balances are in line with the £2.0m forecast, balances at the year-end are anticipated to be £17.676m.

 

37.             Balances are regularly reviewed and are held at a level commensurate with the financial risks faced by the Council.  The position on balances together with the surplus on the Insurance Reserve will be evaluated as part of the Service and Resource Planning process for 2008/09 – 2012/13.  This means that balances are held at an appropriate level and surpluses or shortfalls are readdressed at least annually.

 

Efficiency Savings

 

38.             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 2007/08 is £8.1m. 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.

 

39.             The 2007/08 revenue budget includes £10.1m of savings and service reprioritisations classed as efficiency savings which 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. Details of any discrepancies that may affect the achievement of the savings will be included in future monitoring reports.

 

Best Value Performance Indicator (BVPI8)

 

40.             BVPI8 measures performance in relation to the prompt payment of invoices. The Council’s target for 2007/08 is for 95% of invoices to be paid within 30 days of receipt.  BVPI8 performance for April will be reported verbally, if this is available by 20 June 2007 .

 

Conclusion

 

41.             The 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 these positions and where necessary produce proposals to ensure that overall budgets are managed.

 

PART 2 - CAPITAL PROGRAMME

 

42.             At this stage of the financial year there are no known variations to report.  The Council is receiving £3.269m of Performance Reward Grant for capital purposes through the Public Service Agreement.  Included in this figure is some £0.626m for key worker housing that will be used to repay part of the associated debt.

 

43.             This leaves a balance available of Performance Reward Grant for capital of £2.643m.  The allocation of this funding was agreed by Council in February 2007.  £0.425m is payable to Thames valley Police Authority and the Drugs and Alcohol Action Team; £0.735m has been agreed for schools and the balance of £1.483m is for other County Council Services.  These items will be added to the Capital Programme in due course.

 

RECOMMENDATION

 

44.             The Cabinet is RECOMMENDED to:

 

(a)               note the report;

 

(b)              approve the non-repayable supplementary estimate of £0.152m requested by the Director of Children, Young People & Families as detailed in paragraph 6;

 

(c)               approve the permanent virements from Social & Community Services to Community Safety of £0.046m and from Community Safety to Social & Community Safety of £0.024m (paragraph 22);

 

(d)              approve the permanent internal virement of £1.376m within Corporate Core (paragraph 23);

 

(e)               approve the permanent virement of £2.733m from all Directorates to Shared Services (paragraph 27);

 

(f)                 approve the permanent virement of £0.335m from all Directorates to Corporate HR (paragraph 28);

 

(g)              approve the temporary virement of £0.255m from Corporate Core to Social & Community Safety (paragraph 29); and,

 

(h)              approve the permanent virement of £0.056m from Social & Community Services to Corporate Core (paragraph 30).

 

 

SUE SCANE

Head of Finance & Procurement

Corporate Core

 

Background papers:            Directorate Reports

 

Contact Officers:                   Ken Bell, Assistant Head of Finance (Services) (part 1), Tel: 01865 815411

Mike Petty, Strategic Financial Manager - Capital and Strategy (Financial Planning) (part 2), Tel: 01865 815622

 

June 2007

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