ITEM CA6
CABINET –
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
3.
The
following annexes are attached:
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
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
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
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
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
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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