ITEM CA5 CABINET – 15 JANUARY 2008
FINANCIAL MONITORING
Report by the Assistant Chief Executive & Chief Finance Officer
Introduction
1. This report sets out the Council’s forecast financial position for the 2007/08 financial year based on actuals to the end of November 2007. It includes projections for revenue, balances, reserves and capital. The report sets out explanations where the forecast outturn is significantly different from the budget and also when compared to the position at the end of October with action plans to recover the position where appropriate.
2. The in-year overspend for Directorates is forecast to be £1.162m, as set out in the table below, which is a decrease of £0.489m from the position reported last month of £1.651m. The in-year forecast excludes the variances on the City Schools Reorganisation, Dedicated School Grant (DSG) funded services and the Transport Days variation.
3. Taking into account the virement of £0.400m to Agency Placements from Unallocated DSG (recommended by Cabinet for approval by Council on 8 January 2008) and a further £0.081m of supplementary estimates for flood related expenditure (see paragraph 8) the forecast in-year overspend becomes £0.681m, which is 0.2% of the total Directorates’ budgets.
4. The year-end forecast of general balances is set out in Annex 5. After taking into account known changes, the forecast is £21.122m. Taking into account the forecast Directorate outturn, the consolidated revenue balances forecast is £20.441m. [2]
5. Figures for each Directorate are summarised within the Annexes and individual Directorate reports setting out the detail have been placed in the Members’ Resource Centre.
6. The following Annexes are attached:
Annex 1 (a-e) Forecast Outturn by Directorate Annex 2 (a-c) Virements and Supplementary Estimates Annex 3 Specific grants monitoring Annex 4 Forecast earmarked reserves Annex 5 Forecast general balances (Annexes 1 - 5 - download as .pdf file) Annex 6 (a-g) Capital monitoring (Annex 6 - download as .xls file)
Part 1 - Revenue
7. Annex 1 shows the forecast revenue outturn by Directorate based on the position to the end of November 2007. Significant issues or movement in the variances are commented on below and the management action being taken.
Floods
8. Supplementary estimates totalling £0.981m and £0.052m, relating to expenditure incurred as a result of the July floods, were approved by Cabinet on 20 November and 18 December 2007 respectively. Further supplementary estimates totalling £0.029m are being requested in this report and are explained in the following sections for each of the Directorates.
9. A summary of supplementary estimates for flood related expenditure as at 30 November 2007 is set out in the table below. There are likely to be further requests in future reports.
Children Young People & Families: £1.370m in-year overspend (£1.863m total overspend)
10. The overall Directorate position is a forecast overspend of £1.863m, as shown in Annex 1a. This includes the cost of the City Schools Reorganisation (£1.957m) where the repayment is planned over a number of years, the Transport Days variation (-£0.320m) and an underspend on DSG funded services (-£1.144m), which will be required to be carried forward as an underspend on DSG. This leaves a Directorate in-year overspend of £1.370m.
11. The projected overspend has increased by £0.030m since the last report. This relates to an increased pressure on the Legal Services budget, which is now forecasting an overspend of £0.280m. This projection includes the overspend brought forward from 2006/07 of £0.162m.
12. The Business Process Re-engineering Project on Access to Legal Services is reviewing processes within the Directorate, and is currently developing recommendations for ways in which controls can be improved and strengthened, in order to bring the expenditure under greater control. The separate budgets previously held by Strategy & Performance Service to meet educational legal costs and by Early Years & Family Support Service for social care legal costs have already been brought together under the management of one service.
Dedicated Schools Grant
13. There is no change to the underspend reported last month of £1.144m predicted on Out of County Placements and the Directorate is still investigating other areas of applicable DSG expenditure that offset this sum. Any balance remaining will be required to be carried forward as an underspend on DSG.
Social & Community Services: £0.360m overspend
14. The position for the Social and Community Services Directorate is a forecast revenue overspend of £0.360m, an overall increase of £0.301m since the October report. After adjusting for the £0.101m supplementary estimate for flood expenditure, which has now been added to the Directorate’s budget, this represents a £0.402m increase in the forecast variance since the last report.
15. There has been an increase of £0.225m in the forecast overspend for External Home Support, largely due to an increased take-up of Direct Payments. The forecast overspend is now £0.500m, of which £0.179m relates to expenditure on care and support costs (including housing) for failed asylum seekers.
16. The forecast variance in income for residential and nursing placements for Older People has increased by £0.168m to £0.658m. The increased income this year is mainly associated with full fee payers. There have been seven additional full fee payers so far this year creating around £0.200m additional income. The average income across all of the full fee payers (89 people) has also increased by around £0.003m per person per year, creating a further £0.270m income. The total income forecast this year is £12.2m and relates to around 1,900 clients, which is around £0.5m higher than the actual income achieved last year for a similar number of clients (after adjusting for inflation).
17. The projected overspend in Business Support has increased by £0.170m to £0.320m (after adjusting for the £0.101m supplementary estimate for flood expenditure). This is due to some measures in the action plan proving hard to deliver. Further pressures have also been identified since the Action Plan was agreed, mainly in relation to the Staff Support Service and reduced income from the PCT. Every effort will be made to reduce this variance over the remaining months of the financial year. However, if a variance remains at year-end, the Directorate would propose that carry forwards from underspending areas are used to offset this overspend as far as possible. The action plan will be reviewed in light of this latest forecast to ensure a sustainable position going into future years.
18. Management action to contain costs in Cultural Services is proving successful and savings of £0.098m are now anticipated within the library service. Savings have mainly been achieved through reducing casual staffing hours and by holding posts vacant. If these savings are sustained to the year-end, they will be ring-fenced to offset the overspend of £0.255m carried forward from 2006/07 associated with stock write-down costs.
19. As previously reported, pressures have been identified in Adult Learning, mainly due to income shortfalls associated with contracts to provide training to partner organisations. Whilst management action will be taken where possible, a balanced year-end position will be achieved by drawing down £0.492m from their reserves at the year-end. This would leave a remaining balance of £0.099m in their reserves. Pooled Budget Memorandum Accounts
20. The Older People and Physical Disabilities Pooled budget is projecting an overall underspend of £0.995m compared to £0.508m last month. The County Council elements of the pooled budget are projected to underspend by £1.059m (compared to £1.391m in October) and the Primary Care Trust (PCT) elements are expecting an overspend of £0.065m (compared to £0.883m in October).
21. The large decrease in the forecast overspend for the PCT elements of the pool is due to an increased contribution from the PCT in recognition of pressures associated with the revised framework for Continuing Care.
22. As previously reported, the County Council variance is mainly due to savings within the contracts for block purchased beds, shorter average length of stay and savings as a result of the new single Registered Nursing Care Contribution rate.
23. The Learning Disabilities Pool is predicting an overspend of £0.732m, compared to £0.875m in October. The reduction in forecast spend this month is due to slippage on the start date of new placements. If the forecast does not improve further corrective action will be taken, where possible, during the year to reduce the net spend. If this fails the overspend will be carried forward, to be addressed by the pool in the coming year(s). If the Joint Management Group decides that the overspend cannot be reasonably dealt with by the pool either in the current or future years, a request for further funding from both partners would be made.
Environment & Economy: £0.534m underspend
24. The Directorate is forecasting an underspend of £0.534m, an increase of £0.355m since October. The main movements are within Transport and Property Services.
25. Within Transport the supplementary estimate of £0.480m for flood expenditure has now been added to the budget. This has been offset by action plans within Oxfordshire Highways to increase their expenditure on road maintenance and drainage schemes by £0.330m. An underspend of £0.080m is also now forecast on the project for Access to Oxford, which will be required to be carried forward into 2008/09.
26. Within Property Services an in-year underspend of £0.070m on the Salix project is now forecast, which will need to be carried forward into 2008/09. This is in addition to the previously reported £0.200m underspend to be carried forward, which is due to re-profiling the budget over 3-years.
Community Safety: £0.189m underspend
27. The overall Community Safety Directorate position is a forecast underspend of £0.189m, which is a change of £0.476m since October (£0.287m overspend). This mainly reflects the addition to the budget of the £0.400m supplementary estimate for flood expenditure approved by Cabinet.
28. In November a further £0.029m expenditure has been incurred relating to the July floods and a further supplementary estimate for this amount is requested in this report.
29. An underspend of £0.060m is forecast on a 2007/08 Policy Plan to purchase an IT solution for the Fire and Rescue Service Personal Development System (IPDS) to replace the current paper based system. Trials of two systems are due to commence in early 2008, however purchase of the system will now slip into 2008/09, therefore this amount will need to be carried forward.
Corporate Core: £0.155m overspend
30. The overall position for the Corporate Core is a forecast overspend of £0.155m, an increase of £0.010m since October.
31. The operating loss forecast for the Print & Design Unit has increased by a further £0.030m to £0.130m. The growing deficit is the result of a highly competitive market and reduced work coming from both the directorates and external customers. Unless action is taken, a similar deficit is likely next year. There are various options currently under review for addressing this budget pressure, all of which have cost implications.
32. The estimated overspend in the Coroner’s Service has increased by £0.010m to £0.060m due to the agreement of the Coroner’s national pay award. As in previous years, this will be funded from balances. As previously reported, the current scrutiny review is considering the future of the management of this service.
33. There have also been small changes in variances reported in Corporate HR, Change Management and Finance & Procurement, totalling a net reduction of £0.030m.
Virements and Supplementary Estimates
34. The virements requested this month are detailed in Annex 2a, virements previously approved in Annex 2b and Supplementary Estimates in Annex 2c. The supplementary estimates requested this month total £0.029m.
Specific Grants Monitoring
35. Annex 3 details the movement on specific grants.
Strategic Measures
36. We have been reporting additional interest earned on the Council's money market investments of £2.500m and indicated that this could rise further by the end of the year. The current forecast is that this will rise by a further £1.000m to £3.500m. This is a result of the level of balances and the recent effects of inter-bank rates being exceptionally high due to the liquidity problems in money markets.
37. We have further reported the uncertainty around the Baxter Index (inflation applied to infrastructure), which is currently around 3.5% lower than the budget provision of 6.2%. However, we need to be cautious in estimating where the rate will be by the end of February which is the point at which it is a measure used for the budget given the high price of oil which may push the current Baxter inflation rate higher. Each one percent movement in the Baxter Index equates to around £0.280m. This means that if the current rate were to continue there would be an additional saving of around £1.000m. This cannot be counted on at this stage because of the uncertainty alluded to above.
38. The Council has taken further long term borrowing from the Public Works Loan Board to finance the Capital Programme and has also restructured existing loans. This has resulted in borrowing at a lower level than the budget provision. Overall savings from debt restructuring and borrowing undertaken this year are now £0.050m in a full year.
Part – 2 Balance Sheet
Reserves
39. Annex 4 details the forecast movement on earmarked reserves. The only change this month is the forecast use of the Adult Learning reserve (see paragraph 19).
Balances
40. Annex 5 sets out the year-end forecast of general balances taking into account known changes. Forecast balances are £21.122m as at the end of November, an increase of £0.971m since the last report. This is due to an additional £1.000m forecast interest on balances (see paragraph 35) and a further £0.029m supplementary estimate requested for flood related expenditure.
Creditors
41. BVPI8 measures the percentage of undisputed invoices paid within 30 days of receipt for which the Council’s target for 2007/08 is 95%. The performance for the year to the end of November for the Council overall was 89.1%. The overall performance for November was 91.4%, which is the highest monthly performance of the year although still some way short of the target figure. All areas are benefiting from moving procurement across to the new e-procurement arrangements, the results for which are now regularly beating the results for those old style invoices.
42. The Council will fail to meet the 95% target overall during the current financial year, however this is a key target and efforts continue to get monthly performance up to 95% by the end of the financial year to give us an opportunity to meet it in 2008/09.
Part – 3 Capital
43. At the end of November 2007 the variation to the last capital monitoring report is expected to be -£7.089m in 2007/08. The increase in the total cost of schemes included in the programme is £6.477m since the last report.
44. The changes to the last monthly monitoring report are shown in the table below:
Directorate: Children, Young People & Families
Main Programme
45. There is a reduction in payments of £2.504m in 2007/08. This is mainly due to the change in spending profile of some of the schemes. These include Banbury Dashwood Cattle Market -£0.433m, Wheatley Park 10 Class Block -£0.400m, Chinnor St Andrews -£0.350m and Children’s Centres -£1.132m.
46. There is an increase in overall payments of £0.923m. The main reasons are due to cost increases on the projects at Banbury Stanbridge Hall £0.337m and Didcot Science Block £0.461m. These increased costs are funded within the overall resources available to the schools capital programme.
Forward Plan
47. There is a reduction in payments in 2007/08 of £0.315m mainly due to financial re-phasing on Didcot Stephen Freeman -£0.250m, Fitzwaryn Temporary Classrooms £0.200m and Woodstock Marlborough Extensions -£0.200m.
48. There is a reduction in overall payments of £0.315m mainly due to changes in the risk/contingency provision of -£0.363m
Directorate: Social & Community Services
49. There is a reduction in payments of £4.624m in 2007/08. This mainly reflects a change in the profile of spend on a number of projects. These include Homes for Older People (HOPs) Externalisation -£2.950m (which relates to the transfer of the Orchard Fields Banbury site from Children, Young People & Families), Bicester HOP -£1.104m, Stowford House -£0.782m and the Library Improvement Programme £0.201m. The Wallingford Special Transport Project has transferred to the Environment & Economy capital programme -£0.270m.
50. There is a reduction in overall payments of £0.109m.
Directorate: Environment & Economy
51. There is an increase in payments of £0.763m in 2007/08. This reflects mainly the addition of the County Hall Better Offices Project £0.479m and the transfer of the Wallingford Special Transport Project from Social & Community Services £0.270m.
52. There is an increase in overall payments of £5.978m. This mainly reflects changes in funding resulting from the capital settlement. These include additions to reflect capital grants in respect of Detrunking Road Maintenance £6.304m and for Specific Road Safety Measures £4.478m, offset by reductions in Structural Maintenance to reflect the reduction in capital grants within the transport capital settlement -£7.188m.
53. In addition the overall costs of the County Hall project of £2.018m have been included. Directorate: Community Safety
54. There is a reduction of £0.374m in 2007/08 due to the financial rephasing of projects for the Radio Scheme -£0.100m, Banbury Fire Station -£0.174m and Minor Works -£100m.
RECOMMENDATIONS
55. The Cabinet is RECOMMENDED to:
(a) note the report;
(b) approve the virements as set out in Annex 2a;
(c) approve the supplementary estimates totalling £0.029m as set out in Annex 2c; and
(d) approve the changes to the capital programme as set out in paragraphs 43 to 54;
SUE SCANEAssistant Chief Executive & Chief Finance Officer
Background papers: Directorate reports
Contact Officers: Lorna Baxter (Parts 1&2) Tel: 01865 816087 Mike Petty (Part 3) 01865 815622
January 2008 [1] The variance has been calculated as the difference between the latest budget and forecast outturn. The percentage is a measure of variance to latest budget. [2] The consolidated revenue balances forecast is the forecast general balances less the forecast Directorate in-year overspend plus the Transport Days variation.
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