ITEM CA5
CABINET – 24 JUNE 2008
FINANCIAL MONITORING
Report by Assistant Chief Executive & Chief Finance Officer
Introduction
1. This is the first financial monitoring report for the 2008/09 financial year and covers the period up to the end of April 2008 for both revenue and capital budgets. 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 from issues in 2007/08 and areas of emerging pressures.
2. The 2008/09 revenue budget was approved by Council in February 2008. Subsequent budget reallocations to reflect late notification of grants and other factors were approved by Cabinet on 15 April 2008. These budgets will be used for the Council’s Service & Resource Planning publications for 2008/09 to 2012/13 and form the basis for future monitoring reports. The table below summarises the budget for 2008/09 by Directorate:
3. The following annexes are attached: (download as .xls file)
Annex 1 (a-b) Virements and supplementary estimatesAnnex 2 (a-b) Specific Grants Monitoring
Part 1 - Revenue
4. For each directorate the key risk areas have been identified based on issues in 2007/08 and emerging pressures.
Children, Young People & Families
5. The Directorate is currently undergoing a major restructuring to deliver the county council's priorities for children and young people more effectively and efficiently. Financial monitoring arrangements are in place to minimise financial risks during the restructure transitional stage and will be reported separately in each monitoring report.
6. Due to the rising cost of fuel, the Home to School Transport budget is a financial risk for 2008/09. Proactive monitoring and reporting arrangements are in place and these were effective in containing the risk in 2007/08 and accurately forecasting the year-end position. Work continues on improving contract tendering, the rationalisation of taxi routes through improved school coordination and in other areas. The contracts for the Didcot and Chipping Norton routes are due to be retendered during 2008/09. The high fuel costs have an adverse impact on the retendered costs.
7. The Food with Thought service is forecasting a breakeven position for 2008/09 based on forecasted meal numbers. A financial risk exists due to the recent inflation rise on the cost of food products and transport and also on the achievement of the forecasted meal numbers.
8. The budgets for out of county and agency placements will be combined in 2008/09 to achieve an effective and efficient commissioning strategy. However, the high volatility and placement costs associated with this service area continue to make this the highest budget risk area for the Directorate.
9. The Council submitted a ‘special representation’ claim to the Borders and Immigration Agency in July 2007 showing that the costs associated with looking after asylum seekers exceeded the agency’s standard unit costs. The outcome was expected in December 2007 but as yet is not resolved. In respect of 2007/08 an independent audit of Oxfordshire’s costs, linked to the lobbying exercise, was undertaken in January 2008.
Social & Community Services
10. The Adult Learning service was overspent by £0.241m in 2007/08 as a result of income shortfalls. This was offset by a contribution from the service’s reserve and a recovery plan is now in place to ensure a sustainable position going forward. Progress against this plan will be reported during the year. The service is also expected to repay £0.101m to balances during 2008/09. A temporary call on balances was approved for two years during 2006/07 of £0.188m, with £0.087m repaid at the end of 2006/07.
11. The 2008/09 Library Service budget assumes net savings of -£0.064m due to the temporary closure of the Central Library refurbishment. Due to slippage on the overall Westgate Project this saving will not be fully achieved in 2008/09 although the total saving is still thought to be achievable over the duration of the project. This will mean that unless there are other variations the Library Service would overspend by £0.064m in 2008/09 but that this overspending would be matched by similar underspending in a later year.
12. A potential pressure of £0.250m on staffing costs has been identified in Care Management & Occupational Therapy. This is due to the need to provide additional OCC staff based in hospitals to cover for sickness and maternity leave.
13. There are considerable pressures in Strategy & Transformation. Customer support has many demands on its services to support the ‘Putting People First’ agenda. The service area will need to ensure that the directorate agrees priorities for both the change agenda and also for systems work during the year in order to ensure that these pressures are mitigated as much as possible.
Pooled Budgets
14. The following table sets out the Pooled Budgets managed by the Council for 2008/09.
15. In addition to inflation increases the Oxfordshire Primary Care Trust has increased its contribution to the Older People’s pool by £3.850m (25%) in respect of the on-going additional costs arising from changes to the Continuing Care framework. The contribution to the Learning Disabilities’ Pool has also been increased by £0.920m (3%) in line with the additional contribution made in 2007/08.
Environment & Economy
16. Within Waste Management costs associated with contract compliance will be a pressure in 2008/09, however, funding is held centrally within the directorate to support this so there will be no financial impact overall.
17. The Waste Treatment project costs look to increase as the competitive dialogue stage progresses. The worst case scenario estimates additional consultancy costs of £0.500m, which if the proposed 2007/08 carry forward is accepted will reduce to just over £0.360m. If the directorate cannot meet the cost during the year, they may request a supplementary estimate at the year end to support any unfunded costs.
18. Within Property Services the carry forward overspend on repair and maintenance and health & safety mean that non-schools (although the position is the same for schools) allocations for 2008/09 will be reduced to compensate for this overspend being carried forward. It is anticipated that forecast expenditure will come in line with the reduced budgets through effective financial management.
Community Safety & Shared Services
19. The firefighter houses affected by the flooding in Abingdon in July 2007 are still not habitable and so it is necessary to continue renting properties from the private sector to temporarily house the affected firefighters and their families. A supplementary estimate of £0.011m is requested to cover costs to date in 2008/09. It is expected that further supplementary estimates will be required until the repair work is completed.
20. In 2008/09 the Gypsy and Traveller Service will be managing traveller sites on behalf of Buckinghamshire County Council with a review of future arrangements at the end of the year. The management fee will cover this Council’s costs in full.
21. The Shared Services budgets have transferred to this directorate from Corporate Core this year. The business is now fully operational and all services have operating budgets for current establishments. Negotiations are continuing to complete the transfer of all remaining budget savings due from directorates. Further planned savings are to be achieved by a programme of continuous improvement and system development. Some of this will be challenging to deliver, particularly in the area of Learning and Development activity and funding. The project remains broadly on target to meet its savings as set out in the business plan. Corporate Core
22. The decision by the Council in setting the 2008/09 budget to give additional funding to the Coroner’s Service and Communications & Marketing should alleviate the pressures in those services.
23. There are continuing pressures in the Strategic Human Resources & Organisational Development service resulting from level of resourcing required to fulfil its strategic role. An action plan is being developed by the Head of Service to ensure that the service stays within budget this year.
24. £0.200m of funding was agreed as part of the 2008/09 service and resource planning process to offset the Print & Design £0.172m overspend being carried forward from 2007/08. Following the decision made in earlier in 2008, the Print & Design Unit closed on 23 May 2008. County Print Finishers within Social & Community Services are taking over the provision of a reprographics service and will also offer a small in house design and procurement service. The reprographics service should be self financing but it is proposed that, if there is a loss in the first year, this should be met from balances.
25. The Job Finder service has been successful in redeploying some of the Print & Design workforce and this has significantly reduced the anticipated one-off costs of closure. A full analysis of these costs will be included in the May monitoring report to July Cabinet together with a request for a supplementary estimate.
26. A £3.0m ICT Strategy Investment Fund was established using one-off funding available for allocation in 2008/09. This will be used to fund projects agreed by the ICT Change Management Board. The use of this fund will be reported in future months.
27. The Change Management Board has already agreed the allocation of the majority of the funding available from the Change Fund. The amount available to allocate for 2008/09 is £1.985m for revenue and £0.268m for capital. The projects that will benefit from funding include SAP for Schools, various partnership working projects and 21st century customer.
Virements and Supplementary Estimates
28. The virements requested this month are detailed in Annex 1a. The annex reflects the virements relating to the transfer of the Area Based Grant (ABG) income budgets from directorates to Strategic Financing (paragraph 31).
29. The supplementary estimates requested this month are shown on Annex 1b and total £0.059m. The amount of Supporting People grant for 2008/09 was known at the time of setting the budget. However, due to the way it is accounted for on SAP, an imbalance between expenditure and income has been identified. This was as a result of the way inflation was applied on SAP. A request for a supplementary estimate (£0.048m) is made in respect of the imbalance to bring the budget into line with the grant allocation. This is not additional funding but a correction to the accounting entries. The remaining £0.011m relates to costs arising from the July 2007 floods in firefighter houses.
Specific Grants Monitoring
30. Annex 2 details the movement on specific grants in 2008/09.
31. As part of the 2008/09 budget setting process it was recognised that a number of existing specific grants would be transferred into the ABG. In compiling the budget the ABG income remained within the directorates to directly offset the grant related expenditure. However, the Area Based Grant Guidance issued on 28 February 2008 states that the ABG should be treated as a general grant. This means that the grant income budgets should be removed from the directorate budgets and shown as external financing, in a similar way to the Revenue Support Grant and National Non Domestic Rate funding. The budget for expenditure on the ABG will remain within the directorates’ budgets. Annex 1a shows the virements for this movement of budget between directorates and strategic financing. This annex also shows other ABG related adjustments where the expenditure and grant budgets have been amended to reflect the final allocation of ABG for 2008/09. Future monitoring reports will include a section on expenditure on the ABG.
Strategic Measures
32. A number of amendments have been made to the Council’s lending list since the last monitoring report to Cabinet.
33. The following banks have been removed from the lending list due to a reduction in credit rating below the council's minimum credit rating criteria: · Caja de Ahorros de Galicia (Caixa Galicia) · American Express Bank · Glitnir Bank hf · Kaupthing Bank hf · Kaupthing Singer & Friedlander Ltd · Bradford and Bingley PLC
34. The following banks were temporarily suspended from the lending list due to a negative ratings watch but have since been reinstated following affirmation of credit ratings: · Landsbanki Islands · Heritable Bank Ltd
35. The following banks were added to the lending list because they meet the minimum credit rating criteria: · Sumitomo Mitsui Banking Corporation Europe Ltd · Sumitomo Trust & Banking Co Ltd · Wells Fargo Bank NA
36. Egg banking Plc was removed from the lending list following the integration of Egg and Citibank's UK personal financial services operations into a single UK consumer business. The lending limit for Citibank was reduced from £30m to £22m following a reduction in credit rating.
37. Credit Lyonnais was removed from the lending list due to removal of FSA rating.
38. To manage the increased risk as a result of the credit crisis in the banking sector, country limits were reintroduced to limit deposits to banks registered within the same country to 25% of the investment portfolio. This excludes UK banks where the total remains unlimited. The impact of this has been a temporary suspension of new deposits to Irish banks until the total lent falls below 25%.
Part 2 - Capital
39. Work was undertaken at the end of 2007 to ensure the proposed capital programme for 2008/09 was deliverable. More recently work has been undertaken to review the deliverability of the programme taking into account the slippage in the 2007/08 programme, the results of which are tabled below.
40. The table below sets out the 2008/09 programme agreed by Council in February 2008 and the 2007/08 underspend to give a total programme for 2008/09. The variation shows the current projection of spend against the total programme.
41. The February 2008 Capital Programme included £18.6m relating to Schools devolved capital formula allocations. This is excluded from the figures in the table below as it is spent in and by schools.
42. The reasons behind the variation from the total programme are analysed below:
· Planning consent delays, ecological survey windows, links to external developments – 38% of total variation · Re-phasing of minor schemes (10 schemes averaging £0.3m each) to future years – 25% of total variation · Change in cost from original allocation to detailed appraisal where accurate and known phasing can be established with certainty – 15% of total variation · Other – 22% of total variation
43. There remains a risk that there will be further slippage on the revised estimated spend for 2008/09. The margin of risk could be up to 15% of the current forecast.
Directorate Specific
Children, Young People & Families
44. Excluding devolved formula capital, the variation against the total programme is -£8.216m. This includes rephrasing within the forward plan -£3.249m, slippage due to external factors -£2.181m and -£1.94m due to changes between the programme of works and the original allocation. The key schemes and the reasons for slippage are set out below.
Social & Community Services
45. The variation on the total programme is -£1.966m. This mostly arises due to external factors affecting three library schemes totalling -£2.506m. The key schemes and the reasons for slippage are tabled below.
Environment & Economy
46. The variation on the total programme is -£2.136m. This combines rephrasing of projects -£0.715m, opportunity funds not required -£0.669m and customer uptake of schemes -£0.350m as the key factors to the change. Transport anticipates that there will be no material variation from their programme in 2008/09. The key schemes and the reasons for slippage are tabled below.
RECOMMENDATIONS
47. The Cabinet is RECOMMENDED to:
(a) note the report; and
(b) approve the virement and supplementary estimate requests.
SUE SCANE Assistant Chief Executive & Chief Finance Officer
Background papers: Directorate reports
Contact Officers: Lorna Baxter, Assistant Head of Finance (Corporate Finance) Tel: (01865) 816087
June 2008
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