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ITEM EX5 - SUPPLEMENT B

EXECUTIVE – 19 MARCH 2002

BUDGET MONITORING

SOCIAL SERVICES BUDGET PROPOSAL 2002-03

1. The Council agreed a budget for 2002/03 at its meeting on 5 February. When agreeing the budget the Council was conscious that further work was required on the Social Services budget. In particular, the Council wished to implement one of the recommendations from the FINE report and undertake an exercise to identify a bottom up budget linked to service activity. This could then form the basis of the Social Services budget for next year. The Council agreed the Executive’s budget strategy which instructed Social Services officers to report to the Executive with options for allocating a total of £105.2m across service areas and with an indication of the activity to be provided in each area at those spending levels.
2. Over the past few weeks extensive work has been undertaken by service and support staff to link activity with budgets and to determine a "bottom up" budget for 2002-03. The results from this exercise were considered by the Social Services Senior Management Team (SMT) on 6 March 2002 and proposals identified to re-allocate resources within the overall budget approved by Council. This re-allocation was carried out mindful of service priorities and the potential impact on national performance indicators as represented by service plans developed within the department’s planning into action framework.
3. This report outlines the strategy used and the outcome from this exercise, i.e. an affordable budget linked to activity levels.
4. The table below summarises the department’s financial position based on the Medium Term Financial Plan 2002-03 and the Council’s decision on the budget.

	£m	£m
Draft Medium Term Financial Plan		98.1
Funding for HOPs transfer		2.5
Additional Unavoidable Pressures - funded	4.6
Additional Unavoidable Pressures - unfunded	1.4
Total Unavoidable pressures		6.0
Additional Unfunded Pressures		6.0
TOTAL REQUIRED BUDGET		112.6
Agreed Funding for Social Services		105.2
Upper Funding Shortfall Limit		7.4

5. The draft Medium Term Financial Plan (£98.1m) represented a £2.7m (2.8%) increase on the budget for the current year. The Council added a further £7.1m (7.4%) to the Social Services budget giving a total increase in resources of £9.8m (10.3%). However, £5m of these resources are to repay the overspend in 2001/02. The actual expenditure in 2001/02 is currently expected to be about £100.4m, i.e. £5m above the budget. This compares with a budget for 2002/03 of £100.2m, excluding the repayment of the overspend.
6. The bottom up budget exercise was carried out to identify what budget would be required to continue with the current level of activity. The outcome of this exercise was a budget of £114.1m, £8.9m above the Social Services budget of £105.2m. In carrying out this exercise we knew that the outcome would exceed the resources available because, despite a significant increase in the Social Services budget, activity levels have increased beyond what the Council can afford.
7. The bottom up budget has been put together in an entirely different way to normal practice. As a consequence it is not easy to analyse the changes that have occurred, particularly the difference between demographic growth (variations in activity) and the continuing impact of 2001/02 activity levels. However, the table below provides an indication of the component parts of the excess activity and compares it with the pressures identified in January.

Analysis of Pressures	January Position	Bottom Up Budget
	£m	£m
Unavoidable pressures not funded	1.4	1.4
Increased forecast overspend 2001/02	0	1.0
Impact of 2001/02 overspend on 2002/03	0	2.7
Loss of Grant Income	1.3	1.3
IT investment	2.3	0
Demographic growth not funded	1.0	1.3
Other pressures not funded	1.4	1.2
TOTAL	7.4	8.9

8. The current forecast overspend in 2001/02 is £5.3m. The bottom up budget assumes a marginal improvement by the end of the year to £5m. When reporting to the Executive in January there was an expectation that the action taken to reduce expenditure as a consequence of this overspend would produce full year savings that would result in no pressure next year. In practice some of the savings proposals have proved undeliverable, either in total or in part. In addition, the exercise in identifying current activity levels for the bottom up budget has not picked up all the current plans to reduce activity next year. As a consequence a pressure of £2.7m is shown as the ongoing impact of the current year’s overspend.

The Strategy

9. The SMT meeting on the 6 March considered the cost of the unfunded activity and prior to the meeting identified the key points that would help in the evaluation and re-allocation of resources. The key points are listed in summary below:

• Contribution to the Department’s Objectives
• Impact on performance indicators
• Scope for change in short and long term
• Risk of Legal Challenge
• Conclusions from the Department’s risk analysis work
• Impact on Partnership working

10. Emphasis was placed on the National Performance Indicators and what would improve performance or where an adverse affect on our performance would not be significant. For each service area, options for service movement were identified as follows:

Service Area	Key Service Considerations
Children Looked After	Reduction in the numbers looked after Hold foster care levels constant Reduce residential care Increase adoptions
Older People	Reduce long term residential admissions Reduce intensive home support (clients over 10 hours) Increase the number of people receiving low levels of care Reduce the number (re) assessed and tightened eligibility criteria
Mental Health	No major changes required
Physical Disabilities	Reduce long term residential admissions Reduce intensive home support (clients over 10 hours) Increase the number of people receiving low levels of care
Learning Disabilities	Reduce long term residential admissions Reduce the number of people receiving low levels of care
All Services	Focus on case administration (assessing all cases, providing statement of needs, completing reviews)

11. We also had available for guidance CIPFA Statistics from 1999/2000 which identified our spend on services in relation to other authorities. From this information we concluded that:

• We spend considerably more on Learning Disabilities than other Counties
• We spend slightly higher on Service Strategy and Regulation than other authorities
• On all other services we spend less than average when compared with other authorities.

12. SMT used this information to help identify how to allocate resources and bring activity levels down to within the resources available.

Proposed Budget 2002/03

13. The budget proposed has been determined by initially increasing the draft Medium Term Financial Plan to reflect the high levels of current activity, followed by a re-allocation of resources using the strategy identified above to reduce activity to an affordable level. The resultant budget is one that reflects service priorities and usage, in line with recommendations within the FINE Report. The outcome of this exercise for the 31 service areas is shown in Annex 1. The table below illustrates the impact that this process has had on the Service Divisions.





14. Reduction to Keep Within Existing Resources

The reductions that have had to be made are detailed in Annex 2 and 3. Annex 2 provides the financial impact of the reduction in service levels. Annex 3 provides a narrative description of the reductions to be made and the rationale behind the proposals. In some cases the strategy to be adopted in achieving the reduction is outlined but the precise details of the reductions have yet to be worked up. It is proposed to report this detail to the Executive on 16 April.

Approval of the Budget by Council

15. As indicated above, the Council approved a budget at the meeting in February. In practice, the intention is that the budget proposed in this report will replace the previously agreed budget. However, technically the Council will have to agree a series of virements to amend the previously agreed budget, bringing it in line with the budget proposed in this report. The list of necessary virements will be produced for the Council meeting on 2 April.

Budget Monitoring

16. The budget proposed in this report is at a strategic level. As well as working up the detail of some of the proposals as mentioned above, a detailed budget with associated activity is to be produced for management purposes. The intention is to produce regular reports for budget managers with the financial and activity information they require. A summary of this information will be reported to SMT, the Budget Working Group and the Executive as appropriate. All this is in accordance with the recommendations coming out of the FINE report.
17. Action is being taken to implement other aspects of the recommendations from the FINE report, which will help in delivering next year’s budget. This includes improving the quality and availability of financial and activity information that will be used in the monitoring reports. Training in cost centre management is also planned for budget holders. Financial management will become part of departmental management processes. Finally a set of action plans are currently being drawn up for delivering the reductions in activity that are necessary to deliver the budget. These action plans will have responsible officers and milestones to measure progress.

Impact on 2003/04

18. An exercise has been carried out to identify the broad implications of the proposed Social Services budget for 2002/03 on 2003/04. Some of changes to the levels of activity have part year implications next year. The outcome of the exercise is contained in the following table:

Potential Variation	£m	Comment
Abnormal inflation	1.3	Phased in over two years
Demographic growth	1.6	Needs to be reviewed
HOPs transfer	- 0.4
Fair charges for Home Support	0.4	Implemented October 2002
Specific grants falling out	1.5	Needs to be reviewed
Supporting People (transitional housing benefit)	2.0	Replaced by specific grant?
Reductions in activity levels – full year effect	-0.3	Needs to be reviewed
Repayment of 2001/02 overspend	-5.0	Assumed repaid in 2002/03
Net Additional Cost	1.1

19. A number of these potential variations need to be reviewed. For example the Medium Term Financial Forecast last Autumn included a projection for demographic growth. This has been repeated above but is likely to be affected by the bottom up budgeting exercise.
20. The exercise suggests that an additional £1.1m of resources are needed in 2003/04, over and above normal inflation, in order for services to carry on at the proposed level for 2002/03. During the next few months further work will be undertaken on a revised Medium Term Financial Forecast for Social Services and its relationship with the budget strategy agreed by the Council on 5 February.

RECOMMENDATION

21. The Executive is RECOMMENDED to RECOMMEND the Council to:

1. agree the budget proposals for Social Services contained in the report, and authorise the virements necessary to put these into effect;
2. note that the proposals entail a significant re-allocation of resources, partly to bring budgets into line with activity and partly to reduce activity levels to an affordable level; and that as a consequence flexibility will be needed during the course of the year and further virements are likely to be necessary as a result.

Background Papers Nil

Contact Officer: Paul Gerrish Tel: 01865 815370

18 March 2002

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