Meeting documents

The Executive
Tuesday, 19 March 2002

EX190302-05supC

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ITEM EX5 - SUPPLUMENT C

EXECUTIVE – 19 MARCH 2002

BUDGET MONITORING

BUDGET MONITORING 2001/02 and BUDGET 2002/03

Supplementary Report by the Leader of the Council and the Deputy Leader of the Council

Introduction

This is the first quarterly budget monitoring report to come to the Executive under the new political management arrangements. Until the budget heads are aligned to the new responsibilities of the "paired" Executives, the reports follow the format of the "old" committees. Executives have examined the individual reports carefully and discussed them, where appropriate, with Directors. The following contains their commentary and advice to the Executive.

Strategic overview

In setting the budget for 2002/03, the Executive accepted the County Treasurer’s advice to increase reserves to at least £6 million in order to provide a cushion against the possibility of continuing overspends in Social Services, a planned overspend arising from the revenue consequences of the City Schools Reorganisation and any other unforeseen financial problems. This outturn report endorses the wisdom of that strategy significantly.

At 31 March 2002, the Council’s balances are expected to be:

	£m
Revenue balances	3.0
Committee balances:
Social services over-spend	(5.3)
City schools revenue over-spend	(1.7)
All other committees net under-spend	2.9

Net overdrawn balances

1.1

Overspend temporarily funded from Capital Reserve

(1.1)

Social Services over-spend will be carried forward and will form a first charge against their budget for 2002/03. Social Services will therefore have to "pay back" this over-spend from 2001/02 as well as eliminate the level of over-spend currently in their budget. The Education City schools over-spend is planned and will be recovered from savings arising out of the reorganisation in later years. In theory, therefore, revenue balances should be restored to £3 million and augmented by an additional £3 million from the 2002/03 budget to create a total of £6 million. However, this depends on Social Services succeeding in bringing spending under control and it does assume the realisation of savings expected from the City schools reorganisation. Increasing the level of Revenue balances to £6 million does little more than match the level of over-spend currently shown by Social Services and, as such, can hardly be seen to be excessive.

School balances are forecast to be £13.3 million at 31 March 2002. Although this may seem to be a significant sum when resources elsewhere are stretched, it must be remembered that many schools have earmarked significant parts of these balances for specific expenditure. It must also be remembered that any "borrowing" of these balances by the County Council will have to be repaid in later years. The Council has "borrowed" £1.1 million of these balances at 31 March 2002 to fund current pressures and this will be increased by a further £½ million taken as a strategic measure in the 2002/03 budget. This totals £1.6 million and will have to be repaid to schools in later years.

There are further strategic measures in the 2002/03 budget totalling £5.8 million, all of which require reversal in later years.

The Council’s position therefore remains extremely tight and, with spending pressures in a number of areas and uncertainty around several budget heads, it is vital that all areas of the Council exercise strong financial management. It must be made clear that there is no room for over-spending in 2002/03.

Learning & Culture Portfolios (previously Education and Cultural Services Committees)

Although the Education budget shows a net over-spend of £0.3 million, this includes planned over-spending arising on the City Schools reorganisation of £1.7 million which is expected to be recovered from savings in later years. The "real" position is therefore an under-spend of £1.4 million. This is made up of a large number of small variations. There are commitments and pressures anticipated in 2002/03 of £1.6 million and the "real" under-spend will be applied towards funding them.

Within the general trend of under-spends, the Education budget contains two significant projected over-spends. These are:

	£000
Out of county placements	387 (partly offset by under-spend on statementing budget of £235k)
Transport	322

The report indicates continuing pressure on both of these budget heads.

Reference has already been made to school balances (para 5 above) which comprise £12.2 million with schools and a further £1.1 million deposited with the County Council. This is a total of £13.3 million.

The report highlights the amount of funding that comes in the form of ring-fenced or conditioned government grants. The total to date is £37 million.

The Cultural Services budget shows a satisfactory position with an under-spend of £162K projected for the year end. None of the variations require highlighting.

Social & Health Care Portfolios (previously Social Services Committee)

The Social Services report shows a predicted over-spend of £5.3 million at 31 March 2002. This is £2.1 million more than that shown in the December QFR.

The principal causes of over-spends are:

Continuing and rising spending pressures;

Planned savings that have not proved deliverable;

Commitments that the financial system had failed to pick up in earlier monitoring reports.

In the context of spending pressures, all areas of Social Services need to understand that the envelope of £105 million for Social Services in 2002/03 is the maximum that the Council can afford. It represents an increase of just under £10 million on the 2001/02 budget and takes planned spending £20 million over the Standard Spending Assessment. There is no room for over-spends.

There is equally no room for planned savings that are undeliverable. It is the Executive’s clear expectation that the budget for 2002/03 is realistic and achievable.

Finally, the FINE report sets out a clear Action Plan to improve financial management in Social Services. This is absolutely essential.

There must be:

ownership of budgets by all budget holders;

accurate capture and recording of all commitments as they are incurred;

timely and accurate financial reporting;

a willingness to work within budget from April 2002 onwards.

The FINE report has been accepted by the Executive and by Social Services and is now in the early stages of implementation.

Implementation of the Social Services budget is bound to be difficult. The Executive is committed to delivering good services within a balanced budget and will support officers in achieving this. We cannot continue to provide services that are beyond our means.

Environment Portfolios, including roads and transport (previously Environmental Committee)

There is a projected year end under-spend of £1.1 million (before any funding of the planned Repairs and Maintenance over-spend). This is £254,000 more than the figure reported in December. The main areas of change are increased projected under-spends on Public Transport Revenue Support and Waste Management. Reasons are given in the report. Much of the under-spending relates to slippage on individual projects and will have to be carried forward to fund expenditure in 2002/03.

The key issue is the proposed use of part of the under-spend to fund the planned over-spend on urgent building works. Details are given in Annex F – the report on the former Operations Sub Committee budget. In light of significant over-spending by other departments, the Director of Environmental Services imposed a freeze on expenditure on planned building maintenance work in November in order to minimise the impact on the overall Council budget. The net over-spend on building maintenance is now expected to be in the region of £0.8 million rather than the £1 million previously forecast. Specific virement proposals will be made at the end of the financial year when the exact amount of the over-spend is known.

Community Safety Portfolio (previously Public Protection Committee)

This budget head is predicted to show an under-spend of £91K at the year end.

The only significant overspend under this budget head relates to pension costs of fire fighters resulting from medical discharges and ill-health retirements, most of which are borne centrally from Council balances.

Corporate Centre (previously Operations Sub-Committee)

This budget head predicts a planned over-spend of £0.8 million on Repair and Maintenance of Buildings to counter the growing deterioration in the County’s building stock. It is offset by an under-spend on Environmental as described at para 20 above.

Keith R Mitchell Leader of the Council