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ITEM EX5

EXECUTIVE – 20 APRIL 2004

FINANCIAL MONITORING

Report by Head of Finance

1. This report sets out the financial position to the end of February. The report for March will reflect further known variances and go to the Executive on 18 May. The provisional outturn position will be presented to the Executive on 16 June. There are inevitably some changes after this. This year it is intended to produce a full outturn position and explanation of variances and performance of the budget in the early autumn. It will include an analysis of the Council’s consolidated balance sheet by service area. The Statement of Accounts is statutorily required to be produced earlier this year and will go to Best Value Committee on 28 July 2004. The Council’s Financial Publications are:

• Part 1 the overall summary of the Council’s budget due to be published at the end of April
• Part 2 the Service Analysis will incorporate budget and performance data and be published at the end of May
• Part 3 the outturn position will be published in early September
• Part 4 the Statement of Accounts will be published in early September.

2. The individual Service Directorate reports, which make up this report, are in the Members’ Resource Centre. The position for each Directorate is considered below.

Learning & Culture

3. Learning & Culture is forecasting an overspending of £2.596m of which £0.521m is recoverable in future years (of this £0.291m relates to transport and £0.230m relates to the Music Service). The major components of the overspend are: fees to independent schools £0.960m and statementing £0.800m; premature retirement contributions £0.547m. There is an under spend of £0.250m on Early Education Funding for 3 and 4 year olds where the take up of places is around 77% against a target of 85%. It is deemed that this target will be reached in 2004/05.
4. The overall change since last month’s report is a worsening of £0.159m. This is accounted for mainly by the following; an overspending on the Early Years Team of £0.120m; an additional overspend on premature retirement contributions of £0.94m (now forecast at £0.547m overspent) offset by excess inflation awarded of £0.150m and other various minor underspendings; and an overspending on the Individual School’s budget contingency of £0.150m. The latter arises from the cost of closed city schools protected salaries for redeployed staff being significantly greater then forecast.
5. The end of year position leaves a residual overspending of £0.358m, after taking into account the action plan to repay the deficit on SEN over the next three years. Any residual deficit will need to be carried forward to 2004/05 and compensating savings found. However, the final year end position may still change.

   Closed City Schools

6. The deficit of £0.700m on the closed City Schools will be offset by excess capital receipts from the sale of City Schools – so there is no effect on general reserves. Any variation to this figure will also need to be met in this way. A report setting out the position is due to go to a meeting of the City Schools Steering Group.

Schools Budgets 2003/04 and 2004/05

7. The position for 2003/04 remains as previously reported. It is considered that the £2m overall overspend forecast by schools will not materialise based on previous actions by schools and that the likely outturn will be nearer to nil or somewhat better than this. Although it is not possible to confirm it at this stage until the schools have formally closed their accounts for the year, the level of bank balances seems to indicate that the end of year position will be significantly better than forecast.
8. However, despite the expected improvement in the schools’ year end position, 187 schools have returned indicative budgets forecasting a collective deficit for 2004/05 of £9.7m. In order to qualify for Transitional Grant a school must have a forecast deficit. The basis for distributing the Transitional Grant has been agreed by DfES and the schools have been notified of their provisional allocations. Schools submitting deficit budgets have until 2 June to submit their budgets, all other schools must submit by 1 May. The adverse incentive of receiving Transitional Grant is leading to the schools setting deficit budgets. It will be extremely important to ensure that there is a robust system in place for approving budgets which ensures that deficits are not being submitted for the sake of receiving extra grant. It will continue to be a high priority to monitor schools’ budgets this year.

Social & Health Care

9. Social & Health Care continue to report a forecast carryforward of £0.869m to be carried forward to meet pressures next year. There have been further reductions in spending on a number of budget heads as shown below which has enabled the provision for section 117 clients to be increased to £0.746m. This provision relates to mental health clients who have a right to reclaim charges made for accommodation. The provision of £0.746m will be carried forward to next year to meet potential claims. Based on Social & Health Care assumptions it is expected that a provision of around £0.750m is the minimum required and there is further work to establish whether this needs to be increased. This provision relates to clients’ claims pre the establishment of the pooled budget. A separate provision is required within the pool.

Increased spend on Children and Families Carry Forward on older people Carry Forward on Business Support Carry Forward on Mental Health Carry Forward on Physical Disabilities Provision for section 117 clients Reduced spend across client groups Other changes general	£m January 0.174 -1.406 -0.130 -0.122 -0.166 0.301 0.364 0.116	£m February 0.250 -1.437 -0.213 -0.220 -0.233 0.746 0.212 0.26
	-0.869	-0.869



10. The movement on the pooled budget is a £0.736m increase in carry forward. The forecast carry forward at year end is now £0.906m compared to £0.170m reported last time. The main reason for this increase is the receipt of the residential allowances grant for 2003/04. The Government did not announce the allocations until November 2003. The allocation for Oxfordshire is £1.572m of which £0.512m has been paid to the pooled budget which has met the costs of these clients. Subsequent to this position being reported, the Joint Management Board for the pooled budget have agreed to make provision for any S117 claims relating to the period since the pool was established and also to make a provision for the ombudsman’s decisions that are awaited. These actions would reduce the carry forward.
11. The remaining £1m of the grant is still available to allocate. This means that the Social & Health Care carry forward could increase by a further £1m. However, there are a number of possible outstanding adjustments to be made to the accounts for 2002/03 and 2003/04 and a number of areas of risk, which I set out in my risk assessment to Council on 10 February. Final clarification on these matters is required before assumptions can be made around the unallocated grant.
12. The provisional allocation for Residential Allowances in 2004/05 is £3.779m. The proposals for allocation are out to consultation and the final allocation still needs to be confirmed. Application of the grant can then be considered.
13. I noted in my previous report that the Social & Health Care Scrutiny Committee on 3 March felt they were unable to accept the budget monitoring reports for December 2003 and January 2004 in light of the uncertain financial situation. The Best Value Committee on 14 April will receive the ‘Update Report on Financial Control within Social & Health Care Directorate’, a joint report by the Director for Social & Health Care and myself. This report will go to Scrutiny on 5 May. A further report will go to the Executive on 4 May. In the meantime the ongoing work on debtors and income in Social & Health Care is continuing and referred to below.


Social & Health Care Debtors and Income

14. I reported on the latest position in my last report. This is updated in the report referred to above. I have not repeated any of that report here since there is no substantive new information to add, but I reaffirm that the improvement in forecast general reserves for 2004/05 of £1.3m, which I reported last time, is earmarked against any costs arising from the review of debtors and income being carried out.
15. The project team appointed to do the work have cost £0.107m for the period February and March 2004 and this is a call against the general reserves for 2003/04. The projected cost of the project team from April to September 2004 is £0.204m, which will need to be a supplementary estimate for 2004/05. There is also a proposal to make a number of permanent appointments to the income and assessment team and in financial accounting in Social & Health Care in order to sustain the improvements made. The cost will be £0.104m, which will be a continued commitment and will need to be a request to Executive and Council for a supplementary estimate to be met from general reserves in 2004/05 and part of the base budget thereafter.

Environment & Economy

16. The total projected carryforward for the Directorate is £1.735m compared with £1.462m in the previous report. This is an increase of £0.273m. This mainly results from an increased under spending on Highway Management of £0.130m. There are various other minor increases in under spending. The Director for Environment & Economy has committed to looking at the reasons lying behind the carry forwards and to strengthening budget management in some areas.
17. The major components of the carry forward are: £1m on waste management; £0.591m on land use planning; £0.167m on highway management and £0.194m on public transport. There is an offset of £0.100m over spend on transport development and £0.105m over spend on Business Support. The Director was requested to ensure that he carried forward a minimum of £0.550m by the Executive to help safeguard the yearend position.

Community Safety

18. The forecast under spend on the Community Service Budget is £0.89m which is an increase of £0.040m since the report last time. This arises on the Fire and Rescue Service budget head mainly from under spending on administration and the whole time firefighters’ budget to be carried forward to 2004/05.

Corporate Governance

19. The predicted carryforward is £1.567m. This compares with £1.514m reported last time. The major make up of the carry forward is: £0.336m on the modernisation fund; £0.650m on IEG; £0.170m on Human Resources and £0.489m on Corporate and Democratic Core. There is a overspend of £0.100m on property which is offset against the above underspends.

Directorate Carry Forward Reserves

20. The forecast outturn position for the Directorate Carry Forward Reserves as set out in the report is summarised at Annex 1. The latest forecast shows a carry forward of £1.664m compared to £1.457m reported to the Executive in March. This is an increase of £0.207m.

Consolidated Position

General Reserves estimated for February Less supplementary estimate for Social & Health Care Project Team Add Directorate Carry Forward Reserves Less City Schools Planned Transitional Costs	£m   7.859   -0.107 1.664 -4.082
Total	5.334

Conclusions

21. There is an increase in the overall Service Directorates carry forward position of £0.207m. There are four Directorates with positive carry forwards. The position on Learning & Culture has worsened slightly but there could still be some improvement in the final yearend position. It has not materially changed for some time and remains fairly stable overall. Learning & Culture have produced an action plan to repay the over spend over three years. There is a residual amount to repay of £0.358m which will need to be found in 2004/05 although this figure could still improve. The overall position on the Directorate Carry Forward Reserve is a positive carry forward of £1.6m. I set out in my previous report the improvement in forecast general reserves for 2004/05 since the estimated position used to set the budget. The main component of this is the over spend on City closed schools of £0.700m which is being met by excess capital receipts on sale of closed city school sites and not from general balances. I reaffirm that I have earmarked the overall improvement of around £1.3m against outstanding issues to be resolved on Social & Health Care debtors and income.

Issues for 2004/05

22. I have already referred to the necessity to monitor the position on schools’ budget submissions in 2004/05 carefully and the allocation of the Transitional Grant as well as monitoring the outturn position in year. This is also true for the position on SEN for Learning & Culture. There are a number of outstanding issues for the Social & Health Care budget, which I have also set out.
23. There will be other calls on general reserves arising from the proposal to commission consultants to advise on the future development of SAP and from the intention to carry out a short external review of financial management within the authority. These proposals arise from the report to Best Value Committee on 14 April.

RECOMMENDATION

24. The Executive is recommended to note the report.

CHRIS GRAY
Head of Finance

Background Papers:

Contact Officer: Jenny Hydari Tel: 01865 815401

April 2004

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