AGENDA ITEM 6
BOROUGH OF POOLE
CABINET
7 SEPTEMBER 2010
COUNCIL BUDGET MONITORING
(1 APRIL 2010 – 31 JULY 2010)
PART OF THE PUBLISHED FORWARD PLAN : YES
1 PURPOSE OF THE REPORT
1.1 This report gives the Council’s performance against budget for the period 1 April 2010 to 31 July 2010 and the forecast financial outturn for the year.
1.2 The purpose of the Council Budget Monitoring reporting process is to:
a) promote principles of sound and effective financial management within the Authority; to promote an efficient closure of the Authority’s accounts with consistency between in year and year-end financial reporting; to ensure there are no surprises in the authority’s year-end financial position.
b) ensure the Council’s budget monitoring process is produced regularly on a timely basis throughout the year with the information presented considered to be reliable, relevant and understandable.
c) ensure the Council manages performance against budget with prompt action being taken when material variances arise or deficits are forecast. The management of these variances being designed to avoid an adverse impact on service delivery or on the achievement of corporate objectives.
1.3 All Service Units have confirmed their acknowledgement of the issues raised.
2 DECISION REQUIRED
2.1 It is recommended that Cabinet:
a) Note the contents of the report.
b) Approve the budget transfers (virements) as set out in sections 5.5 and 7.5.
c) Approve the actions proposed in sections 10.
2.1 It is recommended that Council:
a) Approve the budget transfers (virements) as set out in sections 5.4 and 7.4.
b) Receive options from the relevant Director’s for managing the additional Government Cuts.
3 EXECUTIVE SUMMARY
3.1 Financial position and outlook for the year;
The Medium Term Financial Plan (MTFP) update report to Council on the 27 July 2010 re-balanced the Council’s 2010/11 budget position as it stood to enable the Council to deal with the in-year emerging pressures and to better position itself to deal with the far bigger financial challenges that lay ahead.
The July report also clearly identified that the full extent of the Governments in-year cuts and the impact of increasing demand for Council services would not be known for some time. This situation means the Council will be required to periodically re-balance its budget as the position develops and information becomes available. Exhibit 1 below updates the Council’s overall position as at the end of July.
Exhibit 1 – General Fund Position / June Position 2010/11 £000’s / July Position 2010/11 £000’sIn year requirements
- Savings & efficiencies
already assumed in MTFP / 4,263 / 4,263
- Emerging in-year pressures since Feb / 1,233 / 1,589
- In-year revenue cuts announced by Government / 1,383 / 1,511
Revised General Fund pressure / 6,879 / 7,363
Other additional changes
- Reduction in LSP monies
(50% cut in performance reward grant) / 1,131 / 1,076- Reduction in capital grants so far announced
/ 424 / 1,547Sub-total of other pressures / 1,555 / 2,623
Total in-year pressures
/ 8,434 / 9,986Met by
- Savings & efficiencies work planned / (4,263) / (4,263)
- New in-year savings proposals by SDs / (3,222) / (4,863)
- Non-allocation of LSP monies / (1,131) / (1,076)
Total reductions found to date / (8,616) / (10,202)
Net in-year pressure (surplus) / (182) / (216)
3.2 As Exhibit 1 shows the Council continues to forecast that there will be a small surplus in its budget position for 2010/11. As such the position is consistent with the agreed financial strategy of creating as much head-room as possible within the Council’s 2010/11 financial position by the financial year end. However the position as reported is based on the assumption that the numerous actions outlined in the July Medium Term Financial Plan Update report to Council are implemented. These actions include;
a) achieving the planned efficiencies and savings of £4.263m assumed within the base budget for 2010/11;
b) the Strategic Director and Service Unit Head proposed cuts and savings to current year operations, as set out within the MTFP update report;
c) the Local strategic Partnership SP allocate no additional monies beyond their existing funding commitments, matching the £1.076m in-year cuts in the Local Area Agreement Performance Reward grant;
d) a general recruitment freeze unless it is agreed that a post must be filled for business critical reasons. Prior approval to recruit must be given by the Strategic Director and the Portfolio Holder;
e) the deferment or delayed of all spend wherever possible;
f) the re-negotiation of all contract terms, to reduce costs, wherever possible;
g) not entering into any new contracts if there is any uncertainty as to the funding streams they will rely on to pay the costs of the contract in future years unless they are agreed to be business critical. The relevant Strategic Director and the Portfolio Holder must be consulted in these instances;
h) in the case of all new contracts consider including break clauses allowing the Council to terminate a contractual arrangement if a services funding or function ceases at some point in the future, where it can be shown that this will not adversely affect the competitiveness of the original contract price to a greater extent than the corresponding benefit thereby secured.
3.3 The position as shown in Exhibit 1 incorporates a £1.2m increase in the total value of the 2010/11 in-year funding cuts as announced by the new Coalition Government (total now £4.134m). Exhibit 2 below highlights the detail of these reductions.
For the purposes of this report it has been assumed that the additional cuts will be taken where they fall. However it is recommended that the relevant Director’s report to Council on the options for managing these cuts and the associated service implications.
3.4 Exhibit 2 provides details of the 2010/11 in-year Government grant cuts so far announced.
Revenue & Capital / JunePosition
£000’s / July
Position
£000’s
Area Based Grants
Department of Education (24%) / 698 / 698
Support People Administration Grant / 100 / 100
Road Safety Grant (27%) / 91 / 91
Home Office / 17 / 17
Total Area Based Grants / 906 / 906
Housing & Planning Delivery Grant / 477 / 477
Children’s Services Specific Grants
Teachers Development Agency / 0 / 75
Contact Point / 0 / 46
Local Delivery Support Grant / 0 / 7
Children’s Services Specific Grants / 0 / 128
Local Strategic Partnership – LAA reward / 1,131 / 1,076
Transportation Services - Capital
Local Transport Plan – Integrated Transport / 348 / 348
Local Transport Plan – Road Safety / 76 / 76
Total – Transportation Services Capital / 424 / 424
Strategy Team - Capital
Stronger and Safer Communities Grant / 0 / 23
Total – Strategy Team Capital / 0 / 23
Children’s Services - Capital
Sure Start & Early Years Capital Grants / 0 / 825
Harnessing Technology Grant / 0 / 187
Extended Schools / 0 / 55
Youth Capital Grant / 0 / 33
Total Children’s Services Capital / 0 / 1,100
Overall Total / 2,938 / 4,134
3.5 In addition to the 2010/11 in-year cuts the Government have also announced that they have cancelled the Building Schools for the Future Programme. Consequentially the Council’s Capital Programme will be adjusted to reflect the following reductions;
· £10.2m Montacute School
· £9.0m Winchelsea School
· £17m St Aldhelm’s Academy
· £3.6m Associated ICT Programme
The Government have though made a commitment to fund improvements to the Ashdown Technology College and have stated that they will review their position on the St Aldhelm’s Academy as part of the October Comprehensive Spending Review.
3.6 In respect of the General Fund revenue position Appendix 1 summarises the year-end financial outturn position. All variances in excess of £100,000 and other salient variances which have not been previously been detailed in either the May Budget Monitoring or July MTFP Update reports, are set out as follows:
Community Support
[1]Ý £156,000 Adult Social Care – Net Position
The main reason for the variance has been a very small number of high cost packages which have been required to meet the assessed needs of people with a learning disability and people with a physical disability.
Local Economy (Including Transport)
Ý £178,000 Planning Services (Fee Income)
Market conditions have resulted in a significant reduction in the number of large planning applications received by the Authority. Historically these applications accounted for 5% of the total applications received but achieved approximately 46% of total Planning fee income. The income variance also includes reductions in the amount likely to be generated from pre-application advice and the s106 administration fee.
Ý £170,000 Building Regulations Service (Fee Income)
Fee income on the Building Regulation Control Account is currently forecast to be £170,000 less than budget at year-end due to the benign market conditions. This overall pressure on the section is reduced to a net £9,000 pressure based on mitigation including reductions in the sections employee base and the use of the specific earmarked Building Regulations Account reserve.
Resources Portfolio
Ý £149,000 Human Resource Recruitment Income
Consequential impact of the decision to introduce a general recruit freeze within the organisation.
Corporate Income and Expenditure
ß (£178,000) Dolphin Centre – Additional Rent
In accordance with the terms of the lease the Council is due to receive an additional £178,000 in respect of the performance of the Dolphin Centre in 2009/10. This is in addition to the base rent of £790,000.
ß (£48,000) In-Year Revised Resource Allocations
As part of the 2009/10 monitoring process a principle was established whereby any savings that are due to changes in a base budget assumption, be that due to one-off events or lower price or volume increases, then the resources should be redirected in support of the Council’s Medium Term Financial Plan.
Within July a £48,000 saving has been identified in respect of the resources required to meet the National Non Domestic Rates (NNDR) liabilities on Council owned property.
3.7 It may aid understanding of Appendix A1 to this Council Budget Monitoring Report to establish that £2.9m of the variance reported at the cost of portfolio controlled services level relates to the use of specific earmarked reserves for the purposes they were intended for. Detailed analysis of how earmarked reserves are being drawn down is highlighted within Appendix A3 to Appendix A8.
3.8 There have been no significant movements in the estimated use of earmarked reserves between the end of May and end of July positions. However Members are asked to note that due to the Governments announcement to cancel the Building Schools for the Future programme the Council will be reviewing its commitments against the specific earmarked reserve set up to support the development of the programme. The intention is to incorporate a forecast final position as part of its August Council Budget Monitoring Report.
4. EFFICIENCY REVIEW PROGRAMME (ERP) - MONITORING
4.1 As part of the 2010/11 budget process, and in recognition of the growing financial pressures and the expectations of significant reductions in Government grant funding from 2010/11 onwards the Council established an Efficiency Review Programme to support the achievement of even greater level of efficiencies and savings than had previously been assumed. The Efficiency Review Programme compliments the Business Transformation Programme and is focused on cross cutting reviews and service based operational efficiencies that should start to accrue from 2011/12 onwards.
4.2 Consistent with the end of May position, the July 2010 the Council Budget Monitoring Report identifies £133,000 of annual reoccurring savings generated by the review of procurement ERP. These savings can be analysed as follows;
£37,000 Printing & Design Framework Contract
£32,000 Energy Contract (phased transfer over)
£33,000 Self Insurance Arrangements
£31,000 Mobile Phone Review
5. BUDGET TRANSFERS (VIREMENTS) - REVENUE
5.1 A revenue virement is a transfer of resources between or within approved budgets.
5.2 Appendix A2 highlights the virements that have been undertaken since the 2010/11 budget was set.
5.3 In accordance with the Council’s Financial Regulations the following rules associated with revenue virements apply;-
§ Senior Responsible Officers can approve virements up to £100,000.
§ Virements over £100,000 and up to £500,000 require prior Cabinet approval.
§ Virements over £500,000 require prior Council approval.
However where the virement is into a new or otherwise unplanned function or activity Senior Responsible Officers can only approve up to £50,000 with prior cabinet approval required for those over £50,000 and up to no more than 10% of business plan income or expenditure.
5.4 In accordance with these regulations the following transfers (virements) require the approval of Council
Virements within a Statement of Service
Children’s Services
£9,755,000 Young People Learning Agency (YPLA)
Funding for Further Education Colleges and other 16-18 providers. The new responsibility from 1 April 2010 to receive funds from the YPLA and passport directly to 16-18 education providers other than schools was removed in July by the new Coalition Government with immediate affect.
5.5 In accordance with these regulations the following transfers (virements) require the approval of Cabinet
Virements within a Statement of Service
Children’s Services
£277,000 Sure Start Grant
New allocations for access to childcare for disabled children (£110,000) plus finalisation of the second year of the pilot for 2-year olds (£167,000).
£113,000 Schools Standards Funds Grant
Grant adjustments for the new academic year - KS4 engagement, national challenge, and one to one tuition plus changes to other grants to reflect finalised January 2010 census data
£101,000 Standards Funds Grant for Early Years
Increased allocation from finalised January 2010 census data reflecting the growth in take up of nursery places in 2009/10 due to population growth and increased flexibility of the offer.
6 CAPITAL
6.1 The Council’s current capital programme budget for 2010/11 is £52.4m. This can be compared to the original budget for the year of £46.9m. The increase of £5.5m is as a consequence of slippage from previous years, reprofiling to future years, reduction in grant funding as part of the Government’s public spending cuts, and various additions to the programme funded by capital grants and other sources.