BOROUGH OF POOLE
CABINET
14 JUNE 2011
COUNCIL BUDGET MONITORING
FINANCIAL OUTTURN
(1 APRIL 2010 – 31 MARCH 2011)
PART OF THE PUBLISHED FORWARD PLAN : YES
1PURPOSE OF THE REPORT
1.1This report gives the Council’s performance against budget for the period 1 April 2010 to 31 March 2011 and the financial outturn for the year.
1.2The 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.
2DECISION REQUIRED
2.1It is recommended that Cabinet:
a)Note the contents of the report.
b)Approve the capital budget virements as set out in sections 9.5 and 10.3.
2.2It is recommended that Cabinet recommend to Council:
1)The transfer of the £522,000 surplus for the year to un-earmarked reserves as set out in sections 7.1 and 7.2.
2)Subject to their formal review as part of the 2012/13 budget process, the movement on the Council’s earmarked reserves as set out in Appendix A9 and discussed in section 7.3 of the report.
3)Approve the capital budget virement as set out in section 9.4.
3EXECUTIVE SUMMARY
3.1Revenue Position;
A key component of the Council’s approved financial strategy was to maximize its current financial year-end resources as a means of better enabling the Council to address the financial and operational challenges which lay ahead.
Further to this strategy huge endeavourers across the Council have created £1.095m of additional one-off savings and efficiencies over and above the £0.522m assumed and incorporated within the budget proposals for 2011/12 (£1.617m total surplus 2010/11).
In accordance with the principles set out and approved by Council as part of the 2011/12 Budget Report, it is proposed that these additional resources will be applied as follows;
- £800,000 to increase the Revenue Contribution to Capital (RCCO) as a means of mitigating the residual exposure across the capital programme as a whole including the £7.129m resource gap on the Children’s Services Capital Programme.
- £295,000 to create an earmarked reserve to mitigate against anticipated further inflationary pressures which have emerged, due to world events, since the budget for 2011/12 was set, including significant pressure relating to the cost of fuel and utility prices.
3.2Exhibit 1 - Summary Financial Outturn for 2010/11
Category (as per Appendix A1) / Amount£000’s
Service Unit / Portfolio Areas / (2,491)
Corporate Income & Expenditure / Other Financing Items / 543
Funding Items (including Government in-year grant cuts) / 1,426
Net surplus for 2010/11 / (522)
3.3Un-earmarked Reserves
If the proposals in 3.1 are approved the Council’s earmarked reserves will stand at £7.125m. Once the £1.169m allocation approved as part of the 2011/12 budget is duly processed in the new financial year the balance will be £5.95m which is the minimum amount within the £5.95m to £7.9m risk assessed range that members agreed be maintained.
3.4Earmarked Reserves
The balance on earmarked reserves as at the 31 March 2011 is £13.201m and is higher than the £11.718m estimated when the 2011/12 budget was constructed. Besides the re-profiling of expenditure on a number of corporate programmes the increase reflects the proposed inflationary reserve highlighted in 3.1 above and a new Adult Social Care reserve established as part of the agreement with Bournemouth & Poole NHS over the 2011/12 new NHS Operating Framework resources. These reserves will be subject to a fundamental review as part of the 2012/13 budget setting process to determine the extent to which these resources can be redirected to help mitigate the identified gap in the Council’s Medium Term Financial Plan.
3.5Capital
The Council invested £36.8m in its General Fund capital infrastructure in 2010/11 which represents a 34% increase over the previous year (£27.5m). The £36.8m also represents 93.8% of the approved resources, which although slightly down on 2009/10 (94.5%) compares favourably with the 90.5% average over the previous 3 financial years.
Variations from the approved resources relate to a requirement to reprofile the resources relating to the Poole Bridge and the purchase of new vehicles.
3.6Housing Revenue Account
The Housing Revenue Account, as managed by Poole Housing Partnership, generated an additional £92,000 surplus compared to the assumed position as part of the 2011/12 budget. These extra resources will primarily be invested in additional capital works in the new financial year.
The Council invested £6.1m in its Council Housing Stock in 2010/11 which is lower than the £8.8m invested in 2009/10 as the Council has now met the required Decent Homes Standard.
The Housing Revenue Account delivered 91% of its approved programme. It is requested that resources associated with the flat roof at Rodney Court and the Sustainability programme be reprofiled into 2011/12
4MARCH COUNCIL BUDGET MONITORING
4.1Appendix A1 summarises the issues within the year-end financial outturn.
It should however be noted from the outset that there have been a number of changes that reflect some of the accounting entries required to be incorporated within the Council’s formal statutory accounts. These book-keeping adjustments have been included to keep any adjustments between this report and the statutory accounts to an absolute minimum and to speed up the production of the statutory accounts. These adjustments do not impact on the general fund balance or the taxpayer, and include;
- International Accounting Standard 19 (IAS19) for pension accounting.
- Initial Capital Charges (Depreciation and Impairment). These have been processed but are subject to final refinements.
4.2Significant variations arising since the end of February report are set out as follows:
Children’s Services
[1](£105,000)Children Looked After
The previous Children Looked After forecast was constructed assuming a higher number of young people requiring care services as at the 31 March 2011. The actual number in care as at the end of 2010/11 was lower but they have now been placed in 2011/12 approximately 8 weeks later than previously assumed.
Community Support
(£129,000)Housing & Council Tax – Benefit Payments
In establishing the £56m forecast for Government benefit subsidy receivable it was previously assumed that the Council would obtain a £100,000 financial advantage from the Government’s regulations surrounding benefit overpayments. As an example, for subsidy overpayments determined as Local Authority (LA) error it is in theory possible to obtain 100% Government subsidy, provided the council is within certain predetermined thresholds, on such overpayments and to also then go onto actually recover the overpayment.
As a result of continued careful and diligent management on the part of the Financial Services Benefit Teams in respect of such regulations the Council has been able to maximise and secure an additional £129,000 income bringing the years forecast additional income to £229,000.
Resources
£330,000Crown Building Costs
A provision for £330,000 has been set aside in the accounts to cover disputed service charge payments dating back to 2006/2007 which may be due to the Landlord in respect of the Crown Buildings site. It should be noted that negotiations regarding the final amounts due are continuing.
Other Funding before Net Budget Requirement
(£225,000) Investment Income
As part of the Council Budget Monitoring report for the period to the end of October 2010 an additional £141,000 of income was prudently included in respect of rent reviews which dated back to 2006. It was also noted that final negotiations with the leaseholder may eventually lead to further increases. Although negotiations remain to be finally resolved the leaseholder has made an offer which means it is now reasonable to include a further £225,000 of investment income.
(£153,000)Pension Costs – Deficit - funding element
Impact of the austerity measures which have meant certain posts have been kept vacant during 2010/11 pending the reduction in full-time equivalent post numbers factored into the 2011/12 budget. As per the March 2011 budget report, and agreement with the pension fund Actuary, the Council will pay a fixed contribution value from 2011/12 onwards.
(£62,000)Treasury Management – Net interest Earned
Net improvement in the predicted deficit for the year since the February report position. Includes the positive General Fund impact in 2010/11 from the 12 April 2011 Council decisions to maximise the Council’s utilisation of supported borrowing available to the HRA in 2010/11.
4.3It may aid understanding of Appendix A1 to this Council Budget Monitoring Report to establish that £0.306m 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.
Movements in the specific earmarked reserves have been highlighted in the previous Council Budget Monitoring reports throughout the year. Significant movements since the February report include;
- (£573,000)Adult Social Care Reserve
Establishment of a reserve as part of the agreement with the NHS over the 2011/12 NHS Operating Framework resources allocated to Primary Care Trusts to invest in social care services which benefit health. At the time of writing this report, this arrangement remains subject to final agreement with NHS Bournemouth and Poole. Any variations will be highlighted as part of the 2011/12 Budget Monitoring Process.
- (£300,000)Grant Related Reserves
In line with the Local Authority Accounting Practice bulletin 88 the Council can no longer move grant income received in 2010/11 into 2011/12 unless the conditions of the grant stipulate that it has to be returned if not eventually spent. There are a number of miscellaneous grants which do not have this specific condition, in these circumstances the Council is requirements to carry forward the unused resources into the new year via earmarked reserves.
- (£224,000)Highway Investment – Improvement Priority
Increase in the previous established reserve which was established to allow a period of mitigation before the implementation of previously announced budget reductions. Now includes resources specifically set-a-side to contribute to the delivery of the Marston Road / Bay Hog Lane capital development.
- (£99,000)School Block Reserve
Favourable movements in the month provide a final outturn position for the year of an under spend on the Dedicated Schools Grant of £99,000.
In the month savings have been made on Special Educational Needs, mainly attributable to Independent Special School costs, on nursery costs from lower take-up of places and the of other grants for central staffing.
These savings have been reduced by £132,000 to cover the unexpected shortfall on the Standards Fund Grants. This follows the decision in March by the Department for Education (DfE) not to pay the final instalment of the Standards Funds of £294,000. The balance of this cut in funding has been met from other grants with unallocated amounts rather than being available for carry forward into the summer term
- (£90,000)Self Insurance Fund
Planned increase in the specific self insurance fund to provide mitigation of the higher excess levels now within premiums.
- (£33,000)Talbot Village – Enquiry Earmarked Reserve
Proposed increase in the Talbot Village Enquiry cost earmarked reserve as a consequence of the external inspectors insistence that the Council appoint a Programme Officer to monitor the whole enquiry. Overall the amount now provided for will be £140,000 across the two financial years 2010/11 and 2011/12.
5EFFICIENCY REVIEW PROGRAMME (ERP) - MONITORING
5.1As 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 levels of efficiencies and savings than had previously been assumed. The Efficiency Review Programme is focused on cross cutting reviews and service based operational efficiencies originally forecast to accrue from 2011/12 onwards.
5.2Work on this agenda commenced during 2010/11 with the new strategic procurement and self insurance arrangements delivering savings and efficiencies, well ahead of schedule. So far £295k of realisable ongoing base budget savings have been delivered which can be analysed as follows;
Amount£000’s / Contract
116 / Printing & Design Contract
34 / Mobile Phone Contract
33 / Self Insurance
32 / Energy Contract
30 / ICT – Desktop Replacement Strategy
24 / ICT – Mobile Phone Call Technology
19 / National Non Domestic Rates
7 / PPE & Work wear
295 / Total from 2011/12 onwards
5.3In relation to 2010/11, £345k of savings have been delivered including some one-off amounts in respect of the above items and £103k of mostly backed dated National Non Domestic Rates assessments.
6SUMMARY PERFORMANCE AGAINST THE 2010/11 APPROVED RESOURCE
6.1The key significant variances for the year, as detailed in Appendix A1, are as set out in Exhibit 2 below;
Exhibit 2 – Key variances 2010/11
Amount£000’s / Significant Variances from Budget
2,045 / Adult Social Care
(£1.5m Strategic Director led savings to support in-year pressures and Government Grant cuts – net £514k)
548 / Parking Service – Fee Income
330 / Crown Buildings – Disputed Service Charge provision
328 / Central Government Revenue Grant Cuts (part £1.511m total)
242 / Investment in Human Resources (Recruitment/capacity)
199 / Planning Fee Income
167 / Building Regulation Fee Income
(11) / Service Unit based net allocations to Earmarked Reserves
(103) / In-year revised resource allocations (NNDR rebates etc)
(153) / Pensions – Deficit funding cost savings
(182) / Concessionary Fares
(229) / Housing & Council Tax Benefit Payments maximised subsidy
(242) / Efficiency Review Programme – Strategic Procurement / ICT
(5,430) / In-year savings and efficiencies delivered to cover;
-In year Government Grant Cuts
-In year Service Pressures
-Contribute to the improved financial health of the authority.
(2,491) / Total - Portfolio Areas (less use of Earmarked Reserves)
800 / Revenue Contribution to Capital – additional amount
209 / Treasury Management – Investment Income
78 / Small central items
(178) / Dolphin centre – additional rent
(366) / Investment Income – rent reviews
543 / Total – Corporate Income/Expenditure–Other Financing Items
1,182 / Central Government Revenue Grant Cuts (part £1.511m total)
306 / Use of Earmarked Reserves (net £295k allocation to inflationary reserve)
(62) / Miscellaneous Grant adjustments
1,426 / Total – Other Funding
(522) / Surplus for the Year
6.2In closing its 2010/11 accounts the Council has further ensured that the principles set out and approved by Council regarding its financial strategy are delivered by using the £1.095m additional surplus created since the budget for 2011/12 was established to;
- increase the 2010/11Revenue Contribution to Capital (RCCO) by £800k as a means of mitigating the residual exposure across the capital programme as a whole including the £7.1m resource gap on the Children’s Service Capital Programme.
- To create a £295,000 earmarked reserve to mitigate against anticipated further inflationary pressures which have emerged, due to world events, since the budget for 2011/12 was set, including significant pressure relating to the cost of fuel and the price of utilities.
7RESERVES
7.1 The Council’s Medium Term Financial Plan includes a risk assessment which supports a range of £5.95m to £7.9m for the Council’s un-earmarked reserve.
However as part of the 2011/12 Budget and Council Tax setting process members approved a strategy that as a minimum the Council’s general un-earmarked reserves should be maintained at £5.95m. This is at the lower end of this risk assessed requirement and also factors in the agreement that £1.169m of the 31 March 2011 balance is allocated as follows within 2011/12;
- £939kCorporate Re-Organisation Fund
- £150kHuman Resource Services – Capacity
- £80kTalbot Village Planning Enquiry
7.2 In summary the Council’s General Fund revenue reserves as at the end of the financial year are highlighted as follows;
31st March 2010£000 / Details of General Fund Balances/Reserves / 31st March 2011
£000
8,256 / General Fund Unearmarked Balances / 7,125
4,548 / School Balances (Local Management of Schools) / 5,221
11,733 / Earmarked Reserves (See Below) / 13,201
24,537 / Total General Fund Reserves / 25,547
Please note;
a)In line with the 2011/12 Budget the allocation of £1.169m of the 31 March 2011 balance from unearmarked reserves in 2011/12 will leave a residual balance of £5.95m as per the Council’s approved reserve strategy.
b)Due to 2 secondary schools moving to Academy status a like for like comparison with the £5.221m of School Balances held as at 31 March 2011 would be £4.155m
7.3As part of this report Member approval is being sought for the £1.468m net increase in the Council’s earmarked reserves, as highlighted in Appendix A9. Movements within earmarked reserves in excess of £0.5m during the year are as follows;
- £1.477m Corporate Reorganisation Fund
As referenced earlier in this report the Council has created a fund to meet the extraordinary one-off costs of reorganisation required by the Council due to the significant planned reductions in Government funding over the period of the Medium Term Financial Plan (MTFP). Resources set-a-side in the December 2010 MTFP Update report have been reduced by liabilities falling to be recognised in the 2010/11 financial year.
The 2011/12 Budget report further increased this reserve as per 7.1 above.
- £0.609mImprovement Priorities
This reserve supports specific targeted developments and improvements. The increase includes a strengthening of the Highway Investment element to ensure mitigation of previously announced budget reductions and to enable a contribution to the delivery of the Marston Road / Bay Hog Lane development, as well as resources set-a-side for post 16 education.
- £0.573m Adult Social Care Reserve
Establishment of a reserve as part of the ongoing discussions with the NHS over the 2011/12 NHS Operating Framework resources allocated to Primary Care Trusts to invest in social care service which benefit health.
- (£1.492m) Major Projects Reserve
Reduction to reflect the implementation work undertaken during the course of the year to support the Council’s major projects and initiatives including Building Schools for the Future, Customer Services, Business Transformation and Employee First.
- (£0.670m)Local Strategic Partnership
In accordance with the changes around LAAP bulletin 88 this reserve is now treated as a Receipt in Advance due to changes in recommended accounting policy.