AGENDA ITEM 5

BOROUGH OF POOLE

CABINET

2nd June 2009

COUNCIL BUDGET MONITORING

FINANCIAL OUTTURN

(1 APRIL 2008 – 31 MARCH 2009)

PART OF THE PUBLISHED FORWARD PLAN : YES

1PURPOSE OF THE REPORT

1.1This report gives the Council’s performance against budget for the period 1st April 2008 to 31ST March 2009 and also the financial outturn for the year. 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 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.

1.2All Service Units have confirmed their acknowledgement of the issues raised.

2DECISION REQUIRED

That Cabinet:

a)Note the contents of the Report.

b)Approve the actions proposed in sections 10 and 11.

Recommend to Council;

c)The transfer of the £1.683m surplus for the year to un-earmarked reserves as set out in 5.2

d)The movements on the Council’s earmarked reserves as set out in Appendix A9 and as discussed in section 5.3 of this report.

These recommendations are in line with the Council’s Medium Term Financial Plan and consistent with the recommendations to Council in February 2009 when the budget for 2009/10 was approved.

3EXECUTIVE SUMMARY

3.1Financial position and outlook for the year;

The provisional final outturn for the 2008/09 financial year is a £1.683m surplus as summarised below. This figure may change slightly for the reasons set out in section 9.2 and if any of the proposed reserve movements are not approved. The final outturn will be reported to the Audit Committee on the 25th June 2009 as part of the formal approval of the 2008/09 Statement of Accounts.

Summary Financial Outturn for 2008/09 / Amount
£000’s
Service Unit / Portfolio Areas - deficit / 197
Corporate Income & Expenditure – (surplus) / (836)
Additional Revenue Contribution to Capital (RCCO) / 443
Additional LABGI / Growth Points / Area Based Grants / (511)
Movement on Earmarked Reserves (including LPSA) / (976)
Net surplus for 2008/09 / (1,683)

The actual outturn mitigates a significant reduction in the assumed capital receipts receivable over the Medium Term Financial Planning period while ensuring that the unearmarked reserves remain at the level used as the basis for the 2009/10 budget and council tax setting. In essence the Council’s actual financial position as at the 31st March 2009 allows it to meet its previous commitment to apply £1.454m of the 2008/09 reported surplus to support the 2009/10 budget.

3.2 Appendix A1 summarises the issues within the year-end financial outturn. Significant variances since the end of February are set out as follows:

Children’s Services

[1]£194,000Recoupment

Recoupment charges are made between local authorities for resident Special Educational Needs (SEN) pupils educated in other authority special schools or mainstream schools with additional individual support. The overspend comprises unexpected additional net costs relating to 2007/08 and updated estimates for 2008/09 due to additional pupils and higher placement costs than previously forecast. Despite attempts to expedite procedures, agreement of charges with our neighbouring Authorities continues to be a slow process

(£100,000)Grant maximisation

Costs have been reviewed and re-apportioned within the terms of grant conditions between the Sure Start Grant, which cannot be carried forward, and the Dedicated Schools Grant (DSG) to ensure maximum usage of grants relating to early years provision. The headroom in the sure start grant has been created due to lower than previously estimated costs associated with the operation of the new Children’s Centres.

Environmental Area

£106,000Beach Huts Licence Income

Annual charges for beach hut licences are levied on the 1st January in each calendar year. Historically 38% of the income is credited to the financial year in which the charge is raised. Officers have reviewed this apportionment and believe that it should be adjusted to 25% to more appropriately match the periods of the relevant financial year. This change in the accounting arrangement has created the pressure as reported.

Community Support (Including Cultural Services)

(£109,000)Older People Residential Care – Deferred Payments.

All people entering non-temporary residential care have a legal right to defer payment of their assessed residential charge, calculated via the national Charging for Residential Care Guidelines (CRAG), until a point at which they choose to sell their property. In choosing to defer their payment individuals agree to a legal charge being placed on their property to their value of the assessed charge. Therefore the value of the legal charge will increase daily from the point they enter the residential placement to the day they leave (most commonly when the client dies)

The £109,000 is the annual year-end adjustment to the total deferred debts that are over a year old.

(£135,000)Benefit Subsidy Receivable.

Since 2004 Council’s have been able to claim subsidy on overpayments determined as Local Authority (LA) error. However subsidy will only be received in circumstances where the total is less than a predetermined 0.54% threshold of total correct payments.

It is not normally assumed that the Council will be able to obtain this potential subsidy due to the low threshold set. However as a result of vigorous and close management by the Benefit Service it has been possible to maximise and secure this additional income.

£443,000Revenue Contribution to Capital (RCCO)

When the Medium Term Financial Plan (MTFP) was presented to Council in February 2009 the approved capital programme was premised on an assumed level of capital receipts over the period to 2012. Recently as a consequence of unfavourable market conditions and a subsequent reassessment of receipts realisable, these assumptions have been revised downwards creating pressure on the contingency used to underwrite the capital programme.

In order to mitigate the impact of this reduction in capital receipts £443,000 has been used to increase the revenue contribution to capital. The following table demonstrates the changes that have occurred in the capital programme and the underlying contingency.

Significant Changes in the Council’s capital programme / Total Programme
£000’s / Contingency £000’s
Council Approved Capital Programme 2008 to 2012 (February 2009) / 145,671 / 4,825
Removal of notional budget for Building Schools for the future & assumed grant funding / (10,000)
New Schemes – Play-builder
(Grant funded) / 1,118
New Schemes – Transportation
(Funded by developer contributions) / 1,270
Expenditure transferred to revenue
(see note below) / 757 / 757
Other small adjustments / (59)
Reduced forecast of capital receipts / (2,105) / (2,105)
Increased Revenue Contribution to Capital
(RCCO) / 443 / 443
Current Capital Programme
2008 to 2012 / 137,095 / 3,920

Capital Accounting Adjustments

Latest guidance in respect of the Financial Reporting Standard (FRS) 15 considers the costs that should not be capitalised, as they are not directly attributable to bringing a physical asset into working condition. Examples include preparing procedures for how a new system / asset will operate, training of staff in the use of the asset, promoting the new service / asset, the cost of alternative arrangements (hiring alternative accommodation) whilst the property is built, etc.

As a consequence of this guidance certain expenditure previously recorded as capital thought-out the year has now been transferred and shown as chargeable to revenue.

4SUMMARY PERFORMANCE AGAINST THE 2008/09 APPROVED RESOURCE (Appendix A1)

4.1Portfolio Areas

The variance against the revised budget is a small net pressure of a £197,000. The key significant variances for the year can be summarised as follows;

(£644,000) Adult Social Care Services

(£475,000)National Concessionary Fares Scheme

(£356,000)Children’s Services (Including Children’s Social Care)

(£246,000)Property Services deferred planned maintenance

(£216,000)Transportation Services (savings and efficiencies)

(£127,000)Miscellaneous net variances

(£122,000)Street Lighting / illuminated signs energy costs

£106,000Beach Huts Licence Fee income

£145,000Parking Service Income (including decriminalised parking)

£147,000Office accommodation rationalisation strategy

£262,000Land Charges Income

£404,000Employee Fist expenditure

£415,000Planning Fee Income (applications)

£431,000Building Schools for the future

£473,000Schools Block (Dedicated Schools Grant) expenditure

£197,000Net deficit on portfolio area

Whilst the position on the Service Unit / Portfolio controlled budgets is a slight deficit it should be noted that in reaching this position the Authority has positively managed a number of significant and extraordinary demands for services and resources in-year. These issues have arisen for a number of reasons including from the effects of the downturn in the economy including reductions in key income budgets such as planning fees and land charges.

Corporate Income & Expenditure

The net variance in this area is a surplus of £836,000. During the year the Council has generated an extra £608,000 from Treasury Management activity. This surplus was generated from the combination of an extra £468,000 investment income with a £153,000 saving from a reduction in borrowing costs as a consequence of taking proactive action to reprofile Public Works Loan Board (PWLB) debt. In addition to reducing borrowing costs this action also limited the Council’s exposure to losing funds in the volatile financial markets. In respect of the £468,000 extra investment income this was generated from the impact of higher cash balances and higher than anticipated investment returns in the 1st half of the year (£626,000) less the impact of the dramatic cuts in the base rate in the second half of the year to the extent they fell to 0.5% in March 2009 (£158,000).

An additional £227,000 income has also been earned from investment properties including the extra £143,000 rent receivable as a consequence of the Dolphin Centre’s actual trading performance in 2007/08.

Other Financial items impacting on the General Fund

A key movement relates to the extra £350,000 received at the end of February 2009 as a result of the Department of Communities and Local Government’s release of the £100m set-a-side nationally as a contingency for the final year (2007/08) Local Authority Business Growth Incentive Scheme (LABGI).

Other changes reflect movements on un-ringfenced grant allocations, being the £108,000 Local Authority Business Growth Incentive grant allocation and an increase of £29,000 in the Area Based Grant award for the year. A number of transfers to and from earmarked reserves have been made and these are set out in more detail below. In addition the Revenue Contribution to Capital has been increased as explained in section 3.2.

Summary

As highlighted in paragraph 3.1 the provisional final outturn taking into account the full year activity and the transfers to reserves result in a surplus on the general fund of £1.683m.

5RESERVES

5.1 During 2008/09 Member approval was obtained (Cabinet 9th September 2008) to allocate £2.831m from the Council’s unearmarked reserves to support the Council’s major projects and programmes. Approval was subsequently obtained (Cabinet 10th February 2009) to further use the Council unearmarked reserves with the application of £1.454m to support the Council’s Budget and Council tax for 2009/10.

5.2 In summary the Council’s General Fund Reserves as at the end of the financial year are highlighted as follows;

31st March 2008
£000 / Details of General Fund Balances/Reserves / 31st March 2009
£000
7,448 / General Fund Unearmarked Balances / 6,300
3,433 / School Balances (Local Management of Schools) / 3,895
10,129 / Earmarked Reserves (See Below) / 14,163
21,010 / Total General Fund Reserves / 24,358

The unearmarked reserves are in line with the assumption used as part of the budget report.

5.3As part of this report Member approval is being sought for the £4.034m net movement on the Council’s earmarked reserves, as highlighted in Appendix A9. However it should be borne in mind that £2.831m of this relates to the amount transferred from un-earmarked reserves as part of the report to Cabinet on the 9th September 2009.

Other key movements within earmarked reserves include;

  • £1.815m of the £1.878 resources set aside within the original budget as a provision for costs associated with equal pay.
  • Unapplied revenue Local Public Service Agreement (LPSA) reward grant received in 2008/09.
  • Net use of reserves to deliver key Council projects and programmes set against increases such as those to enable the timing of spending to transfer between years in respect of the Council’s improvement priorities including investment in its planned maintenance programmes.

6CAPITAL

6.1The Council’s original capital programme for 2008/09 was £27.6m.

6.2As a consequence of the re-profiling of capital schemes during the year along with various other changes the Approved Capital Programme has been amended to £25.8m. These include all known and reported under and over spends for the following capital schemes, Old Town 1st School, Turlin Moor, Open Space and Play Strategy, and Private Sector Renewal – Warmth & Well Being grants.

6.3The final outturn for the year was £24m, this represents 93% of the approved or 87% of the original Capital programme for the year. This compares favourably against the 2007/08 financial year were the performance was 86% of the approved programme. The 2008/09 actual performance also compares favourably against the averages of the previous 3 financial years performance, which have been 86% of the approved or 77% of the original capital programmes for the year.

6.4During 2009/10 the Council’s Capital programme is currently forecast to move to £59m. To support this increase the Council will be reviewing its capital monitoring arrangements including the introduction of a corporate capital monitoring function linked to the Council’s project and programme management arrangements. This will be further supported by the introduction of a formalised Capital Resource Allocation Model (CRAM) to assist in the allocation of scarce capital resources to Council priorities.

6.5A full set of individual scheme details, including variations from approved resources, is attached as Appendix B.

6.6Appendix B12 highlights the following changes to the approved Capital programme that have occurred duringMarch 2009.Included within these are the following significant changes; -

Community Support

(£349,000)High Dependency Day Centre Project

In line with Capital Accounting requirements the costs previously charged to capital have been transferred to revenue.

Local Economy (Including Transportation)

£122,000Canford Bridge

Additional contributions plus resources reprofiled back from 2009/2010

Resources

(£201,000)Customer Services – Stage 2 Feasibility

In line with Capital Accounting requirements the costs previously charged to capital have been transferred to revenue.

7HOUSING REVENUE ACCOUNT (HRA)

7.1Appendix C presents the Housing Revenue Account for the period between 1st April 2008 and the 31st March 2009 as prepared by Poole Housing Partnership (PHP).

7.2In summary there was a £236,000 surplus on the Housing Revenue Account compared to the original budget. This means the account will commence 2009/10 with a balance £324,000 higher than the minimum prescribed level, which is £690,000. The main variations were as follows;-

Savings and efficiencies

  • £150,000Reduced PHP Management Fee through PHP efficiencies
  • £101,000Increase in interest receivable due to higher balances
  • £77,000Insurance cost savings as a consequence of retendering
  • £53,000Reduced bad debt provision due to good collection performance

Pressures

  • £103,000Additional utility costs (electricity and gas)
  • £42,000Miscellaneous small pressures

In line with the financial strategy for the Housing Revenue Account the additional resources will be focused on achieving the Decent Homes standard in Council properties, supporting sustainable communities and providing resources to support the stock options appraisal process.

In respect of the HRA capital programme, the final outturn of £8.809m represents 99% of the February approved resource or 73% of the original budget for the year. The consequence of the slippage in the period since December 2008 is that the balance on the HRA Major Repairs Reserve will be £718,000 higher than was planned in constructing the 2009/10 budget. These higher balances will be needed to fund the programmes that have slipped from 2008/09.

7.3Cabinet are requested to note the following significant deferment (slippage) since February on the HRA Capital programme into 2009/10.

  • £120,000Building External Programme – Roof Replacements

7.4Cabinet are requested to note the following acceleration of the HRA Capital programme into 2009/10.

  • £73,000Sustainability

8BUDGET MONITORING REPORTING ASSUMPTIONS

8.1Financial reports as set out are produced by Financial Services.

8.2Actual expenditure and income included is that posted to the Council’s financial ledger as at 31st March 2009 and covers the period from 1st April 2008.

9STATUTORY ACCOUNTS

9.1 The statutory deadline for the 2008/09 Statement of Accounts to be approved by the Audit Committee is the 30th June 2009.

9.2In order to adhere to this deadline the revenue and capital accounts for 2008/09 were closed on the 30th April 2009. The only adjustments that should occur between this report and the one on the 25th June to the Audit Committee are as follows;

  • Capital Accounting Adjustments based on the valuations to be provided by the district valuer.
  • Central support cost re-apportionments in line with the Best Value Accounting Code of Practice (BVACOP).
  • Statutory apportionment of the Social Services Management and Support Services (SSMSS) after the effects of 10.2 to BVACOP client categories.
  • Adjustments to the surplus/deficit on the Building Regulation Account to reflect 10.2.
  • Adjustments resulting from the periodic review of the balance sheet.
  • Adjustments as a consequence of consolidating the accounts of Poole Housing Partnership with those of the Authority’s Housing Revenue Account (HRA).
  • Adjustments from the application of the Landfill Allowance Trading Scheme.
  • Schools final outturn position.

9.3The Accounts being presented to the Audit Committee on the 25th June will include a statement, which provides an audit trail of how the outturn presented in Appendix A links into the Statement of Accounts.

10 PROPOSED ACTION - REVENUE

10.1 The Head of Children & Young People - Integrated Services reports to Cabinet on the procedures that will be adopted to improve the management of the recoupment process.

11PROPOSED ACTIONS - CAPITAL

11.1It is it is requested that the relevant Lead Officers in consultation with the Head of Financial Services reports to Cabinet how they intend to improve their monitoring arrangements in respect of the following capital schemes.

Lead Officer / Service Unit / Capital Scheme
Jim Bright / Children’s Services / Old Town First School
Stuart Twiss / Children’s Services / Turlin Moor
Richard Nicholson / Leisure Services / Open Space & Play Strategy
Kelly Ansell / Housing & Community Service / Private Sector Renewal Warmth & Well Being Grants

12UPDATE ON PREVIOUS COUNCIL BUDGET MONITORING REPORT ACTIONS