HERTFORDSHIRE COUNTY COUNCIL
CABINET
MONDAY19 MARCH 2007 AT 2.00 P.M. / Agenda Item No:
8

COUNTY COUNCIL REVENUE AND CAPITAL BUDGET MONITOR 2006/07

Report of the Finance Director

Author: Andrew Nightingale, Assistant Finance Director

Tel: 01992 555331

Executive Member: Robert Gordon

1.Purpose of the Report

To inform Cabinet of the forecast outturn for Revenue and Capital Budgets in respect of 2006/07.

2.Summary

2.1The monitoring positionat the end of December 2006 shows a revenue underspend of £835,000(0.16%) against the latest budget of £509.258m. After adjusting for the application of £10m from the 2006.07 special provision to support additional highway maintenance works in 2007/08, at the end of December the balance on the special provision is £780,000 and the balance on the pay and price contingency is £484,000. On the basis of monitoring information to date, a contribution to balances of up to £2.1m is projected at year end.

2.2The principal reasons for the variation in the forecast revenue outturn are listed in Table 2 (para 1.2), whilst a summary analysis across service is shown in Appendix A.

2.3Table 5 (para 4.1) analyses by service the projected capital underspend of £33,185m, Analysis by type of variance is shown in Table 6 (para.4.1), whilst a summary analysis across services is given in Appendix B.

2.4The change in Government Funding to Dedicated Schools Grant (DSG) has meant that any variances in CSF schools budget are ‘ring-fenced’ and can not be used elsewhere. This is explained further in section 3 of this report.

2.5General Balances as at 1 April 2007 are projected to be £19.2m before taking into account the impact of over / underspends during the course of the year. £1.5m of these reserves are expected to be needed to fund the impact of the Munby judgement.

2.6The reported 2006/07 prudential indicators show that no limits have been breached nor are they expected to be in the remainder of the year.

Conclusions

3.1The Cabinet is asked to consider the information contained in this report.

1.REVENUE BUDGET VARIANCES

1.1Table 1 below summarises the variances by service using the criteria previously laid down in Financial Regulations 2000. The variances shown in Table 1 represents against the latest approved budget taking into account the virements approved by cabinet on 20 November 2006.

Table 1: Budget Variances 2006/07

Overspends / Planned
Under-
Spends / Unplanned Under-spends / Net Variances
£000 / £000 / £000 / £000
CSF Education Non-Schools / 815 / (595) / 220
CSF Children’s Services / 1,931 / (1,022) / 909
CSF Cultural Services / (2) / (19) / (21)
Adult Care Services / 300 / (300)
Adult Care Services – Crime and Drugs Strategy Unit / (213) / (213)
Environment / (270) / (270)
Fire & Rescue
Resources Service (Corporate)
Central Items / (1,460) / (1,460)
Totals at 31/03/07 / 3,044 / (3,879) / (835)

1.2The following table shows those variances of £75,000 or more against the latest budget. Detailed explanations for these variances are listed in sections 1.3 to 1.7.

Table 2

Service / Description / Para
Ref. / Forecast
Over/ (Underspend)
£000
CSF Education Non-Schools / SEN Transport / 1.3.1 / 600
Complaints Team / 1.3.2 / 20
ICT / 1.3.3 / (76)
CRB checks / 1.3.4 / 148
In Year Savings – Vacancy Freeze / 1.3.5 / (197)
In Year Savings – Charging Expenditure to Grant / 1.3.6 / (206)
In Year Savings- Backdating costs to Supply Insurance Scheme / 1.3.7 / (82)
Planning, Policy and Improvement / 1.3.11 / (53)
CSF Children’s Services / Out CountyPlacements / 1.3.8 / 836
Pay and non Pay / 1.3.9 / 791
Complaints Team / 1.3.2 / (109)

ICT

/ 1.3.3 / (33)
In Year Savings – Vacancy Freeze / 1.3.5 / (29)
In Year Savings – Charging Expenditure to Grant / 1.3.6 / (444)

In Year Savings – Projects Delayed Starts

/ 1.3.10 / (189)
In Year Savings- Backdating costs to Supply Insurance Scheme / 1.3.7 / (35)
Planning, Policy and Improvement / 1.3.11 / (23)
Adult Care Services / Non-Residential Income / 1.4.1 / 300
Elderly & Physically Disabled Care Packages / 1.4.2 / (200)
Learning Disability Care Packages / 1.4.3 / (100)
Adult Care Services – Crime and Drugs Strategy Unit / Police Community Support Officers / 1.5.1 / (200)
Environment / Waste Management / 1.6.1 / (270)
Central Items / Interest on Balances & Capital Financing / 1.7.1 / (1,460)
Forecast Underspend >£75K Variances / (1,011)

All Services

/ < £75k Variances / 176

Total Forecast Underspend

/ (835)

1.3CHILDREN, SCHOOLS & FAMILIES (CSF)

1.3.1SEN Transport

£600,000 or or 4.8% overspend

For SEN home to school transport the Passenger Transport Unit (PTU) undertake arrangements on behalf of the service. Transport arrangementsfor pupils are finalised in September when the total requirements for provision for the new academic year become clear. Whilst the overall numbers of children being transported through this budget have remained relatively constant, changes to the mix of existing contracts for SEN pupils have impacted on the costs this includes:

  • increases in time and mileage of journeys
  • larger vehicles being required on some routes to accommodate new pupils to the routes
  • additional journeys – where there is no capacity within the existing contract to change journey time for integration of new pupils (for instance where a later start time is required).
  • additional vehicles being added to contracts to accommodate extra pupils
  • changes of operator / retender of contracts

Although the impact of these increases has been mitigated to some extent by reductions in vehicles on some contracts and decreases in time and mileage for other contracts overall there has been a net increase in costs.

A management action plan to reduce this overspend is in place and includes the review of high cost contracts. Initial reviews have resulted in the reduction in underspend this month by £73,000. In addition a more stringent process for managing financial consequences of placement decisions is being developed alongside a review of processes for agreeing to provide escorts.

1.3.2Complaints Team£89,000 or 8.7% underspend

Vacancies for two posts within the Complaints Team, the Head of Service and Customer Care Manager, have been held during the year pending clarification of requirements of the new Social Care Complaints legislation. Recruitment for these posts is now in progress.

1.3.3ICT£109,000 or 2.3% underspend

Management action to produce efficiencies in this area for 2007/08 has resulted in reduced PC supports costs being achieved earlier than expected.

1.3.4CRB Checks£148,000 or 41.1% overspend

Whilst there has been an increasing volume of Criminal Record Bureau (CRB) checks from schools in the wake of the List 99 media attention, this increase was exacerbated as a result of the new guidance from the DfES which took effect from the beginning of the Autumn Term 2006.

Coupled with HCC’s policy of now requiring supply teachers (via ETeach) and invigilators amongst other groups to have yearly rechecks, the service are on target to complete 18,000 CRB checks which equates to a 51% increase on last year. The impact of the new arrangements was not apparent until the latter half of the Autumn term.

Further investigation has revealed that whilst some of this volume increase for checks is ‘one off ' an element of the increase is on-going and CSF are currently reviewing how this can be accommodated within budget pressures for 2007/08.

1.3.5In Year Savings – Vacancy Freeze£226,000 or 3.5% underspend

A number of areas within the service have frozen vacancies to generate savings. Whilst a number are in support service areas the majority of the savings come from vacancy freezes in a number of front line service teams within Learner and Adolescent areas albeit that the level in relation to individual teams has been restricted so as not to impact on front line services.

1.3.6In Year Savings – Charging Expenditure to Grant £650,000 underspend

There are a large number of specific grants received within CSF, related to schools and the Local Authority, which are either ring-fenced or linked to specific streams of activity for which there is some flexibility. CSF has established an Inward Funding Group to review and co-ordinate the entire range of grants to ensure that its use is maximised against priorities. Over the last 2 years a more aggressive approach has been taken to off-set expenditure against overheads. In 2006/07 elements of a number of these grants, including Standards Fund, Sure Start and Children’s Service Grant, have not been specifically applied and it is proposed to off-set these against overhead costs within the budget.

1.3.7In Year Savings- Backdating costs to Supply Insurance Scheme

£117,000 underspend

This saving relates to the recovery of administration costs from the schools sickness supply insurance scheme for financial years 2004/05, 2005/06 and 2006/07 to the level of £117,000

1.3.8Out County (Social Care)£836,000 or 7.4%overspend

The pressure on this budget is well documented. Management action, identified in November, to reduce the overspend, estimated a reduction of £600,000 from the previously reported position of £1.5m to £900,000. This was based on the presumption that 21 (16%) children, out of a total cohort of 128 placed at the time, could be brought back in county. At their meeting on 20th November, Cabinet agreed to fund the projected £900,000 overspend from special provision.

However, a significant movement in volumes of changes in placements in current year has meant that savings made from ended placements has been consumed by other pressures.

The table below demonstrates the tremendous amount of movement in the number of placements between October and December 2006:

Table 3

Reason for Movement / Number of Children
Ended Placement / -22
New Placement / 13
Change in Placement / 19
Extended Placement / 34
Earlier than anticipated ended placement / -12
Other i.e. fee change / 59
Total

These changes are projected to result in an overspend of £836,000 over and above the £900,000 funded from special contingency.

In order to manage the budget, social work professionals and finance colleagues forecast end dates linked to the children’s care plan. This end date might refer to the end of the financial year, when a young person has turned 18 or when it is predicted that a return home is possible. This is based on a best case scenario expecting whatever work that needs to be done to end a placement could be completed on time. The impact of extension of placement dates is estimated to be £673,000 between October and December 2006.

An improved process is being developed between Area Social Work staff, finance and the Central Placement Service so that there can be refinement and more robust validation of predicted end dates. Alongside this we are developing a risk assessment model for all cases which will provide a more sophisticated analysis of likely end dates in which the worst case scenario for spending would be that children placed out county would be costed to the end of the financial year.

1.3.9Social Care Area Pay & Non Pay£791,000 or 5.7% overspend

The need to recruit to the enhanced staffing establishment in the Area Social Care teams has led to an additional financial pressure in two ways. Firstly, there has been a considerable increase in recruitment costs (£41,000). Secondly, in order to secure safer running of the service and deliver increased capacity, CSF has had to make extensive use of agency staff in order to maintain an adequate level of service. Owing to the high costs of agency staff this is projected to impact on the current overspend to the extent of an additional £750,000 during the current financial year. CSF are reviewing the current agency contracts to determine how far this pressure can be mitigated. CSF has identified additional ‘in year savings’ to offset the additional staffing costs. Without the agency staff in place, CSF would not have been able to introduce the changes in the Area Social Care teams from November 2006, thereby putting at risk the capacity to improve overall performance, particularly in the timely completion of assessments.

1.3.10In Year Savings – Projects Delayed Starts£189,000 or 5.9% underspend

A number of small IT projects that were due to be started during the current year have been deferred to next year. These include;

  • the digital pen project which is linked to the development of ICS
  • IT equipment for the Family Support service which is to provide additional PCs for each of the family support centres and email accounts for each family support worker.

In addition, expenditure on adaptations for looked after children has been deferred until the next financial year.

1.3.11Policy, Planning and Improvement£76,000 or 13.1% underspend

This budget supports the staffing costs for the Planning & Improvement Team and funds the production of the CSF Service and Children and Young Peoples Plan (CYPP). The reported underspend relates to staff vacancies during the year.

1.4ADULT CARE SERVICES (ACS)

1.4.1Non-Residential Income £300,000 or 6% overspend

Following the fist nine billing runs, the prediction is now that income from non-residential charging will be £4.7m in 2006/07. This is £300,000 or 6% less than the revised target of £5m as agreed by Cabinet in December 2006. This is an increase of £200,000 since last month’s reported figure.

1.4.2Elderly & Physically Disabled Care Packages£200,000 or 0.5% underspend

Offsetting the increased shortfall in income from non-residential charging is adecreased expenditure projection for EPD home care/extra care/direct payments.

1.4.3Learning Disability Care Packages£100,000or 0.3% underspend

As previously reported, this budget is projected to underspend by a further £100,000 or 0.3% against the adjusted budget of £32.9m. This is due to continuing concerted management action in three main areas:

  • the implementation of revised methods of negotiating residential care placements with suppliers
  • alternative care packages being made available to clients rather than residential care provision ie Day Care, Home Care or Supported Living
  • some packages are either completely or partially funded by Health following negotiation

1.5ADULT CARE SERVICES (ACS) CRIME AND DRUGS STRATEGY UNIT

1.5.1Police Community Support Officers £200,000 or 10.7% underspend

Hertfordshire Police, who employ the PCSO’s, have advised that there will be an underspend of £200,000 in 2006/07 on salaries and other associated costs..

1.6ENVIRONMENT

1.6.1Waste Management£270,000 or 1.0% underspend

Following clarification of the regulations, it is now clear that the landfill tax per tonne relating to recycling credits is capped. This had not been anticipated at the time of constructing the budget. The impact of this reduction in future years has been reflected in the relevant budget projections.

1.7CENTRAL ITEMS

1.7.1Interest on Balances and Capital Financing £1.46m or 5.1% underspend

Short Term interest rates have increased more quickly and to a higher level than was expected when the budget was set. This coupled with the higher balances being held, partly as a result of the slippage of the capital programme, has resulted in an underspend on the Interest on Balances element of this budget.

2.AREAS OF CONCERN

There are a number of budgets showing current overspends/underspends because of actual spending to date, known commitments or where there are risks and significant uncertainties associated with spending projections. No variations are projected at the year-end on these budgets as it is anticipated that management action in place will contain the potential risks. However these budgets represent areas of concern and are detailed below.

2.1CHILDREN, SCHOOLS AND FAMILIES (CSF)

2.1.1Children with Disabilities

Weekly monitoring is being carried out for Children with Disability budgets and whilst management action to reduce the overspend in this area continues, there is a potential risk that the overspend will increase by a further £100,000 by the end of the financial year.

Managers are currently reviewing those cases with the highest spend per annum (18 cases above £20k per annum). These cases account for 2.4% of the overall number of cases and 17% of the costs. Whilst each case has to be reassessed, which takes approximately ½ day for each; they can be reviewed relatively quickly and will provide a yield in the shorter term.

There is an action plan in place to review how the impact on the 2007/08 budget can be reduced.

2.1.2Child Litigation Unit SLA

This budget funds both the Service Level Agreement (SLA) for the Child Litigation Unit and costs associated with external specialist legal fees. The over spend reflects the current level of usage against the SLA which is estimated to be in excess of 1,000 hours greater than the agreement (£100k). This reflects the high number of cases overall, including a backlog of cases from last year. In addition the overspend predicted for specialist legal fees (£100k) is due to an increase from the number of complex High Court cases requiring expensive counsel. However, there is potential for some rebates against the costs to be payable by the end of the year and are currently being investigated.

2.2ENVIRONMENT

2.2.1Safety Camera Partnership

Income from the operation of Hertfordshire’s Safety Cameras has reduced despite there being little change in the number of incidents being reported. Action has been taken to reduce expenditure.

2.2.2CountyTransport Services (CTS)

Investigations are currently underway to determine the reason for an overspend that is likely to occur in CTS. Clearly this has implications for Adult Care Services as the main customer as well as Environment, but in as much as any liability lies with this department, it is intended that any increased costs will be countered by managed action taken across all the department’s activities including extending the period before vacancies are filled with the intention of producing an underspend on pay.

2.3ADULT CARE SERVICES

2.3.1Other Pressures

Budget pressures remain within the ACS budget, most notably in the areas of residential care where earlier overspend projections have been funded by transfer from special provision. However, every effort is being made to contain expenditure within the latest approved budget.

3CHILDREN, SCHOOLS & FAMILIES (CSF) SCHOOLS

3.1The change in Government Funding to Dedicated Schools Grant (DSG) has meant that any variances in CSF schools budget are ‘ring-fenced’ and can not be used elsewhere. The budget figure of £70.036m for schools relates to the accounting adjustments for the authority’s responsibilities for FRS17 Retirement Benefits and capital charges. Variances against the Schools Budget are shown against the gross school budget (excluding FRS17 and Capital Charges) of £565.328m. Details of the current variance of £1.567m are shown in Table 4 below:

3.2The table belowdetails the projected variances from budget significant movement in the net underspend since November.

Table 4

Service / Description / Para
Ref. / Previously reported position
£’000 / Movement
£’000 / Forecast
Over/ (Under spend)
£000 / % of Budgets
CSF Learning & Schools Effectiveness / SEN Recoupment & Additional Welfare and Tuition / 3.3.1 / (650) / (650) / (9.80%)
Home & Hospital Education / 3.3.2 / (120) / (120) / (22.68%)
Units & Bases / 3.3.3 / (100) / (100) / (4.93%)
Earmarked Pupil Funding / 3.3.4 / 130 / 130 / 50.60%
Out CountyPlacements / 3.3.5 / 838 / 232 / 1,070 / 9.21%
CSF Strategy & Resources /

Teachers Reform Grant

/ 3.3.6 / (600) / (600) / 4.56%

Nursery Provision

/ 3.3.7 / (1,831) / (1,831) / 16.12%

Dedicated Schools Grant