Item 5
BOROUGH OF POOLE
REPORT TO COMMUNITY SUPPORT & EDUCATION
SCRUTINY COMMITTEE
16 SEPTEMBER 2004
MANAGEMENT OF CAPITAL ASSETS
PART OF PUBLISHED FORWARD PLAN: NO
STATUS – GENERAL
1. PURPOSE AND POLICY CONTEXT
1.1 This report outlines the review of the financial management of the Hamworthy & Rossmore schools capital projects.
2. DECISION REQUIRED
2.1 Members are asked to note the report and make the following recommendation to Cabinet:
2.2 In order to avoid budget overruns of this kind in future and to learn from the mistakes that have been made to date, this Committee strongly recommends that the robust approach to project commissioning, planning and management set out in appendix A is adopted by the Council for all large capital projects.
2.3 Members are also asked to agree to receive half yearly progress reports on the implementation of the detailed action plans set out in the audit reports in appendices D and E.
3. BACKGROUND
3.1 Members have been previously informed of requests to support virements from the Education Asset Management Plan budget for both the Hamworthy and Rossmore school capital projects.
3.2 In relation to the Rossmore project, the original capital budget of £3,669k is now reporting a capital need of £4,989k, a variance of £1,320k. Additional running costs of £95k were only identified at the end of the project.
3.3 A plan of financial management action to support the identification of additional costs related to the Rossmore Pyramid Targeted Fund Project was reported to Cabinet on 29/06/04 (see Appendices B,B1). The financial management of the fit-out and operation of the Rossmore Community Library and Learning Centre part of the project was reported to Cabinet on 22/07/04 (see Appendices C,C1,C2).
3.4 The Heads of Property/SASS are currently preparing a report on the financial management of the additional costs required for the Hamworthy Project (to be approved by Portfolio Holder) . The Capital Programme Leader has advised that costs are being finalised and that the value of additional funding required (for additional works plus overspend) is not likely to be significantly different to that previously reported to Members at the Learning Overview Group Committee on 28/01/04 (£350k overspend against an initial budget of £5,448k).
3.5 The Head of Financial Services requested Internal Audit to carry out an assessment of the financial control of these projects (see Appendices D & E).
3.6 In the Corporate Financial Monitoring report to Cabinet (29/06/04), the Head of Financial Services proposed to refer both the Hamworthy and Rossmore targeted fund new school schemes to the September Community Support and Education Scrutiny Committee to determine any lessons that can be learnt and to establish an action plan for improvement in the management of capital projects.
4. LESSONS TO BE LEARNED
4.1 Lessons to be learned to improve the management of capital projects in the future are:
· Ensure a Project Brief is in place for all capital projects.
· Improve the clarity of project team roles/responsibilities.
· Ensure there is an adequate project budget estimating system in place for all projects.
· Improve the clarity of responsibilities for ongoing project details authorisation.
· Improve monitoring/controlling of project costs, including formal adoption of a project management methodology.
5. IMPROVEMENT ACTION PLAN
5.1 Attached at Appendix A is an action plan which addresses the main weaknesses identified from the Internal Audit financial reviews of the Hamworthy and Rossmore school capital projects. Members are asked to note the actions proposed to address the weaknesses identified and the officers responsible for implementing the improvements.
R L Jackson
Head of Financial Services
7th September 2004
Contact Officer: Keith McCormick 01202 633123
1
APPENDIX A
Hamworthy Schools /Rossmore Pyramid Capital Projects – ACTION PLAN
Weakness /Remedy
/ Responsible OfficerStarting Project
1. Project Brief - Lack of Project Brief / · Ensure Project Brief is drawn up at early stage and signed off by the client (formal project methodology would assist) / · Members
· Management Team
· Project Sponsor (Service Unit Head – SASS etc)
· Technical Officer Lead (Head of Property Services)
2. Appointment of Team - Lack of clarity over individual Unit/ officer’s roles/ responsibilities / · Implement ‘Responsible Client’ for each project (as per HofFS ‘Changes to Capital Programme Controls’ report)
· Introduce a formal project methodology
· Agree/document the roles of Property/SASS/ Governors/Headteachers (including communication methods) for school capital projects / · Management Team
· Project Sponsor (Service Unit Head – SASS etc)
· Technical Officer Lead (Head of Property Services)
3. Business Case - Inadequate project budget estimating system / · Introduce a robust project budget estimating system including independent individual estimate verification for large projects (formal project methodology would assist) / · Project Sponsor (Service Unit Head – SASS etc)
· Technical Officer Lead (Head of Property Services)
Directing and Controlling Project
4. Authorisation – Lack of Clarity
over who was responsible for
authorising Project Details / · Define roles and responsibilities of Project Team / · Project Sponsor (Service Unit Head – SASS etc)
5. Cost Control - Ineffective monitoring / controlling of project costs / · Introduce better use of quantity surveyor financial statements (including where partnering used) - (formal project methodology would assist) / · Project Sponsor (Service Unit Head – SASS etc)
· Technical Officer Lead (Head of Property Services)
· Head of Financial Services
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APPENDIX B
REPORT TO CABINET (29/06/04) - Corporate Financial Monitoring
(1st April – 31st May 2004)
Rossmore Pyramid Targeted Fund Project
Budget Update
Purpose
To approve a plan of financial management action to support the identification of additional costs related to the Rossmore Pyramid Targeted Fund Project.
Recommendations
To approve:
1. The additional capital project costs of £642,000 associated with building woks:
o Community Learning Centre - £99,000
o Technology Block - £191,000
o Trinidad/Alderney Schools - £180,000
o Highways issue - £75,000
o Fees & Contingencies – £97,000
2. The currently estimated capital receipts from Trinidad School and Rossmore Library, above those built into the original capital project, be used to support the additional capital costs of the project now identified.
3. An amount of £66,000 is committed to this project from the Corporate Capital Contingency.
4. The Portfolio Holder for Education and Adult Learning reports to the 22nd July Cabinet on the options to reduce the significant additional capital and revenue costs associated with the Community Learning Centre.
Background
In June 2003 Cabinet approved a capital project budget of £3,669,000 of which Department for Education & Skills funds £2,470,000. In December 2003 this was increased by £478,000 to £4,147,000, financed from the Schools Asset Management Plan Funds and Rossmore Community College.
Staff turnover has led to the appointment of an External Quantity Surveyor who has identified the latest forecast of costs associated with the project. Full details are set out in Appendix C1.
Issues Arising
· Building Project
As set out in appendix C1 the Capital project, excluding the Community Learning Centre Library set up cost, are estimated to cost an extra £642,000 than was reported in December 2003. Although there have been some cost pressures, including planning requirements, high steel prices and changes to design required by the school amalgamation, the major reason for the extra cost appears to be a result of a poorly costed project. There are no significant variations in design to account for this scale of variation that could not have been managed within normal project contingencies.
· Library Set Up
The intended design for the Library within the Community Learning Centre is for a modern facility with a high level of IT facilities available, accessible for more hours and having the latest technology available for tracking up to date book stocks. The capital project allowed £60,000 for set up costs that are now estimated to be £469,000.
In addition, revenue costs are also significantly (£256,000) above the £64,000 provided for in the budget for the existing Rossmore Library.
These are significant variations and Cabinet may wish to consider options to reduce the overall financial commitment. It is suggested that the portfolio holder for Education and Adult Learning reviews the needs more closely with the Head of Cultural and Community Services and reports back to the next meeting of Cabinet on the 22nd July.
· Capital Receipts linked to the Project
The Trinidad School, old Rossmore library and school caretaker’s house will generate an additional resources above that assumed at the time the capital project was agreed. These additional resources have not been budgeted to be utilised elsewhere and can be made available to support the project as now fully costed.
· Overall funding shortfall
The confidential Appendix C1 sets out the additional and overall funding currently available to this project. It also identifies that there is currently an overall funding shortfall of £66,000. This could be funded from the Corporate Capital Contingency.
List of Background Reports\Papers
Hamworthy Schools/Rossmore Pyramid Capital Projects, Action Plan – Appendix A
Rossmore Pyramid Targeted Fund Project, Budget Update - Appendix B
Rossmore Targeted Funding Scheme - Appendix B1
Rossmore Community Library and Learning Centre – Appendix C
Rossmore Project Refurbishment Costs, Capital/Set Up Costs – Appendix C1
Rossmore Project Refurbishment Costs, Revenue – Appendix C2
Review of Financial Control, Hamworthy Schools Capital Project Expenditure – Appendix D
Review of Financial Control, Rossmore Pyramid Capital Project Expenditure – Appendix E
Other Executive/Cabinet Background Papers
21 Nov 2001 - Targeted Capital Bid 2001
12 Dec 2001 - Targeted Capital Bid 2001
8 May 2002 - Rossmore Pyramid Targeted Capital bid 2001
5 June 2002 - Rossmore Project Financial Report
10 Sept 2002 - Rossmore Bid Update
8 Oct 2002 - Rossmore Pyramid Scheme Update
10 Dec 2002 - Rossmore Pyramid Targeted Fund Project – Scheme Update
10 Dec 2002 - Hamworthy Schools Targeted Fund Project Update
11 March 2003- Rossmore Project Scheme Update
8 April 2003 - Approval of Proposals for Planning Application for Rossmore School’s Project
10 June 2003 - Rossmore Pyramid Targeted Fund Project
28 Jan 2004 - Hamworthy & Rossmore Projects (Learning Overview Group)
REPORT TO CABINET (29/06/04) - Corporate Financial Monitoring(1st April - 31st May 2004)
Rossmore Targetted Funding Scheme
TOTAL CAPITAL COSTS
Original Budget / Revised Budget / Current Forecast / Variance to Original Budget / Commentary
£000's / £000's / £000's / £000's
Community Learning Centre
Building Works / 850 / 925 / 1,024 / (99)
Library Set up / 60 / 60 / 60 / 0 / Options on additional
requirements deferred to
Technology Block / future Cabinet Report
Building Works / 850 / 1,050 / 1,241 / (191)
Fixtures & Fittings / 60 / 60 / 60 / 0
Trinidad/Alderney
Building Works / 1,200 / 1,171 / 1,351 / (180)
Fixtures & Fittings / 30 / 30 / 30 / 0
Transport Issue / 0 / 0 / 75 / (75)
Fees & Contingency / 619 / 851 / 948 / (97)
3,669 / 4,147 / 4,789 / (642)
Funding
Dfes Credit Approvals / 2,470 / 2,470 / 2,470 / 0
Capital Receipts
Trinidad School / 999 / 999 / 1,400 / (401) / * Decision Required
Library Site / 200 / 200 / 300 / (100) / ** Decision Required
Herbert Avenue / 30 / (30) / ** Decision Required
Education AMP / 0 / 431 / 431 / 0
Rossmore College / 0 / 47 / 92 / (45) / Confirmation Required
3,669 / 4,147 / 4,723 / (576)
Shortfall / 0 / 0 / (66) / 66
* Purchaser identified, still subject to contract
** subject to confirmation
APPENDIX C
REPORT TO CABINET (22/07/04) – Corporate Financial Monitoring
(1st April – 30th June 04)
REPORT OF THE LEARNING PORTFOLIO HOLDER: ROSSMORE COMMUNITY LIBRARY AND LEARNING CENTRE
1 Purpose of the Report
1.1 To approve a plan of the financial management and level of service provision for the fit-out and operation of the Rossmore Community Library and Learning Centre.
2. Decisions Required
2.1 To note the additional capital costs, as set out in Appendix D1, of £200,130 associated with setting up the Rossmore Community Library and Learning Centre.
2.2 To approve the allocation of £99,130 from the Corporate Capital Contingency and £80,000 from the Libraries Revenue budget for book stock replacement to fund identified increase. The remaining £21,000 being funded from Rossmore Community College’s delegated resources.
2.3 To approve the proposals for the service level provision of the Rossmore Community Library and Learning Centre set out below including that for ICT provision and opening hours.
2.4 To note the additional Library Services revenue costs, as set out in Appendix D2 of £94,770, net of an annual contribution from Rossmore Community College’s delegated budget of £52,660.
2.5 To note that these additional revenue costs will need to be addressed as part of the 2005/06 budget setting process, either from within the service or as part of the Council's Medium Term Financial Plan.
3 Background and summary
3.1 The Rossmore Community Library and Learning Centre is due to open in January 2005.
The ambitious vision for this project is to create a learning facility that challenges the traditional barriers to gaining access to education, learning and resources as experienced by many people. The project is based in a ward with identified need to provide learning opportunities to raise the skills levels of the local population. This is an exciting and innovative project that will build community partnership to place the library service on a school campus that is an integrated focal point for learning in the local community.
It is recognised that the overall management of this capital project has experienced difficulties and that this has been reported to Cabinet previously. The project is currently the focus of an internal audit which will be presented to the Education and Community Support Scrutiny Panel in September. Following the appointment of the new Head of Culture and Community Learning in April 2004 a funding problem with the Community Library and Learning Centre was identified. The allocated funding for the set-up and operation of the centre was not adequate for the expected level of service provision. Costs were worked out with assistance from Financial Services and during May/June 2004 a clearer picture of the true situation emerged.