HERTFORDSHIRE COUNTY COUNCIL
POLICY AND RESOURCES CABINET PANEL
WEDNESDAY 16JUNE2010AT 2.00 P.M. / Agenda Item No:
3

COUNTY COUNCIL REVENUE AND CAPITAL BUDGET MONITOR 2009/10

Report of the Director of Resources and Performance

[Author: Lorraine Allen, Group Manager, Financial Planning and Strategy Tel: 01992 555313]

Executive Member: David Lloyd (Resources and Economic Wellbeing)

1.Purpose of The Report

1.1To inform Members of the outturn for the 2009/10 Revenue and Capital Budgets.

1.2To inform the Panel of the efficiency savings achieved in 2009/10 prior to the submission of the Value for Money National Indicator (NI179) to the Department for Communities and Local Government (DCLG) by 22nd July 2010.

2.Summary

2.1The monitoring position at the end of March 2010 shows a revenue underspendof £6.686million (1%) against the latest approved budget of £682.024million.

2.2The principal reasons for the variation in the revenue outturn are listed in Table 3 (paragraph 1.2 refers), whilst a summary analysis across service is shown in Appendix A.

2.3Revenue carry forward requests totalling £468,000 have been made and are detailed in section 2 of this report. It is also proposed that the risk of increased impairment of Icelandic bank deposits be covered by a £5.511 million increase in the specific reserve, funded from the special provision.

2.4Table 7 (paragraph 4.1 refers) and Appendix B provide an analysis of the capital underspend of £86.843 million. This variance includes slippage of £81.673 million. Of the reported slippage, £14.5 million relates to childcare quality and access and children’s centres programmes funded from Sure Start grants. In order to comply with the grant conditions these projects need to be completed by March 2011, so the progress on these projects now requires careful review to minimise any risk of loss of funding or the need to cancel elements of the programme (paragraphs 4.2.23 and 4.2.24 refer).

2.5It is proposed to carry forward capital slippage of approximately £64.855 million into 2010/11. The detail of this will be presented to Cabinet on 19th July 2010.

2.6General balances as at 31 March 2010 would be £31.4 million if all carry forward requests were to be approved and £5.511 million of the special provision is used to increase the specific reserve for Icelandic deposits at risk.

2.7Table1 below sets out the position on reserves agreed by the County Council in February based on an estimated position at the 1 April 2010. This included the writing back of reserves to the general fund following a detailed in year review and the application of £21.1million of reserves to meet the 2010/11 and 2011/12 budget and the establishment of a £4.5 million Transformation Fund.

Table 1: Reserves Position

IPP Projection
February 2010 / Outturn position
£m / £m / £m / £m
Available reserves 1.4.2010 / 25.4 / 31.4
Add back released reserves / 19.0 / 19.0
44.4 / 50.4
Less:
Application of one-off reserves / (21.1)
Transformation Fund / (4.5) / (25.6) / (25.6)
Balance / 18.8 / 24.8

2.8As part of the budget the Council established a minimum prudent level of general reserves of 2½% of the non-schools budget (£18.8 million). In light of current litigation in relation to equal pay claims and the New Roads and Street Works Act (relating to the judges ruling on the Veolia street works claim) a review of the minimum prudent level of general reserves has been undertaken. It is proposed that this is increased by £6 million to £24.8 million (circa 3% of non-schools budgets) to accommodate these risks.

2.8The reported 2009/10 prudential indicators are included as Appendix C. Summary information on the council’s treasury management activityis attached at Appendix D, on debt management at Appendix E and on Accounts Payable at Appendix F.

2.9Section 9 of this report provides information on 2009/10 efficiency savings outlining the latest position against NI179.

3.Conclusions and Recommendations

3.1The Panel is asked to consider the information in this report and make comments to Cabinet, and recommend that Cabinet approves the following:

  1. revenue carry forwards totalling £468,000 as set out in Table 5;
  1. the application of £5.511 million of the special provision to increase the specific reserve for Icelandic deposits at risk;
  1. a £6 million increase in the Minimum Prudent Level of Reserves;
  1. capital slippage on committed schemes be carried forward into 2010/11 with the detail of this to be presented as part of the revised Capital Programme to Cabinet at their meeting on 19 July 2010;
  1. for schemes where there is no existing commitment to be delivered in 2010/11 or where there is an ongoing annual budget available to meet the slippage,the action to be taken as set out in Table 10.
  1. the allocation of £238,000 of the underspend from capital schemes no longer required to the Nascot Wood scheme as set out in paragraphs 4.2.34 and 4.2.36 of the report.

1.REVENUE BUDGET VARIANCES

1.1Table 2 below summarises the variances by service using the criteria previously laid down in Financial Regulations 2008.

Table 2: Budget Variances 2009/10

Overspends / Planned Under-spends / Unplanned Under-spends / Net Variances
£’000 / £’000 / £’000 / £’000
ChildrenSchools and Families / 11,975 / (5,341) / (715) / 5,919
Adult Care Services / 3,409 / (928) / (1,659) / 822
Environment & Commercial Services / 1,356 / (1,162) / (3,359) / (3,165)
Fire & Rescue / (80) / (80)
Strategy and Partnership / 5 / (88) / (820) / (903)
Resources and Performance / 3,845 / (i,144) / (1,300) / 1,401
Sub Total / 20,590 / (8,640) / (7,933) / 3,994
Precepts / 5 / 5
Capital Financing & Interest on Balances / (6,737) / (6,737)
Contingency and Special Provision / (923) / (923)
Review of Balance Sheet / (2,327) / (2,327)
Central Items / (698) / (698)
Totals at 31/03/2010 / 20,595 / (18,627) / (8,631) / (6,686)

1.2The following table shows those variances of £100,000 or more against the latest budget. Detailed explanations for these variances are listed in sections 1.3 to 1.8.

Table 3: Variances Exceeding £100,000

Service / Description / Para
Ref. / Forecast
Over/ (Under spend)
£’000
ChildrenSchools and Families / Inclusion Services / 1.3.2 / (862)
Admissions and Transport / 1.3.3 / (440)
School Planning & BSF / 1.3.4 / (186)
Learning and School Effectiveness / 1.3.5 / (187)
Childhood Support Services / 1.3.6 / (582)
Standards & School Effectiveness / 1.3.7 / (190)
Children and Families Central / 1.3.8 / 3,237
Safeguarding Services / 1.3.9 / 3,474
Children Looked After Services / 1.3.10 / 3,023
Access to Education / 1.3.11 / (101)

District Partnership Services

/ 1.3.12 / (161)

CAMHS (Integrated Children’s Services)

/ 1.3.13 / 115

Strategic Commissioning

/ 1.3.14 / (299)

Directorate

/ 1.3.15 / 144

IT Budgets & Recharges

/ 1.3.16 / (357)
Other PBS budgets / 1.3.17 / (649)
Adult Care Services / Net purchasing budget for older people / 1.4.1 / 1,911
Net purchasing budgets for people with a physical disability / 1.4.2 / 1,200
Net purchasing budgets for people with a learning disability / 1.4.3 / 298
Strategic Centre and Support Services / 1.4.4 / (1,379)
Release of Section 117 Provision / 1.4.5 / (718)
OPPD Staffing Budgets / 1.4.6 / (180)
In-House Services / 1.4.7 / (195)
Crime Drugs and Strategy Unit / 1.4.8 / (100)
Environment / Structural Maintenance / 1.5.1 / 160
Routine Maintenance / 1.5.2 / 408
Winter Maintenance / 1.5.3 / 707
Lighting / 1.5.4 / (299)
Traffic Management and Safety / 1.5.5 / (140
Passenger Transport / 1.5.6 / (851)
Waste Management / 1.5.7 / (1388)
Strategic Planning and Information / 1.5.8 / (404)
Commercial Services / HBS / 1.5.9 / (1,203)
Strategy and Partnerships / Strategic Partnership / 1.6.1 / (145)
Customer Service Centre / 1.6.2 / (175)
Legal Services / 1.6.3 / (213)
Member Services / 1.6.4 / (205)
Service / Description / Para
Ref. / Forecast
Over/ (Under spend)
£’000
Resources and Performance / Herts HR / 1.7.1 / (259)
Information Technology / 1.7.2 / (1,144)
Civic Buildings / 1.7.3 / 3,144
Corporate Managed Properties / 1.7.4 / (962)
Service Property Costs / 1.7.5 / 478
Hertfordshire Property / 1.7.6 / 124
Central Items / Capital Financing/Interest on Balances / 1.8.1 / (6,737)
Local Authority Business Growth Incentive (LABGI) scheme / 1.8.3 / (698)
Contingency /Special Provision / 1.8.4 / (923)
Review of Balance Sheet / 1.8.5 / (2,327)
Forecast Overspend >£100K Variances / (6,236)

All Services

/ < £100k Variances / (450)

Total Forecast Overspend

/ (6,686)

1.3CHILDREN, SCHOOLS & FAMILIES (CSF)

1.3.1 CSF Overview

The initial outturn position is an overspend of £5.123million, but a decision to change the accounting treatment for home to school transport increases the overspend to £5.919million. The outturn figure of £5.919million also includes late property charges of £220,000.

The outturn position highlights a number of areas of service where challenging pressures already exist for the financial year 2010/11, despite extra funding having been built into the budget. The CSF Board and the Finance team are currently assessing the potential level of overspend and identifying mitigating actions.

  • Independent placements (social care):£1.5million
  • Independent Fostering:at least £2.8million
  • Adoption allowances£100,000
  • Contact Service: up to £1.0million
  • Childcare Litigation:at least of £400,000
  • CLA Team budgets:£400,000
  • Safeguarding team agency overspend:£700,000

This equates to a total risk of around £7 million. (All figures are approximate and come with major assumptions / caveats behind them.)

1.3.2Inclusion Services - £862,000 or 2.4% Planned underspend

The underspend on Inclusion Services comprises

  • £239,000 on the Multi-Agency and Psychology Service (previously £208,000)
  • £389,000 on Disabled Children’s Services (previously £303,000)
  • £236,000 on SEN Transport (previously £600,000) and
  • A net overspend of £2,000 on other services (previously £16,000 underspend)

These variances were due to

  • unfilled vacancies in MAPS, arising from a national shortage of Educational Psychologists, additional income from Targeted Mental Health in Schools (TAMHS) to cover support activities, plus a MAPS contribution to the reduction in CSF overall spend;
  • pressure on the budget for independent placements for children with disabilities and under-funding of Assistant Team Manager posts in Disabled Children’s Services teams, offset by the full-year effect of previous year’s efficiencies in Disabled Children’s services budgets, a £200,000 contribution to the reduction in CSF overall spend, reduced expenditure within residential homes due to a vacancy management policy and improved rotas across homes, maximised use of the Aiming High grant and higher than expected refunds from service users in receipt of Direct Payments;
  • negative RPI applied to SEN transport contracts, other re-tendering and in-year contract changes (total £719,000) offset by the £483,000 effect of a change in the accounting procedures for home to school transport; and
  • net variances of £2,000 across a range of budget headings.

1.3.3Admissions and Transport - £440,000 or 4.2% Planned underspend

As previously reported there has been an under-spend on the Mainstream Home to School Transport budget, arising from the result of negative RPI being applied to contract renewals, re-tendering and in-year contract changes, the provision for late payments requests from the local hardship budgets not being needed, and savings achieved through bad weather in January, whereby there were fewer journeys to mainstream schools by taxi operators andsome "e" routes.

Despite additional savings of £203,000 being achieved since the time of the December report, the underspend has reduced at year-end as a result of a change in the accounting procedures from home to school transport (the impact of the change is £313,000).

1.3.4School Planning and BSF - £186,000 or 3.7% Planned underspend

At the time of the end of December report it was known that work on the Welwyn/Hatfield BSF "follow-on project" was being progressed less rapidly than previously expected, producing a £90,000 underspend. This is partly linked to long term financial risk around programme funding - so that as little money is spent up-front prior to greater evidence that the programme will eventually be funded, but without slowing the project to the extent that if funding was available the County Council would lose access to it because its proposals were too underdeveloped. This has led to savings in early-stage development costs. These have been partly offset by additional costs on the development of the Stevenage schemes covered by the Supplementary Outline Business Case, namely Thomas Alleyne and Barclay, flowing from the need amongst other things to modify the proposed scheme in the light of public opposition at Great Ashby.

Since the time of writing the December report, £30,000 of costs expected to be incurred in relation to the move of Thomas Alleyne school, and acquisition and development of the Great Ashby site, slipped from 2009/10 to the following year, due in part to the delay in planning approval for the proposal from December to March.

The final underspend on BSF was £31,000 greater than these previous forecasts. In addition a further £35,000 underspend on the Planning budget is due to a reduction in the use of agency staff and lower area review costs.

1.3.5Learning and School Effectiveness - £187,000 or 41.3% Planned underspend

LSE previously reported a£200,000 contribution to the reduction in overall CSF spend, arising from the reallocation of premises budgets following the implementation of the PFI-funded residential provision. The final net underspend achieved has reduced to £187,000, due to higher than expected year-end recharges for health and safety and communications.

1.3.6Childhood Support Services (CSS) - £582,000 or 323.3% Planned underspend

As previously reported, Childhood Support Services contributed £85,000 to the reduced overall CSF spend, by delaying Study Support projects, bringing their total under-spend to £117,000.

Since the time of writing the December report a further £147,000was freed up by maximising expenditure covered by grant. The grant has become available due to under claiming by settings against the Graduate Leader Fund, an area of Sure Start Grant.

The final £318,000 of underspendcomprises the following:

  • Sure Start grant income relating to 2009/10 expenditure incorrectly included in the 2008/9 accounts (£113,000);
  • Over estimate of revenue feasibility costs for capital programme due to under capitalisation (£60,000);
  • Undeclared slippage from individual children's centres (£100,000);
  • Staff absence that led to slippage on project delivery(£22,000); and
  • The saving achieved from delaying Study Support projects increased by a further £23,000.

In addition to this, Sure Start 0-7s activity underspent by £79,000 and, as ring-fenced funding, this will need to be returned (i.e. there is a net nil effect on the CSF outturn position). Other Sure Start areas not ring-fenced underspent by £205,000; this grant has been used instead to fund Home Start activity (see section 3.12.3) and so has a net nil effect on the CSS outturn position.

Much of the CSS funding comes from grant, with only a small proportion from County Council funds. This underspend represents a very small proportion of the grants, but appears as over 100% of County Council budgets.

1.3.7Standards and School Effectiveness - £190,000 or 1.5% Planned underspend

As previously reported, there is a pressure creating an overspend on the teachers pension budget as a result of the difference between the HCC calculation of inflation, and the actual higher costs of pensions inflation (ie retail price inflation).This has had a significant impact in the current year because the pension increase was 5%, whereas the inflation included in the budget was 1%.Previously reported as £146,000, the final pressure on pensions was £187,000

However, set against this, SSE’s contribution to the CSF in year savings of £279,000 (previously projected as £261,000) was achieved through actions including:

  • Deferring until 2010-11 the secondary aspiring heads programme, by ending contracts with external consultants;
  • Review of staffing arrangements, such as using existing staff to cover seconded posts and not recruiting administrative staff;
  • The autumn and spring term Continuing Professional Development (CPD)was scaled back. There is a drive across SSE to produce data on CD's and therefore reduce printing costs.
  • Meeting costs of the Primary Team and business systems from Making Good Progress Grant;
  • Using Training Development Agency(TDA) grant to fund the School Workforce Development team;
  • Using funding from 14-19 RPA grant to fund 14-19 advisers; and
  • non filling of vacancies in the Secondary Strategy team and applying grant savings to the School Effectiveness Advisor (SEA) budget.

Additional changes since the December report are:

  • ABG funding of £79,000 for designated teacher training was not required this year and was offered up as a contribution to reducing CSF’s overall overspend;
  • the MECS budget has underspent by £28,000 due to take up of the field force resource being less than budgeted;
  • Music underspent by £3,000 and
  • other budgets have moved upwards by £12,000.

1.3.8Children and Families Central- £3.237 million or 50.1% Overspend

As previously reported, this overspend relates to the volume and cost of independent placements. The increases in commitments during 2009/10 places a high risk on the sufficiency of the budget for 2010/11.

Management action in response to this position will include improvements to the rigour of the placement monitoring process and the creation of a strategy for 2010/11 that will secure a level of Children Looked After (CLA) that can be funded from within the available budget.

1.3.9Safeguarding Services- £3.474 million or 14.2% Overspend

Safeguarding Services team budgets: £860,000 overspend

As previously reported, this overspend was occasioned due to the national shortage of qualified children's social workers and the need to rely on expensive agency staff to fulfil statutory child protection and children looked after duties. The main items increasing the outturn position compared with that reported at the end of December are

  • non staffing costs, mainly printing and stationery, which are charged out to services at the end of year as opposed to monthly. The forecasting on this item was done at last year's costs plus inflation but, following a significant restructuring in September last year, insufficient spend was forecast for this financial year. Forecasting will be adjusted to ensure a more accurate forecast in the next financial year and stationery and photocopying billing will be explored.
  • spend on agency social work staff contracted in March to cover permanent posts which have been vacant for some time. At any point in time the teams may have up to 20 outstanding requests for agency social work staff to cover priority work such as child protection allocations and care proceedings cases in Court. As well as there being a serious shortage of permanent staff in the market, there is also a significant shortfall of agency staff available for hard to recruit to posts in child protection so we can never predict when the agency staff required will become available. March is the most critical time for allocations in the performance reporting year and the service was not in a position not to contract suitable agency staff when they became available.

Contact Service: £1,425,000 overspend

This service meets the Authority’s responsibility to secure and promote contact between children looked after and their birth parents, guardians, anyone else with parental responsibility, relatives, friends and others connected with them “unless it is not practicable or consistent with the child’s welfare”. As numbers of children looked after rise, the level of contact activity thus increases. Under section 8 of the Children Act 1989 courts are able to set levels of contact in individual cases, (in terms of the frequency type and supervision) which has made it difficult to accurately forecast future expenditure.

The reasons for this overspend have been outlined in previous commentaries. This is a statutory duty and as the numbers of younger children have risen sharply over the last 18 months, the number and frequency of contacts has risen, the levels largely being determined by the Courts.

The increase in expenditure since the forecast reported at the end of December is due to:

  • new/increased contacts directed by Court or as a result of children temporarily looked after during child protection investigations;
  • contacts that were expected to end but where there have been delays in Court processes or moving children out of care to family carers; and
  • use of agency staff whilst staff previously anticipatedto have begun in fixed term posts by March were brought into post.

The use of staff on fixed term contracts as opposed to using more expensive agency staff is a key strategy to manage this complex and demand led provision and this must be expedited now that additional funding put into this service has become available, as is the renting of a building in the Stevenage area to reduce travelling costs/time and increase capacity of workers to supervise three contacts per day instead of two.