HERTFORDSHIRE COUNTY COUNCIL

POLICY, RESOURCES & PERFORMANCE CABINET PANEL

WEDNESDAY 15JUNE 2011 AT 2.00PM

HERTFORDSHIRECOUNTY COUNCIL PERFORMANCE AND FINANCE MONITOR Q4 2010/11

Report of the Director Resources and Performance

[Authors:Claire Cook, Assistant Director Finance

Tel: 01992 555737

Chris Badger, Head of Performance Improvement and Diversity

Tel: 01992 588314]

Executive Members:David Lloyd, Resources and Economic Wellbeing

Derrick Ashley, Transformation, Performance & Waste Management

  1. Purpose of report

1.1To present the Quarter 4 (January to March 2011) performance and finance monitor to the Policy, Resources and Performance Cabinet Panel. This report will also be considered by Cabinet on 20June 2011.

1.2As with the Quarter 3 2010/11 report, the detailed data behind the priority sections in the covering report to the Policy, Resources and Performance Cabinet Panel will be made available on the Herts Datastore (

  1. Recommendations
  2. The Policy, Resources and Performance Cabinet Panel is invited to:
  3. recommend that Cabinet approves the following:
  1. revenue carry forwards totalling £1.395 million as set out in Table 4 in section 3.5 together with the treatment of grant carry forwards of £15.588 million as set out in table 5,also in section 3.5.
  1. the transfer of £8 million of this year’s underspend into the Invest to Transform Fund to fund the one-off costs relating to changes in non-school staff Terms & Conditions
  1. the transfer of £9m of this year’s underspend to a new Waste PFI Reserve to recognise the risks that arise from such a major complex project.
  1. an increase of £2.219 million to the General Fund balance bringing to £20.338 million (2.5% of the non-schools budget on the basis that a-c are agreed)
  1. capital slippage on committed schemes to be carried forward into 2011/12 with the detail of this to be presented as part of the revised Capital Programme to Cabinet
  1. Allocation of the 2010/11 Schools Budget underspend to support slippage on schools capital expenditure programmes funded from revenue of £4 million and to support the remaining shortfall on the standards fund allocations for 2010/11. The decision on the final amount of this allocation to be delegated to the Director Resources and Performance in consultation with the Executive Members for Performance and Resources and Education and Skills for agreement.
  2. note progress and comment on any areas of concern and/or interest.

3Revenue and Capital Budget Monitor 2010/11

3.1Revenue Budget

The forecast year-end underspend for 2010/11 of £19.492million (2.5%) against the latest approved budget of £783.394 million principally represents the early delivery of transformation savings necessary to deliver the Council’s medium terms savings target. The underspend also reflects a number of one-off efficiencies of £8.4 million. These relate to:

  • review and release of balances and reserves - £4.1 million
  • savings on capital financing related to use of balances and slippage on capital programme - £3.4 million
  • application of time limited non-recurring grants - £0.9 million

The underspend is a one-off saving and does not negate the need for the Council to reduce annual spending by £200 million per annum over the period 2010/11 to 2014/15, £57 million of which is to be delivered in 2011/12.

The new IFRS accounting arrangements for grants mean that there are a number of new conditions that need to be satisfied to determine the accounting treatments. If these conditions cannot be met then the grants need to be treated as carry forwards in the accounts even though they may be ring-fenced for specific purposes. For 2010/11 this means that £15.588 million of grants (set out in table 4) need to be treated in this way. Over and above this Revenue Carry forward requests, totalling £1.395 million, have been made and are detailed in table 5 of this report. For the purposes of this report the revenue underspend is shown net of these amounts.

If the carry forward and reserve movements were agreed this would result in a general balance of £20.338 million (2.5% of the non-schools budget).

An analysis of the net variances which make up the forecast revenue outturn is listed below in Table 1. Table 2 lists projected variances over £250,000 together with the latest forecast for the council’s most high risk/volatile budgets. Further details are included within the relevant priority sections of this report.

A summary analysis across service is shown in Appendix A.

Further details of budget variances can be found in the monthly budget monitors at

Table 1: Budget Variances 20010/11

At QTR 4 / Overspends / Planned Under-Spends / Unplanned Under-spends / Net Variances
£`000 / £`000 / £`000 / £`000
ChildrenSchools and Families / 1,236 / (8,811) / 0 / (7,575)
Adult Care Services / 6,306 / (6,100) / 0 / 206
Environment & Commercial Services / 139 / (6,579) / 0 / (6,440)
Fire & Rescue / 0 / (494) / 0 / (494)
Resources and Performance / 408 / (6,270) / 0 / (5,862)
Sub Total / 8,089 / (28,254) / 0 / (20,165)
Precepts / 0 / 0 / (21) / (21)
Capital Financing & Interest on Balances / 0 / 0 / (3,414) / (3,414)
Contingency and Special Provision / 4,108 / 0 / 0 / 4,108
Review of Balance Sheet / 0 / 0 / 0 / 0
Central Items / 0 / 0 / 0 / 0
Totals at 31/03/2011 / 12,197 / (28,254) / (3,435) / (19,492)

Table 2: Analysis of movements in variances greater than £250,000 and variances against high risk budgets by priority

Ref / Department / Description / Original Budget / Latest Approved Budget (LAB) / Movement since Q3 £000s / Over / (Underspend) £000s
1. Supported Economic Wellbeing
N/A / N/A / N/A / N/A / N/A / N/A
2. Maximise Independent Living
P2/A / ACS / OPPD Purchasing (Gross) / 143,909 / 141,623 / 136 / 4,296
P2/B / ACS / LD Purchasing (Gross) / 96,665 / 55,991 / 879 / 2,279
P2/C / ACS / Income from OPPD Client Charges / (30,580) / (29,596) / 40 / (210)
P2/D / ACS / Preventative Services / 10,206 / 9,879 / (251) / (798)
P2/E / ACS / Strategic Centre / 17,844 / 14,930 / (638) / (1207)
P2/F / ACS / Transport SLA / 7,100 / 7,097 / (294) / (240)
3. Ensure a Positive Childhood
P3/A / CSF / Independent Placements –Social Care & Fostering Providers / 11,537 / 11,983 / 663 / 2,589
P3/B / CSF / Safeguarding Services Pay / 16,610 / 17,255 / (1,297) / (2,168)
P3/C / CSF / Contact Service / 1,595 / 1,598 / (260) / 1,010
P3/D / CSF / Childcare Litigation / 3,180 / 3,180 / (237) / 1,163
P3/E / CSF / Fostering Services / 10,863 / 10,924 / (193) / (294)
P3/F / CSF / Independent Placements – Disabilities / 3,787 / 3,787 / (113) / 616
P3/G / CSF / Commissioning Support Programme / (2,180) / (2,180) / 1369 / 2,180
4. Secure a Good Education for all
P4/A / CSF / SEN Home to School Transport / 13,812 / 13,823 / (351) / (1,238)
P4/B / CSF - schools budget / Maternity / 2,727 / 2,727 / 29 / 629
P4/C / CSF - schools budget / Independent Placements - Education / 16,261 / 16,172 / (412) / (3,129)
P4/D / CSF / Performance and Business support / 54,829 / 97,198 / (1,387) / (9)
P4/E / CSF / Inclusion services / 19,444 / 18,902 / (663) / (1,463)
P4/F / CSF - schools budget / Admission and Transport / 9,309 / 9,226 / (648) / (1,294)
P4/G / CSF / Early Intervention / 5,060 / 2,634 / (253) / (461)
P4/H / CSF / District Partnership / 2,049 / 1,932 / (380) / (622)
P4/I / CSF / Services to Young People / 7,083 / 8293 / (897) / (997)
5. Reduce Carbon Emissions
N/A / N/A / N/A / N/A / N/A / N/A
6. Promote Safe Neighbourhoods
N/A / N/A / N/A / N/A / N/A / N/A
7. Be a Leading Council
P7/A / ENV / Waste Management / 35,462 / 36,657 / 13 / (510)
P7/B / ENV / Routine Maintenance / 19,718 / 17,182 / (15) / (524)
P7/C / ENV / Winter Maintenance / 3,795 / 3,635 / (518) / (21)
P7/D / F&R / Firefighters Pay / 25,883 / 25,898 / (66) / (216)
P7/E / CF&IoB / Capital Financing and Interest on Balances / 39,885 / 47,944 / 5 / (3,414)
P7/F / ENV / Transport Planning Policy and Stategy / 3,721 / 4,457 / (1774) / (1881)
P7/G / ENV / Strategy Planning and Information / 2,123 / 3,801 / (311) / (795)
P7/H / R&P / Central and Shared Building / 13,139 / 12,290 / 513 / 146
P7/I / R&P / Property and Technology / 5,284 / 13,135 / (838) / 2136
P7/J / R & P / Corporate Managed Properties / -4,100 / -2,643 / (632) / (630)
P7/K / R & P / Herts HR / 6,279 / 5,861 / (321) / (471)
P7/L / R & P / Service Property Cost / 0 / 0 / (415) / (415)
P7/M / Contingency / Contingency / 5,635 / 5,365 / 1,108 / 4,108

3.2Schools Budget

The government funding for the Schools Budget is delivered by way of Dedicated Schools Grant (DSG). Any variances in the schools budget are ‘ring fenced’ and not allowed to be used elsewhere. Any surplus or deficit arising from the DSG is allowed to be carried forward into the following year and has no impact on the county’s financial position. The final position on the schools budget as at 31st March 2011 was an underspend of £13.466 million against an overall budget of £670.865 million (2.1%).

The largest single item of the underspend (£4.3 million) relates to Capital Expenditure funded by revenue (CERA). CERA is used to support capital works in schools and the schools capital programme also has slippages of some £4 million which will need to be funded from CERA in 2011/12 in addition to the amount already approved in the Integrated Plan. The specific approval of the Schools Forum would be required for this as this would result in the central expenditure limit being exceeded. The Schools Forum will consider this at their meeting of 14th June 2011 and members will be updated at the Policy, Resources and Performance Cabinet Panel on 15th June 2011.

Late notification was received from the Department for Education regarding 2010/11 standards fund instalment informing this (and all other authorities) that it would not be paying the final instalment and that the equivalent sum (around £2.753m for the County) is now part of 2011/12 DSG. The impact of this is either a £2.7m cut from 2010/11 standards fund (with implications for summer term funding) or the same amount of cut from 2011/12 DSG. Following objections from local authorities and other representative bodies, the DfE have indicated that this cut in funding may be recovered from 2011/12 DSG (without impacting schools budget shares), spread recovery over a number of years or continue to show this amount as receivable from the department until a definitive solution will be reached in 2012/13 (for 2013/14 implementation). In order to close the 2010/11 accounts officers have treated this amount as receivable in 2010/11 but it would be prudent to resolve this issue as soon as possible for the 2011/12 financial year. Work is being undertaken to identify how far this deficit can be met from the unspent 2010/11 standards fund grant that has been carried forward to 2011/12. It is also proposed that any remaining shortfall after this exercise be met from the 2010/11 carry forward which is likely to be in the region of £1 million. Schools Forum have already agreed the use of carry forward to meet this commitment given that it would result in a breach of the Central Expenditure limit.

3.3Capital Budget

Expenditure for the Capital Budget is estimated to be £45.443 million below the latest budget, as shown in the table below. This variance includes projected slippage of £42.506 million. This is in comparison to the £5.659 million underspend and a slippage of £14.025 million reported in the December monitor.

The slippage on all capital projects has been reviewed as part of the closure process and slippage of £42.506 is required to meet the ongoing commitments on these projects. However, in light of the slippage a review of the capital programme for 20011/12 to 2013/14 is also being undertaken to take account of any ongoing impact on cashflows. A revised capital programme will be proposed to Cabinet at their meeting on 20 June 2011.

Variances exceeding £250,000 are included within the relevant priority sections of this report. Further details of all variances can be found in the monthly budget monitors at:

A summary analysis of the projected capital underspend by service is shown in Table 3 below.

Table 3: Capital Budget Variances 2010/11

Service / Latest Budget
(£’000) / Projected Outturn
(£’000) / Slippage
(£’000) / Under spend
(£’000) / Over
spend
(£’000) / Total Variance
(£’000)
Adult Care Services / 14,958 / 5,475 / (7,900) / (1,583) / - / (9,483)
Libraries, Culture & Learning / 2,816 / 2,001 / (783) / (33) / 1 / (815)
Education & Children’s Services / 113,765 / 89,969 / (27,271) / (5461) / 8936 / (23,796)
Environment & Transport / 64,419 / 58,616 / (3,456) / (2,347) / - / (5,803)
Fire & Rescue Service / 1,944 / 852 / (1085) / (22) / 15 / (1092)
Resources & Performance / 13,811 / 9,372 / (2011) / (2,435) / 7 / (4,439)
Trading Standards & Registration / 27 / 12 / - / (15) / - / (15)
Total / 211,740 / 166,297 / (42,506) / (11,896) / 8,959 / (45,443)

3.4Other Financial Information

The reported 2010/11 prudential indicators, summary information on the Council’s treasury management activity, debt management, accounts payable and carry-forwards is included in the ‘Priority 7 – Be a Leading Council’ section of the full report.

Capital Financing Requirement

The Capital Financing Requirement (CFR) has reduced by £65 million, this is due to a reduction in forecast capital expenditure in 2010/11 (forecast £198 million)

Debt Management Report

With continued robust debt management processes, the reductions in outstanding debt during 2009/10 have been maintained; speed of payment has also improved with 50% of invoices now paid within 30 days. This has been achieved in the context of new income streams being processed through Accounts Receivable (music schools, and some HCS charges against properties). There has been a £264k reduction in the value of uncollected debt over 9 months old, as older debt has been the subject of specific review and, where necessary, write off.

A range of new reports have been developed and are now in use in the Debt Management team, to facilitate debt handling and the production of management information

Treasury Management Report

Yields on the Council’s investment portfolio have improved in the last two quarters with the introduction of money market funds. This has enabled investments to be diversified across a range of investment vehicles, thereby spreading the risk.

The liquidity indicator measuring the length of time investments are held has fallen from 91 days in quarter 3 to 27 days in quarter 4. This reflects that a high proportion of the investment portfolio has been held in instant access money market funds during the quarter.

3.5Grant and Revenue Carry forwards

Grant Carry forwards

The new IFRS accounting requirements for grants mean that there are a number of conditions that need to be met to determine the accounting treatments of grants. If these conditions are not met then the grants need to be treated as carry forwards even though they may be ring-fenced for specific purpose. The table below sets out the total amounts of grants that will need to be treated in this way for 2010/11 – in previous years they would have been shown as creditors within the accounts. The service underspends have been shown net of these amounts

Table 4: Grant Carry forwards

Service / Carry Forwards
Environment and Commercial Service / £3,193,000
Fire & Rescue / £1,062,000
Health and Community Services / £2,551,000
CSF / £8,752,000
Total / £15,588,000

Table 5: Revenue Carry Forwards

Revenue carry forwards of £1.395 million set out in the following table will be submitted to Cabinet for approval.

4Commercial (Procurement) Report

Markets Summary
Data from the Office of National Statistics (ONS) shows high street sales rose 0.2% in March compared to February's 0.8% fall. That is despite the Government's spending cuts starting to bite, and inflation continuing to hit household budgets. The UK Economy grew in quarter 4 by just 0.5% - This only offsets a similar size fall in quarter 3.
ONS data also released shows public sector net borrowing fell short of the Office for Budget Responsibility's forecast during the 2010/2011 financial year. It came in at £141.1bn - against revised expectations of £145.9bn.
Inflation remains a lot above the Bank of England target. For March CPI =4.0% (up from 3.7% in Dec) and RPI =5.3 % (up from 4.8% in Dec). However both these numbers are a fall from February 2011.The drop was largely due to a record monthly fall in the price of food and non-alcoholic drinks, which fell 1.4%, compared with a rise last year. This drop eases pressure on Interest rate rises from The Bank of England.
Internationally Standard & Poors downgraded the US debt outlook to negative and there are increasingly suggestions that Greece's debt will be restructured in the summer.
Energy prices have risen in first quarter by 30%. The implications of this on electricity and gas costs for the County Council are still being looked at but maybe significant when our current contract ends. An oil price remaining at over $100 per barrel will impact global growth rates.
Supply Side Commentary
Waste reports that Edwards Waste Management who operate 12 of our 18 household waste sites and the associated container provision and transport contractwent into receivership (19th January 2011.) Replacement contracts are being tendered. It seems likely that the Household Waste Recycling Service will not be disrupted. Financial impact still to be determined.
Adult Social Care report no major supply side issue in Domiciliary care though some local difficulties. HCS has agreed a new strategy for home care provision that develops a range of Key Strategic partners.
In the residential care area, there is an oversupply in the markets.
Energy- wholesale energy prices have risen around 30% since New Year as a result of the political unrest in N. Africa and the Middle East and the nuclear disaster in Japan. The County Council has agreed to sign up with LASER (a consortium run by Kent) from October 2011 on the basis of flexible procurement. The impact of the wholesale prices on the County Council’s likely costs is being looked at by LASER at the moment.
Children Social Care
Independent sector. Hertfordshire has one of the lowest levels of children’s residential care provision in the country. The Children & Young Persons Act 2008 has placed a new duty on local authorities to ensure that it secures a range of accommodation for children looked after within the authority’s area.
The Commissioning Strategy for Placements is now being implemented as part of the Children Looked After (CLA) Transformation project 4.
Herts Catering - Food inflation has been an issue this quarter with the consumer price index for food in January 2011 running at 5.7% and the Producer Price index at 5.1%
Highways report 24 of 25 KPI’s at green this quarter with some minor issues. Large variations in the monthly score of one KPI (TMA Notice compliance) being addressed
IS / ICT – Software price volatility being experienced with some suppliers offering extended maintenance reductions to secure business, and others putting licence and maintenance renewals up beyond normal levels in line with inflation.
Transport
Inflation pressures over 5% - Also affected by the County Council’s decision to continue with 0% indexation for another year on all contracts. Has led to some bus companies cutting all/part of commercial routes which HCC cannot support due to reduced budgets. However, some companies have taken over contracts currently supported by the County Council as ‘commercial routes’.
Negotiations underway with Hertfordshire Bus and Coach operators. Target is to replace all current contracts with one ‘new’ contract by 1st May.
HR – External pay rates for some agency worker groups are starting to reduce. Reed Learning was awarded the L&OD Managed Service Provider Framework contract in February.
Demand Side Commentary
Waste – none reported.
ACS - Domicilliary Care report that demand is still increasing for specialist dementia care and demand increasing for flexible care for direct payment and individual budget holders.
New home care strategy includes both strategic and tactical approaches to improve provision.
In the residential care area demand remains similar to last quarter. There remains increased pressure for enablement beds.
Energy - The short term outlook suggests rising prices. Crucial year for infrastructure investment as 25% of UK power stations close by 2020. BP say that primary energy use is growing by 40% over next 20 years mostly from China.
Children Social CareSpeech and Language Therapists. There is a national shortage, compounded by the high cost of living in Herts and the close proximity to London where pay is higher. A Joint Health and CSF Commissioning strategy to develop a service that utilises a greater workforce skills mix, to relieve the pressure on SLT. Joint commissioning will improve our influence over the provider. A separate preferred providers framework is underway to understand and grow the market in the independent sector and Health providers on the borders of Hertfordshire.