Rother District Council Agenda Item: 6.1

Rother District Council Agenda Item: 6.1

Report to-Cabinet

Date-17 May 2010

Report of the-Director of Resources

Subject-Revenue Budget and Capital Programme Monitoring to 31 March 2010

Recommendation to COUNCIL: That:

1)the capital programme be amended to reflect the carry forward of underspent provisions as detailed in Appendix A; and

2)the Minimum Revenue Provision Policy shown at Appendix B be approved and adopted.

Head of Service: Robin Vennard

Lead Cabinet Members: Councillors Maynard and Patten

Revenue budget 2009/10

Introduction

1. This report details the likely 2009/10 end of year financial position for the Council. Substantial work is ongoing to finalise the Council’s accounts and there will be further changes, particularly to take account of accruals of income and expenditure and finalisation of the Council housing and Council Tax benefit subsidy claim. This is a substantial claim in excess of £35m where small changes can have a material impact on the finances of the Council.

Changes to the Revenue Budget

1. There were no changes approved by Cabinet to the Revenue Budget during the quarter.

Key Items of Income and Expenditure:

Employee Costs – £290,000 underspend

1. Savings have been achieved with a number of posts being held vacant during the year and officers on long term sick receiving no or reduced salaries. The variation excludes the effects of non cash transactions concerning FRS17 Pension costs and end of year leave creditor which are reversed out to ensure there is no impact on the Council tax payer. The table overleaf shows the main savings achieved by services:

Service / Saving
£000
Building Control / 74
Planning / 53
Finance / 80
Environmental health / 23
Internal Audit and Business Improvement / 27
Help Points and Other / 33
Total expected underspend / 290

Investments - £290,000 shortfall

1. Investment earnings havecontinued to perform below expectations. Returns considerably outperformed the 7 day benchmark rate and therefore shows good performance of both funds managed internally and those by the Council’s Fund Managers, Investec. Total amounts invested are below the original estimates and it is likely there will be a shortfall on returns of £290,000 against the annual budget. This will be kept under close review during the remainder of the year. The shortfall will need to be met from the Interest Equalisation Reserve.

Major Contracts

5.Refuse Collection, Recycling and Street Cleansing –Nil Variation – it was hoped to achieve savings of £70,000 through lower than expected inflation rates applicable to the contract. However this has been offset by an increase in the volume of activity in servicessuch as clinical waste and delivery of new boxes and bins.

6.Grounds Maintenance– £25,000 underspend – as with the waste contract, inflation savings have been achieved for the grounds maintenance contract. This saving has reduced by £5,000 on that previously reported.

7.Leisure Contract – £38,000 underspend – as reported in July, following a review of the contract there is likely to be a saving this year of approximately £30,000 against the budget. In addition inflation savings of £8,000 have also been identified.

Major Income sources

8.Planning and Building Control Income – currently below the budget target but up on 2008/09 performance. Subject to any changes resulting from the finalising of the accounts, the shortfall of income against budget is approximately £330,000, an improvement on the previous estimate made in December. There are indications that income levels are increasing in the 2010/11 financial year, but this will be kept under close scrutiny.

9.Rents – there is a projected shortfall of income of £20,000 due to rent reviews being agreed at a lower level than anticipated. This will therefore have an ongoing impact in 2010/11.

1. Parking Charges – additional income £50,000 – the final position for year end looks to be up £50,000 on the target income of £915,000 for the year.

1. Land Charges – additional income of £50,000 has been achieved against the budget. Some costs (e.g. payments to ESCC) have risen to offset this but the service target is to break even.

Summary of Revenue Budget Variations

1. The net overall projected variation is summarised in the table below:

Variation / Amount
£
Employees / (290)
Investments / 290
Major Contracts / (63)
Income / 250
Net Variation / 187
Use of Reserves / (187)

13.Due to the positive action taken by the Strategic Management Team during this year to control costs,it has been possible to reduce the overspend and therefore reduce the expected call on reserves to balance the revenue budget. This is positive news for 2010/11 and the difficult situation ahead with continued pressure on Council finances, particularly the predicted reductions in central government support.

Collection Fund

14.The figures shown below reflect our collection performance as at 31 March 2010 against monies due to the Council prior to finalising the Council’s accounts.

Equivalent Period
2009/2010 / 2008/2009 / 2007/2008
Collectable Annual debit (at 100% collection) / £52,563,359.89 / £51,302,220.16 / £49,160,116.00
Income Received / £51,720,933.46 / £50,522,147.91 / £47,815,923.00
Income Received as a % of collectable debit / 98.40% / 98.48% / 97.27%
Budgeted yield (at 98.5% collection) / £52,457,951.21 / £50,851,333.00 / £49,207,946.00
Income Received as a % of budgeted yield / 98.60% / 99.35% / 97.17%

15.As can be seen, the collection rate is marginally below that achieved in 2008/09 but does show the success of the Revenues Team in this difficult economic climate. It was previously reported to Members that the taxbase was lower than expected due to new properties not being completed. The latest calculation shows that the current taxbase is now higher and in line with estimates. The delay in completions will still have an impact on the Collection Fund. Work is ongoing to finalise the Fund in particular to review the level of bad debt provision given that collection rates have fallen. A deficit up to £350,000 is predicted with the County Council meeting the majority of the cost.

Capital Programme

16.The capital spend to the 31 March 2010is shown at Appendix A. This shows that 65% of the 2009/10 programme has been spent. The major variations relate to the major programme items such as the Next Wave project and Sidley Goods Yard where changes to the programming of works have meant that spending will need to be carried forward into 2010/11. How the spending has been financed is also shown at Appendix A.

17.During a review of the Council’s balance sheet by the Council’s advisors, Sector, it was identified that a minimum revenue provision (MRP) liability relating to past capital expenditure had occurred and that to avoid this it will be necessary to set aside £645,000 of capital receipts. This is a complicated area of accounting where local authorities are normally required each year to set aside some of their revenues as provision for capital expenditure financed by borrowing or credit arrangements. However, Rother has been in the position where due to the amount of capital receipts it has held, no MRP has been necessary and as a result of the work by Sector will continue to be in this position for the next three to five years depending on the level of capital spend. It is necessary for the Council to adopt a formal policy with regard to MRP and a draft policy statement is shown at Appendix B of this report. A full copy of the work undertaken by Sector is available on request.

Conclusion

1. This report shows that the Revenue budget is in deficit for 2009/10. The shortfall in investment returns is significantly larger than was predicted when the budget was set in March 2009. Income remains under significant pressure but through cost control measures in staffing and other gains, the deficit has been reduced. The balance however will need to be met from earmarked reserves. This has been agreed by Members at their previous meetings and therefore no new recommendation is required.

Malcolm Johnston

Director of Resources

Risk Assessment Statement

Regular financial reporting is integral to good decision making and therefore Members and Officers need an up to date understanding of the Council’s financial position.

1

cb100517 – Revenue Budget and Capital Monitoring

Appendix A

2009/10 / 2009/10 / Comments
ITEM / PROJECT / Programme / Final Spend
£ / £
4 / Cultural & Related Services
4-01 / Village Halls and Community Grants - residual / 96,000 / 11,236 / Only one remaining approved scheme is now outstanding. Provision of £50,000 needs to be carried forward into 2010/11.
4-02 / Community Grants / 59,275 / 79,692 / Additional spend met from revenue provision. Overall spend with total approved funding for the scheme
4-04 / Bexhill Seafront - Next Wave / 1,771,797 / 385,361 / Slippage in timescales previously reported to Members. Has CABE approval to minimize risk of losing funding.
4-10 / Swimming and Leisure Centre Redevelopment / 176,326 / 11,342 / Rolling programme of works. Needs to be carried forward to 2010/11
4-13 / Museum - Lottery Project / 110,309 / Residual snagging payments and works to original museum.
4-15 / Drainage of Sports Pitches / 170,005 / 172,460 / Completed
4-20 / De La Warr Pavilion - capital grant / 41,000 / 41,000 / Completed
4-21 / Multi use games area / 35,000 / Scheme deferred
4-22 / EgertonPark - EPIC / 18,000 / 17,195
4-23 / Summerhill Allotments / 17,000 / 17,000 / Completed
Total / 2,384,403 / 845,595
2009/10 / 2009/10 / Comments
ITEM / PROJECT / Programme / Final Spend
£ / £
5 / Housing
5-02 / Disabled Facilities Grant / 710,000 / 724,578 / Small overspend to be met from housing aid grants
5-07 / Housing Aid Grants / 248,000 / 225,615 / See above
5-08 / Private Sector Renewal - Decent Homes / 49,000 / 59,951 / Additional spend to be met from savings in other housing items.
5-16 / Energy Efficiency / 226,300 / 226,329
5-18 / Loan Scheme Capital Grant / 6,200 / See above
5-19 / Houses in Multiple Occupation - Fire Safety grants / 60,000 / 59,646
Housing Development - Netherfield / 120,000 / In progress. Carry forward to 2010/11.
Total / 1,419,500 / 1,296,119
6 / Planning and Development
6-01 / Sidley Goods Yard / 3,167,532 / 2,673,983 / On target in terms of cost. Scheme to be finished in 2010/11. Carry forward remaining provision.
6-03 / Marley Lane Development / 471,660 / 61,436 / On target in terms of cost. Scheme to be finished in 2010/11. Carry forward remaining provision.
6-05 / Marley Cottage, Brede / 50,000 / 50,000 / Complete
Total / 3,689,192 / 2,785,418
2009/10 / 2009/10 / Comments
ITEM / PROJECT / Programme / Final Spend
£ / £
7 / Environmental Services
3-04 / BexhillCemetery Extension / 100,000 / Awaiting outcome of negotiations. Carry forward to 2010/11.
7-08 / Fairlight Coastal Protection Scheme / 7,611 / Further works funded from government grant
Total / 100,000 / 7,611
Support Services
1-02 / Town Hall - Upgrade Cabling, Communications and Power Infrastructure / 40,968 / Project deferred and is subject to review of scope and cost.
1-05 / Backlog Repairs/DDA Works / 90,127 / 51,831 / Rolling programme of works. Balance of provision to be carried forward to 2010/11
1-16 / Infrastructure Modernisation, network access and security enhancements / 130,950 / 43,666 / Rolling programme of works. Balance of provision to be carried forward to 2010/11
1-19 / I.T Equipment replacement programme / 97,418 / 134,313 / Rolling programme of works. Overspend to be taken from 2010/11 provision
1-20 / Image Project / 50,000 / 51,795 / Complete
1-21 / Gov Connect - Data Handling / 32,000 / 31,657
Total / 441,463 / 313,262
TOTAL CAPITAL PROGRAMME / 8,034,558 / 5,248,005

Capital Programme Funding 2009/10

Contribute / Direct / Capital / Capital / MTFS &
Capital / from other / Revenue / Receipts / Receipts / Earmarked
ITEM / PROJECT / Grants / Bodies / Funding / LSVT / Other / Reserves / TOTAL
£ / £ / £ / £ / £ / £ / £
4 / Cultural & Related Services
4-01 / Village Halls and Community Grants - residual / 11,236.00 / 11,236.00
4-02 / Community Grants / 20,416.97 / 59,275.00 / 79,691.97
4-04 / Bexhill Seafront - Next Wave / 385,360.92 / 385,360.92
4-10 / Swimming and Leisure Centre Redevelopment / 11,342.49 / 11,342.49
4-13 / Museum - Lottery Project / (50,000.00) / 160,309.40 / 110,309.40
4-15 / Drainage of Sports Pitches / 172,459.70 / 172,459.70
4-20 / De La Warr Pavilion - capital grant / 41,000.00 / 41,000.00
4-22 / EgertonPark - EPIC / 17,195.00 / 17,195.00
4-23 / Summerhill Allotments / 17,000.00 / 17,000.00
Total / 0.00 / 335,360.92 / 20,416.97 / 0.00 / 489,817.59 / 0.00 / 845,595.48
Contribute / Direct / Capital / Capital / MTFS &
Capital / from other / Revenue / Receipts / Receipts / Earmarked
ITEM / PROJECT / Grants / Bodies / Funding / LSVT / Other / Reserves / TOTAL
£ / £ / £ / £ / £ / £ / £
5 / Housing
5-02 / Disabled Facilities Grant / 482,577.63 / 242,000.00 / 724,577.63
5-07 / Housing Aid Grants / 72,662.83 / 152,952.13 / 225,614.96
5-08 / Private Sector Renewal - Decent Homes / 59,951.33 / 59,951.33
5-16 / Energy Efficiency / 226,328.75 / 226,328.75
5-19 / Houses in Multiple Occupation - Fire Safety grants / 59,646.07 / 59,646.07
Total / 901,166.61 / 0.00 / 0.00 / 394,952.13 / 0.00 / 0.00 / 1,296,118.74
6 / Planning and Development
6-01 / Sidley Goods Yard / 2,673,982.70 / 2,673,982.70
6-03 / Marley Lane Development / 0.00 / 61,435.51 / 61,435.51
6-05 / Marley Cottage, Brede / 50,000.00 / 50,000.00
Total / 0.00 / 0.00 / 0.00 / 0.00 / 2,785,418.21 / 0.00 / 2,785,418.21
Contribute / Direct / Capital / Capital / MTFS &
Capital / from other / Revenue / Receipts / Receipts / Earmarked
ITEM / PROJECT / Grants / Bodies / Funding / LSVT / Other / Reserves / TOTAL
£ / £ / £ / £ / £ / £ / £
7 / Environmental Services
7-08 / Fairlight Coastal Protection Scheme / 7,611.00 / 7,611.00
Total / 7,611.00 / 0.00 / 0.00 / 0.00 / 0.00 / 0.00 / 7,611.00
Support Services
1-05 / Backlog Repairs/DDA Works / 51,831.13 / 51,831.13
1-16 / Infrastructure Modernisation, network access and security enhancements / 43,666.14 / 43,666.14
1-19 / I.T Equipment replacement programme / 134,312.85 / 134,312.85
1-20 / Image Project / 51,794.93 / 51,794.93
1-21 / Gov Connect - Data Handling / 31,657.00 / 31,657.00
Total / 0.00 / 0.00 / 0.00 / 0.00 / 229,810.12 / 83,451.93 / 313,262.05
TOTAL CAPITAL PROGRAMME / 908,777.61 / 335,360.92 / 20,416.97 / 394,952.13 / 3,505,045.92 / 83,451.93 / 5,248,005.48

1

cb100517 – Revenue Budget and Capital Monitoring

Appendix B

Minimum Revenue Provision Policy Statement

The Council will implement the new minimum revenue provision (MRP) Guidance to have effect from 1 April 2007, and defer any actual MRP charge consideration until the 2009/10 financial year.

The Council’s reason for this approach arises from the fact that a potential MRP liability was not evident until the 2009/10 financial year, coupled with the Council’s intention to immediately make arrangements for reducing the Council’s debt liability in order to ensure that no debt liability requiring an MRP persists for the foreseeable future.

The Council is setting this Policy after having had regard to the Guidance issued by the Secretary of State under section 21(1A) of the Local Government Act 2003. In particular, the Council are satisfied that the recommendations for the annual amount of MRP set out within this Policy Statement will result in the Council making the requisite prudent adjustment to the Council’s level of debt liability in order to avoid any initial or ongoing debt liability.

It is the Council’s intention to set aside during 2009/10 from the available balance of usable capital receipts an amount of £654,000. This will reduce the Council’s debt liability as at 31 March 2009 to £1.091 million, which is equivalent to the amount of Adjustment A.

The Council propose, and consider it prudent, to abide by the requirements of Regulation 28 of The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003, which provide for no MRP to be charged in respect of that element of debt liability represented by what is commonly referred to as Adjustment A.

1

cb100517 – Revenue Budget and Capital Monitoring