PART 1
(OPEN TO THE PUBLIC) / ITEM No. 5
REPORT OF THE STRATEGIC DIRECTOR OF CUSTOMER AND SUPPORT SERVICES
TO THE BUDGET AND AUDIT SCRUTINY COMMITTEE ON THURSDAY, 9th FEBRUARY 2006
TITLE: REVENUE BUDGET 2005/06: BUDGET MONITORING
RECOMMENDATIONS: Members are asked to consider the current position on the revenue budget and to remind all directors of the need to ensure that net expenditure is kept within the agreed approximate and, should any overspends occur, they will have to be made good from the following year’s budget.
EXECUTIVE SUMMARY:
The report provides details of the changes to the budget control total from the original base estimate to the current revised estimate (the approximate), the current position relating to budget monitoring and the implementation of the agreed revenue budget savings for 2005-2006.
BACKGROUND DOCUMENTS: Various working papers and reports. (Available for public inspection)
CONTACT OFFICERS:
Chris Hesketh Tel. 793 2668
Colin Kay Tel. 793 3245
ASSESSMENT OF RISK: Key budgetary control risks were identified in reports to this committee in July 2005, October 2005 and January 2006.
PRUDENTIAL INDICATORS: Details of the key prudential indicators are shown in the report.
SOURCE OF FUNDING: Revenue Resources
LEGAL ADVICE OBTAINED: Not applicable
FINANCIAL ADVICE OBTAINED: This report concerns key aspects of the City Council’s revenue finances and has been produced by the Finance Division of Customer and Support Services.
WARD(S) TO WHICH REPORT RELATE(S): None specifically
KEY COUNCIL POLICIES: 2005/06 Revenue Budget
Report Detail
1 Introduction
1.1 Work on the 2006/07 revenue budget, which includes a reassessment of the current year’s estimate to produce the 2005/06 approximate has now been completed. During the budget process directorates have reviewed all of the issues, which have been highlighted by the budget monitoring exercise, and this report includes details of the latest approximate figures for 2005/06.
1.2 This report is based on directorates’ latest budgetary control reports, the trading statements for the DSOs and an update on the progress being made on the savings proposals which have now been absorbed into the approximate.
1.3 Arising from last month’s meeting, Budget and Audit Scrutiny Committee requested further information from the Strategic Directors of Children’s Services and Environmental Services regarding investigations into possible budget problem areas.
The latest information relating to each of these items is contained within section 3 of this report.
1.4 During the CPA process, accountants and Audit Commission auditors together developed a view that it would be desirable to enhance the reporting to members of the council’s treasury management “Prudential Indicators”. The indicators have therefore been included in this report, and it is proposed that they be included in all future budgetary control reports. This will help to ensure the appropriate scrutiny of treasury management performance, as well as allowing the council to achieve the auditor’s highest mark in that particular CPA key performance indicator.
2 Changes from the original base estimate to the current revised estimate (“approximate”)
2.1 The base estimate for 2005/06 amounted to £294.772m and assumed a net contribution from balances of £0.643m leaving estimated balances of £6.835m at 31st March 2006. Due to an underspend of £2.447m balances are now estimated to be £9.282m at 31st March 2006.
2.2 The changes to the budget control total involve allocations from the inflation and provisions, which were included in the original estimate, some of the items which have been discussed in the budget monitoring exercise during the year and variations to the base figures that have been agreed by the Cabinet.
2.3 The approximate includes those items, which have been accepted as unavoidable
increases in net expenditure, and an analysis of the major variations is included at Appendix 1.
3 Budgetary Control Reports
3.1 Arts and Leisure
As reported throughout the year the directorate is still projecting that expenditure will be contained within the overall budget at year-end.
3.2 Chief Executives
Apart from the additional cost of £61,000 in respect of the top slicing of budgets previously agreed at Director’s Team, it is still anticipated that the remainder of the directorate’s expenditure will be contained within the budget at year-end.
3.3 Community Health and Social Care
The Learning Difficulty Service budget is under severe pressure. However, the projected year-end additional cost has again reduced and is now estimated at £511,000. As previously reported, sources of funding / actions have been identified to achieve a balanced budget for the year.
The projected overspend on Home Care expenditure for Mental Health and Physical Disabilities client groups of £140,000 and £200,000 will be met from additional income from client contributions to care.
The current underspend on salaries to the end of December totals £232,000 (excluding Children’s Services).
The total Community, Health and Social Care budget is currently indicating a year-end underspend of £200,000. However, due to the volatile nature of elements of the service close monitoring needs to continue for the remainder of the year.
3.4 Customer and Support Services
As has been regularly reported throughout the year the directorate is anticipating that net expenditure will be contained within the overall budget at year-end.
3.5 Planning
Apart from the additional costs (in the region of £100,000) in connection with the removal and consequent clearing up in respect of travellers, it is still anticipated that net expenditure for the remainder of the year will be within budget.
3.6 Children’s Services
The overspend on the Inclusion Service has reduced from the £295,000 reported last month to £206,000. It is still anticipated that the cost of the service will be met from within the existing budget but close monitoring will need to continue for the remainder of the year.
As reported last month, expenditure in respect of the volatile Children’s Outside Placements is still anticipated to overspend in the region of £600,000, and even after some internal balances have been utilised an unfunded overspend of approximately £150,000 is projected for the year-end.
Members will recall that in the September 2005 report the Transport Service was reporting a year-end overspend of approximately £100,000. However, after further investigation the position was reported to the November 2005 committee as having improved. The latest monitoring report is now suggesting a year-end overspend in the region of £300,000 and an immediate investigation of the situation is now taking place.
Following last month’s recommendation, work is still continuing to evaluate if any of the additional costs reported can be found from elsewhere within the budget.
3.7 Environmental Services
The directorate is continuing to show an overspend which currently stands at £235,000 to the end of December 2005. Investigations are still being undertaken to evaluate if funding can be found from elsewhere within the budget.
3.8 Housing General Fund
As reported throughout the year the directorate is still anticipating that net expenditure will remain within budget at year-end.
An updated report on the Homelessness position is contained elsewhere on today’s agenda.
3.9 Corporate Issues
The favourable corporate issues that have been reported throughout the year have helped to alleviate some of the pressure areas within the total budget and form a major part of the variations contained in Appendix 1.
4 Housing Revenue Account
The Housing Revenue Account is still anticipating that net expenditure will remain within budget at year-end.
5 Direct Service Organisations
5.1 Details of the trading positions of the various DSOs are indicated in the table below.
DSO / As at / Budget / Actual / Variance / Year EndForecast / Variance 31/12/04
Surplus / (Deficit) / Surplus / (Deficit) / Favourable / (Adverse) / Favourable / (Adverse) / Favourable / (Adverse)
£ / £ / £ / £ / £
School & Welf. Catering / 4/12/05 / 28,234 / 117,455 / 89,221 / 75,000 / 60,270
Building Cleaning / 31/12/05 / 9,425 / 47,641 / 38,216 / 40,000 / 16,924
Commercial Catering / 31/12/05 / 22,122 / 75,368 / 53,246 / 35,000 / 6,582
VMM / 31/12/05 / 11,588 / 145,097 / 133,509 / 64,000 / (17,424)
Grounds Maintenance / 31/12/05 / (52,409) / (4,330) / 48,079 / 30,000 / (121,524)
Street Cleansing / 31/12/05 / 14,990 / 84,590 / 69,600 / 60,000 / 43,944
Refuse Collection / 31/12/05 / 30,772 / 9,373 / (21,399) / (500) / (58,639)
Total / 64,722 / 475,194 / 410,472 / 303,500 / (69,867)
5.2 The majority of DSOs continue to trade favourably and the overall position shows more favourably than the corresponding period last year. The year-end forecast is good with only the Refuse Collection DSO anticipating a very small adverse position.
5.3 The position on the Refuse Collection DSO has improved following the accrual of the outstanding income from the client.
5.4 The School and Welfare Catering, Building Cleaning and Commercial Catering DSO figures have been amended this period to exclude any adjustments in respect of FRS 17 costs. This makes them consistent with the other DSOs and results in a slight improvement of trading position.
6 Budget Risks
6.1 A full budget monitoring exercise is undertaken each month by all directorates to ensure that any issues and corrective action are identified at an early stage. Areas that represent greater risks in budgetary control have been identified and will be subject to greater scrutiny.
Key budgetary control risks were detailed in reports to this committee in July 2005, October 2005 and January 2006. No new areas of risk have currently been identified.
7 Progress on agreed savings
7.1 The achievement of savings is now reflected in the overall net expenditure position for each directorate.
8 Prudential Indicators
8.1 It is a statutory duty under Section 3 of the Local Government Act 2003 for the council to determine its affordable borrowing limits. In determining its limits the council must have regard to the Prudential Code and ensure that total capital investment remains within sustainable limits, in particular that the impact upon its future council tax/rent levels is acceptable.
8.2 The Prudential Code requires the council to set a number of Prudential Indicators, certain of which replace the borrowing/variable interests limits previously determined as part of the Treasury Management Strategy Statement, but also extending the period covered from one to three years. These indicators were included in the 2005/06 Revenue Budget and in the Capital Programme approved by council in March 2005.
8.3 In summary the Prudential Indicators are as follows:
a) Authorised Limit for External Debt
b) Operational Boundary for External Debt
c) Prudential Indicators for Treasury Management
d) Comparison of Net Borrowing and CFR
e) Maturity Profile
The key indicators have all been met and are detailed at Appendix 2.
9 Summary
9.1 The application of control totals shows that the approximate for 2005/06 provides for £1.382m as a contribution to balances and this position now excludes any funding from DSO surpluses that may arise.
9.2 Close scrutiny must continue for the remainder of the year to ensure that any new
budget issues and areas of risk allow for immediate action to be taken.
9.3 With regards to overspendings Directors are reminded that under the current scheme of delegation:
· Any overspend at outturn by a directorate will be expected to be made good from the following year’s revenue budget for that directorate;
· If it is not possible for an overspending to be made good in the following year, the Director should report to their Lead Member and to the Lead Member for Customer and Support Services explaining the reasons why this cannot be achieved and outlining how it can be made good over a longer period, but not exceeding the following year plus the two succeeding years.
10 Recommendations
10.1 Members are asked to consider the current position on the revenue budget and to remind all directors of the need to ensure that net expenditure is kept within the agreed approximate and, should any overspends occur, they will have to be made good from the following year’s budget.
Alan Westwood
Strategic Director of Customer and Support Services
Appendix 1
Approximate Budget 2005/06
Variation from original estimate to revised estimate (“approximate”)
£m / £mOriginal estimate
/ 294.772Major variations:
· NNDR reduction in rateable values for leisure centres / - 0.790
· Street lighting electricity contract renewal / 0.234
· Capital financing – debt rescheduling savings in excess of budget / - 1.102
· Revenue support grant amendment to prior year / 0.068
· Unsupported borrowing paybacks / - 0.219
· Contributions to capitalised cost of VERs in the interests of efficiency / - 0.234
· Airport and Modesole dividend income in excess of budget / - 0.448
· Other minor amendments / 0.058
Anticipated service underspends 2005/06 / - 2.447
Less:
· Approved carry forward of 2004/05 underspends / 0.422
· Budgeted contribution from reserves / 0.643
1.065
Estimated contribution to reserves 2005/06 / 1.382
Approximate / 294.772
Statement of General Fund reserves
£m / £mBalance as at 31st March 2005 / 7.900
Less:
· Approved carry forward of 2004/05 underspends / - 0.422
· Budgeted contribution from reserves to support the 2005/06 revenue budget / - 0.643
- 1.065
Budgeted level of reserves 31st March 2006 / 6.835
Anticipated service underspend 2005/06 / 2.447
Estimated balance as at 31st March 2006 / 9.282
Appendix 2
Prudential Indicators
Authorised Limit for External Debt
Forward Estimates
2005/06 / 2006/07 / 2007/08£m / £m / £m
Total Authorised Limit for
External Debt / 636 / 682 / 732
Actual Gross External Debt as at 20/01/06 / 521
This limit represents the total level of external debt (and other long term liabilities, such as