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  1. 1. Agenda Item No. 29th November, 2006 To the Chair and Members of the CABINET FINANCIAL MANAGEMENT REPORT: REVENUE BUDGET PROJECTIONS 2006/07 Decision Taker Relevant Overview Wards Affected Key Decision & Scrutiny Panel Cabinet Overview and All Yes Scrutiny (K0676) Management Committee Purpose 1. This is the 2nd Financial Management report and presents the latest projections of income and expenditure compared to budget for the 2006/07 financial year. It contains projections of the year end position for:- • the General Fund Revenue Account (paragraphs 8 to 17); • General Fund Reserves (paragraphs 24 to 28); • the Housing Revenue Account (paragraphs 29 to 32); • Trading Accounts (paragraphs 33 to 34) the • Collection Fund (paragraphs 35 to 37). Recommendations 2. It is recommended that Cabinet:- • note the contents of this report and the actions proposed by CMT to achieve the budget set for 2006/07 and reduce the potential overspending on the budget at the year end (see paragraph 22); • Use £1.5m of LAGBI income (over and above the £300k budget target) to create an Invest to Save reserve and delegate CMT to establish the internal processes needed to manage this; • Credit any additional LAGBI income over and above the £1.5m to General useable reserves, to provide greater scope for dealing with any future financial issues. Summary 3. The report sets out the following key issues:- • Projections indicate that N.C.C.S. are estimating to overspend by £2.5m, which represents 1.7% of their budget target There is, however,
  2. 2. a great deal of volatility in key service areas, making financial projections more difficult. The issues are set out in more detail in paragraphs 8 -10. • There are significant financial issues for Corporate Services and Council wide budgets, which total an additional £6.3m.These include:- • 2006/07 Efficiency savings that are still to be delivered; • Equal Pay compensation payments; The report covers these issues in some detail in paragraphs 11 to 17 and the management actions that are being taken to ensure that any overspends are minimised. • There is potential for additional income on Local Authority Business Growth Incentive (L.A.B.G.I.) of £1.7m, the treatment of which is identified in paragraph 23. • The projection of the balance available on General Fund revenue reserves at the end of this financial year is just over £5m (see paragraphs 24 - 28). This will depend on the success of management action in limiting an in year overspend and a risk assessment is included at Appendix F. • The Council’s trading accounts are projecting a total deficit of £312k, compared to a budgeted surplus of £425k. The main issues are on Cleaning and Catering, Schools Catering and Steadfast Windows. The significant problems with the Cleaning and Catering trading account are as a result of the loss of a contract for the Racecourse (see paragraphs 33-34) • The Housing Revenue Account (H.R.A.) is projected to underspend by £0.7m, resulting in an in year deficit of £1.3m. This is largely as a result of additional rental income due to falling council house sales. The in year deficit will need to be charged to the £6.6m of H.R.A. balances. Background 4. The 2006/07 General Fund net revenue budget was set at £201.116m by Full Council on 27th February, 2006. Since then, the following funds have been moved from approved earmarked reserves to the revenue account to fund key items. £000 Original Budget 201,116 Add: Standards Fund carry forward 539 Add: One-off reorganisation pension costs 950 Add: OFSTED Action Plan 55 Less: LABGI income from Year 1 Appeal -521 Revised Budget Total 202,139
  3. 3. 5. The approved budget for 2006/07 included the following key elements:- • a 2.7% increase in Council Tax for 2006/07; • an additional £25.5m expenditure to fund inflation, shift resources and investment in a number of schemes outlined in the corporate plan for future years; • the Council would be able to reduce its cost base by £15.3m. 6. Under the Council's Financial Procedure Rules, the forecast budget position and any changes to approved budgets will be put forward for consideration by management as part of a financial management report to Cabinet on a quarterly basis. 7. The projections shown in this report are the result of reviewing expenditure and income to date and also the action plans of the service areas to produce estimates to full year end. All managers will continue to receive monthly budget statements, which form the basis for revenue budget monitoring and management of the financial position. General Fund Revenue Budget Projections 8. N.C.C.S. A detailed forecasting exercise has been performed on these budgets, which total £152.2m. This has included:- • an examination of actual expenditure and income as at 30th September, 2006; • forecasting full year expenditure and income for 2006/07, using the best estimates available at this time. This has been completed by the Services Financial Management Team, working closely with budget managers. 9. The best estimate available at this time concludes that this crucial area of service delivery expenditure and income will overspend by approximately £2.5m. Appendix A provides a more detailed breakdown of this position. 10. There are many areas of volatile budgets and assumptions have been made in order to build up this projection. The main areas of overspend are as follows: - • Childrens Out of Authority Placements, is currently projecting a year end overspend of £833k. Work has been ongoing to limit placements but this is not always possible due to individual circumstances. • Out of Authority – Fostering Fees, currently projecting a £757k overspend by the year end. • Adults and Older People – Independent Sector Placement, currently projecting to overspend by £528k. This area is difficult to project due to changes in mortality rates and number of placements made.
  4. 4. Corporate Services Budgets 11. These budgets include those support areas of the Council that are delivered centrally from within O.D.C., Education Standards, Development and P.P.G., but also include some large service delivery teams, for example the Planning and Revenues & Benefits services. These budgets total £62m. 12. The best estimates of income and expenditure available at this time highlight three significant budget problem areas, totalling £2m (3.3%), that need to be managed in year. They are:- • Projected shortfalls of income in the Building Design and Asset Maintenance Team, totalling approximately £544k. This is partly due to changing work patterns that are reducing the scope for these internal services to charge to the Council’s capital programme and also to schools. There are also a number of issues associated with the way in which financial targets for these services have continued at the same level over the medium term, when work patterns are changing. • HR & OD – staffing budgets have been analysed and are projected to overspend by £410k, this is due to a combination of additional staff added to the structure and the costs of unbudgeted posts still being required. Further work is ongoing to review this area with the Service Managers. 13. There are some emerging underspends in Corporate Services that need to be clearly highlighted to assist in managing the Council’s financial position. The two most significant assumptions made in relation to these are: - • Planning Delivery Grant: income of £170k above budget. It has been assumed that this will not be ring-fenced for planning; • Additional Rent income as a result of a delay in the property disposals programme, which amounts to £325k. This will occur for 2006/07 only. Efficiency Agenda Targets 14. In setting the Revenue Budget for 2006/07, the Council agreed to a resource shift of £25.5m, which would be met in part from cashable efficiencies of £15.3m. Progress has been made in ensuring these cash savings can be delivered and are reflected in the budget targets that are monitored above. There is, however, a balance of £3m of cashable savings for which there is yet to be developed a clear plan of delivery and, if not managed, will lead to the Council overspending. These are:- Grants to Voluntary Organisations: The budget target for 2006/07 amounts to £2m. Cabinet have taken decisions which will deliver only £800k of this target, which leaves a budget shortfall of £1.2m. Homes Closure: Cabinet have taken the decision not to proceed with the re- alignment of care between in house and private provision, which would have
  5. 5. resulted in the closure of a Council run care home. This leaves a financial savings target of £108k still to deliver. Music Service: this can only be implemented from the new School year and therefore only 50% will be achieved, the saving not met amounts to £120k Mileage Allowances: The Council currently pays above the Inland Revenue recommended rate for mileage. A plan was in place at the time of setting the budget to reduce the mileage allowance to put Doncaster in line with other councils. This has not progressed and an efficiency target of £518k remains to be delivered. O.D.C.: Although O.D.C. has reduced costs significantly by centralising support service delivery, there are outstanding cashable savings targets of £700k that need clear plans for delivery. Council Wide Budgets 15. These are the budgets that are managed on a Council wide basis, due to either their specialist nature or that they cannot be sensibly allocated to a Strategic Director. These budgets tend to be managed by the Corporate Finance team/H.R. and include:- • Any balances owed to or from the Government or Pension Fund; • Budgets that are short term in nature and are supported by contributions from Reserves; • Treasury Management; • Job Evaluation/Equal Pay; • Business Growth Incentive Scheme; • Costs of Voluntary Early Retirement, incurred during the Council wide restructure. 16. The best estimates of income and expenditure available at this point in the financial year, highlight budget problem areas, amounting to £1.7m: - Equal Pay Compensation: A total budget of £4.5m was set aside (for 2005/06 & 2006/07), during the budget process to meet the costs of backdated compensation to Council employees who would be entitled to take out equal pay claims against the Council. To-date, payments have been made which total £4.1m (£900k in 2005/06). In addition to this, the Council will incur a tax liability (of close to £1m).
  6. 6. There are a series of payments due to groups of employees that the Council has agreed for fairness should also be included in the compensation arrangements. These payments, including the tax liability, amount to a further pay-out of nearly £800k. When these additional payments are made, the resulting overspend will amount to £1.4m (Total Budget of £4.5m, compared to Total Expenditure of £5.9m). Management are reviewing the estimated payments, but it is felt these amounts will be incurred by the end of the financial year. Costs of Voluntary Early Retirement (Council Reorganisation): A budget of £950k was set aside in the Council’s Revenue Budget to meet the 2nd year costs of V.E.R.s from both the council restructure and the racecourse redundancies. The detail of the projections has been subject to change as individual cases have been finalised. The latest projection points to an overspend against this budget of £315k. 17. There are two areas in which the Council may have the opportunity to improve its budget position during 2006/07. They are:- Treasury Management: The Council operates a pro-active Treasury Management strategy, the parameters of which are approved by Council in advance of each financial year. The parameters (prudential indicators) for 2006/07 were set at Full Council on 27th February. The Corporate Director of Finance monitors performance within these parameters on a regular basis and can confirm that the Council is operating within approved limits. Details are shown at Appendix D. There is no need to revise these indicators. The first quarter financial management report projected that the income target for this area would be overachieved by £125k. However, after a reassessment of the level of the investment balance, which is exhibiting a decreasing trend, it is felt prudent to now predict a break even position. Work is currently taking place to review the Councils current debt portfolio and determine the scope for restructuring debt in order to reduce treasury costs into future financial years. Business Growth Incentive Scheme: The allocations to Doncaster of the Local Authority Business Growth Incentive Scheme (L.A.B.G.I.) totalled £1,347k for the first year of the scheme (2005) and were reported as part of the 2005/06 revenue outturn and the first quarter financial management report For this financial year, there is an income target of £300k for L.A.G.B.I. income, which recognises that the 2005/06 pay-out was enhanced by the new inclusion of the Airport on the business rates register. Scheme details for the second year of the scheme (2006) were announced by the Government at the end of September 2006. Taken at face value the scheme details for year 2 appear more generous than for year 1. However,
  7. 7. the Government has pointed out in the details released that ‘given the uncertainties involved in predicting L.A.B.G.I. end of year rateable value caution should be exercised by local authorities in making any L.A.B.G.I. grant predictions’. The experience from the first year of the scheme’s operation is that forecasting of income is particularly difficult. The view of finance officers is that the Council should receive at least £2m from year 2 of the scheme and the total could be as much as £4m. Year 2 grant payments will be announced in February 2007 and no certainty can be provided until then. This report takes the prudent view that income from this source in 2006/07 will be no more than £2m. Officers should have a clearer view on the likely income from this source by the time the third quarter financial management report is produced. Managing Current Budget Pressures 18. Within a net budget of £202m there must be scope to manage service budget pressures within current resource allocations. To do this effectively managers need to: - • understand the budgets under their control; • be able to make projections; • have the competence in managing their finances; and • work to a corporate agenda to secure the overall financial position of the General Fund. 19. There are some key issues which will need tackling to assist in improving budget management and these are set out below. 20. Budgets have been allocated to areas and neighbourhoods without clarity as to what actually can be managed at the community level. Some types of expenditure do not lend themselves to this, for example independent domiciliary care. Clarity over who is responsible for managing what budgets had become blurred. The absolute basis of good financial management is clarity over who manages what funds and that this aligns clearly with the management structure of the organisation. 21. Financial Management competency levels are very varied amongst managers. They range from sheer non-acceptance of responsibility for anything financial to full acceptance of responsibility and proactive management of budgets. In some areas there is a clear correlation between overspending and lack of financial management expertise. 22. The following has been agreed by CMT: - • CMT have discussed and agreed prompt and robust action is needed to address the potential overspend.
  8. 8. • Leadership Team will be meeting on the 17th November to focus on the need for Budget Managers to clearly identify all potential underspend areas, which may assist in the managing the potential overspend. • Budget Managers, via Leadership Team, will need to identify areas of expenditure that can either be deferred or not implemented. Any impact on Service provision will need clearly identifying. • If after reporting back to CMT and Executive Board, there is still a significant projected overspend, there will need to be more radical action implemented in December, which could result in no further expenditure on non-essential areas. Invest to Save 23. Given that the LAGBI income is completely one-off in nature and that DMBC cannot assume that there will be such a significant pay-out in future years, Cabinet are asked to consider the following options: - a) Use the LAGBI income to offset the projected overspend and budget problems in 2006/7, as outlined in this report. The problems with this approach are that the underlying budget problems will continue into future years and this action may discourage prompt management action to address financial shortfalls. b) Credit all LAGBI income to the Council’s general useable reserve, which is currently running at just over £5m. This would be used to deal with one-off and unforeseen financial issues in future years and provide the Council with a greater scope to deal with financial stability. c) Use a proportion of the LAGBI income (£1.5m) to create a Council Invest to Save reserve. The reserve would be used to fund internal loans to efficiency projects, providing cash injection to deliver cost reductions. Loans would only be made on approval (by a board) of robust business cases, which have clear objectives and targets to deliver savings. This would include repayment of the internal loan, which would be administered by the Council’s Corporate Finance Team. Many Councils now use this type of mechanism, as it has the advantages of providing realism and discipline into value for money projects, which often fail to deliver significant cashable savings. General Fund Reserves 24. A summary of the most up to date position on Council reserves is shown below. A full breakdown is shown at Appendix C. Details of the movement in earmarked reserves and the projected 2006/07 position following utilisation of those reserves are attached at Appendix E. There are more detailed papers available for Members, if required, which show the purpose and management arrangements for each of the reserves. £m Total Resources Brought Forward 32.977
  9. 9. Less Earmarked Reserves -26.930 6.047 Less 2006/07 Known Commitments -0.679 5.368 Less 2007/08 Known Commitments -0.950 4.418 25. There was £6.047m of general useable reserves at the outset of this financial year. Of this, £679k is committed to meet 2006/07 items (shown at Appendix C). 26. A balance of just over £5.3m is projected for the end of this financial year. If any further use of reserves is approved or the Council overspends in 2006/07 the balance will reduce. 27. After taking into account the 3rd and final year of V.E.R. costs associated with the Council’s restructure, the current projection is for reserves to fall to just over £4.4m by the end of March 2008. This is without assuming any further debits or credits arising from under or overspending in year. 28. In order to evaluate whether or not the useable reserves are sufficient to support the Council’s financial activity, a risk assessment has been carried out of all known potential commitments that could arise in this financial year. This was included with the Revenue Budget approved by Council on 27th February, 2006. An updated risk assessment is contained at Appendix F. It shows that, if all risks come to fruition then there will be severe pressure on existing reserves, which could be fully utilised in 2006/07 if the projected overspend does materialise. Housing Revenue Account 29. Appendix A shows that the Housing Revenue Account is projected to show a deficit at the year end of £1.301m against a budgeted deficit of £1.993m, an underspend of £692k. This is due to a number of factors, which are set out below. 30. Due to a continuing decrease in the number of properties sold, there is an anticipated increase of £952k in Rent income over and above that which was budgeted. Non dwelling rent income and miscellaneous income are also expected to be over budget by £20k. 31. District Heating income is expected to reduce by £211k following the conversion of some communal heating schemes to individual systems. Also expenditure is expected to increase due to an increase in Housing Subsidy to be paid of £0.069m 32. The current level of H.R.A. balances amounts to £6.607m. This is significantly higher than the level of £3.4m, that was approved by Council on 27th February, 2006. If the current projected deficit of £1.301m does materialise, H.R.A. balances will reduce to £4.6m by the end of March 2007. This also includes the £750k approved by Cabinet at its meeting on 20 th
  10. 10. September 2006 to provide much needed funding to rectify problems on the Kingsway Estate, Stainforth. Trading Accounts 33. The table below shows the latest projected position on the Council’s Trading Accounts. Budgeted Year End Variance Surplus/(Deficit) Projected Surplus £k / (Deficit) £k £k Cleaning & Catering 25 (225) (250) Schools Catering 0 (200) (200) Inpress 73 75 -2 Steadfast 20 (288) (308) Public Buildings 20 20 -0 Transport 5 30 -25 Markets 283 227 (56) Highways 0 11 -11 Total 425 (350) (775) 34. This shows a sizeable overspend on the trading accounts, in that they are not expected to achieve their budgeted surplus. The keys issues are: - • Cleaning and Catering operations are projecting a deficit of £225k. This is mainly due to the loss of the contract for catering with the Racecourse. This will be an ongoing problem. • Indications are that there is a reduction in income for School dinners. Further work is taking place to determine the ongoing effect of this reduction. There has not been an increase in the prices from September 2006, as the Service felt this would reduce sales even further. • The projected deficit for Steadfast Windows of £288k is due to the fall off in Windows being ordered by the ALMO. Trading Accounts should not be subsidised by the council tax payer and there will need to be an identified way forward that addresses the problems of these operations. The Director is currently undertaking a comprehensive review of the operations and is expected to report his recommendations in the early Autumn. Collection Fund 35. During the first 6 months of this financial year 54.9% of Council Tax was collected and it is currently forecast that between 95% and 97% will be received by the end of the year. Actual rates achieved will be published as part of the Council’s outturn process. 36. During the first 6 months of this financial year 56.9% of Business Rates was collected and it is currently forecast that between 96% and 98% will be
  11. 11. received by the end of the year. Actual rates achieved will be published as part of the Council’s outturn process. 37. Council Tax arrears are estimated to be £5.7m, which is within the end of September target of £5.9m. The target for the end of the year is to reduce arrears to £4.6m. Options Considered 38. This report has identified the key budget problems which will need addressing in year. Management will be working with key directors to bring forward options for consideration by Members that aim to manage key areas of potential overspends in the following areas:- • Overspends in Service Areas • Plans for the achievement of the remaining £3m of the £15.3m efficiency target; • Equal Pay; • Trading Operations; • Building Design and Asset Maintenance. Reasons for Recommended Option 39. The measures and actions which are proposed by Management, will be critical to ensure the Council does not overspend. Impact on Transformational Goals 40. Through the Corporate Plan and Budget process and the corporate investment needs and prioritisation methodology, revenue and capital budgets for 2006/07 were aligned with the Council's strategic planning framework to assist in achieving transformational goals. Risks & Assumptions 41. The table below highlights the most significant risks that could have a negative impact on the deliverability of the proposed budget for 2006/07 and the action taken to mitigate against it. Risks/Assumptions Probability Impact Proposed Action Robustness of Low High • To work Estimates in a dynamic continuously with Situation budget holders in monitoring of income and expenditure against budget
  12. 12. Risks/Assumptions Probability Impact Proposed Action Overspending of High High • Address key 2006/07 budgets problems identified in this report with clear management action. Council reserves are Medium High • The risk not sufficient to cover assessment of unknown commitments. reserves and potential impact is included at Appendix F. Consultation 42. C.M.T. has considered these matters on a corporate basis. Financial Implications 43. These are set out in the body of the report. Legal Implications 44. The authority is required to make arrangements for the proper administration of its financial affairs. This monitoring report assists in discharging that obligation. The actions recommended to manage Council resources in year are in accordance with relevant provisions and guidance as set out in the body of the report. Conclusion 45. The financial projections contained in this report highlight a number of financial pressures, which total between £8m and £9m. Significant Management action is now required to ensure the Councils Budget is not overspent by the year end. There will need to be close monitoring of these actions and the progress will be reported to Cabinet in the financial monitoring report in February 2007. Contact Officer: Julie Wright, Corporate Director of Financial Services, Tel. 737650 Report Author: Steve Mawson, Services Finance Manager, Tel. 862606 Background Papers: Revenue Budget and Council Tax 2006/07 to Council 27th February, 2006.
  13. 13. APPENDIX A Summary Projections: 2006/07 General Fund N.C.C.S. Neighbourhood & Area Budgets Area Area / Income / Approved Forecast Forecast Manager Borough Expenditure Budget for Outturn Year End Wide Year £ Variance Managed £ £ Area Manager Area Gross Expenditure 4,195,600 4,168,600 -27,000 North Gross Income -1,351,470 -1,341,470 (10,000) Borough Gross Expenditure 37,567,680 38,884,680 (1,317,000) Gross Income -11,105,270 -11,105,270 -0 Net Expenditure 29,306,540 30,606,540 (1,300,000) Area Manager Area Gross Expenditure 3,564,100 3,603,100 (39,000) West Gross Income -1,192,800 -1,221,800 -29,000 Borough Gross Expenditure 20,296,380 20,021,380 -275,000 Gross Income -10,577,910 -10,443,910 (134,000) Net Expenditure 12,089,770 11,958,770 -131,000 Area Manager Area Gross Expenditure 3,672,260 3,680,260 (8,000) East Gross Income -1,145,360 -1,150,860 -5,500 Borough Gross Expenditure 62,313,530 63,731,310 (1,417,780) Gross Income -13,596,880 -13,620,880 -24,000 Net Expenditure 51,243,550 52,639,830 (1,396,280) Area Manager Area Gross Expenditure 3,238,120 3,225,120 -13,000 South Gross Income -751,400 -769,400 -18,000 Borough Gross Expenditure 29,039,150 29,039,150 -0 Gross Income -11,765,730 -11,648,730 (117,000) Net Expenditure 19,760,140 19,846,140 (86,000)
  14. 14. Area Area/Borou Income/ Approved Forecast Forecast Manager gh Wide Expenditure Budget for Outturn Year End Managed Year £ Variance £ £ Area Manager Area Gross Expenditure 4,353,070 4,307,070 -46,000 Urban Gross Income -878,870 -853,870 (25,000) Borough Gross Expenditure 35,331,330 35,244,330 -87,000 Gross Income -14,800,370 -14,800,370 -0 Net Expenditure 24,005,160 23,897,160 -108,000 Town Centre Area Gross Expenditure 991,990 1,095,890 (103,900) Manager Gross Income -455,810 -456,810 -1,000 Borough Gross Expenditure 13,065,670 13,065,670 -0 Gross Income -5,792,210 -5,882,210 -90,000 Net Expenditure 7,809,640 7,822,540 (12,900) Directorate Borough Gross Expenditure 5,998,360 5,979,360 -19,000 Management Gross Income -3,856,810 -3,856,810 -0 C.D.C. Costs Borough Gross Expenditure 445,900 445,900 -0 Gross Income 0 0 -0 Safeguarding Borough Gross Expenditure 1,491,030 1,491,030 -0 & Standards Gross Income -518,400 -518,400 -0 Adult Borough Gross Expenditure 22,855,240 23,815,240 (960,000) Protection & Community Manager Gross Income -19,441,310 -20,381,310 -940,000 Youth Borough Gross Expenditure 3,023,910 2,827,910 -196,000 Offending Services Manager Gross Income -1,996,880 -1,803,880 (193,000) Net Expenditure 8,001,040 7,999,040 -2,000 Net Expenditure 152,215,840 154,770,020 (2,554,180)
  15. 15. Corporate Services Budgets Approved Budget Forecast Forecast Year for the Year Outturn End Variance £ £ £ Development: - Gross Expenditure 19,718,030 18,883,200 -834,830 - Gross Income -7,524,260 -7,474,710 (49,550) - Net Expenditure 12,193,770 11,408,490 -785,280 Education Standards inc. Schools: - Gross Expenditure 242,310,120 242,227,850 -82,270 - Gross Income -213,460,530 -213,474,390 -13,860 - Net Expenditure 28,849,590 28,753,460 -96,130 Organisational Development & Culture: - Gross Expenditure 99,990,600 102,644,410 (2,653,810) - Gross Income -85,602,240 -85,238,420 (363,820) - Net Expenditure 14,388,360 17,405,990 (3,017,630) Policy, Partnerships & Governance: - Gross Expenditure 7,699,350 7,869,530 (170,180) - Gross Income -2,073,590 -2,084,370 -10,780 - Net Expenditure 5,625,760 5,785,160 (159,400) Specialist Change: - Gross Expenditure 598,730 614,830 (16,100) - Gross Income -32,000 -48,100 -16,100 - Net Expenditure 566,730 566,730 -0 Total: - Gross Expenditure 370,316,830 372,239,820 (1,922,990) - Gross Income (308,692,620) (308,319,990) (372,630) - Net Expenditure 61,624,210 63,919,830 (2,295,620)
  16. 16. Council Wide Budgets Approved Budget Forecast Forecast Year End for the Year Outturn Variance £ £ £ - Amending Report(Formula Grant) 269,000 269,000 -0 - Contribution from Insurance Fund -750,000 -750,000 -0 - Trading Surplus -425,000 350,020 (775,020) - Unsupported Borrowing 2,324,470 2,324,470 -0 - General Financing -35,705,310 -35,705,310 -0 - Levying Bodies 22,429,400 22,389,400 -40,000 - P.S.A. Reward Grant -1,015,000 -1,015,000 -0 - Job Evaluation/Equal Pay 2,500,000 3,893,470 (1,393,470) - Business Growth Incentive Scheme 2005 -521,240 -521,240 -0 - Business Growth Incentive Scheme 2006 -300,000 -2,000,000 -1,700,000 - Budget Savings not Met -1,457,340 59,530 (1,516,870) - Reorganisation Costs 950,000 1,265,400 (315,400) Total Council Wide -11,701,020 -9,440,260 (2,260,760) Total General Fund Services 202,139,030 209,249,590 (7,110,560) Housing Revenue Account Housing Revenue Account:- - Gross Expenditure 51,376,500 51,367,250 -9,250 - Gross Income -49,382,970 -50,066,020 -683,050 - Net Expenditure 1,993,530 1,301,230 -692,300
  17. 17. APPENDIX B Analysis of General Fund Key Variances on budgets (over £100k) Description Total Recurring One-off Overspend / Overspend / Underspend Underspend £k £k £k Planning Delivery Grant -171 -171 Additional Rental Income (property) -325 -325 St Leger Homes Recharge 175 175 Town Centre Improvements -130 -130 Building Control Inspection Fees -167 -167 In House Childrens Residential Homes 130 130 Children's Homes - efficiency target to sell beds 130 130 not yet implemented Children's Out of Authority residential placements 830 830 Music Service efficiency target – cannot be 120 120 implemented until new school year – will achieve 50% in 2006/07 Out of Authority fostering placements 760 760 Staffing Vacancies in CYPS / HCVP / SSSC -429 -429 Uncommitted grants on Access & Systems -540 -418 -122 Capacity and Delayed Discharges Independent residential care – greater number of 530 530 clients in first half of year than expected. In house Residential Care -230 -230 Learning Disable Support Living 250 250 Additional contract costs for extra care beds 265 100 165 Independent Sector Home Care 320 320 Wardens service – shortfall in income 400 400 Car Parking repairs and maintenance savings – -100 -100 not all budget required Resource Recovery – Disposal 150 150 Landfill Tax saving – less tonnage -150 -150 Repairs and Maintenance on social care buildings 300 300 – demand is more than the funding available. Building Design & Asset Maintenance– income 544 544 shortfall Fruit in Schools 297 297 Efficiency Saving – Car Mileage not yet achieved 518 518 Neutral Vendor – shortfall in Income 133 115 18 ODC Savings / Income for support services 791 791 HR & OD overspend on staffing costs 410 410 Procurement Efficiencies not yet delivered 200 200 Benefits Subsidy Grant -150 -150 Charge from St Leger Homes for taking cash 131 131 income at housing offices Elections Costs 123 123 VER / Redundancy for Corporate Assurance 147 147 Income claimed from funding relating to prior -101 -101 years Efficiency Saving – Homes closure not delivered 108 108 Efficiency Saving – Grants to External 1,200 1,200 Organisations – not delivered in full
  18. 18. APPENDIX C £m Total of Resources 32.977 Less: Earmarked Reserves Schools, Individual School Reserves -11.971 OFSTED Action Plan -0.098 Section 106 Income -9.984 B.I.F./Capital -2.008 I.T. Fund -0.853 Procurement Budget for Schools P.F.I. -0.263 Pupil Retention fund -0.182 Charities & Donations -0.100 Advance Funding of Community and Voluntary Led Sector Led Projects -0.500 Standards Fund -0.539 Employers’ Contribution from Pensions Authority -0.432 Leaves: Uncommitted Reserves 6.047 2006/07 known commitments 2nd Year V.E.R. costs incurred in 2005/06 -0.900 Transfer of Advance Funding of Community Projects 0.500 2nd Year Racecourse V.E.R. costs -0.050 One Off Investment in 2006/07 (Cabinet 12/07/06) -0.750 Late Notification of LABGI income – 2005 scheme 0.521 Balance Projected at 31st March, 2007 5.368 2007/08 known commitments 3rd Year V.E.R. costs incurred in 2005/06 -0.900 3rd Year Racecourse V.E.R. costs -0.050 Balance Projected at 31st March, 2008 4.418
  19. 19. APPENDIX D TREASURY MANAGEMENT PARAMETERS (Prudential Indicators) Indicator £m Authorised Limit of Debt 505 Operational Boundary of Debt 330 Actual Total Debt as at 30.09.06 300 Maturity Structure of Borrowing Indicator __________________________ Upper Limit Lower Limit Actual % % % Under 12 months 30 0 3 12 months and within 24 months 30 0 0 24 months and within 5 years 50 0 10 5 years and within 10 years 75 0 17 10 years and above 90 10 70 Upper Limit Lower Limit Actual % % % Variable Rate Borrowing 30 0 3 Fixed Rate Borrowing 100 10 97
  20. 20. APPENDIX E SCHEDULE SUMMARY Movement in Earmarked Reserves Balance Projected Balance as at 31.03.06 as at 31.03.07 £'000 £'000 Individual Schools Budget:- Gross Surplus 12,583 12,583 Gross Overdrawn (612) (612) Education Standards Fund 539 171 Procurement Budget for Schools P.F.I. 263 0 OFSTED Action Plan 98 43 Pupil Retention Fund 182 182 Council I.T. Fund 854 0 Advance Funding of Community & Voluntary Sector Led Regeneration Projects 500 0 Capital Reserve 0 0 Objective 1 Match Funding 55 30 Borough Investment Fund 1,952 1,690 Pensions Reserve 432 0 Section 106 Income 9,984 8,084 Charitable Donations 100 100 Total 26,930 22,271 Movement in Provisions Balance Projected Balance as at 31.03.06 as at 31.03.07 £'000 £'000 Insurance 4,874 4,124 Section 117 Mental Health Act 2,223 0 Overstated Income 731 731 Equal Pay Claims 1,080 0 Total 8,908 4,855
  21. 21. APPENDIX F Risk Assessment of General Reserve for 2006/07 Risks & Quantification Maximum Potential Call on Item Reserves £000 Payments under s117 of the Mental Health act – has separate provision and 200 this is deemed adequate. Insurance Fund at 70% - funding level deemed adequate. Known provisions and Final claims still to be settled for North 0 contingent liabilities as Bridge and Denaby Crossing highway at February 2006. schemes which total £4m. Separate 0 provision has been made. Contingent liability for racecourse media rights not funded – maximum is £750k 150 over 5 years. Some key budget problems have been Forecast Outturn for highlighted in the financial management 3,050 – 4,050 2006/07 Revenue. report that need to be managed and prompt action taken. A significant expenditure commitment has been included in the 2006/07 revenue proposals which should ensure that staffing structures are fully funded. Staffing budgets do, however, include a Approved Staffing 0 reduction of 5.5% factor to take into Structures not funded account turnover and vacancies in in 2006/07 budget. 2006/07. Indications from the financial management report are that staffing costs are being well managed to within budgetary target.
  22. 22. Risks & Quantification Maximum Potential Call on Item Reserves £000 The proposals are robustly costed and management are clear about actions needed to achieve the targets. The financial management report concludes that there is confidence in delivering over £12m of the £15.3m efficiency target in the 2006/07 budget. It does, however, highlight key challenges in delivering £3m. Pay and price inflation has been calculated using financial records and intelligence as to known commitments. At Robustness of this stage, these estimates should be 2006/07 budget robust. 3,000 proposal. There are several items of one-off funding being utilised in the 2006/07 proposals. These include the Insurance Fund contribution of £750k and the Performance Reward Grant of £1.015m. This funding will be available for only one year and will need to be replaced in 2007/08 budget proposals. The key risk to the 2006/07 revenue budget is the lack of any ongoing contingency funding other than reserves, which can only be used to fund commitments on a one off basis. A significant proportion of funding for the Not possible to quantify risk Capital Programme relied on achieving with certainty. The asset sales and securing estimated grant achievement of the funding funding. If these are not achieved, then envelope for capital will need there is a high risk of over-commitment. to be closely monitored on a Capital Programme. monthly basis and Any further borrowing would result in contingency plans will need to pressure on the revenue budget and be drawn up to ensure that would, at present not be sustainable or over-programming does not affordable. become a reality. If a major capital receipt does not materialise in 2006/07 and balances Investment Income is available for temporary investment are 0 less than Budgeted. reduced as a result. Currently, this budget is projected to achieve its target. Current IT projects which are underway It is assumed that any new IT are funded from earmarked reserves and requirements would not be the Corporate Capital Programme. funded from reserves as the I.T. Strategy. Council reviews the potential There is currently no additional funding for IT partnerships. This area identified for any new system replacement is an unknown quantity at or upgrade requirements. present. Revenue funding of £4.4m has been set Funding for Equal Pay aside to meet equal pay commitments. Compensation not 1,400 The latest estimates suggest there could Sufficient. be an overspend of £1,400k.
  23. 23. Risks & Quantification Maximum Potential Call on Item Reserves £000 The Corporate Director of Human Resources & Organisational Development has provided a best estimate of full year costs of the implementation of Job Evaluation as £2.5m. The estimated It is too early to assess if the costs have been derived by estimating the £2.5m ongoing budget costs at 2% of the pay bill for Local provided will be adequate, but Job Evaluation. Government Workers. Implementation this will be addressed as part has been deferred until the 1st April, of the budget strategy for 2007, and the costs provided for in 2007/08. 2007/08 are £2.500m. The updating and refinement of these costs will be a significant factor for the preparation of the 2007/08 Revenue Budget. Close monitoring is needed on a month-to-month basis in 2006/07. A review will be External funding, Potential to overspend in 2006/07 if carried out in 2006 to quantify Principally NRF, is not external funding is not achieved as the Council’s exposure to the Secured as Budgeted budgeted for. cessation of NRF funding and for. exit strategies will be proposed as part of the budget strategy for 2007/08. Although Funding has been assumed of £2m, in the forecasting of the latest An increase in the Revenue Monitoring position. There is a 0 LAGBI possibility that additional monies may be received, however it is not prudent to rely on the income at the current time Total Maximum 7,800 - 8,800 Quantified Risks. General Reserve 5,300 Available in 2006/07. Minimum Headroom (2,500) – (3,500) Available.