Meeting documents
Cabinet (DCC)
Thursday 28 August 2008
Meeting: Cabinet (County Hall, Durham - Committee Room 2 - 28/08/2008 10:00:00 AM)
Item: A5 Quarter 1 Finance Report
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| Report of Stuart Crowe, County Treasurer [Cabinet Portfolio Member for Resources, Councillor Michele Hodgson] | |
Purpose of the Report
1 The purpose of this report is to review the Council’s current financial position and to provide a forecast of the position at the year-end.
Background
2 The quarterly finance reports have two purposes:
i. To provide information that will provide the link to external reporting requirements at the year-end.
ii. To provide a forecast of the likely outturn and therefore provide an opportunity to take appropriate action to deal with under and over spendings in services. Executive Summary
3 The County Council’s budgetary statements as at 30th June 2008 forecast that by the year end:
i. Services will be over spent by £3.243m, although this is more than covered by the planned use of reserves and contingencies
ii. Investment income will be over budget by £3.158m
iii. There will be an underlying under spend of £3.505m
Forecast Position
4 At this stage of the financial year the outturn forecast for services is an over spend of £3.24m against original budget. Under Non-service specific items it is forecast that the return on short-term investments will exceed the original budget by £3.16m, leading to an overall net outturn position of £0.09m over spend on original budget.
5 This is information that will be available in year-end financial reports.
Planned use of Earmarked Reserves
6 During the budget setting process, some expenditure was planned to be met from Earmarked Reserves. This was, in the main, to meet the estimated cost of settling equal pay claims.
7 During the Final Accounts process, a number of earmarked reserves were created to fund expenditure to be incurred in 2008/09.
8 When expenditure is incurred for which a specific reserve exists, services over spend their original budget, but this will be met from the earmarked reserve.
Pressures
9 Adult and Community Services (ACS) pressures relate to energy costs (£0.30m) although a contribution to be made to Durham Police Authority as agreed by Cabinet (£0.50m) is included in this total. The contribution is to be met from Reserves.
10 Across Children and Young Peoples’ Service (CYPS) the most significant issues are BSF Development and Planning Costs (£0.75m), where additional spend in 2008/09 will initially be funded from general reserves and recovered from future year’s budgets, and agency placements, Direct payments and transport costs (£0.375m).
11 The Budget Plan for DSG in 2008/09 assumed an over spend from the previous financial year of £0.495m would need to be recovered. This is the starting point in the budget book. The actual over spend was only £6,000 and so, in presentational terms, the expenditure against original budget will therefore show as £0.49m over spent during the year.
12 Within Environment there are pressures around street lighting energy costs (£0.60m) and fuel costs for public transport (£0.30m).
Savings
13 In Adult and Community Services there are a number of areas of under spend, the majority of which are non-recurrent and cannot be considered for future years efficiency savings. The key areas are:
§ Investment from the PCT of £0.85m, the majority of which will be used in 2009/10 and 2010/11.
§ Staff turnover and vacancies resulting in an under spend of £0.67m.
§ Area based grant allocations, which will not be fully expended in 2008/09 resulting in an under spend of £0.55m.
§ Grants have been received in-year that were not in the original budget. This will result in an under spend of £0.40m.
§ Income levels linked to shared packages of care with health partners running approximately £0.30m higher than estimates.
14 In CYPS under spends on staffing budgets and maximising of grant income are likely to be around £0.37m.
15 Within Environment a number of unfilled vacancies across several areas of the Service are contributing to a likely year-end under spend of £0.50m.
16 The forecast return from short-term investments is set to exceed original budget by £3.16m due, in the main, to the relatively high cash balance held by the Council at present. This is due to slower than anticipated spend on areas of the capital programme and equal pay reserves as claims are not yet settled.
Planned remedial actions / Proposals for additional spend
17 Within ACS the key issues detailed are mainly fortuitous and cannot be maintained in the long term. Expenditure in relation to care purchase budgets is broadly on target at this stage although the position will be closely monitored throughout the year.
18 In CYPS, slippage on employee budgets and maximising of sources of grant funding will be used to offset potential over spending. The combined effect of these issues is expected to allow the overall service budget to be broadly in balance at the year-end (if the BSF development costs are discounted as they are utilising general reserves and being recovered from future year budgets).
19 In Environment there are already signs of pressures building in relation to energy costs and other costs affected by fuel and oil based products. These are being partially offset by savings in salaries.
Savings and Efficiencies
20 The County Council's priorities are under constant review, and the additional investment commitments and savings are considered as part of the authority's budget setting process. In addition as part of the Comprehensive Spending Review (CSR07) the government is expecting councils to achieve cash-releasing efficiency gains.
21 The current forecast is that £5.67m of the total £6.14m service savings identified as part of the budget process will be realised this year.
Capital Budget
22 The forecast outturn at this stage projects an under spend of £14.11m against original budget, much of this rolling forward into the budget for 2009/10.
Aged Debt Analysis
23 The total outstanding debt figure has decreased in the first quarter of the year, both in value and number of invoices outstanding. This has to be taken in the context that much of the county council debt is cyclical. A big improvement came in the debt ‘over 1 year old’ where one invoice of £1.6m was paid.
24 The Corporate Income and Debt Management Policy has now been operating for just over a year and it is only now that we are seeing the full benefits, with all debt being fully managed.
Treasury Management and Prudential Indicators
25 Since mid 2007 the global credit crisis has led to unusually high interest rates being paid compared to the Bank of England base rate, resulting in increasing returns. However, the rates have now eased back and begun to level off.
26 Actual external debt in 2008/09 to 30th June 2008 is within is within the limits set by the Council.
Recommendations
27 It is recommended that:
i. Members note the financial position of the County Council as at 30th June 2008
18th August 2008
p/reports/ha11-08
Quarter 1 Finance Report
Contents
Page Number Detail
1-4 Purpose of Report and Executive Summary
5 Contents
6-26 Revenue Budget Monitoring
27-28 Savings and Efficiencies
29-30 Capital Budget Monitoring
31-32 Aged Debt Analysis
33-34 Treasury Management and Prudential Indicators26
Revenue Budget Summary
28 Services are currently projecting an over spend on their budgets of £3.24m at year-end.
29 Outside of service budgets the current assumption is that we will spend sums held in contingencies for equal pay claims this year, however if this does not happen then there is potential for a large under spend against original budget.
30 Interest and investment income are running ahead of projections due to the high value of cash balances held. The current forecast is to bring in additional income of £3.16m over and above that which was budgeted for.
31 The net forecast position is therefore an overall contribution to the general reserve of £0.41m, a reduction of £0.09m on original budget.
32 However, part of the spending will be financed from earmarked reserves. There is therefore an underlying under spend of £3.505m across service and non-service specific areas.
Adult and Community Services
33 Adult and Community Services continue to operate in a dynamic environment yet at the same time the Service is becoming more sophisticated in monitoring and forecasting both commissioning activity and financial outturn.
34 A detailed base budget building process ensures that there is confidence in understanding the current financial position. At this stage of the year however a range of assumptions have had to be made to estimate a forecast of outturn. These assumptions will be monitored on a monthly basis to ensure that forecasts continue to be as accurate as possible.
35 At this stage of the financial year the service is forecasting an under spend of £1.9million (1.2%) against a revenue budget of £161.4m. The majority of this under spend relates to a range of one off issues which are non recurrent and cannot be considered for future years efficiency savings. The key issues are as follows:
§ During the restructure process with CYPS a number of posts were left vacant to safeguard staff. The majority of posts are now filled but are often being filled internally. This is resulting in higher than expected levels of staff turnover. A number of posts in some services are also being left vacant linked to LGR. In total the forecast under spend in £320,000.
§ The Service received confirmation in March that increases in Area Based Grant allocations could be expended within the Service. Investment plans are now in place and being actioned for this funding. Naturally all of the funding will not be expended in 2008/09. There is also some slippage in relation to growth linked to the Day Service Improvement Programme. In total the under spend for these areas will be £550,000.
§ General vacancy levels in social work teams (especially in Mental Health) and in day centres are running at higher than estimated levels. Under spends in this area are estimated to be £350,000.
§ Income levels linked to shared packages of care with health partners are running higher than original estimates. An over recovery of income is estimated of £300,000.
§ A one off investment of £850,000 has been received from the PCT for Health Improvement in the County. Investments against this sum will be decided in partnership, although the majority of investment is expected in 2009/10 and 2010/11, resulting in a significant under spend in 2008/09.
§ The key issues detailed above are mainly are fortuitous and cannot be maintained in the long term. Expenditure in relation to care purchase budgets is broadly on target at this stage although the position will be closely monitored throughout the year.
§ The capital budget is forecast to under spend by £5.4million. This under spend results from delays in formulating the plans for investing in our in house residential homes (£4million) and delays in taking forward a range of smaller schemes.
36 The estimate of outturn in based upon the Original Budget. At this stage of the year the service is forecasting an underspend of £1.9 million (1.2%) against an original budget of £161.4 million. Progress against achieving the savings target of £2.6 million is strong with £180,000 at risk of not being achieved.
37 Further detail in relation to the forecast of outturn is provided below:
Employees
38 During the restructure process with CYPS a number of posts were left vacant to safeguard staff. The majority of posts are now filled but are often filled internally. This is resulting in higher than expected levels of staff turnover. A number of posts in some services are also being left vacant linked to LGR. In total the forecast under spend in £320,000.
39 The service received confirmation in March that increases in Area Based Grant allocations could be expended within service. Investment plans are now in place and being actioned for this funding. Naturally all of the funding will not be expended in 2008/09. There is also some slippage in relation to growth linked to the Day Service Improvement Programme. In total the under spend for these areas will be £550,000.
40 There is a £500,000 forecast under spend in the home care provider linked to current activity levels. A corresponding overspend is occurring in the external home care purchase budgets where activity levels are higher than forecast.
Premises
41 A reserve was created in 2007/08 of £648,000 to enable investment in the internal environment of in house residential homes. The expenditure of this reserve will show as an over spend in 2008/09.
42 The cost of energy has increased significantly since the original budget was set. The over spend in this area is expected to be £125,000.
Transport
43 The key under spend relates to car allowances especially in home care where activity is below estimated levels due to lower numbers of staff.
Supplies and Services
44 There are no significant ongoing pressures in this budget. The overspend relates to activity funded by grants which were not included in the original budget and imbalances in relation to where growth was placed in the budget and where it is actually being expended.
Agency and Contracted Services
45 At this stage of the year care purchase, especially in Learning Disability and Older Persons’ services is close to budgeted levels. This will be monitored closely however, as small increases in percentage activity can have a significant impact upon the overall position.
46 In addition a £0.50m contribution was agreed by Cabinet to be made to Durham Police Authority.
Income
47 Income levels linked to shared packages of care with health partners are running higher than original estimates. An over recovery of income is estimated of £300,000.
48 A one off investment of £850,000 has been received from the PCT for Health Improvement in the County. Investments against this sum will be decided in partnership, although the majority of investment is expected in 2009/10 and 2010/11, resulting in a significant under spend in 2008/09.
49 Grants have been received in-year that were not in the original budget. This will result in an under spend of £400,000.CHIEF EXECUTIVE Chief Executive
Executive Summary
50 To date the CEO has under-spent by £0.17m compared to the profiled budget, which is mainly due to under spends on staffing and supplies and services. Actual expenditure is forecast to be in line with budget at the year end.
Employees
51 The under-spend of £0.11m to date is mainly due to vacant posts and non-payment of the pay award, an allowance for which has been made in the budget.
Supplies and Services
52 The under-spend of £0.09m to date is mainly due to the timing of payments. It is anticipated that actual expenditure will be in line with budget at the year end.
The Dedicated Schools Grant (DSG)
53 The grant covers all School Delegated Budgets and the costs of certain Support Services for schools and pupils that are managed by the Local Authority e.g. Education Other Than in School; placements at Independent Special Schools; School Admissions, non-Local Authority Early Years provision and Capitalised Repair and Maintenance of school buildings.
54 The final DSG for 2008/2009 was confirmed by the Department for Children, Schools and Families (DCSF) on the 19 June 2008 at £274,436,000 which was only £7,666 more than the Local Authority’s calculation.
55 The Budget Plan for DSG in 2008/2009 assumed an over spend from the previous financial year of £0.495m would need to be recovered. This is the starting point in the original Budget Book. In reality, this was only £6,000 and this meant there was a DSG balance of £0.489m to be considered by DCC Schools Forum when it met on the 10 July. Priorities are:-
§ School Kitchen Ventilation;
§ Capitalised Repair and Maintenance - School Electricity Supplies;
§ Administration - School Workforce Census;
§ Arrears Equal Pay;
§ Energy Performance Certificates
56 During the financial year, budgetary control will be exercised against the actual DSG available.
57 The standard budget group headings covering the likes of Employees, Supplies, Income etc. are only guide figures in the Original Budget as the majority of spending is undertaken by individual schools, thus the table of figures is of limited benefit. Standards Fund and Standards Grant “income” to schools of £47m or thereabouts, has now been finalised.
58 In presentational terms, the expenditure against original budget will therefore show as £0.49m over spent during the year.
Pressures
59 There is insufficient data available to indicate whether budgets on the Local Authority managed parts of the DSG will be adequate for the full financial year. However, it is worth logging the areas that can be volatile and will be the focus of detailed budget projections in future reports:-
§ Independent Special School Fees
§ Redundancy payments for school staff
§ Early Years provision - non Local Authority places
§ Home and Hospital Tuition
§ Capitalised Repair and Maintenance of School Buildings
Savings
60 There is nothing to indicate that there will be any under spending against the budgets managed by the Local Authority. The scope for redirection of any savings is limited, as alternative spend can only be on items within the DSG and may be subject to the views of DCC Schools Forum.CHILDREN AND YOUNG PEOPLE’S SERVICE (LA) CYPS Revenue Budget (LA)
61 The total Revenue Budget is £102.7m and of this figure about £83m is actually managed by the Director of Children and Young People’s Services.
62 Additional Area Based Grant of £200,644 was received in March 2008 for Substance Misuse Preventative Strategies and this will therefore feature in Employees and Supplies Budgets and appear as an over spend. Since that time, additional grants have been released for a variety of purposes and clearly this will effect spend shown in budgetary control reports compared to Original Budgets. The most significant examples are:
§ £981,260 National Digital Infrastructure - Broadband in Schools (13.3.08)
§ £220,000 Parenting Support Strategy Grant (7.5.08)
§ £387,111 Standards Fund Flexible Early Years Entitlement (27.6.08)
§ £250,000 Beacon Peer Support Programme - School Improvement(27.6.08)
§ £478,541 Sure Start, Early Years and Child Care Grant (14.7.08)
Planned Use of Reserves
63 There are several parts of the service budget where spending will differ from original budget:-
§ Investment initiatives - supported by Scrutiny Members (Academic mentoring; priorities for Post 16 Learning; IT/Impact Centres; E-learning pilot £160,000
§ Extra Early Years income to Education Development Service Trading Account £85,733
§ Adoption “Invest to Save Initiative” - operational balance £337,228
§ Building Schools for the Future planning costs £242,726
64 (The overall impact of the issues listed above has the potential to result in an apparent overspend of £0.826m, compared to Original Budget).
65 Several grants, approx value £0.38m are able to be spread across more than one financial year and hence there is a carry forward of some funds, received in the 2007/2008 financial year, to match with spending plans during 2008/2009. This will produce a variance compared against Original Budget.
Pressures
66 There are features of CYPS Revenue Budget that regularly present Budgetary Control challenges. Listed below are a number of areas of potential overspend based on 3 month’s experience into this financial year:-
§ Agency Placements 150,000
§ Direct Payments to Parents of Disabled Children 125,000
§ Transport costs 100,000
§ Redundancy Payments - school staff 50,000 67 Most aspects of the budget are in line with available resources. The grant income referred to earlier has a net nil effect as there will be more spend but it is entirely met via grant.
68 Transport to Schools and Colleges is probably the most difficult part of the budget to predict as demand changes in September 2008 at the start of a new academic year. Higher than average transport inflation may well be reflected in contract prices and the charge for contract tickets.
69 The cost of agency placements for children in care of the Local Authority is closely monitored because of the potential cost of individual placements and this has the potential to overspend by the year end. New arrangements mean that the PCT is more likely to make a financial contribution to this type of placement.
70 Falling rolls in Primary and Secondary schools has led to a number of staff redundancies being approved to date, mostly from 31 August 2008.
71 The largest budget variation has been put forward by the team responsible for the Building Schools for the Future initiative as it is expected excess costs to do with finalising design, contracts and tenders for the first wave of schools in County Durham will be a feature of the 2008/2009 budget. The Treasurer is aware of this and it has been reflected in the overall project budget which spans several years.
Savings
72 CYPS budget for 2008/2009 includes a package of savings measured with a value of £2.2m. Savings associated with School and College Transport will not be confirmed until the beginning of 2009. All other proposals have either been delivered or are on target.
73 Slippage on Employee Budgets and maximising of sources of Grant Funding will be used to look to offset potential overspending. The combined effect of these issues is expected to allow the overall service budget to be broadly in balance at the year end (if the BSF development costs are discounted as they are utilising future year budgets).CORPORATE SERVICES Corporate Services
Executive Summary
74 To date Corporate Services has over spent against the profiled budget by £0.21m which is mainly due to the additional cost of member elections, partially offset by an over-recovery of income and an under spend on staffing costs. After allowing for the planned transfers from reserves, actual expenditure is forecast to be in line with budget at the end of the year.
Employees
75 The under spend of £0.25m is mainly due to the delay in filling vacant posts in Estates and Design Services, and non-payment of the pay award, an allowance for which has been made in the budget.
Premises
76 The under spend of £0.11m is mainly due to the reversal of creditor provisions from 2007/8, against which full payment has yet to be made. Actual expenditure is expected to be in line with budget at the year end.
Supplies and Services
77 The over spend of £0.85m is mainly due to additional costs associated with revised member structure for the new authority. Consequently it is anticipated that this budget head will over spend by £0.9m at outturn, however this will be met from reserves.
Income
78 The over recovery of £0.30m is mainly due to the timing of receipt of income. Actual income is expected to be in line with budget at the year end.COUNTY TREASURER AND OTHER SERVICES
County Treasurer and Other Services
Executive Summary
79 There is an over spend of £0.97m against the profiled budget to date which is mainly due to additional expenditure relating to LGR, which will be met from reserves. After allowing for the planned transfers from reserves, actual expenditure is forecast to be in line with budget at the end of the year.
Employees
80 The under spend of £0.24m is mainly due to the non-filling of vacant posts and non-payment of the pay award, an allowance for which has been made in the budget.
Premises
81 The over spend of £0.11m is due to the timing of the rental payment for Customer Services Data Centre.
Supplies and Services
82 The over spend of £1.23m is mainly due to the:
§ costs associated with the new structure for the new authority £0.50m
§ timing of expenditure.
83 Actual outturn is expected to exceed the budget by £0.51m at the year end which will be funded from reserves.
84 The Environment Service has a gross expenditure budget of £87.670m and a projected income budget of £24.654m which results in a net budget of £63.016m.
85 Much of the income is generated from external sources and as a consequence can contain elements which are uncertain and potentially volatile. Some areas of spend such as subsided bus services and Civil Engineering works which cut across several areas of the Service are also subject to higher than normal levels of inflation. The Waste Disposal Service is also subject to unexpected variances caused by changes in tonnages to be disposed of and the method by which disposal takes place.
86 As with all Services, the Environment Service has contributed to the savings required for 2008/09 as identified in the Medium Term Financial Plan and achieving these whilst still maintaining a high level of service delivery will be a challenge for all concerned.
87 Savings are expected to be made on Salaries but these will be offset by higher energy costs for Street Lighting and the rising cost of fuel and oil based products. The downturn in the housing market is affecting the level of income from the associated highway and footway requirements and some grant income will be less than anticipated. There are some other relatively minor variances but at this stage of the year these are not seen as indicative of any problems and will largely be addressed through a review of profiled spend, and some minor budget revisions during November. Other than the items mentioned above, it is not anticipated at this stage that there will be any other significant variances at final outturn.
88 The budget is in any event subject to a continuous review process which should enable any difficulties to be identified and addressed as early as possible.
Employee Costs
89 This is currently showing an under-spend against the year to date budget which is mainly due to a high level of staff turnover, and consequently there are a number of unfilled vacancies across several areas of the Service. Although every effort is made to fill posts as they become vacant and avoid any adverse effect Service delivery there is a natural delay in the process. The uncertainty around LGR is likely to add to this turnover and this trend may continue over the remainder of the year. The delay in the completion of the Visitor Centre at Hardwick Park has resulted in a corresponding delay in the appointment of staff. In addition the budget figure includes a provision for a pay award from 1st April which is still subject to on going negotiations but will be backdated once agreed.
90 Staff turnover remains a concern and the staffing budget is likely to remain under-spent at the year end.
Premises
91 The additional costs associated with Premises are primarily due to advance payments of rents, rates and way-leaves and are not seen as indicative of any problems at this stage.
Agency and Contracted Services
92 There are several pressures which have been identified including a sharp rise in Street Lighting Energy costs which is likely to add up to £600,000 to this year’s expenditure year and also fuel costs for Public Transport which will increase the cost of subsidised services by £310,000. Fuel and other oil-derived costs are extremely volatile at the moment and will need to be closely monitored as the year progresses.
93 Spend against specific projects funded by earmarked reserves and identified through the Scrutiny process will show as an over spend of £170,000.
94 A reduction in works (as described below under Income) will reduce the costs under Agency by approximately £300,000.
Income
95 The downturn in the housing market and in new developments generally is having an effect on income levels and a shortfall of £250,000 is already being forecast. This has been redressed through a reduction in works budgets. In addition the amount of Planning Delivery Grant which was expected to be received has dropped by £96,000.Savings and Efficiencies
96 The County Council's priorities are under constant review, and the additional investment commitments and savings are considered as part of the authority's budget setting process. In addition as part of the Comprehensive Spending Review (CSR07) the government is expecting councils to achieve cash releasing efficiency gains. The County Council and Districts are also expected to make savings as a result of the LGR agenda.
97 Like the rest of the public sector, local government will expected to achieve at least 3% per annum net cash-releasing efficiency gains. The expected annual gains will increase in line with inflation. The baseline expenditure for the County Council is currently estimated to be £328.675m. The baseline calculation is voluntary, but is a useful benchmark against which to measure progress. Using this baseline, the recommended saving for the first year is therefore £9.86m.
98 Over the three year period the Authority is recommended to make cashable gains of £36.75m, including estimated efficiency savings from the Unitary authority in years 2 and 3. These gains could be split as follows:
99 The target for efficiency is non mandatory but it is expected that the Audit Commission will be reviewing the overall approach to VFM, and this will impact on the Authority’s Use of Resources score.
100 There will be a single figure for NI 179 reported to Government and this will be recorded on the national indicator Data Interchange Hub. The intention is that the figure will be reported twice during the year, the first time in October 2008 as a prediction for the cash releasing efficiency gains to the end of the year, and then in mid July 2009 to record the efficiency gains actually achieved during the preceding year.
101 The current situation regarding the projected savings for 2008/09 included in the Council's original budget projections is as per the following table:
102 The CLG are currently finalising guidance on the definitions of eligible cash releasing gains, which, it is anticipated will be very similar to those that operated under Gershon, apart from the fact that non-cash releasing gains will not be allowed. At that point we hope to produce a more fulsome exposition of the breakdown of savings planned and achieved. It is considered that many of the ongoing efficiency savings identified already through the budgetary process will be eligible for this category.
103 The current forecast is that £5.67m of the total £6.14m service savings will be realised this year.
104 In the first quarter of the year the new build project at Durham Johnston incurred expenditure of £3.3m. Information from the project manager suggests that £3.5m of the 2008/09 budget of £18m will need to be re-phased to 2009/10 as it is not likely to be spent in 2008/09. Following this re-phasing the projected outturn for CYPS capital programme for 2008/09 is £63m.
105 In Corporate Services, the Avenue project will not be undertaken in its original form and therefore it has been necessary to re-phase funds into 2008/09 to the value of £5.2m.
106 The key issues in Adult Services under spend of £5.43m are as follows:
§ The final programme for investing in the in-house residential homes is yet to be agreed. It is unlikely that any of the £4million budget will be expended in 2008/09.
§ Progress is being made in investing budgets available to for I.T., Mental Health, Library Modernisation and Day Service Improvement. Activity will continue into 2009/10 resulting in 2008/09 under spends of £920,000.
107 The total outstanding debt figure has decreased in the first quarter of the year, both in value and number of invoices outstanding. This has to be taken in the context that much of the county council debt is cyclical.
108 A big improvement came in the debt ‘over 1 year old’ where one invoice of £1.6m was paid.
109 The Corporate Income and Debt Management Policy has now been operating for just over a year and it is only now that we are seeing the full benefits, with all debt being fully managed.
Treasury Management and Prudential Indicators
Prudential Indicators
110 The Prudential Code is designed to guide the Council’s decision on what it can afford to borrow. The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 specifies the Prudential Code for Capital Finance in Local Authorities, issued by CIPFA, as the code of practice to which local authorities must have regard when setting and reviewing their affordable borrowing limit.
111 The key objectives of the Prudential Code are to ensure that within a clear framework the capital investment plans of the Council are affordable, prudent and sustainable. A further key objective is to ensure that treasury management decisions are taken in accordance with good professional practice and in a manner that supports prudence, affordability and sustainability.
112 To demonstrate that the above objectives have been fulfilled, the Prudential Code sets out the indicators that must be used, and the factors that must be taken into account. The Code does not include limits, these are for the Council to set and monitor. The Prudential Indicators for the current financial year and the two subsequent years are set out annually in the Budget Book.
External Debt
113 A key indicator for in-year monitoring is the Operational Boundary (an indicator of affordability). The chart below compares actual external debt in 2008/09 to 30th June 2008 with the Authorised Limit and Operational Boundary and shows that debt is within the limits set by the Council:
114 The Authorised Limit represents the maximum limit of total external debt, gross of investments. The Operational Boundary for external debt is based on the same estimates as the Authorised Limit but reflects directly the County Treasurer’s estimate of the most likely, prudent but not worst case scenario, without additional headroom included in the Authorised Limit.
115 Public Works Loan Board (PWLB) debt constitutes the majority of external debt. The main PWLB repayment dates are in May and November. Therefore between these months the total level of debt remains relatively stable.
Treasury Management Indicators
116 The Council has an integrated treasury management strategy and has adopted the CIPFA Code of Practice for Treasury Management in the Public Services. Interest rate exposures remain within the limits set out in the 2007/08 Budget Book.
Treasury Management Activities- Short Term Investments
Background
117 Short term investments are made in accordance with the County Council’s Treasury Management Policy and Strategy.
118 Since mid 2007 the global credit crisis has led to unusually high interest rates being paid compared to the Bank of England base rate, resulting in increasing returns. However, the rates have now eased back and begun to level off.
To view tables and graphs, please refer to pdf attachment or Hard Copies located in the Record Office or Corporate Services.
Attachments
1 The purpose of this report is to review the Council’s current financial position and to provide a forecast of the position at the year-end.
Background
2 The quarterly finance reports have two purposes:
i. To provide information that will provide the link to external reporting requirements at the year-end.
ii. To provide a forecast of the likely outturn and therefore provide an opportunity to take appropriate action to deal with under and over spendings in services. Executive Summary
3 The County Council’s budgetary statements as at 30th June 2008 forecast that by the year end:
i. Services will be over spent by £3.243m, although this is more than covered by the planned use of reserves and contingencies
ii. Investment income will be over budget by £3.158m
iii. There will be an underlying under spend of £3.505m
Forecast Position
4 At this stage of the financial year the outturn forecast for services is an over spend of £3.24m against original budget. Under Non-service specific items it is forecast that the return on short-term investments will exceed the original budget by £3.16m, leading to an overall net outturn position of £0.09m over spend on original budget.
5 This is information that will be available in year-end financial reports.
Planned use of Earmarked Reserves
6 During the budget setting process, some expenditure was planned to be met from Earmarked Reserves. This was, in the main, to meet the estimated cost of settling equal pay claims.
7 During the Final Accounts process, a number of earmarked reserves were created to fund expenditure to be incurred in 2008/09.
8 When expenditure is incurred for which a specific reserve exists, services over spend their original budget, but this will be met from the earmarked reserve.
Pressures
9 Adult and Community Services (ACS) pressures relate to energy costs (£0.30m) although a contribution to be made to Durham Police Authority as agreed by Cabinet (£0.50m) is included in this total. The contribution is to be met from Reserves.
10 Across Children and Young Peoples’ Service (CYPS) the most significant issues are BSF Development and Planning Costs (£0.75m), where additional spend in 2008/09 will initially be funded from general reserves and recovered from future year’s budgets, and agency placements, Direct payments and transport costs (£0.375m).
11 The Budget Plan for DSG in 2008/09 assumed an over spend from the previous financial year of £0.495m would need to be recovered. This is the starting point in the budget book. The actual over spend was only £6,000 and so, in presentational terms, the expenditure against original budget will therefore show as £0.49m over spent during the year.
12 Within Environment there are pressures around street lighting energy costs (£0.60m) and fuel costs for public transport (£0.30m).
Savings
13 In Adult and Community Services there are a number of areas of under spend, the majority of which are non-recurrent and cannot be considered for future years efficiency savings. The key areas are:
§ Investment from the PCT of £0.85m, the majority of which will be used in 2009/10 and 2010/11.
§ Staff turnover and vacancies resulting in an under spend of £0.67m.
§ Area based grant allocations, which will not be fully expended in 2008/09 resulting in an under spend of £0.55m.
§ Grants have been received in-year that were not in the original budget. This will result in an under spend of £0.40m.
§ Income levels linked to shared packages of care with health partners running approximately £0.30m higher than estimates.
14 In CYPS under spends on staffing budgets and maximising of grant income are likely to be around £0.37m.
15 Within Environment a number of unfilled vacancies across several areas of the Service are contributing to a likely year-end under spend of £0.50m.
16 The forecast return from short-term investments is set to exceed original budget by £3.16m due, in the main, to the relatively high cash balance held by the Council at present. This is due to slower than anticipated spend on areas of the capital programme and equal pay reserves as claims are not yet settled.
Planned remedial actions / Proposals for additional spend
17 Within ACS the key issues detailed are mainly fortuitous and cannot be maintained in the long term. Expenditure in relation to care purchase budgets is broadly on target at this stage although the position will be closely monitored throughout the year.
18 In CYPS, slippage on employee budgets and maximising of sources of grant funding will be used to offset potential over spending. The combined effect of these issues is expected to allow the overall service budget to be broadly in balance at the year-end (if the BSF development costs are discounted as they are utilising general reserves and being recovered from future year budgets).
19 In Environment there are already signs of pressures building in relation to energy costs and other costs affected by fuel and oil based products. These are being partially offset by savings in salaries.
Savings and Efficiencies
20 The County Council's priorities are under constant review, and the additional investment commitments and savings are considered as part of the authority's budget setting process. In addition as part of the Comprehensive Spending Review (CSR07) the government is expecting councils to achieve cash-releasing efficiency gains.
21 The current forecast is that £5.67m of the total £6.14m service savings identified as part of the budget process will be realised this year.
Capital Budget
22 The forecast outturn at this stage projects an under spend of £14.11m against original budget, much of this rolling forward into the budget for 2009/10.
Aged Debt Analysis
23 The total outstanding debt figure has decreased in the first quarter of the year, both in value and number of invoices outstanding. This has to be taken in the context that much of the county council debt is cyclical. A big improvement came in the debt ‘over 1 year old’ where one invoice of £1.6m was paid.
24 The Corporate Income and Debt Management Policy has now been operating for just over a year and it is only now that we are seeing the full benefits, with all debt being fully managed.
Treasury Management and Prudential Indicators
25 Since mid 2007 the global credit crisis has led to unusually high interest rates being paid compared to the Bank of England base rate, resulting in increasing returns. However, the rates have now eased back and begun to level off.
26 Actual external debt in 2008/09 to 30th June 2008 is within is within the limits set by the Council.
Recommendations
27 It is recommended that:
i. Members note the financial position of the County Council as at 30th June 2008
| Contact: David Watchman Tel: 0191 383 3543 |
18th August 2008
p/reports/ha11-08
Quarter 1 Finance Report
Contents
Page Number Detail
1-4 Purpose of Report and Executive Summary
5 Contents
6-26 Revenue Budget Monitoring
27-28 Savings and Efficiencies
29-30 Capital Budget Monitoring
31-32 Aged Debt Analysis
33-34 Treasury Management and Prudential Indicators26
REVENUE BUDGET SUMMARY
Revenue Budget Summary
28 Services are currently projecting an over spend on their budgets of £3.24m at year-end.
29 Outside of service budgets the current assumption is that we will spend sums held in contingencies for equal pay claims this year, however if this does not happen then there is potential for a large under spend against original budget.
30 Interest and investment income are running ahead of projections due to the high value of cash balances held. The current forecast is to bring in additional income of £3.16m over and above that which was budgeted for.
31 The net forecast position is therefore an overall contribution to the general reserve of £0.41m, a reduction of £0.09m on original budget.
32 However, part of the spending will be financed from earmarked reserves. There is therefore an underlying under spend of £3.505m across service and non-service specific areas.
ADULT AND COMMUNITY SERVICES
Adult and Community Services
33 Adult and Community Services continue to operate in a dynamic environment yet at the same time the Service is becoming more sophisticated in monitoring and forecasting both commissioning activity and financial outturn.
34 A detailed base budget building process ensures that there is confidence in understanding the current financial position. At this stage of the year however a range of assumptions have had to be made to estimate a forecast of outturn. These assumptions will be monitored on a monthly basis to ensure that forecasts continue to be as accurate as possible.
35 At this stage of the financial year the service is forecasting an under spend of £1.9million (1.2%) against a revenue budget of £161.4m. The majority of this under spend relates to a range of one off issues which are non recurrent and cannot be considered for future years efficiency savings. The key issues are as follows:
§ During the restructure process with CYPS a number of posts were left vacant to safeguard staff. The majority of posts are now filled but are often being filled internally. This is resulting in higher than expected levels of staff turnover. A number of posts in some services are also being left vacant linked to LGR. In total the forecast under spend in £320,000.
§ The Service received confirmation in March that increases in Area Based Grant allocations could be expended within the Service. Investment plans are now in place and being actioned for this funding. Naturally all of the funding will not be expended in 2008/09. There is also some slippage in relation to growth linked to the Day Service Improvement Programme. In total the under spend for these areas will be £550,000.
§ General vacancy levels in social work teams (especially in Mental Health) and in day centres are running at higher than estimated levels. Under spends in this area are estimated to be £350,000.
§ Income levels linked to shared packages of care with health partners are running higher than original estimates. An over recovery of income is estimated of £300,000.
§ A one off investment of £850,000 has been received from the PCT for Health Improvement in the County. Investments against this sum will be decided in partnership, although the majority of investment is expected in 2009/10 and 2010/11, resulting in a significant under spend in 2008/09.
§ The key issues detailed above are mainly are fortuitous and cannot be maintained in the long term. Expenditure in relation to care purchase budgets is broadly on target at this stage although the position will be closely monitored throughout the year.
§ The capital budget is forecast to under spend by £5.4million. This under spend results from delays in formulating the plans for investing in our in house residential homes (£4million) and delays in taking forward a range of smaller schemes.
36 The estimate of outturn in based upon the Original Budget. At this stage of the year the service is forecasting an underspend of £1.9 million (1.2%) against an original budget of £161.4 million. Progress against achieving the savings target of £2.6 million is strong with £180,000 at risk of not being achieved.
37 Further detail in relation to the forecast of outturn is provided below:
Employees
38 During the restructure process with CYPS a number of posts were left vacant to safeguard staff. The majority of posts are now filled but are often filled internally. This is resulting in higher than expected levels of staff turnover. A number of posts in some services are also being left vacant linked to LGR. In total the forecast under spend in £320,000.
39 The service received confirmation in March that increases in Area Based Grant allocations could be expended within service. Investment plans are now in place and being actioned for this funding. Naturally all of the funding will not be expended in 2008/09. There is also some slippage in relation to growth linked to the Day Service Improvement Programme. In total the under spend for these areas will be £550,000.
40 There is a £500,000 forecast under spend in the home care provider linked to current activity levels. A corresponding overspend is occurring in the external home care purchase budgets where activity levels are higher than forecast.
Premises
41 A reserve was created in 2007/08 of £648,000 to enable investment in the internal environment of in house residential homes. The expenditure of this reserve will show as an over spend in 2008/09.
42 The cost of energy has increased significantly since the original budget was set. The over spend in this area is expected to be £125,000.
Transport
43 The key under spend relates to car allowances especially in home care where activity is below estimated levels due to lower numbers of staff.
Supplies and Services
44 There are no significant ongoing pressures in this budget. The overspend relates to activity funded by grants which were not included in the original budget and imbalances in relation to where growth was placed in the budget and where it is actually being expended.
Agency and Contracted Services
45 At this stage of the year care purchase, especially in Learning Disability and Older Persons’ services is close to budgeted levels. This will be monitored closely however, as small increases in percentage activity can have a significant impact upon the overall position.
46 In addition a £0.50m contribution was agreed by Cabinet to be made to Durham Police Authority.
Income
47 Income levels linked to shared packages of care with health partners are running higher than original estimates. An over recovery of income is estimated of £300,000.
48 A one off investment of £850,000 has been received from the PCT for Health Improvement in the County. Investments against this sum will be decided in partnership, although the majority of investment is expected in 2009/10 and 2010/11, resulting in a significant under spend in 2008/09.
49 Grants have been received in-year that were not in the original budget. This will result in an under spend of £400,000.CHIEF EXECUTIVE Chief Executive
Executive Summary
50 To date the CEO has under-spent by £0.17m compared to the profiled budget, which is mainly due to under spends on staffing and supplies and services. Actual expenditure is forecast to be in line with budget at the year end.
Employees
51 The under-spend of £0.11m to date is mainly due to vacant posts and non-payment of the pay award, an allowance for which has been made in the budget.
Supplies and Services
52 The under-spend of £0.09m to date is mainly due to the timing of payments. It is anticipated that actual expenditure will be in line with budget at the year end.
CHILDREN AND YOUNG PEOPLE’S SERVICE (DSG)
The Dedicated Schools Grant (DSG)
53 The grant covers all School Delegated Budgets and the costs of certain Support Services for schools and pupils that are managed by the Local Authority e.g. Education Other Than in School; placements at Independent Special Schools; School Admissions, non-Local Authority Early Years provision and Capitalised Repair and Maintenance of school buildings.
54 The final DSG for 2008/2009 was confirmed by the Department for Children, Schools and Families (DCSF) on the 19 June 2008 at £274,436,000 which was only £7,666 more than the Local Authority’s calculation.
55 The Budget Plan for DSG in 2008/2009 assumed an over spend from the previous financial year of £0.495m would need to be recovered. This is the starting point in the original Budget Book. In reality, this was only £6,000 and this meant there was a DSG balance of £0.489m to be considered by DCC Schools Forum when it met on the 10 July. Priorities are:-
§ School Kitchen Ventilation;
§ Capitalised Repair and Maintenance - School Electricity Supplies;
§ Administration - School Workforce Census;
§ Arrears Equal Pay;
§ Energy Performance Certificates
56 During the financial year, budgetary control will be exercised against the actual DSG available.
57 The standard budget group headings covering the likes of Employees, Supplies, Income etc. are only guide figures in the Original Budget as the majority of spending is undertaken by individual schools, thus the table of figures is of limited benefit. Standards Fund and Standards Grant “income” to schools of £47m or thereabouts, has now been finalised.
58 In presentational terms, the expenditure against original budget will therefore show as £0.49m over spent during the year.
Pressures
59 There is insufficient data available to indicate whether budgets on the Local Authority managed parts of the DSG will be adequate for the full financial year. However, it is worth logging the areas that can be volatile and will be the focus of detailed budget projections in future reports:-
§ Independent Special School Fees
§ Redundancy payments for school staff
§ Early Years provision - non Local Authority places
§ Home and Hospital Tuition
§ Capitalised Repair and Maintenance of School Buildings
Savings
60 There is nothing to indicate that there will be any under spending against the budgets managed by the Local Authority. The scope for redirection of any savings is limited, as alternative spend can only be on items within the DSG and may be subject to the views of DCC Schools Forum.CHILDREN AND YOUNG PEOPLE’S SERVICE (LA) CYPS Revenue Budget (LA)
61 The total Revenue Budget is £102.7m and of this figure about £83m is actually managed by the Director of Children and Young People’s Services.
62 Additional Area Based Grant of £200,644 was received in March 2008 for Substance Misuse Preventative Strategies and this will therefore feature in Employees and Supplies Budgets and appear as an over spend. Since that time, additional grants have been released for a variety of purposes and clearly this will effect spend shown in budgetary control reports compared to Original Budgets. The most significant examples are:
§ £981,260 National Digital Infrastructure - Broadband in Schools (13.3.08)
§ £220,000 Parenting Support Strategy Grant (7.5.08)
§ £387,111 Standards Fund Flexible Early Years Entitlement (27.6.08)
§ £250,000 Beacon Peer Support Programme - School Improvement(27.6.08)
§ £478,541 Sure Start, Early Years and Child Care Grant (14.7.08)
Planned Use of Reserves
63 There are several parts of the service budget where spending will differ from original budget:-
§ Investment initiatives - supported by Scrutiny Members (Academic mentoring; priorities for Post 16 Learning; IT/Impact Centres; E-learning pilot £160,000
§ Extra Early Years income to Education Development Service Trading Account £85,733
§ Adoption “Invest to Save Initiative” - operational balance £337,228
§ Building Schools for the Future planning costs £242,726
64 (The overall impact of the issues listed above has the potential to result in an apparent overspend of £0.826m, compared to Original Budget).
65 Several grants, approx value £0.38m are able to be spread across more than one financial year and hence there is a carry forward of some funds, received in the 2007/2008 financial year, to match with spending plans during 2008/2009. This will produce a variance compared against Original Budget.
Pressures
66 There are features of CYPS Revenue Budget that regularly present Budgetary Control challenges. Listed below are a number of areas of potential overspend based on 3 month’s experience into this financial year:-
£
§ BSF Development and Planning Costs 722,500§ Agency Placements 150,000
§ Direct Payments to Parents of Disabled Children 125,000
§ Transport costs 100,000
§ Redundancy Payments - school staff 50,000 67 Most aspects of the budget are in line with available resources. The grant income referred to earlier has a net nil effect as there will be more spend but it is entirely met via grant.
68 Transport to Schools and Colleges is probably the most difficult part of the budget to predict as demand changes in September 2008 at the start of a new academic year. Higher than average transport inflation may well be reflected in contract prices and the charge for contract tickets.
69 The cost of agency placements for children in care of the Local Authority is closely monitored because of the potential cost of individual placements and this has the potential to overspend by the year end. New arrangements mean that the PCT is more likely to make a financial contribution to this type of placement.
70 Falling rolls in Primary and Secondary schools has led to a number of staff redundancies being approved to date, mostly from 31 August 2008.
71 The largest budget variation has been put forward by the team responsible for the Building Schools for the Future initiative as it is expected excess costs to do with finalising design, contracts and tenders for the first wave of schools in County Durham will be a feature of the 2008/2009 budget. The Treasurer is aware of this and it has been reflected in the overall project budget which spans several years.
Savings
72 CYPS budget for 2008/2009 includes a package of savings measured with a value of £2.2m. Savings associated with School and College Transport will not be confirmed until the beginning of 2009. All other proposals have either been delivered or are on target.
73 Slippage on Employee Budgets and maximising of sources of Grant Funding will be used to look to offset potential overspending. The combined effect of these issues is expected to allow the overall service budget to be broadly in balance at the year end (if the BSF development costs are discounted as they are utilising future year budgets).CORPORATE SERVICES Corporate Services
Executive Summary
74 To date Corporate Services has over spent against the profiled budget by £0.21m which is mainly due to the additional cost of member elections, partially offset by an over-recovery of income and an under spend on staffing costs. After allowing for the planned transfers from reserves, actual expenditure is forecast to be in line with budget at the end of the year.
Employees
75 The under spend of £0.25m is mainly due to the delay in filling vacant posts in Estates and Design Services, and non-payment of the pay award, an allowance for which has been made in the budget.
Premises
76 The under spend of £0.11m is mainly due to the reversal of creditor provisions from 2007/8, against which full payment has yet to be made. Actual expenditure is expected to be in line with budget at the year end.
Supplies and Services
77 The over spend of £0.85m is mainly due to additional costs associated with revised member structure for the new authority. Consequently it is anticipated that this budget head will over spend by £0.9m at outturn, however this will be met from reserves.
Income
78 The over recovery of £0.30m is mainly due to the timing of receipt of income. Actual income is expected to be in line with budget at the year end.COUNTY TREASURER AND OTHER SERVICES
County Treasurer and Other Services
Executive Summary
79 There is an over spend of £0.97m against the profiled budget to date which is mainly due to additional expenditure relating to LGR, which will be met from reserves. After allowing for the planned transfers from reserves, actual expenditure is forecast to be in line with budget at the end of the year.
Employees
80 The under spend of £0.24m is mainly due to the non-filling of vacant posts and non-payment of the pay award, an allowance for which has been made in the budget.
Premises
81 The over spend of £0.11m is due to the timing of the rental payment for Customer Services Data Centre.
Supplies and Services
82 The over spend of £1.23m is mainly due to the:
§ costs associated with the new structure for the new authority £0.50m
§ timing of expenditure.
83 Actual outturn is expected to exceed the budget by £0.51m at the year end which will be funded from reserves.
ENVIRONMENT
Environment84 The Environment Service has a gross expenditure budget of £87.670m and a projected income budget of £24.654m which results in a net budget of £63.016m.
85 Much of the income is generated from external sources and as a consequence can contain elements which are uncertain and potentially volatile. Some areas of spend such as subsided bus services and Civil Engineering works which cut across several areas of the Service are also subject to higher than normal levels of inflation. The Waste Disposal Service is also subject to unexpected variances caused by changes in tonnages to be disposed of and the method by which disposal takes place.
86 As with all Services, the Environment Service has contributed to the savings required for 2008/09 as identified in the Medium Term Financial Plan and achieving these whilst still maintaining a high level of service delivery will be a challenge for all concerned.
87 Savings are expected to be made on Salaries but these will be offset by higher energy costs for Street Lighting and the rising cost of fuel and oil based products. The downturn in the housing market is affecting the level of income from the associated highway and footway requirements and some grant income will be less than anticipated. There are some other relatively minor variances but at this stage of the year these are not seen as indicative of any problems and will largely be addressed through a review of profiled spend, and some minor budget revisions during November. Other than the items mentioned above, it is not anticipated at this stage that there will be any other significant variances at final outturn.
88 The budget is in any event subject to a continuous review process which should enable any difficulties to be identified and addressed as early as possible.
Employee Costs
89 This is currently showing an under-spend against the year to date budget which is mainly due to a high level of staff turnover, and consequently there are a number of unfilled vacancies across several areas of the Service. Although every effort is made to fill posts as they become vacant and avoid any adverse effect Service delivery there is a natural delay in the process. The uncertainty around LGR is likely to add to this turnover and this trend may continue over the remainder of the year. The delay in the completion of the Visitor Centre at Hardwick Park has resulted in a corresponding delay in the appointment of staff. In addition the budget figure includes a provision for a pay award from 1st April which is still subject to on going negotiations but will be backdated once agreed.
90 Staff turnover remains a concern and the staffing budget is likely to remain under-spent at the year end.
Premises
91 The additional costs associated with Premises are primarily due to advance payments of rents, rates and way-leaves and are not seen as indicative of any problems at this stage.
Agency and Contracted Services
92 There are several pressures which have been identified including a sharp rise in Street Lighting Energy costs which is likely to add up to £600,000 to this year’s expenditure year and also fuel costs for Public Transport which will increase the cost of subsidised services by £310,000. Fuel and other oil-derived costs are extremely volatile at the moment and will need to be closely monitored as the year progresses.
93 Spend against specific projects funded by earmarked reserves and identified through the Scrutiny process will show as an over spend of £170,000.
94 A reduction in works (as described below under Income) will reduce the costs under Agency by approximately £300,000.
Income
95 The downturn in the housing market and in new developments generally is having an effect on income levels and a shortfall of £250,000 is already being forecast. This has been redressed through a reduction in works budgets. In addition the amount of Planning Delivery Grant which was expected to be received has dropped by £96,000.Savings and Efficiencies
96 The County Council's priorities are under constant review, and the additional investment commitments and savings are considered as part of the authority's budget setting process. In addition as part of the Comprehensive Spending Review (CSR07) the government is expecting councils to achieve cash releasing efficiency gains. The County Council and Districts are also expected to make savings as a result of the LGR agenda.
97 Like the rest of the public sector, local government will expected to achieve at least 3% per annum net cash-releasing efficiency gains. The expected annual gains will increase in line with inflation. The baseline expenditure for the County Council is currently estimated to be £328.675m. The baseline calculation is voluntary, but is a useful benchmark against which to measure progress. Using this baseline, the recommended saving for the first year is therefore £9.86m.
98 Over the three year period the Authority is recommended to make cashable gains of £36.75m, including estimated efficiency savings from the Unitary authority in years 2 and 3. These gains could be split as follows:
| Year | 2008/09 | 2009/10 | 2010/11 |
| Target (% of 2007/08 baseline) | 3% | 6.1% | 9.3% |
| Expected gains (£m) | 9.86 | 23.11 | 36.75 |
99 The target for efficiency is non mandatory but it is expected that the Audit Commission will be reviewing the overall approach to VFM, and this will impact on the Authority’s Use of Resources score.
100 There will be a single figure for NI 179 reported to Government and this will be recorded on the national indicator Data Interchange Hub. The intention is that the figure will be reported twice during the year, the first time in October 2008 as a prediction for the cash releasing efficiency gains to the end of the year, and then in mid July 2009 to record the efficiency gains actually achieved during the preceding year.
101 The current situation regarding the projected savings for 2008/09 included in the Council's original budget projections is as per the following table:
102 The CLG are currently finalising guidance on the definitions of eligible cash releasing gains, which, it is anticipated will be very similar to those that operated under Gershon, apart from the fact that non-cash releasing gains will not be allowed. At that point we hope to produce a more fulsome exposition of the breakdown of savings planned and achieved. It is considered that many of the ongoing efficiency savings identified already through the budgetary process will be eligible for this category.
103 The current forecast is that £5.67m of the total £6.14m service savings will be realised this year.
CAPITAL BUDGET SUMMARY
Capital Budget Position104 In the first quarter of the year the new build project at Durham Johnston incurred expenditure of £3.3m. Information from the project manager suggests that £3.5m of the 2008/09 budget of £18m will need to be re-phased to 2009/10 as it is not likely to be spent in 2008/09. Following this re-phasing the projected outturn for CYPS capital programme for 2008/09 is £63m.
105 In Corporate Services, the Avenue project will not be undertaken in its original form and therefore it has been necessary to re-phase funds into 2008/09 to the value of £5.2m.
106 The key issues in Adult Services under spend of £5.43m are as follows:
§ The final programme for investing in the in-house residential homes is yet to be agreed. It is unlikely that any of the £4million budget will be expended in 2008/09.
§ Progress is being made in investing budgets available to for I.T., Mental Health, Library Modernisation and Day Service Improvement. Activity will continue into 2009/10 resulting in 2008/09 under spends of £920,000.
Aged Debtor Analysis
30th June 2008 31st March 2008 Debtors107 The total outstanding debt figure has decreased in the first quarter of the year, both in value and number of invoices outstanding. This has to be taken in the context that much of the county council debt is cyclical.
108 A big improvement came in the debt ‘over 1 year old’ where one invoice of £1.6m was paid.
109 The Corporate Income and Debt Management Policy has now been operating for just over a year and it is only now that we are seeing the full benefits, with all debt being fully managed.
Treasury Management and Prudential Indicators
Prudential Indicators
110 The Prudential Code is designed to guide the Council’s decision on what it can afford to borrow. The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 specifies the Prudential Code for Capital Finance in Local Authorities, issued by CIPFA, as the code of practice to which local authorities must have regard when setting and reviewing their affordable borrowing limit.
111 The key objectives of the Prudential Code are to ensure that within a clear framework the capital investment plans of the Council are affordable, prudent and sustainable. A further key objective is to ensure that treasury management decisions are taken in accordance with good professional practice and in a manner that supports prudence, affordability and sustainability.
112 To demonstrate that the above objectives have been fulfilled, the Prudential Code sets out the indicators that must be used, and the factors that must be taken into account. The Code does not include limits, these are for the Council to set and monitor. The Prudential Indicators for the current financial year and the two subsequent years are set out annually in the Budget Book.
External Debt
113 A key indicator for in-year monitoring is the Operational Boundary (an indicator of affordability). The chart below compares actual external debt in 2008/09 to 30th June 2008 with the Authorised Limit and Operational Boundary and shows that debt is within the limits set by the Council:
114 The Authorised Limit represents the maximum limit of total external debt, gross of investments. The Operational Boundary for external debt is based on the same estimates as the Authorised Limit but reflects directly the County Treasurer’s estimate of the most likely, prudent but not worst case scenario, without additional headroom included in the Authorised Limit.
115 Public Works Loan Board (PWLB) debt constitutes the majority of external debt. The main PWLB repayment dates are in May and November. Therefore between these months the total level of debt remains relatively stable.
Treasury Management Indicators
116 The Council has an integrated treasury management strategy and has adopted the CIPFA Code of Practice for Treasury Management in the Public Services. Interest rate exposures remain within the limits set out in the 2007/08 Budget Book.
Treasury Management Activities- Short Term Investments
Background
117 Short term investments are made in accordance with the County Council’s Treasury Management Policy and Strategy.
| 2007/08 | 2008/09 |
| Quarter 2 | Quarter 3Quarter 4Quarter 1Cumulative 2008/09 |
| Interest Earned* | £1,946,000 | £2,246,000£2,134,000£2,228,000£2,228,000 |
| Average Return Earned | 5.896% | 6.190%5.957%5.750%5.750% |
| Average Bank of England base rate | 5.739% | 5.679%5.352%5.025%5.025% |
| Balance Invested at Quarter End | £120,026,000 | £144,073,000£140,301,000£136,662,000£136,662,000 |
| Average Daily Balance of Investments | £131,826,000 | £146,267,000£143,905,000£155,748,000£155,748,000 |
* Interest earned is before year-end adjustments including payment of interest on school balances. The interest earned figure includes interest relating to maturities due after the quarter end but which relate to the relevant quarter.
118 Since mid 2007 the global credit crisis has led to unusually high interest rates being paid compared to the Bank of England base rate, resulting in increasing returns. However, the rates have now eased back and begun to level off.
To view tables and graphs, please refer to pdf attachment or Hard Copies located in the Record Office or Corporate Services.
Attachments
Quarter 1 Finance.pdf