Download 2007/08 Outturn Position Statement

Audit Committee
Date: 26th June 2008
2007/08 Outturn Position Statement
Report of the Executive Director of Regeneration and Resources
Cabinet Portfolio/Lead Member: Resources, Cllr. Ed Malcolm
Purpose of Report
1. This report explains in more detail the major revenue and capital
variations in the outturn spending position of the Council for the year
ending 31st March 2008 and the known commitments the Council
needs to make. This information is already included in the Foreword to
the Statement of Accounts. The outturn position is subject to external
audit that will be completed by 30th September 2008.
2. Members have already considered and agreed quarterly budget
monitoring reports during 2007/08 and this is the final year-end report.
3. Audit Committee are asked to consider
Position Statement.
the final 2007/08 Outturn
4. The detailed financing of the capital programme is included in the
report and members are asked to consider the financing of the 2007/08
capital programme.
5. Our reserves are reviewed as part of a risk based reserves policy,
taking into account our known pressures for the forthcoming years.
The statement of accounts include additions to these reserves from
one off grant income and review of existing balances. Members are
asked to note the contributions to reserves.
6. This report will be taken to General Purposes Committee on 27 th June
2008 for formal approval, as part of the Final Account process to meet
the end June 2008 statutory deadline.
Committee Date: 26/06/08
Version (final)
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2007/08 Outturn Position Statement (subject to audit)
INTRODUCTION
7. This report explains the 2007/08 outturn position and compares actual
spending with budgets agreed by the Council.
8. This report shows how successful we have been in managing the
budget pressures during 2007/08 to produce a small underspend
overall. The report covers the Revenue Budget, Capital Programme
and the Housing Revenue Account.
OVERVIEW
9. The Council has faced financial pressures during 2007/08 on adult
services, looked after children, teacher redundancy costs and
challenging value for money targets. The Council has worked together
on budget recovery plans and successfully achieved a revenue
underspend for 2007/08 of £0.8m.
10. The original budget of £221.1m was set with a planned use of £0.6m of
reserves. Retaining these resources in reserves, we have been able to
add £0.2m to general reserves.
11. The Council has incurred an overspend of £0.4m on its capital
programme. This is mainly attributable to two schemes added to the
programme during the year for health and safety issues – Marsden
Grotto steps and asbestos removal at King George V School.
12. The Housing Revenue Account has achieved a surplus of £0.8m. This
is against a budgeted deficit of £0.1m, a variance of £0.9m. The
Housing Revenue Account has no overspend on capital.
13. The Council have been able to add to earmarked reserves to meet
commitments on Equal Pay, Job Evaluation and budget pressures in
2008/09.
Committee Date: 26/06/08
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2007/08 Outturn Position Statement (subject to audit)
2007/08 REVENUE OUTTURN
14. Our revenue spending is £0.8m less than our revised net revenue
budget.
15. The original budget of £221.1m agreed by full Council in February 2007
was set prior to final confirmation of our Dedicated Schools Grant
(DSG) funding for 2007/08. This budget included our indicative DSG
allocation of £85.9m. The final allocation of £86.0m was an increase of
£0.1m.
16. The revised budget is shown in the statement of accounts at £221.2m
to include the additional DSG funding.
17. Certain budget adjustments are required during the year to reflect new
budget management arrangements. The main changes were:

Cabinet agreed transfers totalling £0.75m from Regeneration and
Resources Directorate to Neighbourhood Services Directorate
specifically to deal with demand led pressures on adult social
care. Nevertheless, a net overspend of £0.5m remained due to
the volatile nature of this demand.

Budget transfers from Children and Young People to
Regeneration and Resources of £1.3m were required for
redundancy and pension payments to teachers in order to comply
with the Accounting Code of Practice categorisation of
expenditure.

The management of Regulatory Services moved from
Neighbourhood Services to Regeneration & Resources
Directorate in January 2008. The monthly reporting and year end
financial reporting have been retained within Neighbourhood
Services for 2007/08.

The net movement from the contribution to, or use of, earmarked
reserves retained by the Council to meet specific expenditure
needs, is due to the underspend position within the year.
Committee Date: 26/06/08
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2007/08 Outturn Position Statement (subject to audit)
18. The summary of position by Directorate is detailed below. The revised
budget takes into account technical accounting adjustments required
pension charges and capital charges. There is no impact on the overall
revenue outturn position of these adjustments.
19. During the year a number of spending pressures were identified which
have been managed through the year. These included the following
year end budget pressures;

Children and Young People
-

Neighbourhood Services
-

looked after and vulnerable children £1.2m
teacher redundancy costs £1.8m
SEN transport costs £0.2m
adult social care £0.4m (after budget transfer)
waste management £0.7m
Regeneration and Resources
-
VFM targets £1.6m
20. The Council identified these major budget spending pressures early in
the financial year and took steps to ensure that the Council would
achieve an underspend for the financial year.
21. The key areas of underspend that have enabled the Council to achieve
an overall net underspend of £0.2m are:
-
capitalisation of teacher redundancy costs have allowed the
£1.5m of revenue budget to be used against overspends. The
capitalisation of these exceptional costs was always planned
during the year.
-
Insurance contract retendered and change in accounting
treatment have meant one off savings of £0.8m.
-
Investment income £1.6m above budgeted level due to higher
balances held and higher interest rates than budgeted.
Committee Date: 26/06/08
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2007/08 Outturn Position Statement (subject to audit)
-
Underspends on regulatory services, community services and
cultural services totalling £0.7m from holding posts vacant,
additional fees and charges and maximising the use of external
grants.
22. The net underspend of £0.2m will be added to general reserves.
RESERVES POSITION
23. The Council has a risked based reserves policy which is agreed as part
of the Medium Term Financial Plan and reported to Members through
quarterly Cabinet performance reports.
24. This policy has resulted in the creation of earmarked reserves to deal
with our key financial risks:
-
Equal Pay and Job Evaluation Reserve: to specifically meet
any unfunded liabilities from equal pay claims and job
evaluation.
-
Corporate Strategic Financial Risk Reserve: to meet known
significant financial risks, such as adult social care demand and
costs, increased costs of looked after children, value for money
efficiency targets and other significant risks not covered by
specific earmarked reserves.
-
Strategic Reserve: for emergency purposes and unforeseen
liabilities and maintained at 2% of the Council’s net revenue
budget (excl Dedicated Schools Grant and Area Based Grant).
-
General Reserve: to support the Council’s revenue or capital
budgets. This is not an earmarked reserve.
-
Structural Change Reserve: to invest in managing the process
of improving how the Council operates and funding “invest to
save” initiatives.
25. The risks facing the Council have again been reviewed taking into
account the better estimates that are now available for Equal Pay and
Job Evaluation and the known pressures we are facing on adult social
care.
26. Delegated Authority has been given to the Assistant Chief Executive
(Policy), in consultation with the Chief Executive and Leader of the
Council, to negotiate and agree a settlement which resolves the equal
pay and value claims facing the Council. In line with this delegation,
reserve provision has been enhanced where possible to enable the
Council to meet its liability.
Committee Date: 26/06/08
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2007/08 Outturn Position Statement (subject to audit)
27. The statement of accounts reports an underspend of £0.2m after a
number of transfers to earmarked reserves to enable the Council to
deal with the risks from these negotiations.
28. Members are asked to note the following contributions and transfers to
earmarked reserves to help manage the future financial risks and
commitments facing the Council.
29. The Strategic Reserve is held for emergency events such as
unforeseen financial liabilities or natural disasters for which we do not
have a specific reserve. The reserve is held at 2% of our net budget,
following risk assessment, in line with CIPFA guidance. We have
previously defined net budget for this reserve as including DSG, in line
with our Medium Term Financial Plan. Our 2008/09 budget is set
excluding DSG funding.
30. Members are asked to note that the Strategic Reserve is now set at 2%
of our net budget excluding DSG and the Area Based Grant. This will
result in a balance of £2.9m being held in this reserve. The reduction
in balance of £1.5m will be transferred to Equal Pay and Job Evaluation
Reserve (£1.3m) and Corporate Strategic Financial Risk Reserve
(£0.2m) to meet our known risks. These will be kept under review to
ensure that sufficient reserves are maintained in line with
recommendations of the S151 Officer and as required by Audit.
31. The Council received a one off additional allocation of Local Authority
Business Growth Incentive (LABGI) in 2007/08 of £1.6m. This has
been transferred to the Equal Pay and Job Evaluation Reserve.
32. Members are asked to note that one off grant income of £0.8m be
transferred to the Corporate Strategic Financial Risk Reserve.
33. The Council agreed a change in accounting policy for our set aside to
repay debt from Equal Pay and Redundancy. The policy change from
a 10 year repayment to 20 year repayment resulted in a contribution to
the Equal Pay and Job Evaluation Reserve of £0.5m in 2007/08.
34. Existing balances were reviewed to assess whether there was a
continued need. Children & Young Peoples Directorate were holding
balances to manage the risk of tapering Early Years funding. Now that
3 year funding allocations have been received for this area, this
balance has been reviewed. Members are asked to note the transfer of
the surplus balance of £1.0m to Equal Pay and Job Evaluation
Reserve.
35. The other significant movement in earmarked reserves is the increase
in School Balances of £1.1m. This is after provision has been made for
the backdated costs of implementation of Job Evaluation structure of
£0.8m.
Committee Date: 26/06/08
Version (final)
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2007/08 Outturn Position Statement (subject to audit)
36. The table below shows the balances on each of these reserves as at
31st March 2008 after accounting for the above transfers.
2007/08 CAPITAL OUTTURN
37. The Council’s original capital budget for 2007/08, agreed in February
2007 by full Council, was £74.2m. This included the potential
supported borrowing for the ALMO of £20.0m if South Tyneside Homes
achieved the required two star rating.
38. During the closedown for 2006/07 it was agreed that the Council would
carry forward schemes to the value of £10.4m.
39. The revised capital budget for 2007/08 was £72.3m. This includes our
budgets for approved capitalisation of Equal Pay and exceptional
redundancy costs.
40. Expenditure on the capital programme for the year was £54.6m which
has resulted in an overspend of £0.4m, after allowing for £18.2m carry
forwards in to 2008/09.
41. The main reason for the overspend were two schemes added to the
programme during the year for health and safety reasons – Marsden
Grotto steps and asbestos removal at King George V school.
42. The table below shows the final revised capital budget for 2007/08, the
actual capital expenditure, the carry forward commitments to 2008/09
and the capital overspends for 2007/08 of £0.4m (0.6% of revised
budget).
Committee Date: 26/06/08
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2007/08 Outturn Position Statement (subject to audit)
43. The table below gives an analysis of the changes in funding and how
the programme has been financed;
44. The carry forward level is significantly higher than 2006/07 level of
£10.4m due to a small number of regeneration schemes which have
not been implemented in the timescales envisaged due to external
factors. The table below details the main commitments.
2007/08 Capital Commitments
£m
Children and Young People
School asset conditioning
Schools Devolved Formula Capital
Primary school reorganisation
Whitburn School contribution
0.385
1.735
0.400
3.005
Neighbourhood Services
Coastal Protection & Flood Defence (Trow Quarry)
Boldon Colliery Regeneration
Simonside Regeneration
Improve Private Housing in the borough
South Marine Park
1.749
0.581
0.836
0.351
1.410
Regeneration and Resources
Tyne Gateway/Riverside Regeneration
Regeneration and Transformation for Borough
Major Grants Fund
South Shields Registry Office
E-Government
0.600
2.400
0.379
0.400
0.700
Committee Date: 26/06/08
Version (final)
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2007/08 Outturn Position Statement (subject to audit)
45. The available resource has been carried forward to provide funding
from the programme from 2007/08. A report will be brought to Cabinet
in July 2008 on Developing our Financial Strategy.
2007/08 HOUSING REVENUE ACCOUNT
46. The Housing Revenue Account has achieved an underspend of £0.8m
against a budgeted deficit of £0.1m, a positive variance of £0.9m.
47. There is no overspend on the Housing capital budget of £14.3m. Carry
forwards to 2008/09 for Housing Revenue Account capital total £0.1m.
48. There are a number of underspend and overspends within the Housing
Revenue Account budget which result in the net underspend of £0.9m.
The main areas are:

Rental income £0.9m higher than budget due to lower than
budgeted sales and demolitions of properties

Overspend on repairs of £0.5m

Capital charges above budgeted level of £1.0m due to the
revaluation of housing stock

£0.93m underspend for 49th rent week provision in budget not
required.
49. The surplus generated is ring fenced to the HRA and will be taken to
the HRA reserves.
Financial Implications
50. The success of our financial planning and management during the year
and the resultant £0.2m underspend continues to restore stability to the
Council’s budgetary position and improves our reserves position.
51. All other financial implications are as set out in this report.
Legal Implications
52. It is important for the level of reserves to be sufficient to meet the
Council’s estimated liabilities and for decisions to be made to ensure
that the Statement of Accounts can be approved before the statutory
deadline before the end of June 2008.
Committee Date: 26/06/08
Version (final)
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2007/08 Outturn Position Statement (subject to audit)
Risk Implications
53. The outturn position identified in this report is subject to external audit.
Should any changes arise from audit these will be reported back to
Members when the audited accounts are approved.
Options to Consider
54. No options have been identified.
Recommendations
55. Members are asked to recommend to General Purposes Committee: a. The final outturn position of the Council for 2007/08;
b. The £0.193m net revenue underspend be taken to the General
Reserve;
c. That the surplus of £0.768m on the Housing Revenue Account
(HRA) be taken to HRA reserves;
d. The financing of the capital programme for 2007/08 as described
in paragraph 43 of this report;
e. That the 2008/09 Capital Programme be reviewed in light of the
outturn figures for 2007/08 and the resources now available;
f. The contribution to specific earmarked reserves as set
paragraphs 23 to 36.
Reasons for Recommendations
56. A decision on the final outturn, use of reserves and financing of the
capital programme is required in order that the General Purposes
Committee can approve the 2007/08 unaudited Statement of Accounts
by 30th June 2008.
Committee Date: 26/06/08
Version (final)
Page 10
Background papers background papers background papers
2007/08 Outturn Position Statement
The following is a list of the background papers (excluding
exempt papers) relied upon in the preparation of the above
report:
Background Paper
File Ref:
Final accounts working
Files 1-6
papers
Contact Officer:
File Location
Finance Policy Officer
Eric Fisher – Head of Finance – tel. 424 7030
background papers background papers background papers