Cabinet
05 September 2011
Overview and Scrutiny
20 September 2011
Agenda Item No______8_______
BUDGET MONITORING 2011/12 – PERIOD 4
Summary:
This report presents the budget monitoring position for the revenue
account and capital programme to the end of period 4 (31 July 2011)
and also includes a review of the current capital programme.
Conclusions:
The overall position at the end of July 2011 is showing an underspend
for the current financial year. The overall financial position will be
considered in further detail over the coming months as work on the
future budgets and funding the grant cuts is undertaken.
Recommendations:
It is recommended that:
1) Cabinet note the contents of the report and the revenue account
forecast for the current financial year;
2) That Cabinet note the current position on the 2011/12 capital
programme and approve the amendments in relation to the
amalgamation of a number of capital budgets and the removal of 2
schemes as detailed within section 7 of the report.
Cabinet member(s):
Ward(s) affected:
All
All
Duncan Ellis, Acting Financial Services Manager, 01263
516330, Duncan.Ellis@north-norfolk.gov.uk
Contact Officer, telephone number,
and e-mail:
1.
Introduction
1.1
This is the first budget monitoring report to Members for the current financial year
2011/12 and compares the actual expenditure and income position at the end of July
2011 to the base budget as set by Full Council in February 2011.
1.2
The outturn report for 2010/11 was reported to Members in June and detailed a number
of underspends and grants which had not been fully utilised in the year which were
carried forward in a number of earmarked reserves. Where applicable the base budget
for 2011/12 has been updated to take account of the revised spend profile.
1.3
The base budget for 2011/12 includes savings of £558,268 and additional income of
£578,188 totalling £1,136,456 and this report includes the latest position on both of
these areas.
1.4
An updated capital programme for 2011/12 was approved as part of reporting the outturn
position for 2010/11, this report also includes the latest monitoring position on the capital
programme and also starts to highlight any scheme alterations and updates.
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2.
Background
2.1
Budget monitoring is carried out monthly with service managers and officers with budget
responsibility. The detail within this report highlights the more significant variances
against the profiled budget to date along with those which are expected to have a year
end variance and also where applicable to recommend action to be taken to ensure that
the overall budget remains achievable.
2.2
The Service Accountants have been working with the Budget Managers to investigate
any budget variances identified during the first 4 months of the new financial year.
Where significant variances are identified further work is undertaken to try and identify if
the variance will result in a full year impact ie whether the variance may result in an
over/underspend at the end of the year and, in the case of an overspend, what can be
done to mitigate this.
2.3
Work will continue over the coming months to monitor the budget position and identify
further savings that can be fed into both the Revised budget for 2011/12 and also into
the Base budget projections for 2012/13.
2.4
Currently there are a number of consultations from Central Government which have the
potential to impact on local government finance:
•
•
•
The Local Government Resource Review - launched on 18 July 2011 closes on
24 October 2011 and covers proposals for the localisation of Business Rates. A
set of eight technical papers are yet to be published that will inform this
consultation.
Council Tax Benefit – consultation runs until 14 October 2011 dealing with
localising support for Council Tax in England
Housing Benefit Reform – Supported Housing - consultation launched on 19 July
2011 and closing on 19 October 2011 addresses the issues of effective help to
people with specialist housing need
Following these consultations there are varying timescales for the resultant changes to
be implemented. Initial work has begun in all these areas and Members will be kept
informed of progress. However, little work can yet be done on the financial impact for the
Council although these need to be assessed at the earliest possibility because they all
impact on the medium term planning timescale.
2.5
The 2010/11 Outturn report was presented to Cabinet on 6 June 2011 and identified a
number of underspends. Any of these underspends which are anticipated to continue
during 2011/12 have been identified within this report, along with their anticipated full
year effect.
3.
Budget Monitoring Position – Revenue Services
3.1
The general fund summary (Appendix A) shows the high level position at the end of
period 4 and is currently showing a year to date variance of £170,096. The Council
introduced a new policy earlier this year to improve the commitment accounting through
the financial system whereby payments would not be made unless they were
accompanied by a purchase order (except for some specific types of payments which
were excluded from this requirement). This does however cause an issue with the
budget monitoring report as the current commitments are showing as £4,499,516 but
these are full year commitments (as there is no method of profiling these on the financial
system) and include committed expenditure but do not include income due during the
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05 September 2011
Overview and Scrutiny
20 September 2011
year, the focus of the report is therefore on the Year to Date (YTD) variance. Further
details on each of the service areas are included within Appendix B.
3.2
The main variances in relation to commitments are in connection with contract
payments, for example, within Environment there is a commitment showing for contract
costs of £2.3m against a full year budget of £1.5m but this is due to the fact that the
commitment represents the contract costs for the entire year and the £1.5m is the net
cost of the service so there is still 8 months of income to be collected in relation to this
service area which accounts in the main for the difference.
3.3
The following tables provide details for each of the service areas, the more significant
variances along with those which are anticipated to have a full year effect.
Community
Development Management – Although
compared to the same period last year the
number of planning applications received has
decreased slightly, a number of large fee
applications has meant that income is up
(£4,545) against the profiled budget. Income
generated from the discharge of planning
conditions has also increased and is currently
(£12,047) above the profiled budget. It has been
agreed by CMT that this additional income will
be used to fund a one year planning student
placement, and therefore no full year effect is
anticipated.
Over/(Under)
spending to
date
£
(19,222)
Estimated
full year
effect
Performance
Indicator at
Period 4
where
applicable
£
0 531
applications
have been
received to P4
in the current
year compared
with 551 for
the same
period in
2010/11
Strategic Housing – The variance to date
relates to rolled forward provisions for old HRA
electricity accounts which have not as yet been
offset by expenditure (£22,861) and slightly
lower than anticipated R&M costs (£3,332). A
(£3,999) income contribution has also been
received from the Rough Sleeper fund. A full
year effect is anticipated in relation to the
electricity provisions, although some of this may
be required to fund water charges.
(25,243)
(20,000)
Transport – There is currently an underspend
being reported in relation to this service area,
however a 2010/11 invoice is still awaited for
£37,070 relating to adjustments to quarter 3 and
4 payments to bus operators. No full year effect
is expected.
(37,113)
0
Sub Total Community
(81,578)
(20,000)
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20 September 2011
Environment
Over/(Under)
spending to
date
£
Estimated
full year
effect
Performance
Indicator at
Period 4
where
applicable
4,069
£
(10,000)
Sports Centres – The variance in relation to
this service area relates mainly to an invoice for
the hire of Stalham Sports Hall for £24,787
which has not yet been received. No full year
effect is expected in relation to this.
(24,324)
0
Dual use and
sports hall
usage April to
June Actual
176,410,
Target
167,685
Waste Collection and Disposal – The overall
position at the end of period 4 shows an
overspend, however the majority of this £72,532
relates to the receipt of recycling credits which,
due to an audit at NEWS and an admin delay
with Norfolk County Council, are not now
expected until the end of August. Prescribed fee
income is also down by £13,210 against the
profiled budget to date but it is anticipated that
this shortfall can be made up over the year and
therefore no full year is anticipated.
95,517
0
Recycling rate
for all
recyclables
45.87% (based
on estimates
for disposal),
target 47.5%.
(20,345)
(18,000)
54,917
(28,000)
Licensing – there is a minor overspend showing
at present within licensing, £7,280 relates to fee
income being lower than anticipated at this
stage in the year although approximately
£16,000 of income has been invoiced within the
last 2 weeks so no full year effect is expected in
relation to this. There is also an underspend
showing of (£3,203) in relation to taxi test
recharges, this reduced cost is expected to
continue during the year and at present a full
year saving of (£10,000) is expected.
Civil Contingencies – The variance on this
budget relates to the vacant post for the Civil
Contingency Manager. Interviews are currently
being held and an appointment is expected
shortly. There is a full year effect of £18,000
anticipated at present.
Sub Total Environment
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20 September 2011
Information
IT – Support Services – the underspend
currently showing relates mainly to an invoice
that is in dispute dating back to 2010/11
(£7,536), lower than anticipated charges on
telephone rentals and calls to date (£11,390).
No full year effects are anticipated at the current
time but the telephone budgets will be reviewed
as part of the revised budget process.
Over/(Under)
spending to
date
£
(27,836)
Estimated
full year
effect
£
0
Election Services –The current overspending
represents the payments to election officers
which are to be recovered from the returning
officer together with an outstanding balance due
from Central Government (£14k) relating to the
May 2010 General Election.
57,661
0
Customer Services, Corporate – The reason
for the underspend to date is due partly to lower
than anticipated salaries and oncosts (£5,270),
additional postage recharges (£6,549) and other
minor variances. At present no full year effects
have been anticipated.
(20,429)
0
9,396
0
Over/(Under)
spending to
date
Estimated
full year
effect
Sub Total – Information
Resources
Local Taxation – The variance to date includes
one-off restructuring that are to be funded from
the restructuring reserve and an overspend in
relation to postage costs. There is not
anticipated to be any full year effect at this
stage.
Benefits – The variance to date reflects £48,000
of additional Benefits software costs relating to
the Atlas project but this is due to be fully funded
by a grant from the Department of Works and
Pensions. There is also a variance of £5,693 in
relation to the write off of bad debts which is not
budgeted for at service level. Neither of these
items are expected to have any full year effects.
£
32,875
55,261
Performance
Indicator at
Period 4
where
applicable
£
0
0
Performance
Indicator at
Period 4
where
applicable
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Pathfinder – It was originally anticipated that
the Pathfinder scheme was to have been
completed by 31 March 2011. This is not now
the case and the unspent grant monies from
previous years will be used to fund the ongoing
expenditure and as such there is no full year
effect expected.
Corporate and Democratic Core – The
majority of this variance to date (£96,500)
reflects the creditor provision for audit fees
charged to 2010/11.
Sub Total Resources
34,149
0
(102,330)
0
19,955
0
4.
Budget Monitoring Position – Savings and additional income 2011/12
4.1
As part of the budget setting process for 2011/12 a number of savings and additional
income streams were identified and recommended for approval within the report
presented to Cabinet on 14 February 2011. The following table provides details of the
amounts included within the 2011/12 base budget along with an updated forecast for the
current year.
Table 1 – 2011/12 Savings and Additional Income
Service Area
2011/12
2011/12 Variance
Base
Updated
Budget
Forecast
£
£
£
Planning and Building Control
35,707
35,707
0
Conservation and Design
10,000
10,000
0
Land Charges
8,587
8,587
0
Regeneration Management
4,000
4,000
0
Housing Service
21,337
21,337
0
Environmental Health
8,400
8,400
0
Sports Centre
10,115
10,115
0
Media and Communications
47,240
47,240
0
Legal Services
55,000
55,000
0
Customer Services
10,544
10,544
0
Car Parking Management
40,000
40,000
0
Revenues and Benefits
77,254
77,254
0
Organisational Development
56,284
56,284
0
Financial Services and Internal Audit
68,800
68,800
0
Partnership and Community Engagement
105,000
105,000
0
Sub Total Savings
558,268
558,268
0
Additional Income/Grant:
Planning Fee Increase
50,000
50,000
0
New Homes Bonus
350,000
350,000
0
Homelessness Prevention Grant
120,470
120,470
0
Leisure Facilities Income
37,718
37,718
0
Car Parking
20,000
20,000
0
Sub Total Additional Income/Grant
578,188
578,188
0
Total Savings/ Income
1,136,456 1,136,456
0
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(Note – All savings are shown gross. Any one off redundancy or severance costs
associated with delivering these savings will be met as one off costs from the
restructuring earmarked reserve).
4.2
A number of the savings are being achieved in the year from service restructurings for
which one off costs are being funded from the restructuring earmarked reserve which
was established for such purposes. Business cases are being produced for service
restructurings which are then signed off by Corporate Management Team, the Leader
and the Cabinet Member with responsibility for Organisational Development.
4.3
The balance in the restructuring reserve at the beginning of the financial year was
£340,000, as restructurings have taken place in the year to date one-off costs have been
funded from this reserve. The level of the reserve is being monitored along with all
reserves, going forward the available balance in this reserve will need to be considered
as part of the medium term financial planning process to ensure that one-off funding is
available to be used to create capacity through restructuring opportunities.
4.4
As part of the 2010/11 period 4 budget monitoring report presented to Cabinet on 6
September 2010, approval was sought and granted for delegated authority to be given to
the group signing off the business cases (as referred to at 4.2) to release funding from
the restructuring reserve to fund the one off costs associated with restructuring, thereby
strengthening the linkages between the decision making on business cases and the
associated resources.
5.
Budget Monitoring Position – Non Service Expenditure and Income
5.1
Treasury Management in Local Government is governed by the CIPFA Code of Practice
on Treasury Management which recommends that Members should be informed of
Treasury Management activities at least twice a year, but preferably quarterly. Regular
treasury reports in accordance with the requirements of the Code are presented to
members as part of the budget monitoring reports, and this report summarises the
investment transactions which have taken place in the four months to July 2011.
5.2
Inflation, as measured by the Consumer Price Index (CPI), rose to 4.4% year-on-year to
July 2011. The Bank of England in its August Inflation Report attributed this rise to
increases in energy and import prices, and the increase in the standard rate of VAT. The
bank considers it likely that inflation will rise further, possibly to 5% following further gas
and electricity price increases, before falling back from around the end of this calendar
year, although remaining above the 2% target for at least another year.
5.3
The outlook for economic growth is weaker than the Bank projected in the last quarterly
report and remains highly uncertain. Growth is likely to remain sluggish in the near term
reflecting the continuing squeeze on household incomes, before gently picking up as
business investment improves, the economy gradually rebalances from the service
industries to manufacturing and the squeeze on household incomes abates. It has
reduced its forecast for Gross Domestic Product (GDP) in 2011 from 1.9% to 1.7%, and
for 2012 from 2.5% to 2.1%.
5.4
The Bank has declined to make a commitment to holding interest rates, currently at
0.5%, for a set time period (the US Federal Reserve has frozen short-term interest rates
for two years). The bank did not feel it had to make a specific commitment as current
market expectations of the bank rate in 2012 are very close to where it is now.
Table 1 below sets out key economic indicators relevant to treasury activities to the end
of period 9 (where available).
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Overview and Scrutiny
20 September 2011
Table 1
2011
Indicator
March
June
0.5%
0.5%
- Consumer Price Index
4.0%
4.2%
- Retail Prices Index
5.3%
5.0%
% change on
corresponding quarter
previous year
1.8%
0.7%
% change on previous
quarter
0.5%
0.2%
Public Sector Finances
Quarter 1
Quarter 2
Public Sector Net
Borrowing
£23.9bn
£39.2bn
Public Sector Net Debt
£905.3bn
£944.3bn
Net debt as a % of GDP
60.2%
61.9%
Nov - Jan
Feb - Apr
- Number (000s)
2,518
2,430
- Rate
7.9%
7.7%
184
191
6.1%
6.3%
Bank Base Rate
Inflation
Gross Domestic Product
Growth (GDP)
Unemployment
National
Eastern Region
- Number (000s)
- Rate
5.5
Security of the capital sum remains the Council’s main investment objective. This was
achieved by following the Council’s investment counterparty policy set out in its Treasury
Management Strategy Statement for 2011/12 and advice from the Council’s treasury
advisor, Arlingclose.
5.6
Financial markets are extremely nervous at the moment and are suffering from extreme
changes in sentiment. The stresses are most extreme in Europe where the lack of real
progress in resolving the sovereign indebtedness problem is affecting even the stronger
economies of the euro zone such as France. Arlingclose consider that the markets are
not being driven by fundamental economic data, but rather by fear. They cannot ignore
this extreme tension and negative sentiment driving the markets however and in
response have suggested that a prudent response would be to reduce maturity limits for
new investments.
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5.7
The Council will adhere to their advice and the following maturity limits are now being
applied to counterparties on the approved list.
5.8
•
UK banks and building society – maximum maturity limit 6 months with exception of
Santander UK plc which is limited to 3 months and Clydesdale Bank which is 1
week.
•
Australian, Canadian and US banks – maximum maturity limit 6 months.
•
European banks – maximum maturity limit 1 month (Société Generale has been
temporarily suspended from Arlingclose’s approved counterparty list).
Table 2 below sets out the investment activity for the quarter.
Table 2
a)
Banks &
Building
Societies
c)
Money
Market Funds
d)
Bonds
Balance
Investments
Investments
Balance
Increase/
31/03/2011
Made
Repaid
31/07/2011
(Decrease)
£000s
£000s
£000s
£000s
£000s
14,695
12,305
(10,000)
17,000
2,305
395
34,890
(34,705)
580
185
6,500
0
0
6,500
0
21,590
47,195
(44,705)
24,080
2,490
5.9
The 2011/12 budget anticipates that £550,000 will be earned in interest. Surplus
balances available for investment are anticipated to average £22.8m at an interest rate
of 2.42%.
5.10
In the first 4 months of the financial year the average amount invested was £25.5m at an
average rate of interest of 1.94% resulting in an overall interest earned figure of
£166,631. This is £29,243 below the budget position at the end of period 4. The rate
achieved on investments is lower than anticipated but this has been offset by higher
balances available for investment. It is anticipated at this stage that additional interest
earned on higher investment balances will be offset by the reduced rate of interest which
the Council can achieve on its investments, and no shortfall of interest against the
budget is currently anticipated at the year end.
5.11
During the quarter the opportunity was taken to make two long-term investments to
protect the Council against the possibility of interest rates remaining low for an extended
period. A two year investment was made with Lloyds Bank plc at a rate of 2.65% on the
18 April, and a fifteen month investment was made with the Bank of Scotland at the
same rate on the 6 May.
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5.12
The Council can confirm that it complied with its Prudential Indicators for 2011/12 which
had been set at Full Council on 14 February 2011. Details of individual indicators are
set out in Appendix C.
6.
Budget Monitoring Position – Summary
6.1
The following table provides a summary of the full year projections for the four service
areas along with an updated use of reserves figure, this would allow for a contribution to
be made to the general reserve at the end of the year.
Service Area
Community
Estimated Full Year
Effect
£
(20,000)
Environment
(28,000)
Information
0
Resources
0
Service Variance Total
(48,000)
Contributions to/(from) Reserves:
General Fund Reserve
Other Reserves
Non Service Expenditure ,and Income
Total Impact
0
0
0
(48,000)
6.3
Overall the revenue position shows a projected underspend of £48,000. This position
will continue to be monitored and this report will inform the financial planning and budget
process.
7.
Budget Monitoring Position – Capital and Prudential Indicators
7.1
Members were provided with an updated capital programme for both current and future
years as part of the 2010/11 final accounts report in June 2011. Appendix D shows the
latest position for the updated programme, both for General Fund and the Coast
Protection, and provides details of spend up to period 4. The latest position on the
prudential indicators are included within Appendix C, these have been updated for the
2010/11 final accounts position where applicable.
7.2
The following commentary provides an update on non housing schemes;
a) Car Park Ticket Machines – there are currently 2 separate budgets for car park ticket
machines, phase 1 has a remaining balance of £16,768 while phase 2 is currently
showing an overspend of £9,174. It is recommended that these 2 budgets are
amalgamated into 1 single budget. This will leave a remaining budget of £7,594.
b) Similarly it is recommended that the budgets for phases 1 and 2 of the Car Park
Environmental Improvements (remaining budgets of £38,645 and £52,000 respectively)
along with the remaining budget for the Cliff Top Car Park Fencing scheme of £6,386
are combined to give an updated budget of £97,031 for Car Park Environmental
Improvements.
c) There are 2 schemes where the budgets are no longer required, these include the
budget for the purchase of new Beach Huts (remaining budget of £7,657) which was
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completed during 2010/11 and the Remote Access project (remaining budget of £9,930)
which again was completed in the previous financial year. It is therefore recommended
that these schemes are removed from the capital programme.
7.3
The Housing Renovation and Disabled Facilities Grants schemes are progressing, but,
as with the budget available for Strategic Housing and Choice Based Lettings System,
they will all be subject to Member decisions, based on the Housing Strategy document
which is to be approved by Cabinet, and will be reviewed as part of the Revised budget
process.
7.4
Coast protection and coastal pathfinder projects are progressing. Updates on the
progress of the pathfinder capital projects are being reported to the Coastal
Management Board.
7.5
Capital Receipts - The updated capital programme for 2011/12 assumes that new
capital receipts of £85,000 will be generated in the year from the disposal of the public
convenience on the East Promenade in Sheringham. This disposal has now been
completed and the Council achieved a capital receipt of £104,000 in relation to the
disposal which is £19,000 higher than the original estimate. In addition the housing
capital programme assumes capital receipts of £130,000 from preserved right to buys.
Two right to buys have been completed in the current year so the forecast budget has
already been achieved and so the position will be reviewed, in consultation with the
Victory Housing Trust, as part of the revised budget process. The position as regards
capital receipts and financing requirements will continue to be monitored through the
year to ensure that the current capital programme remains affordable.
8.
Implications to the Council
8.1
The overall budget continues to be closely monitored at service level on a monthly basis
and to Members on a quarterly basis. By the end of September the audit of the 2010/11
accounts will have been completed and reported to the Audit Committee. Over the
coming months detailed work will be carried out by Officers and Members of Cabinet on
the future funding shortfall facing the authority over the coming years. The current
financial position of the Council will be used to inform the revised estimate position for
the current year and also the Medium Term Financial Strategy.
8.2
The detail within section 3 of the report outlines the significant variances against the
profiled budget to the end of period 4 and also those anticipated to have a variance at
the year end. Overall the total of the projected service variances at the year end is an
underspend of £48,000. Therefore the current forecast for the year assumes that the
revised budget remains achievable.
9.
Recommendations
9.1
It is recommended that:
1) Cabinet note the contents of the report and the revenue account forecast for the
current financial year;
2) That Cabinet note the current position on the 2011/12 capital programme and approve
the amendments in relation to the amalgamation of a number of capital budgets and the
removal of 2 schemes as detailed within section 7 of the report.