AGENDA ITEM NO. 13
CABINET
16th SEPTEMBER 2014
INITIAL FINANCIAL FORECAST 2014/15
Report Submitted by:
Report Written by:
David Lilly, Head of Financial Services
David Lilly, Head of Financial Services, and
Dave Weaver, Group Finance Officer – Service.
1.
Area Affected
1.1
County Borough Wide.
2.
Purpose of Report
2.1
To outline the initial financial forecast for the 2014/15 revenue and capital budgets
and provide an update on the estimated reserves position.
3.
Key Messages
3.1
This early forecast indicates a net revenue budget overspend of £1.36 million. It
should be noted that this is the forecast position as at the end of July 2014, which is
early in the financial year and therefore the position is likely to change as work
continues by Service Area Management Teams to bring any adverse projections
back in line with approved budgets. The principal areas of concern at this time are
the Social Care and Housing service which is currently forecasting a £1.3million
variance and the delays in implementing the agreed mitigations in respect of third
party procurement (non-employee spend) which is currently forecasting a £591,000
shortfall. All other service areas are either broadly in line with their budgets, showing
marginal overspend positions which can be managed or showing a positive forecast
position.
3.2
Assumptions have been made regarding the achievement of the savings measures,
with most measures having been, or are in the process of being, implemented. In
circumstances where savings have not been achieved alternative measures have
been identified.
3.3
In relation to the Capital budget, this is currently forecasting a full spend against
budget.
3.4
The forecast reserves position is in line with the assumptions included within the
budget setting process. Given the expected severe funding reductions, it is important
that the reserves position is maintained and in year budget allocations are adhered
to.
4.
Background
4.1
Budgets are monitored on a monthly basis and the reporting of the budget
monitoring information is part of management arrangements across the Council. Its
purpose is to raise issues which need management action and does not necessarily
reflect the expected final position at the year end.
4.2
This forecast position is an important point in our financial calendar as it provides an
early indication of our potential year end position, and it allows, where necessary,
measured corrective actions to be implemented by Service Area Management
Teams.
4.3
This report outlines the initial forecast position for 2014/15 utilising the July 2014
financial projections as their base. It summarises returns from individual budget
holders in all Service Areas, with budget holders being asked when preparing their
returns to take account of last years outturn, actual income and expenditure for the
year to date and, most importantly, their knowledge of commitments and income
trends anticipated for the remainder of this financial year.
5.
Revenue Forecast 2014/15
5.1
The forecast position for 2014/15 is summarised in the following table:
Working
Budget
Education Services
Social Care and Housing
Neighbourhood Services
Planning and Public Protection
PSSU
SRS
Resources
Community Services
Strategic Services
Capital Financing
Other
Total
£000s
66,630
41,759
17,961
2,282
853
3,342
14,237
2,224
4,237
11,552
3,814
168,891
Full Year
Forecast
£000s
66,610
43,071
17,979
2,285
839
3,282
13,937
2,351
4,208
11,483
4,210
170,255
Full Year
Variance
(Favourable)/
Adverse
£000s
(20)
1,312
18
3
(14)
(60)
(300)
127
(29)
(69)
396
1,364
5.2
At a whole authority level the forecast position highlights an overall overspend
projection of £1.36 million – members should note that this is only a forecast position
i.e. it has not occurred. The above figures do not include any assessment / impact
for the effects of the welfare reforms on council tax collection at this point in the year.
5.3
A brief summary of each service area is outlined in the following paragraphs:-
5.3.1
Education – £20,000 favourable projection
This favourable projection has primarily arisen primarily following the completion of a
review of Special Educational Needs (SEN) 6th form funding which has identified a
lower than anticipated number of post 16 SEN placements. This favourable situation
has been partly offset by additional costs in respect of additional SEN Out of County
placements and transport costs in respect of Welsh, SEN and Church schools and
the Pupil Referral Unit, being higher than budgeted.
5.3.2
Social Care and Housing - £1.3 million adverse projection
The main areas contributing to this position are as follows:
 Childrens Services - Adverse projection £857,400
As part of the Service Area setting its 2014/15 budget the Services’ Leadership
Team put forward a set of cost estimates and savings proposals which ultimately
set the Childrens’ Services base 2014/15 budget at a level broadly equivalent to
the actual spend in 2013/14; this had not been the scenario in previous years in
that budgets were below the previous years spend. The current 2014/15 forecast
variance relates primarily to an increase in the number of external placements of
children (particularly those in secure accommodation) over the level budgeted,
and the non achievement of some of the savings measures – most notably in
relation to demand management.
 Adult Services - Adverse projection £346,400
There are a number of over and underspends across the division but the key
feature of this projection relates to the forecast non-achievement of savings
measures relating to the capping of care packages and demand management.

Housing and Business Support - Adverse projection £98,300
The underlying cause of this variance is the assumed non-achievement of
several savings measures, together with pressure on the income target for
private lettings associated with the provision of temporary accommodation.
As outlined the progress on delivering the approved £3.1million budgeted savings
has not been as expected, with some £1.4million being classed as high / medium
risk at this forecast position. The service has however found alternative savings
totaling £371,000 to date which will reduce these risk areas to circa £1 million.
The service leadership team is currently reviewing all the projections, case load
assumptions and approved saving measures in order to identify and implement
activities to address the overall projection. If the service is unable to reverse this
forecast pressure then the service has unallocated service specific reserves of some
£309,000 to draw upon, and a further £285,000 of specific reserves earmarked for
projects, which ultimately could be used to support this adverse position.
5.3.3
Neighbourhood Services - £19,000 adverse projection
This small adverse variance can largely be attributed to the late notification of a
reduction in the Sustainable Waste Management Grant, which is being partly offset
by lower than anticipated costs in respect of the residual waste disposal contract. To
remove the forecast pressure all projections are being reviewed.
5.3.4
Planning and Public Protection - £3,000 adverse projection
The key reason for this pressure relates to lower than anticipated income levels in
planning and building control. To mitigate this forecast the service is reviewing all
income projections and restricting non-essential spend.
5.3.5
PSSU – £14,000 favourable projection
This positive position has largely arisen due to staff turnover and the unexpected
continuation of the IDVA grant into 2014/15.
5.3.6
SRS - £60,000 favourable projection
This service is forecasting a favourable position in respect of the corporate telephony
infrastructure service. The forecast information received from Monmouthshire
Council indicates that the core SRS service will achieve a balance budget position in
2014/15.
5.3.7
Resources - £300,000 favourable projection
This forecast is largely associated with lower than budgeted demand for
Discretionary Housing Payments, lower than budgeted take up of the Council Tax
Reduction scheme, and staffing reductions.
5.3.8
Community Services – £127,000 adverse projection
The service area is experiencing a number of pressures across several budget
heads. The largest pressures relate a delay in transferring the Woodlands Road
Community Centre to the new management organisation, and a reduction in the
grant award allocation from Coleg Gwent in respect of adult education courses. The
service is reviewing all budget heads with a view to reducing the forecast net costs
elsewhere, but ultimately should this not be possible it does have an unallocated
service specific balance of £89,000 to utilise.
5.3.9
Deputy Chief Executive Services - £29,000 favourable projection
This position has occurred due a number of staffing changes across a number of
budget heads, and a reduction in the members’ allowances, offset by a reduction in
the level of income being derived from the Registrars service.
5.3.10 Capital Financing - £70,000 favourable projection
This area is currently forecasting a favourable projection as a result of the lower than
anticipated capital programme spend last financial year, which has led to a lower
debt repayment requirement.
5.3.11 Other – £396,000 adverse projection
This budget heading accommodates costs that do not fit into our main service areas.
The projection relates primarily to:
 The current non-achievement of the 3rd party budget saving which is creating
a pressure of £591,000;
 A non-required budget for TLT past service pensions producing a positive
position;
 A favourable forecast in respect of external audit fees, in the main arising from
a one off redistribution of reserves from the Wales Audit Office.
5.4
It should be noted that in addition to the above forecasts, any projected savings
arising from any strike activities within services will be collected centrally and be
used to supplement the General Fund Balance, to assist in providing further financial
resilience.
5.5
In setting the 2014/15 budget, specific mitigation measures of £7.1 million were
identified and to ensure their delivery, and ultimately that of a balanced out-turn
position, each service area has in place a savings list with responsible officers and
delivery dates. Saving proposals will continue to be closely monitored by service
management teams over the forthcoming months to ensure their achievement or the
identification of alternative achievable savings. The following table provides an
overview of progress of achieving the delivery of the agreed saving proposals.
Education Services
Social Care & Housing
Neighbourhoods
Planning & Public Protection
PSSU
SRS
Resources
Community Services
Strategic Services
Service mitigations
Procurement
WithDrawn
£000s
0
140
0
0
0
0
0
0
0
140
High
risk
£000s
0
535
0
0
0
0
0
0
0
535
Medium
risk
£000s
60
620
325
0
0
0
0
0
15
1,020
Low
risk
£000s
0
807
451
50
0
0
20
142
28
1,498
Achieved
Total
£000s
1,054
469
782
50
57
153
535
208
77
3,385
£000s
1,114
2,571
1,558
100
57
153
555
350
120
6,578
Alternative
£000s
0
529
0
0
0
18
0
7
3
557
0
591
0
0
9
600
0
5.6
The high risk category saving measures relate to the following:
 Social Care & Housing - £535,000. These high risk areas relate primarily to
the approved savings measures in respect of demand management and care
capping across all sectors of the service area. However, the service area is
continuing to challenge current practices to mitigate this pressure.
 Procurement - £591,000. This relates to the current non progression of the
review of 3rd party / ‘non-employee’ spend.
6.
Use of Reserves
6.1
Financial reserves have an important role to play in the overall management of the
Council, not only in covering unexpected financial pressures that cannot be mitigated
by Service Area Management Teams, but also in providing support to allow the
Council to consider different approaches to service delivery.
6.2
As part of the Financial Results 2013/14 and Financial Standing report of June 2014,
the Cabinet re-approved the Authority’s reserve policy and agreed that approvals of
usage or an amendment to the proposed usage from all reserves should continue to
be within the remit of the Executive Member for Resources based upon consultation
with and advice from the Statutory Finance Officer.
6.3
In relation to the anticipated reserve usage the following table provides a snap shot
of the reserves position as at July 2014.
All £000s
General Fund Balance
School Balances (before capital loans)
Service Area Balances
Corporate Reserves
31 March
2013
(Actual)
5,645
2,659
4,776
6,276
31 March
2014
(Actual)
5,523
2,391
5,032
5,344
31 March
2015
(Estimate)
4,142
2,145
2,337
4,904
6.4
The General Fund balance is expected to reduce to £4.1million at the end of 2014/15
due to the assumptions underpinning the 2014/15 revenue budget and specific
approvals, although efforts will be made to bolster this position should the
opportunities arise.
6.5
In relation to schools balances the consolidated forecast indicates that the gross
overall level remains at circa 4% of school funding. The Education team continues to
support schools in their medium term financial planning to allocate contingency funds
appropriately and in support of schools’ strategic plans.
6.6
The following tables provide forecasts of the service area balances and corporate
reserves incorporating any known commitments, but as noted above they do not
include any potential changes relating to the above revenue projections or any
alterations to assumptions surrounding council tax collection.
Service Area Balances - All £000s
Social Care & Housing
Education
Strategic Services
PSSU
ICT reserve
Community Services
Neighbourhood Services
Planning & Public Protection
Resources
Total Service Area Balances
Corporate Reserves - All £000s
Insurance
Welfare
Invest to save
Innovation
Corporate Redundancies / Profile
Corporate Accommodation
Corporate Demolition
Risk Management
iLearn Wales Project
Total Corporate Reserves
31 March
2013
(Actual)
1,262
1,041
397
200
372
256
843
143
262
4,776
31 March
2014
(Actual)
1,160
1,476
369
200
403
288
855
64
217
5,032
31 March
2015
(Estimate)
856
64
297
200
121
89
521
52
137
2,337
31 March
2013
(Actual)
1,922
0
1,001
350
1,156
85
1,136
464
162
6,276
31 March
2014
(Actual)
1,504
200
926
350
1,035
91
621
506
111
5,344
31 March
2015
(Estimate)
1,219
200
917
350
980
0
621
506
111
4,904
7.
Capital
7.1
In a similar process to the revenue budget all service areas have reviewed their
approved programmes and all have indicated that all capital projects will be delivered
within the revised estimates. The forecast in respect of the capital programme is
summarised as follows:
Capital Expenditure by Service
Education
Social Care & Housing
Neighbourhood Services
Corporate
Total General Fund
2014/15
Original
Estimate
£000s
7,589
1,743
4,856
1,948
16,136
2014/15
Revised
Estimate
£000s
3,034
2,540
7,399
2,131
15,104
2014/15
Full Year
Forecast
£000s
3,034
2,540
7,399
2,131
15,104
2014/15
Forecast
Variance
£000s
0
0
0
0
0
7.2
The original programme has changed due to the:
 The re-profiling of the 21st Century schools programme in respect of the delayed
Welsh Government approval to progress the programme. Welsh Government
have recently awarded the £10.25million grant in respect of the delivery of the
initial three Primary schools funded by this resource (total £20.5million). It is
anticipated that the three buildings will be completed prior to September 2016.
 Neighbourhood Services’ budget has increased due to slippage from 2013/14 in
respect of Asset Management works and Highways projects, together with the
receipt of additional grant monies for Safe Routes in the Communities and the
annual Local Transport Fund allocation.
 Social Care and Housing’s budget has increased due to slippage on the ECO
project from 2013/14.
8.
Conclusions
8.1
The Council and all services must maintain financial discipline and adhere to agreed
budgets during the 2014/15 financial year as failure to do so will simply increase the
service and financial pressures going forward into the medium term.
8.2
It is important that our financial disciplines are adhered to and that our overall
financial standing is maintained to at least a constant. This discipline will provide
some resilience to enable multi-year solutions to meet the continued challenges of
the anticipated severely restricted financial settlements from the Welsh Government.
9.
Recommendation(s)
9.1
It is recommended that:(i) The forecast position in respect of each service area and the actions being
taken by service Chief Officers to address their adverse variances are noted;
(ii) Specific approvals relating to the use, or amendment, of service specific
reserves are actioned by the Executive Member for Resources in accordance
with normal practice.
Appendices
None
Background Papers
Budget 2014/15 - Council March 2014
For a copy of the background papers or for further information about this report,
please telephone:
David Lilly, Head of Financial Services, 01495 742624