PART 1
(OPEN TO THE PUBLIC)
ITEM NO.
REPORT OF THE STRATEGIC DIRECTOR OF CUSTOMER AND SUPPORT SERVICES
TO THE BUDGET SCRUTINY COMMITTEE ON WEDNESDAY, 7th JUNE 2006
TITLE: REVENUE BUDGET 2006/07: BUDGET MONITORING
RECOMMENDATION: Members are invited to comment on the contents of the report and to
request the Strategic Director of Children’s Services to report back to the next meeting on
plans to contain expenditure on outside placements for children in care within the
directorate’s budget allocation.
EXECUTIVE SUMMARY: The report provides details of the current position relating to
budget monitoring for the revenue budget and the implementation of the agreed revenue
budget savings for 2006 -2007.
BACKGROUND DOCUMENTS: Various working papers and reports. (Available for public
inspection)
CONTACT OFFICERS:
Chris Hesketh Tel. 793 2668 chris.hesketh@salford.gov.uk
Colin Kay Tel. 793 3245 colin.kay@salford.gov.uk
ASSESSMENT OF RISK: Key budgetary control risks will be identified in reports to this
committee in July and September 2006.
SOURCE OF FUNDING: Revenue Resources
LEGAL ADVICE OBTAINED: Not applicable
FINANCIAL ADVICE OBTAINED: This report concerns key aspects of the Council’s revenue
finances and has been produced by the Finance Division of Customer and Support Services.
WARD(S) TO WHICH REPORT RELATE(S):
None specifically
KEY COUNCIL POLICIES: 2006/07 Revenue Budget
Report Detail
1
Introduction
1.1
In accordance with the ‘White Paper’ “Strong Local Leadership – Quality Public
Services”, revised Accounts and Audit Regulations came into force on the 1st April
2003. These regulations amongst other things brought in the requirement to phase in
the earlier signing, approval and publication of the statement of accounts. The phasing
in process ended last year and for the current year and all future years the accounts
need to be completed and approved by the Accounts Committee by the 30th June.
1.2
To try to ensure the revised regulations are adhered to an internal final accounts
closure programme has been prepared which incorporates a target completion date of
the 16th June 2006.
1.3
Budget monitoring reports are normally presented to members on a monthly basis
commencing in the June cycle of meetings when expenditure and income covering the
April period are reviewed.
1.4
At this time of year, work in the Accountancy Division is focused on the closure of the
final accounts for the previous year and as a consequence of the pressures associated
with the need to complete the accounts much earlier a number of accountants may not
yet have formally produced reports to their lead member although they have examined
their budgets.
1.5
At this early stage of the financial year there is very little indicative financial information
available for budget monitoring requirements and reviews are in the main concentrated
on salaries and wages and the implementation of agreed savings.
1.6
This report therefore concentrates on salaries and wages expenditure and the
progress being made in meeting the agreed revenue budget savings proposals for the
year.
2
Budgetary Control Reports
2.1
Issues have arisen with a few budget headings where investigations are currently in
hand or new developments have arisen since the budget was determined, ie:
Areas of Additional Cost Increase

Gas contract renewals have now come in at a 100% increase. This is 40% higher
than was originally included in the estimate. Also see paragraph 4.2 below.

Children’s Services – The Children in Care budget is once again coming under
severe pressure and the first monitoring report is projecting a year-end overspend
between £1m and £1.5m assuming all existing children remain in care for the
remainder of the year, but excluding new cases coming into care.
This budget is currently under discussion between Lead Members for Children’s
Services and Customer and Support Services. It should be noted that the Children
in Care budget is due to be considered in detail at next month’s meeting.
Budmonsep03
2
Areas of Potential Expenditure Reduction/Increased Income

Capital Financing – Investment income is currently ahead of budget by £70,000
and debt rescheduling deals on debt of £53m has secured a revenue saving of
£95,000 for 2006/07, £265,000 for 2007/08 and £192,000 for 2008/09.
Council Tax Revenue

The revenue budget assumes the collection of £87.350m in Council Tax revenue
to fund the budget, and included an expectation that £1m of additional revenue
would be generated from new dwellings. Council tax revenue expected to be
collected based upon current bills issued amounts to £87.5m and is therefore on
target.
Further details will be reported on these issues should they result in a requirement for
budget variations as monitoring progresses over the next few months.
3
Progress on agreed savings
3.1
The attached appendix provides details of the approved savings included in the 20062007 revenue budget.
3.2
The appendix will be updated during the year and it will be included as part of the
regular monthly monitoring report until the savings have been implemented and
achieved.
4
Other Issues
4.1
Members are reminded that the budget for the year includes a 2.95% pay award for
local government staff as part of the final year of a three-year pay settlement. The
teachers pay increase is met from the schools budget that is now wholly funded by the
Dedicated Schools Grant.
4.2
Price inflation has again been limited to a 2.5% increase for charges outside the
control of the City Council, whilst no inflationary increase has been allowed for general
supplies. A 60% increase has been provided for a gas contract that is due to be
renewed in the current year and 12.5% in respect of water. Increases in levies have
been provided for at the levy approved by the appropriate bodies.
4.3
Inflationary increases during 2006/07 will require close monitoring and scrutiny, and
where they exceed the assumptions will need to be contained within the budget
allocations to directorates. The risk assessment of reserves makes allowance for the
possibility of excessive inflationary costs being unable to be met by directorates.
5
Budget Risks
5.1
A full budget monitoring exercise will be undertaken each month by all directorates to
ensure that any issues and corrective action are identified at an early stage. It is useful
however, to identify areas that could represent risks in budgetary control and as a
result will be subject to greater scrutiny.
5.2
The key risks identified by the various directorates are to be reported to members in
July.
Budmonsep03
3
6
Prudential Indicators
6.1
As was reported towards the end of the last financial year it is now a statutory duty
under Section 3 of the Local Government Act 2003 for the council to determine its
affordable borrowing limits. In determining its limits the council must have regard to the
Prudential Code and ensure that total capital investment remains within sustainable
limits, in particular that the impact upon its future council tax/rent levels is acceptable.
6.2
The Prudential Code requires the council to set a number of Prudential Indicators,
certain of which replace the borrowing/variable interests limits previously determined as
part of the Treasury Management Strategy Statement, but also extending the period
covered from one to three years. These indicators were included in the 2006/07
Revenue Budget and in the Capital Programme approved by council in March 2006.
6.3
In summary the Prudential Indicators are as follows:
a)
b)
c)
d)
e)
Authorised Limit for External Debt
Operational Boundary for External Debt
Prudential Indicators for Treasury Management
Comparison of Net Borrowing and CFR
Maturity Profile
The key indicators are detailed in Appendix 2 and have all been met through to 24th
May 2006.
7
Summary
7.1
At this early stage in the financial year the budgetary control exercise has already
highlighted a potentially large overspend within the Children’s Services directorate and
this will be the subject of further investigation and report. Other directorates are not
indicating that there are any potential problem areas, however close scrutiny will
continue throughout the year to determine if any overspends are likely to occur.
7.2
Some progress has been made in respect of the agreed savings for the year and whilst
many have not yet been fully achieved the budget has been adjusted accordingly.
Close scrutiny will need to continue throughout the year to ensure that the full amount
of savings is achieved.
7.3
The 2005/06 revenue outturn is currently being finalised and a provisional position will
be reported separately at today’s meeting. This report has not taken into account any
issues for 2006/07 that may arise from the 2005/06 outturn.
8
Recommendation
8.1
Members are invited to comment on the contents of the report and to request the
Strategic Director of Children’s Services to report back to the next meeting on plans to
contain expenditure on outside placements for children in care within the directorate’s
budget allocation.
Alan Westwood
Strategic Director of Customer and Support Services
Budmonsep03
4
Appendix 1
SAVINGS (SUMMARY)
Achieved
Budget
Adjusted
On Target
Total
£000
Budget
Adjusted
Behind
Target
£000
£000
CHIEF EXECUTIVE
0
150
0
150
CHILDREN’S SERVICES
0
385
0
385
COMMUNITY, HEALTH &
SOCIAL CARE
0
734
0
734
CUSTOMER & SUPPORT
SERVICES
0
1,078
0
1,078
ENVIRONMENTAL
SERVICES
0
284
0
284
HOUSING & PLANNING
0
349
0
349
TOTAL
0
2,980
0
2,980
Budmonsep03
5
£000
Ref.
Description
£000
Comments
Achieved
Budget
Adjusted
On Target
Budget
Adjusted
Behind
Target
Total
Policy and Improvement – reduce supplies
and services
Scrutiny Support - reduce printing costs
Regeneration and Improvement - reduce
initiatives budget
Strategy and Regeneration - identify external
funding
Community Safety - cost recovery of post
Community Safety - amendment to structure
Economic Development - Opportunities
Centre income
Economic Development - LABGI
Executive Services - PAMIS and travel costs
Marketing - re-profile of projects budget
Staffing reductions linked to improved
attendance management
0
8
0
8 Budget adjusted - being monitored
0
0
6
20
0
0
6 Budget adjusted - being monitored
20 Budget adjusted - being monitored
0
13
0
13 Budget adjusted - being monitored
0
0
0
35
7
4
0
0
0
35 Budget adjusted - being monitored
7 Budget adjusted - being monitored
4 Budget adjusted - being monitored
0
0
0
0
15
3
31
8
0
0
0
0
15
3
31
8
Total
0
150
0
150
Increase in School SLA charges
Recharge EIC Director 67%
Teacher Net – transfer costs to schools
Youth Offending Service reduction in
contribution
Broadwalk Centre - increased charge rate
General reductions
Contingency and Development Provision
Consortium - seek alternative course
provider
Staffing reductions linked to improved
attendance management
0
0
0
0
30
46
27
40
0
0
0
0
30
46
27
40
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
0
0
0
0
50
30
100
30
0
0
0
0
50
30
100
30
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
0
32
0
Total
0
385
0
CHIEF EXECUTVE
CE1
CE2
CE3
CE4
CE8
CE9
CE10
CE11
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
SAVINGS (ANALYSIS)
CE5
CE6
CE7
CHILDREN’S SERVICES
CS5
CS6
CS7
CS8
CS9
6
32 Budget adjusted - being monitored
385
Appendix 1 Contd.
CS1
CS2
CS3
CS4
Ref.
Description
£000
Comments
Achieved
Budget
Adjusted
On Target
Budget
Adjusted
Behind
Target
Total
Kenyon Way Community Centre – closure
(July 05)
SCL - increase rental for use of assets
SCL - negotiate share of surplus
0
19
0
19 Budget adjusted - being monitored
0
0
20
47
0
0
20 Budget adjusted - being monitored
47 Budget adjusted - being monitored
Domiciliary and Community Care - increase
charges by 5%
Training - use of grant funding to support
budget
Transport - review service and charging
Staffing - raise casual vacancy rate
Residential/Nursing Care – client
contributions inflation increase
Cleaning services - end subsidy by
recovering cost from users
Long-term Home Care - reconfigurement of
service
Staffing reductions linked to improved
attendance management
0
45
0
45 Budget adjusted - being monitored
0
30
0
30 Budget adjusted - being monitored
0
0
0
25
180
160
0
0
0
25 Budget adjusted - being monitored
180 Budget adjusted - being monitored
160 Budget adjusted - being monitored
0
70
0
70 Budget adjusted - being monitored
0
50
0
50 Budget adjusted - being monitored
0
88
0
88 Budget adjusted - being monitored
Total
0
734
0
734
0
178
0
178 Budget adjusted - being monitored
0
20
0
20 Budget adjusted - being monitored
0
40
0
40 Budget adjusted - being monitored
0
0
0
55
56
66
0
0
0
55 Budget adjusted - being monitored
56 Budget adjusted - being monitored
66 Budget adjusted - being monitored
COMMUNITY, HEALTH AND SOCIAL CARE
CH1
CH2
CH3
CH4
CH6
CH7
CH8
CH9
CH10
CH11
CU2
CU3
CU4
CU5
CU6
Finance - Financial Support Group - staffing
reductions (8.5 FTEs)
Finance - Financial Support Group reduction in transaction costs
Finance - Computer Audit - staffing reduction
(1 FTE)
Human resources - reduce staffing (2 FTEs)
ICT - reduce staffing (2 FTEs)
Law and Administration - staffing reductions
(2.5FTEs)
7
Appendix 1 Contd.
CUSTOMER AND SUPPORT SERVICES
CU1
SAVINGS (ANALYSIS)
CH5
Ref.
Description
£000
Comments
Achieved
Budget
Adjusted
On Target
Budget
Adjusted
Behind
Target
Total
Law and Administration - supplies and
services – reductions
Law and Administration - conveyancing –
increase fees
Staffing reductions linked to improved
attendance management
Multi-functional devices
Agency contract tender
LAPP rebates
Contract savings
FYE of 2005/06 think efficiency saving
proposals
0
21
0
21 Budget adjusted - being monitored
0
5
0
5 Budget adjusted - being monitored
0
52
0
52 Budget adjusted - being monitored
0
0
0
0
0
25
11
47
320
182
0
0
0
0
0
25
11
47
320
182
Total
0
1,078
0
1,078
Increase fees and charges by 4.5%
Refuse Collection/Recycling Service –
efficiencies
Administration - revised work patterns
Staffing reductions linked to improved
attendance management
0
0
135
98
0
0
135 Budget adjusted - being monitored
98 Budget adjusted - being monitored
0
0
11
40
0
0
11 Budget adjusted - being monitored
40 Budget adjusted - being monitored
Total
0
284
0
0
70
0
70 Budget adjusted - being monitored
0
40
0
40 Budget adjusted - being monitored
0
20
0
20 Budget adjusted - being monitored
CUSTOMER AND SUPPORT SERVICES
(CONTD.)
CU7
CU8
CU9
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
Budget adjusted - being monitored
SAVINGS (ANALYSIS)
CO10
CU11
CU12
CU13
CU14
ENVIRONMENTAL SERVICES
EN1
EN2
284
HOUSING AND PLANNING
HP1
HP2
HP3
Planning - Managed Budgets Highways
Works - redeploy the night workers
Planning - Managed Budgets - increase
sponsorship income
Planning - Client Income - increase building
control income
8
Appendix 1 Contd.
EN3
EN4
Ref.
Description
£000
Comments
Achieved
Budget
Adjusted
On Target
Budget
Adjusted
Behind
Target
Total
Planning - Client Income - increase
development control income
Planning - Client Budget - reduce UDP
budget
Planning - Managed Budgets Highways
Works - efficiency on material costs
Housing - Homelessness - reduce
homelessness budget
Housing - Administration - increased
administration grant
Staffing reductions linked to improved
attendance management
0
20
0
20 Budget adjusted - being monitored
0
30
0
30 Budget adjusted - being monitored
0
94
0
94 Budget adjusted - being monitored
0
30
0
30 Budget adjusted - being monitored
0
15
0
15 Budget adjusted - being monitored
0
30
0
30 Budget adjusted - being monitored
Total
0
349
0
349
Grand Total
0
2,980
0
2,980
HOUSING AND PLANNING (CONTD.)
HP4
HP5
HP6
HP8
HP9
SAVINGS (ANALYSIS)
HP7
Appendix 1 Contd.
9
Appendix 2
Prudential Indicators
Authorised Limit for External Debt
Forward Estimates
Total Authorised Limit for
External Debt
Actual Gross External Debt as at
31/03/06
2006/07
£m
2007/08
£m
2008/09
£m
721
775
829
521
This limit represents the total level of external debt (and other long term liabilities, such as
finance leases) the council is likely to need in each year to meet all possible eventualities
that may arise in its treasury management activities.
Operational Boundary for External Debt
2006/07
£m
2007/08
£m
2008/09
£m
Total Operational
Boundary for External debt
621
655
704
Actual Gross External Debt as at
31/03/06
521
This limit reflects the estimate of the most likely, prudent, but not worse case, scenario
without the additional headroom included within the authorised limit. The operational
boundary represents a key benchmark against which detailed monitoring is undertaken
by treasury officers.
10
Prudential Indicators for Treasury Management
Limits on Interest Rate Exposure
Upper Limit on Fixed
Interest Rate Exposure
Upper Limit on Variable
Interest Rate Exposure
Current exposure to variable rate
2006/07
2007/08
2008/09
%
100
%
100
%
100
50
50
50
12.78
19.82
25.14
All Years
Maturity structure for fixed rate
borrowing
Upper Limit
Lower Limit
%
50
50
50
50
100
%
0
0
0
0
40
Current
Maturity
Profile
%
0.09
0.11
5.42
7.99
86.39
30
0
2.17
Under 12 months
12 and within 24 months
24 months and within 5 years
5 years and within 10 years
10 years and above
In addition, the following local limits will
apply:
Variable rate debt maturing in any one
year
Limits on Long-Term Investments
Upper limit for investments of more
than 364 days
Current total investment in excess of
364 days
2006/07
£m
2007/08
£m
2008/09
£m
15
15
15
10
10
10
Comparison of Net Borrowing and Capital Financing Requirement
In order to ensure that, over the medium term, net borrowing will only be for a capital purpose, the
council should ensure that the net external borrowing does not, except in the short term, exceed the
total of the capital financing requirement in the preceding year plus the estimates of any additional
capital financing requirement for the current and the next two financial years. This forms an acid test of
the adequacy of the capital financing requirement and an early warning system of whether any of the
above limits could be breached.
To date this indicator has been met. The current capital financing requirement is £481.8m and the net
borrowing requirement £436.4m.
11
Date
03/04/2006
04/04/2006
05/04/2006
06/04/2006
07/04/2006
10/04/2006
11/04/2006
12/04/2006
13/04/2006
14/04/2006
18/04/2006
19/04/2006
20/04/2006
21/04/2006
24/04/2006
25/04/2006
26/04/2006
27/04/2006
28/04/2006
02/05/2006
03/05/2006
04/05/2006
05/05/2006
08/05/2006
09/05/2006
10/05/2006
11/05/2006
12/05/2006
15/05/2006
16/05/2006
17/05/2006
18/05/2006
19/05/2006
22/05/2006
23/05/2006
24/05/2006
Debt
Outstanding
£'000
520,954
520,954
520,954
520,954
520,954
520,954
520,954
520,954
520,954
520,954
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
520,276
Comparison of Net Borrowing and CFR
Temporary
Net
Investments
Borrowing
£'000
67,900
79,100
79,400
79,400
79,400
76,550
76,500
76,400
74,400
72,400
68,600
70,900
71,200
71,200
70,100
68,400
67,350
66,650
68,650
71,550
73,950
75,750
74,050
77,050
77,350
76,850
75,650
81,050
85,050
86,350
85,550
86,750
80,250
86,750
82,250
83,850
£'000
453,054
441,854
441,554
441,554
441,554
444,404
444,454
444,554
446,554
448,554
451,676
449,376
449,076
449,076
450,176
451,876
452,926
453,626
451,626
448,726
446,326
444,526
446,226
443,226
442,926
443,426
444,626
439,226
435,226
433,926
434,726
433,526
440,026
433,526
438,026
436,426
12
Capital
Finance
Requirement
£'000
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
481,792
Headroom
£'000
28,738
39,938
40,238
40,238
40,238
37,388
37,338
37,238
35,238
33,238
30,116
32,416
32,716
32,716
31,616
29,916
28,866
28,166
30,166
33,066
35,466
37,266
35,566
38,566
38,866
38,366
37,166
42,566
46,566
47,866
47,066
48,266
41,766
48,266
43,766
45,366
13