ANNEXE 3
EPSOM AND EWELL BOROUGH COUNCIL – REVIEW OFFINANCIAL PERFORMANCE
REVIEW OF FINANCIAL PERFORMANCE
AGAINST BUDGET TARGETS FROM SEPTEMBER 1999
1
1
Council Tax - achieved
2
Budget Gap – partially achieved
3
Service Costs - achieved
4
Organisational Efficiency – partially achieved
5
Investment in Services – partially achieved
6
Revenue Reserves - achieved
7
Capital Reserves - achieved
COUNCIL TAX

106738018
Key Corporate Objective to maintain the Council Tax in the mid-range of Surrey
Districts
1.1
The past four years have seen national Council Tax increases well above the level of
inflation.
Having reviewed the financial position in September 1999 the Council
recognised that a adjustment to the level of Council Tax was required in 2000/01 and
that, whilst still maintaining its share of Council Tax at a reasonable level, the level of
increase would need to be above inflation for the following three years. This was
essential if the Council was to be able to continue to raise sufficient finances to
maintain service levels.
1.2
The Council Tax policy was approved recognising the need to increase the level of
income raised locally. This was particularly relevant due to the assumption that central
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REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
government finance would increase, but that the increase would be based on the
relatively low level of formula grant rather than the Council’s true level of expenditure.
1.3
The policy on Council Tax does however provide residents with a benchmark of value
for money compared to other Council’s with similar environmental and financial
issues.
1.4
The Council uses the headline Band ‘D’ average Council Tax to benchmark itself
against the other Surrey Districts as this is the benchmark used nationally by central
government.
1.5
Council Tax charges for Surrey County Council (£851.40 at Band ‘D’) and Surrey
Police (£135.09 at Band ‘D’) are uniform across Surrey. The current position on local
(district/parish) charges is shown in the graph below:-
£1
38
.93
£1
18
.61
140
£1
21
.35
£1
22
.04
£1
38
.53
£1
52
.90
£1
54
.73
£1
53
.53
160
£1
56
.89
180
£1
60
.55
£1
63
.65
SURREY DISTRICT COUNCIL TAX 2003/04
Band D Local Average (District / Parish average)
£8
5.5
0
120
100
80
60
40
20
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1.6
Income raised by this Council from council tax will be £3.7 million in 2003/04 (11%of
the total bill).
1.7
Borough residents currently (2003/04) pay the third lowest Council Tax in Surrey
(11 Districts). The Council has, therefore, achieved this strategic target.
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REVIEW OF FINANCIAL PERFORMANCE
2
ANNEXE 3
BUDGET GAP

Strategic objective to reduce the cost of service provision so as to reduce the
budget ‘gap’
2.1
The Council has a requirement to set a balanced budget with income raised covering
the cost of service provision. Council’s can use their revenue reserves to achieve this
balance, so long as there is a reasonable contingency left in the working balance or in
other revenue reserves to meet unplanned expenditure.
2.2
The four year budget profiles prepared in September 1999 forecast an annual use of the
working balance of over £1 million by 2003/04. If realised this would have lead to a
position where the working balance was no longer available to balance the budget gap.
There would either have to be a very significant increase in Council Tax or the Council
would have to stop proving a main discretionary service.
2.3
The strategy to increase income raised locally, to target management cost and overhead
savings and to maintain a minimum level of reserves for treasury management
purposes has significantly reduced the use of the working balance over the past four
years. The revenue working balance was £4.7 million as at 31 March 2003, a
significant achievement against the base position profiled in September 1999 and
recognised as ‘healthy’ by the District Auditor in the 2002/03 Annual Audit Letter.
2.4
The budgeted use of the working balance for 2003/04 is £0.5 million.
2.5
Despite the progress made income reductions have worsened the forecast for 2003/04
and future years. The main variations forecast against the current base budget are as
follows:
Loss of income due to interest rate reductions

Reduced town hall rent income due to loss of tenancies

Loss of income from a reduced number of car park corporate season ticket holders

Reduced local land charges fee income due to lower number of search requests

Further government grant entitlement loss
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REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
2.6
The management of the four year budget position has significantly reduced the use of the
working balance compared to the four year forecast prepared in September 1999. The
budget gap still remains however. The base budget position looking forward still
anticipates use of the working balance to finance services at around £500,000 per annum
indicating only partial achievement of this strategic objective.
3
SERVICE COSTS

Strategic objective to carry out a service expenditure review
3.1
The main part of the revenue budget process is incremental however specific areas are
examined in detail each year, through service and financial planning and prior to
setting budget targets and preparing the estimates. Resource allocations are also
examined in Best Value and other service reviews.
3.2
The process of Service and Financial Planning has identified a limited number of new
initiatives each year where additional resources have been allocated to help deliver key
corporate and service objectives.
3.3
The Council carried out a more extensive service expenditure review in 2001 and
produced a report that identified the mandatory and discretionary areas of expenditure
on all Council services. The review used criteria drawn from the Council’s Vision
and Values statement to rank services and to provide savings options should the
Council wish to reduce the level of services that it provides. The review was agreed by
the Council and the exercise has been used as a reference source for other decisions.
The outcome of the review has not, however, been used to reduce service levels.
3.4
The 2003 expenditure review has taken a different approach but has used the
information and analysis prepared in 2001. The main elements of this review have
been:
A review of the Council’s finances (reported to Strategy and Resources Committee
along with the budget targets for 2004/05 in September 2003)

A review of investment requirements through a Capital Programme Review
covering investment and funding for the next four years

A specific financial brief within the Best Value Review of Venues (main finding
reported to Strategy and Resources Committee in October 2003)

Officer service workshops
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REVIEW OF FINANCIAL PERFORMANCE
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
Consultation with Residents through focus groups and using the service activity
analysis from the 2001 service expenditure review (reported to Strategy and
Resources in September 2003)

Preparation of the ‘People and Performance’ Corporate Plan and the identification
of key priorities for 2003-07 (also reported to Strategy and Resources in September
2003)
3.5
The Council has carried out service reviews as anticipated when the strategy was agreed.
The ‘healthy’ financial position of the Council has not required enforced service level
reductions and the service and financial planning has effectively targeted resources to
prioritised initiatives and to meet new statutory requirements. The more ambitious
targets in the People and Performance Corporate Plan will however demand a significant
shift in the balance of resources between services, as well as the achievement of further cost
reduction.
4
ORGANISATIONAL EFFICIENCY

4.1
Strategic target to review organisational efficiency so that new initiatives
can be funded from savings or additional income wherever possible
The four budget profiles approved in 1999 included a target of £400,000 per annum management
cost savings by 2003/04. This target was actually achieved by 2002/03. The m ain areas of cost
reduction were:
Reducing the staffing budget through the senior management / organisational restructure

Reductions in insurance costs and other finance overheads

Generating additional town hall rent income through letting accommodation to Surrey
County Council
4.2
The other significant organisational change was the back office re-organisation which comprised
a rationalisation of the central support activities and the transfer of staffing resource to the
customer contact centre. The operational cost of the customer contact centre has been fully
financed from existing staff and information technology budgets.
4.3
The initial efficiency target set in 1999 was achieved by 2002/03. More recently additional
facilities management contract costs and loss of town hall tenant income has offset some of
the organisational savings previously achieved. This will require further cost savings over
the next 4 years.
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REVIEW OF FINANCIAL PERFORMANCE
5
INVESTMENT IN SERVICES

5.1
ANNEXE 3
To deliver the capital programme approved in February 2000, subject to
annual review, to complete the redevelopment of the Rainbow Leisure
Centre and to fulfil new statutory requirements within the four year financial
plan
Capital Investment
5.1.1 The Council agreed a four year capital programme in March 20001. The programme
has been reviewed annually and a Capital Strategy has been developed which allows
the prioritisation of new schemes. The Capital Strategy was rated as ‘good’ by the
Government of the South East in 2002 when last assessed.
5.1.2 There has been a significant slippage in the delivery of the original four year capital
programme and, in particular, in that element of the programme such as Social
Housing Grants and the Hospital Cluster programme that are delivered in partnership
with others, or where delivery is dependant upon planning or other wider community
issues.
5.1.3 Against this the Council responded to a significant challenge when the options for
investment in the Rainbow Leisure Centre were reviewed resulting in a preferred new
build option requiring an investment of just below £8 million.
5.1.4 Investment between 2000 and 2003 totalled £14.2 million and a further investment of
£4.6 million is anticipated this year, providing a total estimated four year investment of
£18.8 million. A summary of investment over the past four years is shown in the
following chart:-
1
Policy Book 2000/01
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REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
CAPITAL INVESTMENT 2000-2004
£3,000,000
2003/04 Forecast
£2,500,000
2000-2003 Spend
£2,000,000
£1,500,000
£1,000,000
£500,000
5.1.5 The Council’s main areas of investment over the past four years have been:
Sports and Leisure

Social Housing Grants

Information Technology

Disabled Facility Grants

Highways related and Environmental Improvements
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Hospital Cluster
Other - miscellaneous
Sports & Leisure - Rainbow Centre (£8m)
Sports & Leisure - General
Parks and Countryside
Social Housing Grant (LASHG)
Housing Disabled Facility & Renovation
Grants
Car Parks
Highways related Improvements
Environmental Improvements
Property / Asset Improvement
Electronic Service Delivery / IT
£-
REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
5.1.6
The Council has achieved its overall investment target. There has been a change of
emphasis with additional expenditure on sports and leisure and less progress than
anticipated on social housing. Funds have been reserved to enable the planned hospital
cluster community and social investment to be made over the next four years, and the
social housing strategy is being reviewed following the changes to the housing finance
regulations in 2003.
5.2
Service Delivery
5.2.1 A separate assessment of performance can be made by reference to the Best Value
Performance Plans, the District Audit’s Annual Audit Letters and the outcome of the
Comprehensive Performance Assessment (CPA) in December 2003.
5.2.2 A useful assessment may be made of the Council’s ability to increase resources
available for services provided to the community. An analysis of the past four year
budget targets shows the following main increases in service budget allocations:Resources Allocated
Service Outcome
Recycling –
An increase in the recycling rate through the reintroduction of doorstep collections across the
Borough and by collecting a wider range of materials
for recycling with new vehicles introduced in 2003.
Rainbow Leisure Centre –
A significantly improved leisure centre has been built
on the site of the old Rainbow Leisure Centre. The
centre is run under contract by a Trust (GLL) with a
net management fee paid to the Council over 15 years.
The management fee from 2005/06 will cover loss of
interest on the reserves used to finance the investment
however there is no provision for replacement for the
capital sum invested.
Concessionary Fares -
The Council entered into an agreement with Surrey
County Council, the 11 Surrey Districts and the bus
companies to provide half price bus travel for the
elderly and disabled. SCC will withdraw funding
over the next two years but the Council is currently
agreeing a new three year contract to ensure continued
provision of this facility.
Customer Contact Centre
– costs met by transfer of
budgets from back office
functions
The Customer contact centre was opened in 2001 and
continues to take on more functions each year.
Route-call bookings have now been transferred and
investment is planned in a new corporate booking
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REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
system.
5.3
Community Safety -
This is a cross-cutting activity however £40,000 has
been specifically allocated to graffiti removal and
capital investment made in CCTV, environmental
improvements and other schemes that contribute to
resident’s expectations for a safe local environment.
Ebbisham Centre
The ‘lifestyle’ centre was funded through Capital
Challenge funding and provides partner facilities for a
library, healthcare, leisure, retail as well as community
accommodation included in the revenue budget.
Property Management –
The Asset Management Plan initially identified £6m
investment needed in planned property maintenance
over a 10 year period. The Council had a budget for
routine maintenance and emergency works but no
budget for planned maintenance. This had led to an
increase in reactive works and has had an impact on
the usage of some venues. It is anticipated that by
2004 all priority 1 works identified in the first survey
will have been completed addressing the most critical
repairs. In additional the budget has been allocated
for urgent H&S works and for disabled access works.
The asset management plan is being developed to
cover non-property assets.
The Council has continued to provide all main services to residents over the past
four years without any significant reduction in service levels. Increased
investment has been made in services to fulfil statutory regulation and central
government targets (e.g. concessionary fares and recycling) and to improve other
services and facilities available to residents (e.g. Rainbow Leisure Centre,
community safety and customer services).
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REVIEW OF FINANCIAL PERFORMANCE
6
REVENUE RESERVES

6.1
ANNEXE 3
Strategic objective to reduce the pension fund deficit so as to achieve a net
revenue cost benefit and to maintain a minimum revenue working balance
of £2.5 million
Working Balance
6.1.1 The 1999 budget review identified a risk of full utilisation of the working balance over
a four year period despite a working balance of around £5 million. Decisions made to
increase revenues and achieve cost savings significantly reduced that risk but a budget
deficit of £560,000 was still anticipated. To provide an effective measure for financial
management, the Council has agreed to maintain a minimum working balance of £2.5
million and uses a four year financial forecast to manage its budget position.
6.1.2 Whilst greater use of the working balance was generally forecast in the early part of the
last four year planning period, the buoyancy of income levels along with some
corporate financing decisions strengthened the Councils revenue budget position.
This income buoyancy was not reflected in the 2002/03 final accounts partly due to the
increasing income targets included in the budget and partly due to economic factors
adversely affecting income levels.
6.1.3 The working balance at 31 March 2003 was £4.7 million. The budget forecast for the
working balance at 31 March 2004 was £4.2 million.
6.2
Strategic Reserves
6.2.1 The strategic reserves comprise provisions future expenditures (e.g. property
maintenance and planning gain receipts) or against liabilities where the level of
expenditure is uncertain (e.g. the insurance reserve)
6.2.2 The Council has reviewed the level of its strategic reserves annually and has
reallocated funds where liabilities or financial risks increase. A review was last
carried out in September 2003 prior to setting budget targets for 2004/05 and as part of
the 2003 service expenditure review.
6.2.3 The highest priority for new funds over the past four years has been: Earmarking interest earned on capital sums for Hospital Cluster investment
into a revenue reserve to protect the value of the capital receipts for future
investment
 Earmarking section 106 planning gains for specific infrastructure investments
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REVIEW OF FINANCIAL PERFORMANCE
ANNEXE 3
 Providing finance for prioritised property maintenance backlog repairs
following the identification and quantification of under-investment during the
preparation of the Asset Management Plan
6.3
Pension Fund
6.3.1 In response to local authority concerns over the impact of pension fund costs on
Council Tax, central government provided a restricted opportunity for Councils to use
capital reserves to make additional payments to the pension fund.
6.3.2 The Council approved an initial £4.9 million payment from capital in 2001. A further
payment of £2.1 million was approved in 2003.
6.3.3 The additional payments will reduce pension fund costs in 2004/05 by some £700,000
compared to the March 2001 certificated payments. The annual loss of interest on
balance is in the order of £300,000.
6.3.4 The Council’s pension fund cover at March 2001 was 74% of estimated liabilities.
The deficit was certified at £10.8 million. The deficit will have increased significantly
following the fall in share values in 2001 but has recovered to some extent in 2003.
The next valuation is due at March 2004.
6.4
The Council has maintained a working balance in excess of the minimum target
of £2.5 million and the additional payments to the pension fund from capital
reserves have significantly contributed to this position.
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REVIEW OF FINANCIAL PERFORMANCE
7
ANNEXE 3
CAPITAL RESERVES

Strategic objective to achieve a minimum position of uncommitted capital
reserves of £8 million over the next four years
7.1
The Council is ‘debt free’ and has no long term borrowing.
7.2
The main sources of funding for capital investment have been:
Capital Reserves – Receipts from sales of land and property, and from capital sums
transferred for hospital cluster investment

Housing Corporation reimbursement of Local Authority Social Housing Grant

Capital Grants – successful bids for specific grants such as ‘e – government’ or for
mandatory investment such as disabled facility grants

Section 106 Planning Gain payments
7.3
The Council’s policy has been to maintain a minimum of £8 million in capital
reserves, in part as a contingency against unplanned and unavoidable expenditures but
also to generate interest on balances that has been used to help finance services in the
General Fund revenue account.
7.4
To achieve the minimum level of reserves the Council set a target of £4 million for
new capital receipts from the sale of land and property. This target is likely to be
achieved and could be exceeded if a high proportion of approved property sales are
completed by March 2004.
7.5
In view of progress made on capital receipts raised from land and property sales the
Council agreed to a additional £2.1 million payment to the pension fund in 2003 and
set a reduced level of minimum capital reserves of £7 million as a guideline for the
2004-2008 capital programme review.
7.6
The Council was expecting to exceed the minimum target for capital reserves (£8
million) and in September 2003 agreed to use a further sum of £2.1 million to
reduce annual pension fund costs, and to help offset the additional costs
anticipated in the March 2004 pension fund valuation.
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