Meeting documents

1 THE ISSUE

1.1 This report presents the provisional revenue and capital outturn for 2005/06, with some recommended technical adjustments. The report refers to known potential pressures for the current year, as a preface to a request to carry forward specific budget items to 2006/07.

2 RECOMMENDATION

2.1 Note the provisional revenue budget outturn for 2005/06 as set out in Appendix 2 at £1,727,000 under spent or 1% of the Council's revenue budget for 2005/06.

2.2 Agree the carry forward proposals in the tables in Appendix 4 as exceptions to the budget management scheme.

2.3 To delegate to the Council's Section 151 Officer the authority to carry forward any underspending in respect of Training services in future years to the extent this reflects the difference between academic and financial years.

2.4 Agree, at this stage, not to write off overspends in Education and Transport as shown in Appendix 4 Table 5 (Section 2), but to create earmarked reserves to cover these overspends subject to reports on Home to School Transport and Transport & Highways to minimise the impact in 2006/07 and future years.

2.5 Agree the creation of earmarked reserves of up to £95,000 for the additional costs of the Coroners Service in 2006/07. (Appendix 1 paragraph 1.10)

2.6 Note the potential costs involved in dealing with issues relating to the Recreation Ground. Agree that up to £100,000 of the 2005/06 surplus should be transferred to an earmarked reserve and to delegate approval to spend from this reserve to the Leader of the Council and the Executive Member for Resources.

2.7 Agree that any resulting surplus arising from decisions made should be returned to unallocated general fund balances.

2.8 Approve the revenue virement listed in Appendix 6.

2.9 Note the final position of the 2005/2006 capital programme (Appendix 5).

2.10 Approve the adjustments to and incorporation of additional funding to the 2005/2006 capital programme as detailed in Appendix 1 paragraph 1.11.

2.11 Delegate agreement of the carry forward of capital under and over spends arising in 2005/06 to the Council's Section 151 Officer in consultation with the Chief Execuitve and Projects Programme Board. (Appendix 1 Paragraph 1.14).

2.12 Note that as a result the Council's Reserves Strategy is on target (Appendix 1 paragraph 1.27 & 1.28).

2.13 Note the implications of the outturn 2005/06 in 2006/07 and future years (Appendix 1 paragraphs 1.15-1.22).

2.14 Note the Treasury Management Outturn position (Appendix 8).

3 FINANCIAL IMPLICATIONS

3.1 These are contained throughout the report.

4 THE REPORT

4.1 This report provides information about the Council's performance in terms of its spending against its revenue and capital budgets in 2005/06. The report also provides information on the Treasury Management position and performance during 2005/06.

4.2 Details and commentary of the outturn position for revenue and capital are provided in Appendices 1-7. The Treasury Management outturn position is presented in Appendix 8.

4.3 The report follows the format of reporting services by Executive portfolio. Requests for carry forward are also listed according with a reference to Portfolio (see Appendix 4).

4.4 The proposals for carry forward are consistent with the structure of the Council in 2005/06 so that no new Directorate carries forward any overspend that it is not responsible for.

4.5 The Corporate Audit Committee will consider the statutory final accounts of the Council. This report presents the provisional outturn in the form that is routinely reported throughout the year as part of budget monitoring.

4.6 The Executive received financial reports throughout the year highlighting the known pressure areas, and identifying those actions that can be taken to reduce these to manageable proportions. Since the monitoring during the year was initially forecasting an overspend, management actions were taken to limit these overspends and find some additional savings. Overall the revenue position has improved, which represents good management given the pressures that were reported during the year. However, as Appendix 1 explains, favourable variances achieved on capital financing costs were due in part to the planned slowdown in the capital programme. Tight control of both revenue and capital budgets will therefore continue to be required in 2006/07.

4.7 A Budget Management Scheme (BMS) is in force, which specifies how over and under spending should be treated in any year.

4.8 Under the Budget Management Scheme all overspends should be carried forward, subject to a proposal from the service to recover them. At least 60% of any under spends can also be carried forward providing that the management of all overspendings have been agreed within a director's service areas and also providing these under spends were reported at the latest in January 2006. If not reported by then, they are considered "windfall" and should not be carried forward unless the Executive expressly approves such carry forwards.

5 RISK MANAGEMENT

5.1 A risk assessment related to the issue and recommendations has been undertaken, in compliance with the Council's decision making risk management guidance. This has taken the form of service risk registers and for 2006/07 a Director's review of the robustness of estimates and budget risks.

6 RATIONALE

6.1 The recommendations made are based upon the Budget Management Scheme and a consideration of the Council's latest financial position and reserves strategy.

7 OTHER OPTIONS CONSIDERED

7.1 Appendix 4 lists all options that can be considered in making a decision on carry forwards and write offs from 2005/06 to 2006/07.

8 CONSULTATION

8.1 Consultation has been undertaken with the Council's Section 151 Officer, Chief Executive, Monitoring Officer, Directors and their supporting finance staff.

9 REASONS FOR URGENCY

9.1 Not urgent.

1.1 Appendix 2 outlines the Council's provisional financial position for the 2005/06 financial year. Before any carry forward the Council underspent by £1,727,000 against the budget for the year, this equates to 1% of the Council's revenue budget for 2005/06. This compares to the figures last reported to the Executive in March of a £955,000 under spend.

1.2 The explanations for the variations are given in Appendix 3 and some are highlighted below.

1.3 The main area contributing to the underspend is capital financing costs. As part of managing potential overspends elsewhere the capital programme was "slowed down" resulting in the delayed need for further borrowing leading to savings in debt interest and Minimum Revenue Provision (MRP) charges. These factors resulted in an underspend of £1,735,000 for 2005/06. Service spending was broadly in line with budget at an overall level although there are variations within this top level figure.

1.4 The main areas of over spending have occurred in the Children's Services, Tourism, Leisure & Culture and Transport & Highways Portfolio's portfolio. However there are variations between services within those broad headings. There is more detail available in the appendices (particularly Appendix 3) and also in the background papers to this report.

1.5 The overspends in Education and Operations are outlined in table 5 of Appendix 4.

1.6 As reported in the Council's budget report for 2006/07 (Council 21^st February 2006) the Council's external auditors have questioned the Council's ability to capitalise Bath Spa Management Costs. It has been decided that as a precaution in closing the 2005/06 accounts these costs will be charged to revenue, funded by the fallback position as set out in the Budget Report. The capitalisation of revenue spend, after covering the Claims costs arising in 2005/06, has created scope to add a further £308,000 to unallocated reserves to help cover the exceptional risks facing the Council over the next 3 years. The capitalisation of revenue also requires budgets to be re-allocated to match revised spend, the virements required are reported for approval in Appendix 6.

1.7 At its meeting on 1^st March 2006, the Council Executive approved the establishment of two earmarked reserves from forecast underspends resulting in 2005/06 to fund one off expenditure as follows:-

1.8 At the same meeting the Council Executive also approved funding for the shortfall in Heritage Services income. The 2005/06 shortfall amounted to £454k which is offset by underspends on capital financing costs as shown in Appendix 2, the shortfall relating to 2004/05 of £40k has also been removed as shown in Appendix 4 Table 1(b). This is broadly in line to that reported to the Executive in March.

1.9 These provisions and the removal of the Heritage shortfall from 2004/05 are reflected in Appendix 4.

1.10 The Executive may wish to take this opportunity to make further provisions within balances for the following potential costs which could arise during 2006/07 and which are not allowed for in the budget agreed during February 2006:-

Coroners - Bristol City Council has administrative responsibility for the Coroners Service on behalf of the four unitary authorities of the Ex-Avon region. The Coroners 2005/06 outturn position for Bath & North East Somerset's was an overspend of £70,000 on a budget of £165,000. The overspend was mainly due to additional costs arising from several large inquests which took place during the year and hospitals introducing charges for mortuary storage fees on hospital deaths that were previously uncharged. This level of overspend was not identified until March 2006, so the budget for 2006/07 does not reflect additional on-going costs for this service. Bristol City Council have produced revised budget estimates for 2006/07 based on a best and worse case scenario which highlight a funding gap for our Council of between £46k and £95k. In considering the overall revenue underspend for 2005/06, It is recommended that the Executive create an earmarked reserve within Council balances for up to £95,000 for Coroners costs.

Education and Transport & Highways overspends as shown in Appendix 4 Table 5 (Section 2) subject to further reports about minimising the impact in 2006/07 and future years.

The Recreation Ground Trust - The requirement to set aside £100k as an earmarked reserve to fund legal advice relating to the position of the trust, and to bring forward a strategic review of the future use and management of the trust. It should also be noted that the Trust has no reserves and has had to fund costs of the receiver manager appointed by the Charity Commissioners. These costs, and the costs of the strategic review were to have been funded by the Trust from income received from the Council for the sale of the Leisure Centre land. This has still to be agreed, leaving the Trust cash balance at a deficit of around £100k at the year end. This sum is an internal debt in the Council's accounts, which will increase as a result of some of these actions (the cost of legal advice will need to be allocated appropriately between the Trust and the Council). It is further recommended that approval to spend from this reserve be delegated to the Leader of the Council, in conjunction with the Executive Member for Resources. The Trustees of the Recreation Ground will also need to approve matters where there are Trust responsibilities including where debt is incurred by the Trust as a result of relevant expenditure.

1.11 On the 22^nd February a capital programme of £49.3 million was approved by Council. At the 1^st March meeting of the Executive a revised programme of £53.955 million was approved. The following additional changes have since been incorporated into the programme, giving a revised total of £53.71million:

Transport & Highways - Hinton Hill scheme funded by Government Supported borrowing (SCA), £418,440 re-phased to 2006/07 to reflect updated spend profile.

Transport & Highways - s.106 funding of £63,937 and revenue funding of £51,000 has been included in the programme.

Brassmill Lane - revenue contribution to capital £1,484

Economic Development - £42,282 of slippage from 2004/05 added to Major Projects Management.

Economic Development - £11,993 of slippage from 2004/05 added in respect of Local Shopping Bid to the RDA.

In addition there have been movements between portfolios reflecting the capitalisation of revenue costs. (paragraph 1.6)

1.12 Spend to the 31^st March totalled £58.958million (£44.343million net of grant funded Stone Mines and SRB expenditure), this represents a spend against forecast of 82.6% against the revised budget or 71% when compared to the original budget including additions but excluding effects of re-phasing and adjusted for Spa Claims.

1.13 Details of the outturn position are given in Appendix 5.

1.14 Carry forwards from under and over spends from 2005/06 will be reviewed by the Council's Section 151 Officer with the Chief Executive and the Projects Programme Board in June for agreement and to ensure that all carry forwards are justified. These will be reported to the Executive in September 2006.

1.24 Decisions are needed on some of the items in Appendix 4 relating to under and over-spending in 2005/06. Each section of Appendix 4 is clearly marked for information or for decision. In particular, decisions are required in tables 3 to 5 of Appendix 4. If all these items are approved, this would give a final under spend of £1,482,000. After allowing for the provisions and earmarked reserves referred to in paragraphs 1.7 and 1.10 and clearing the Heritage deficit from 2004/05 (as approved at the Council Executive meeting on 1^st March 2006) the amount returned to unearmarked balances would be £921,000.

1.25 If any further provisions are created the amount returned to unearmarked balances would reduce accordingly.

1.26 Table 5 of Appendix 4 contains requests to carry forward overspends for recovery in future years in accordance with Budget Management Scheme rules. It is important that a realistic and achievable recovery plan is in place for these carry forwards. Carry forward of overspends should only be agreed where this is the case otherwise there is the risk of further overspending in 2006/07 and future years. In the case of Home to School Transport and Highways & Transport, it is recommended that provisions are made in earmarked reserves for these amounts subject the Council Executive receiving further reports on these cost pressures including the minimisation of impact in 2006/07 and future years.

1.27 A statement of balances is included as Appendix 7. This was also reported in February 2006 at the time of budget setting and has been updated for known changes (these are highlighted in the appendix in the "movement" column). If the requests shown in recommendations 2.2, 2.3, 2.4, 2.5 and 2.6 are approved by the Council Executive the overall situation would be as follows:

1.28 As a result the reserves strategy outlined in the budget report to Council on 21^st February 2006 is being met to date.

1.29 The last estimated figure for capital receipts (reported to the Executive in the 2006/07 budget report in February) assumed Right to Buy (RTB) sales of £1m from Somer Housing Association and General Fund sales of £20.12m, giving estimated receipts of £21.12m. Actual receipts achieved, net of costs, were RTB sale receipts of £2.2m and General Fund receipts of £20.3m. After deducting the payment of £0.5m for restructuring premium in respect of the Ex-Avon debt, the net position on capital receipts was £22.0m, slightly above the target.

1.30 We are also required to report to you how the 2005/06 programme is to be financed. This is as follows: