Meeting documents

APPENDIX 1

REVENUE OUTURN 2007/08

1.1 Appendix 2 outlines the Council's provisional financial position for the 2007/08 financial year. Despite a number of major pressures during 2007/08, the provisional outturn shows the budget has been managed in total with a small under spend/surplus. Before any carry forward the Council under spent by £778,000. After removing the Dedicated Schools Grants overspend of £118,000 (which is automatically carried forward for recovery in 2008/09) the revised Council's under spend is £896,000 against the budget for the year, this equates to 0.9% of the Council's net revenue budget for 2007/08. This compares to the figures last reported to the Cabinet in March of a £214,000 over spend.

1.2 Underlying this "bottom line" figure are a number of variations (at a Directorate level):

• Service overspends of £1.3m
  
• Service under spends of £0.7m
  
• The net overspend at Directorate level being offset by a £1.5m under spend on Corporate and Agency budgets mainly related to capital financing costs and investment income.

1.3 The major pressures (transport, children's services and the corporate efficiency savings target) were identified early in the first monitoring report in 2007/08 as emerging issues. Offsetting these pressures were savings within capital financing costs, which had been highlighted in the previous years outturn report. The Council introduced a robust action plan system for addressing service overspends which was monitored on a monthly basis and has helped produce the favourable outturn position whilst containing significant cost pressures at the bottom line level during the financial year.

1.4 The opportunity has also been taken at this early stage in the financial year to assess the ongoing implications of the provisional outturn on 2008/09 which nevertheless does require Strategic Directors to take some action to contain ongoing pressures from 2007/08 within the 2008/09 budget as well as achieving planned savings for 2008/09.

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

1.6 The main area contributing to the under spend relates to capital financing costs. Improvements in capital monitoring and the rephasing of the capital programme to more accurately reflect cash flow, together with higher interest rates has meant the Council achieved additional income from interest on surplus cash balances. With the favourable cash balances there was no need to undertake further borrowing during 2007/08, therefore also saving on debt interest costs. More details are provided in the Treasury Management Outturn report (Appendix 10).

1.7 The main areas of over spending have occurred in the Customer Services and Children's Services Portfolios. There are under spends in all the other Portfolios. However there are wide variations between services within those broad headings.

CURRENT SPENDING - IMPLICATIONS FOR 2008/09

1.8 The first formal monitoring report for the current year will now be presented to the Cabinet in September. Monthly reports will continue to be reported to Cabinet informally for both revenue and capital expenditure.

1.9 As part of the monthly monitoring process the main pressures faced by services during 2007/08 have been reflected in the budget set for 2008/09. In addition, some additional pressures for 2008/09 are emerging which need to be addressed with robust action plans. Strategic Directors also carried out a risk assessment of their budgets as part of the 2008/09 budget process to inform the Council's reserves strategy. All of these areas will be assessed as part of the updated Medium Term Financial Strategy planned for the September meeting of the Cabinet.

1.10 The emerging pressures total £1.4m, some of which are offset by actions plans within the service or by the ongoing favourable impact on capital financing costs due to higher cash balances leaving a net emerging pressure of around £200k. The table highlights that there are clearly cost pressures that will require strong control by Strategic and Divisional Directors. The main emerging on-going pressures and offsetting savings in 2008/09 are:

1.11 Strategic Directors and Divisional Directors will continue to prepare robust action plans to address both emerging pressures and savings required in 2008/09. These plans, and progress against the plans, will be reported to the Cabinet in September 2008 and will be closely monitored throughout the 2008/09 financial year.

OTHER 2007/08 MOVEMENTS AFFECTING RESERVES

1.12 The net under spend position reported above does not include the following unbudgeted transactions which are one-off in nature or relate to previous years so are reported separately from the regular monitoring figures:

1.13 The net effect of the above transaction is an increase in un-earmarked reserves of £915k. The transactions are reflected in the detailed reserves shown in Appendix 9.

1.14 The school balances reconciliation is still underway. Any net impact on the Council's reserves is expected to be positive.

1.15 Given the favourable outturn position and the above additions to reserves, it is proposed that an earmarked reserve of £500k is created as a "revenue budget contingency reserve" in respect of the normal risks highlighted in the Directors Robustness of Estimates Statements and the emerging pressures highlighted in paragraph 1.10. Any drawdown from this reserve will require approval of the section 151 officer in consultation with the Cabinet Member for Resources. The proposal is highlighted with three others in the "Use of Under spend to make earmarked reserves" section below.

USE OF UNDERSPEND TO MAKE EARMARKED RESERVES

1.16 The Cabinet may wish to take this opportunity to make the following provision within balances for potential costs which could arise during 2008/09 and which are not allowed for in the budget agreed during February 2008:-

• Revenue Budget Contingency Reserve - (see paragraph 1.14) - £500k
  
• Resourcing the transformation programme for the Council - £100k
  
• Resourcing PCT (Primary Care Trust) integration - £100k

DECISIONS REQUIRED RELATING TO OVER AND UNDER SPENDS

1.17 Decisions are needed on some of the items in Appendix 4 relating to under and over-spending in 2007/08. Each section of Appendix 4 is clearly marked for information or for decision. In particular, decisions are required in tables 3 and 4 of Appendix 4. If all these items are approved, this would give a final underspend of £1,098,000. After allowing for the earmarked reserves referred to in paragraph 1.15 and other transfers to reserves detailed in the reserves section below, the net amount returned to unearmarked reserves would be £2,422,000.

1.18 If any further provisions are created the amount returned to unearmarked reserves would reduce accordingly.

1.19 Table 4 of Appendix 4 contains requests to write off overspends as an exception to the Budget Management Scheme rules which would require recovery by service over a maximum of 3 years. The write-offs are requested as it is not considered practical to recover these overspends against the continuing risk of overspending in 2008/09 and future years. Further details on the reasons for write-off requests are detailed in the Appendix.

REVENUE RESERVES

1.20 A statement of revenue balances is included as Appendix 9. This was also reported in February 2008 at the time of budget setting and has been updated for known changes (these are highlighted in the appendix in the "changes" column and detailed in paragraph 1.12 above). If the requests shown in recommendations 2.1 - 2.3 are approved by the Cabinet, the overall situation would be as follows:

1.21 The position against the medium term reserves strategy as agreed in the 2008/09 Budget report is shown in the table below:

1.22 As a result the Council is £3.1m ahead of the reserves strategy outlined in the budget report to Council on 19^th February 2008.

1.23 The Robustness of Estimates review carried out as part of the 2008/09 budget, and reviewed monthly, informed a target level of reserves of £11.5m. The proposals in this paper and a 2008/09 out-turn in line with budget assumptions will mean that the target will have been achieved by the end of 2008/09 (two years earlier than originally envisaged). The £11.5m target included £1m relating to potential exceptional litigation costs. It is proposed that this risk is met from the Exceptional Risk Reserve (ERR), with the general reserves target therefore being lowered to £10.5m and £1m being transferred to the ERR as a consequence. It is further proposed that a further £751k be transferred to the exceptional risk reserve, which would mean that, assuming the 2008/09 budget is met and, even if the new Revenue Budget Contingency Reserve was utilised, then the general reserves target at would still be met at 31 March 2009.

1.24 The balances held by schools have increased by £903k from £3.451m to £4.354m.

COLLECTION FUND OUTTURN POSITION

1.25 As part of the 2008/09 Budget an estimate was made on the position of the Council Tax Collection Fund as at the 31^st March 2008. The estimate was for a surplus of £350k, of which the Council's share was £297k (the balance is paid to the Police and Fire Authorities). The actual outturn position on the Collection fund for 2007/08 is a surplus of £980k (the Councils share is £831k). The improved position is a result of improved collection rates, higher than expected growth in the tax base and a reduction in the bad debt provision.

1.26 The improvement in the Collection Fund position will be factored into future years within the Medium Term Financial Plan.

CAPITAL OUTTURN 2007/08

1.27 The capital budgets (excluding schools) have spent £5m below the 2007/08 revised budget or £7.5m below the revised budget including schools. Schools controlled capital spend was £2.5m below budget.

1.28 This variance included slippage on capital contingency of £1.2m. Services are requesting carry forward of slippage and net overspends to 2008/09 of £2.5m (see appendix 7). It is also proposed to transfer the remaining under spends to capital contingency in 2007/08 and then the slippage of all unspent contingency to 2008/09.

1.29 Details of the overall capital outturn position are given in Appendix 6 with detail on carry forward requests in Appendix 7.

1.30 Generally most slippage was incorporated in the 2008/09 budget setting with £18m slipped at that time. This represents an improvement in capital forecasting on previous years (There was a £9.3m slippage transfer from 2006/07 to 2007/08 in the outturn last year for example).

1.31 There are further requests for £2.482m now (see appendix 7) plus in addition £2.539m will need to be slipped to 2008/09 for the school controlled capital under spend. There is another £800k being transferred into contingency for which a further request is expected in 2008/09 for the "Urban Public Realm/Wayfinding" project. However as a new capital project with no existing budget approval this will require Council rather than Cabinet approval for 2008/09. In addition a request received by the Cabinet for capital grant to the Cabinet from the Holburne will also require Council approval, as no existing scheme exists to finance this.

Capital Resources

1.32 The 2007/08 budgeted figure for capital receipts assumed Right to Buy (RTB) sales of £1m from Somer Housing Association and General Fund sales of £10.888m, giving estimated receipts of £11.888m. Actual receipts achieved, net of costs, were RTB sale receipts of £2.058m and General Fund receipts of £9.880m. The net position on capital receipts was £11.938m, £50k above the target. In addition £800k of receipts were carried forward from 2006/07.

1.33 We are also required to report to you how the 2007/08 programme is to be financed (including the £33.617m of grant funded Stone Mines, Growth Point Funding and SRB expenditure). This is as follows: