REPORT OF THE CABINET/LEADER

PART I

FINAL ACCOUNTS 2001/02

1. The Cabinet has approved the final accounts for the County Council for the year ending 31 March 2002. The draft statutory Statement of Accounts giving full details is circulated separately to each member of the Council and the Constitution requires the Council to approve it at this meeting. A copy of the original report to Cabinet has also been circulated. Some of the significant features of the accounts are described in the following paragraphs.

Service Cash Limited Expenditure and Total Expenditure

2. Service cash limited spending in 2001/02 (summarised in Appendix 1) was £243,000 above the revised estimate. This represents 0.03% of service spending and the Cabinet is very satisfied at this close level of budgetary control. The overspending is offset by a saving on other budgets, mainly from interest on balances, leading to a net overall underspending of £2m.

3. The main area of overspending occurred on Recreation and Heritage principally from the impact of the foot and mouth crisis (£0.2m) and an overspend on Milestones Museum, Basingstoke of £0.3m following difficulties in forecasting visitor numbers which led to over-optimistic forecasts over the longer period. There was also a net overspending of £40,000 on Policy and Resources mainly on personnel and training from the impact of one-off redundancy costs (£120,000) as part of the Hampshire Training Solutions recovery plan, offset to some extent by savings elsewhere. Despite pressures during the year, Social Services achieved a net underspending of £295,000 against its cash limit compared with the last estimate of pressures of some £0.2m.

Action with regard to underspendings and overspendings

4. A commitment has already been made to deal with foot and mouth costs centrally and in addition it is proposed to carry forward the Milestones deficit to be met from future income, and to carry forward the small overspend on Policy and Resources. With regard to underspendings it is proposed to adhere to current policy and return 50% to the service (i.e. in this case Education, Environment and Social Services); in each case the amounts involved are relatively small.

Other Budgets

5. As previously mentioned, savings on other budgets, following adjustments for carry forward, result in a net overall underspending of just over £2m (see Appendix 2) which it is proposed should be used for one-off pressures and investment (£1.6m) (see Appendix 3) and adding to balances as a further protection against other external pressures and liabilities in 2002/03, and the uncertain budget outlook for 2003/04 (£0.4m).

Balances

6. As mentioned under paragraph 5 above, it is proposed that £0.4m be added to general balances and the impact on balances is set out as Appendix 4.

7. The minimum target level of balances is £6.1m (0.6% of the budget) as shown in Appendix 4. There remains £4m in balances which is available to support the anticipated difficulties in 2003/04 (when formula grant is introduced) and the potential liabilities of about £10m that were identified when a 2002/03 budget was prepared. In addition £1.4m will be available to meet anticipated increases in the fire levy in 2003/04.

Earmarked Reserves

8. Earmarked reserves have increased to £68.8m at 31 March 2002, which is £11.6m more than assumed when the 2001/02 budget was reviewed, but £5.9m more than the reserves at the start of the year. These reserves are set aside for specific purposes and the main reason for the net increase is the rise in schools' reserves of £6.1m. Schools' reserves now stand at £31m, 6.9% of delegated budgets, and have increased because of additional Government grants and the use of Standards Fund over 17 months rather than 12 months. The other significant changes during 2001/02 were the use of most of the £4.1m "invest to save" reserve, partly offset by the increase in the capital reserve. The total position with regard to variations in the earmarked reserves is set out as Appendix 5.

Treasury Management

9. The Cabinet has approved the County Treasurer's annual report on the administration and management of the County Council's borrowing, debt and investments.

Pension Fund Accounts

10. The Cabinet has approved the separate accounts for the Hampshire Pension Fund.

County Council Assurance Statement

11. In accordance with the Code of Practice on Local Authority Accounting, a statement of internal financial control is included in the 2001/02 Statement of Account. As part of the process of enabling the County Treasurer to form a view on the effectiveness of internal financial control, the Chief Internal Auditor has produced an independent assurance statement on the adequacy and effectiveness of the system of internal control in each department; his conclusion is that there is an effective framework of control in place.

Capital Spending and Financing 2001/02

12. The Cabinet has reviewed capital spending and financing in 2001/02. Capital payments amounted to £117.3m, some £9.7m more than was estimated at the revised budget stage. This was due to higher spending on schemes funded by Government grants and specific borrowing approval (£3.8m) and contributions from developers and outside agencies (£4.2m). In addition, payments on locally resourced projects were £1.7m higher than forecast mainly as a result of a revised payments profile on the Enterprise project.

13. Capital receipts amounted to £22m. This was £1.5m more than was estimated due to the timing of some receipts as between 2001/02 and 2002/03; but of course, capital receipts in 2002/03 will be correspondingly lower.

14. The County Council's debt outstanding on 31 March 2002 was £303.8m. The net increase in borrowing for the year was £27.7m. Appendix 6 shows the extent to which the capital programme of each service area was achieved in 2001/02. The record of payments for each service and the nature of those payments is shown in Appendix 7. An analysis of capital receipts is shown in Appendix 8, and trends in outstanding debt in Appendix 9.

RECOMMENDATION

That the draft 2001/02 Statement of Accounts as set out in the documents circulated separately be approved.

T.K. THORNBER, CBE

CHAIRMAN

5nR680802