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1. Introduction

1.1 This report outlines the current financial situation, and presents the financial outturn for the year 2002/03 and the budget for 2003/04. Urgent action is required by the JMC partners to address the financial situation.

1.2 Appendix A compares actual revenue expenditure and income with the revised budget for 2002/03.

1.3 Appendix B shows the budget for 2003/04.

2. Financial situation

2.1 The financial situation at the Park should be one of Joint Management Committee's first priorities.

2.2 In 2001/02, the year that the Park had to close for several months due to Foot and Mouth disease, the operations of the Park made a deficit of some £168,000. This was partly offset by a one off contribution of £113,000 from Hampshire County Council (in accordance with the partnership contribution formula then in place), and the rest (£55,000) was taken from the Park's reserves, reducing them to £6,248.

2.3 On its own, this level of reserves would be insufficient to provide the Park's management with any flexibility. However, a further £20,170 was planned to be committed from reserves as matching funding for the major HLF project. This will now have to be found from elsewhere.

2.4 In 2002/03 the Park made a further deficit of £15,596 (although this was less than originally forecast, see paragraph 4 below), taking the Park's reserves into deficit for the first time.

2.5 The current forecast for 2003/04 is for a further deficit of £9,200 (see paragraph 5 below).

2.6 Currently the Park is effectively overdrawn on its account with the County Council (which acts as Treasurer). Whilst the relationship with the County Council ensures that the day to day operation of the Park can continue, the situation must be addressed urgently by the partner authorities.

3. Financial trends

3.1 Before considering the specific figures for 2002/03 and 2003/04, it is worth bearing in mind the financial trends for the past few years, as set out in the table below:

Both 2001/02 and 2000/01 were adversely affected by closure due to Foot and Mouth disease.

3.2 The key features of the above table are, taking 1997/98 as a base year:

· The fall in the real and cash value of local authority contributions (except for the additional one-off contribution in 2001/02) (-10%)

· The rise in income generated from the Parks operations (+£162,000, +94%)

· The rise in gross expenditure costs of the Park's operations (+£164,000, +42%)

3.3 The increase in income from operations has been matched by the increase in expenditure.

3.4 The main changes in local authority partner contributions have been :

· Portsmouth ceased to be a contributing partner after 2001/02 (-£29,941)

· The agreed contribution for East Hampshire is now £5,000 per year (£29,941 in 1997/98)

· The agreed contribution for Havant is now £10,500 (£29,941 until 2002/03)

· Hampshire County Council has increased its contribution by £50,000 to cover the decreases from Portsmouth and Havant.

· The partnership agreement now includes provision for an annual inflationary uplift in partner contributions

3.5 The park needs a recovery plan to deal with the accumulated and ongoing deficit. Operational expenditure needs to be tightly controlled and all opportunities for additional income explored. Consideration should be given to approaching the partner authorities for further contributions. The Park needs at least a net additional £20,000 per annum to wipe out the accumulated deficit and turn the ongoing deficit into a surplus by next year.

4. 2002/03 Final Accounts

4.1 Overall, net expenditure of £221,430 was within the revised budget of £235,800. The revised budget anticipated a transfer from reserves of £29,966 to support the revenue account. Despite the effects of the building work associated with the HLF project the deficit on the revenue budget was restricted to £15,596.

4.2 The variations within the budget headings are summarised below:

a) Employees (-£13,199)

Significant savings were made due to delaying the appointment of the Park Manager until May 2003.

b) Premises (+£3,696)

Higher costs of gas and water are the main factors in this overspend.

c) Transport (-£1,402)

There were minor savings across all budget headings.

d) Supplies and Services (+£19,754)

Additional expenditure on equipment, hired services and promotions. These resulted in additional earned income. The costs of telephones and ICT also exceeded the budget.

e) Income (+£23,219)

All income targets were exceeded which is very encouraging considering the possible inconvenience of the building works. These are a necessary part of the improvements to the Park through the HLF project. The events and extra activities provided during the school holidays have proved to be a great success and have been the major contributor to the growth in income.

5. Reserve account

5.1 At 1 April 2002 the balance in the reserve account stood at £6,248. During the year, interest of £369 has been earned bringing the total in the reserves to £6,617. This is insufficient to cover the £15,596 deficit on the revenue budget. Consequently, the reserve account is overdrawn by £8,979:

5.2 The general reserve is intended to allow the manager a degree of flexibility in managing the operation of the park, and this is now impossible. More seriously, some of the reserve funds which had been identified as matched funding for the Lottery scheme will now have to be found from elsewhere (£20,170).

6. 2003/04 reserve account

6.1 Appendix B shows the budget for the current year. The original budget has been amended for the full effects of inflation, harmonising pay with other Hampshire County Council Countryside staff, training, expenditure on operational equipment and materials. In addition, challenging income targets have been set based on new activities and more visitors.

6.2 The amended budget shows an anticipated drain on reserves of £9,207. This will put the reserve account further into deficit, and leave the Park Manager without the funds to deal with any unforeseen expenditure. As stated above, the ongoing deficit needs urgent attention by the JMC and the partner authorities; the operations of the Park are being protected by the relationship with the County Council.

6.3 A new and welcome feature in the 2003/04 budget is the contribution of £500 from Horndean Parish Council, who have recently joined the Park's Stakeholder forum.

Recommendation

1. That the final accounts for 2002/03 be approved.

2. That the overall finanical situation and the current budget for 2003/04 be noted.

3. That the partner authorities be urged to make good the deficit in the general reserve and the shortfall in the matched funding for the lottery project.

4. That a recovery plan is put in place immediately to bring the Park to at least a break even position.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

Published works.

Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

Appendix A

Sir George Staunton Country Park final accounts 2002/03

Appendix B

Sir George Staunton Country Park budget 2003/04