Contact: Ejner Knudsen, ext 7403 email: [email protected]

1 Introduction

1.1 This report provides an update on the revenue budget monitoring position reported in September.

1.2 It provides details of recent changes to the revenue budget cash limit for the year and reports on the outcome of the most recent budget monitoring review carried out in consultation with budget holders within the Environment Department during September and early October. Details of assessed expenditure to date and a forecast outturn for the year are provided for each major budget heading.

1.3 A detailed summary showing the planned allocation of the highways maintenance budget is provided, and the report also reviews the achievement of planned turnover and other housekeeping savings on the management and support services. The latest monitoring positions on public transport and waste management are also discussed.

1.4 The overall budget monitoring position appears satisfactory for this stage of the financial year. Although the budget remains under pressure in some areas, it should be possible to contain expenditure for the full year within the approved cash limit.

2 Cash limit changes

2.1 The previous report in September made reference to a number of adjustments that had been made to the revenue budget cash limit since the 2003/04 original budget was approved during February. These adjustments had increased the Environment revenue budget cash limit to £82.475 million. The following additional changes to the cash limit have recently been made:

· An increase of £723,000 for the estimated call on the central waste management contingency to reflect additional expenditure arising from the operation of the waste management contract during the second quarter of the year.

· A transfer to Policy and Resources of £116,000 in respect of County Treasurer's Department services, other than the devolved finance unit, which will no longer be included in departments' cash limited expenditure. This technical adjustment to the budget is required because in future the cost of the County Treasurer's services would form part of Policy and Resources cash limit and the relevant expenditure will be allocated to individual services at year end as part of the recharge for central support services and repairs and maintenance of buildings.

· Other minor virements and adjustments between Environment and Policy and Resources, resulting in an overall increase of £1,000.

2.2 The adjusted cash limit is £83.083 million, taking into account the above variations. Appendix 1 provides an analysis of the cash limit over the main service headings, together with details of assessed expenditure to 30 September 2003 and the forecast outturn for each division of service.

3 Budget monitoring review

3.1 As in previous reviews, the departmental budget monitoring process has involved meetings between finance section staff and those departmental staff with budget management responsibilities. Progress in implementing spending plans has been reviewed and consideration given to expenditure and income trends in order to arrive at a forecast outturn for the year for each budget heading. The main issues arising from the budget monitoring review are discussed in the following paragraphs.

Highways maintenance

3.2 The 2003/04 budget provision for highways maintenance is £19.515 million for routine maintenance, funded from the revenue budget, together with £27.274 million for structural maintenance schemes and repairs, funded from the capital programme.

3.3 On the capital maintenance programme two major maintenance schemes, the A334 Curdridge and A325 Alice Holt Phase 1, had preliminary estimates for programming purposes of £1.850 million and £1.500 million respectively. During the detailed design phase of the schemes, it proved possible to make several economies, reducing the likely final cost. The tender prices that have now been received, including allowances for contingencies and fees, are £1.350 million for the A334 Curdridge and £0.750 million for A325 Alice Holt Phase 1, enabling the original schemes to be completed as planned whilst realising savings of £1.250 million for redistribution within the capital programme.

3.4 In addition, the anticipated design fees for structural maintenance schemes for 2003/04 have been assessed at approximately 8% of the works costs, compared to the allowance of 10% originally anticipated and included in the programme. This change results in an additional £220,000 being available for additional works.

3.5 Other minor changes to the programme to reflect the final outturn on a number of capital maintenance schemes together with additional allocations for bridge maintenance works, has resulted in partially offsetting increases of £380,000. However, the net result is that savings of approximately £1.090 million are available for redistribution. Although these sums are quite large, there is nothing unusual in these programme changes which are a routine part of the department's regular monitoring and adjustment of works budgets.

3.6 Appendix 2 sets out details of the 2003/04 highways maintenance programme, showing variations between the programme previously reported in September and the latest forecast outturn. Further changes to the highways maintenance programme will be reported in the 2003/04 revised budget in January.

Management and support services

3.7 As mentioned in the September budget monitoring report, the 2003/04 cash limit assumes that savings from staff turnover and other housekeeping efficiencies will be achieved during the year in order that overall departmental expenditure may be contained within the budget. The 2003/04 savings requirement was set at £603,000, equivalent to 2.9% of the departmental budget.

3.8 The previous budget monitoring report, covering the first quarter of the financial year, identified actual savings from staff vacancies of £196,000. The latest savings figure for the year to date, based on the budget monitoring review completed during September, has increased to £317,000, reflecting further savings from staff vacancies, together with other variations including additional income. Although the achievement of the full savings will need to be monitored carefully during the remainder of the year it does, at this stage, appear likely that the overall target will be met in full.

3.9 A further detailed review of the management and support services budget will be undertaken during November and reported as part of the revised budget in January.

Public transport

3.10 The key area in managing the public transport budget is in monitoring commitments against the budget for bus subsidy contracts, where the level of committed expenditure against the budget of £5.278 million can often vary throughout the year depending upon the extent of contractual changes within the network.

3.11 The previous budget monitoring report in September indicated that the projected 2003/04 level of commitment against the bus subsidies budget was £5.208 million, leaving just £70,000 available as unallocated within the budget to meet any further cost increases arising from contract re-tendering or the deregistration of commercial services. The latest monitoring position, including additional costs arising from a recent commercial service deregistration in Basingstoke and provision for a contractual change in the Winchester area, have increased the overall commitment to £5.274 million. This leaves just £4,000 available in the bus subsidies budget to meet any additional pressures during the remainder of 2003/04.

3.12 Should additional pressures on bus subsidies arise during the remainder of the year then it would be necessary to review the allocation of financial resources to other parts of the public transport budget, to ensure that the approved public transport budget is not exceeded.

Waste management

3.13 The waste management revenue budget is divided into two separate categories for the purposes of budget monitoring:

· The waste contract related budgets, including trade waste income and recycling credits.

· The other non-contract related waste management services covering facility management, administration, promotions and developments, disposal of abandoned vehicles and provision for household waste recycling centre (HWRC) management.

Waste contract related budgets

3.14 The 2003/04 budget for the waste contract related budgets was based on expenditure commitments at the time it was prepared in November 2002. No allowance was included for growth in waste volumes beyond predicted 2002/03 levels, future price increases, increases in landfill tax or other contract cost pressures. A contingency sum of £3.700 million was included in the overall 2003/04 County Council budget to cover these items.

3.15 Periodic allocations are made from this contingency to the waste management budget, based on quarterly assessments of cost increases to the contract and related budgets. The second quarter's call on the contingency has been estimated at £723,000 on which, together with the first quarter's allocation of £485,000 made earlier in the year, has increased the cash limit for the waste contract related services to £32.305 million. This leaves a sum of £2.492 million in the central waste contingency to cover cost increases during the remainder of the year.

3.16 The encouraging trends towards lower household waste volumes and higher recycling levels identified in the previous monitoring report have so far been sustained during the second quarter of the year. The latest figures show that household waste volume levels during the first five months of the year were 3.0% lower than in the corresponding period in 2002/03 and the overall level of recycling has also increased, with a resulting reduction in material being land-filled. Although expenditure in connection with the storage and disposal of refrigeration equipment is continuing at a level beyond the allowance made in the central contingency, which would result in excess expenditure of approximately £300,000 if monthly numbers remain at their present level, the current indications are that expenditure on the waste contract related services during 2003/04 should be contained within the overall budget provision.

Other waste management budgets

3.17 An increase of £394,000 was made to the 2003/04 budget, in line with the additional support provided by the Government, to cover anticipated higher costs associated with the introduction during 2003 of the End of Life Vehicles (ELV) directive. Current expenditure trends suggest that the pressure on the abandoned vehicles budget has eased following the previous year's audit investigations, together with a more favourable market position for scrap metal. However the full impact of the introduction of the ELV directive has yet to be experienced and it is likely that expenditure during the second half of the year may be higher as a result of the higher handling and disposal costs under the directive together with the expected increase in the number of vehicles being abandoned.

4 Conclusion

4.1 A number of changes have been made to the 2003/04 cash limit to reflect the second quarter's call on the waste contract contingency, together with various other technical adjustments to the budget. The revised 2003/04 cash limit is £83.083 million.

4.2 On the highways maintenance budget, savings have been identified against the original programme for major maintenance schemes.

4.3 Savings totalling £317,000 from staff turnover, other efficiencies and additional income have been identified on the departmental budget for management and support services, against the full year savings target of £603,000 included in the budget.

4.4 On public transport, the budget for bus subsidies is almost fully committed following recent contract changes. Amendments to the budget may need to be made to accommodate any further pressures should they arise during the remainder of the year.

4.5 Expenditure on the waste contract related budgets is within the overall budget allowance reflecting lower waste volumes and higher rates of recycling. Costs relating to the disposal of abandoned vehicles have also been within the budget allowance.

Recommendation

1 That the report be noted.

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

Environment Departmental Management Board : 21 October 2003 - Revenue Budget Monitoring 2003/04

Appendix 1

Environment

Revenue Budget 2003/04 - Monitoring statement

Analysis of variations

Appendix 2

Environment

Summary showing detailed allocation of Highways maintenance budget

Revenue budget 2003/04

Capital Maintenance programme 2003/04