Contact: Sheila Little, ext 7545, e-mail: [email protected]

1 Summary

1.1 This report summarises the Education service's spending in 2003/04.

1.2 This report recommends that the final accounts for 2003/04 be approved and that the £555,000 overspend be met from reserves as proposed by Cabinet in February 2004 and endorsed by Cabinet in June 2004.

1.3 Decisions on revenue expenditure and capital programmes and the allocation of the financial resources available contribute to all six corporate strategy aims. Most notably to Aim 1: maximising life opportunities; Aim 3: achieving economic prosperity and Aim 5: improving services.

1.4 Race and equality impact assessment has been considered in the development of this report and no adverse impact has been identified.

1.5 Although there is an overall net under spend of £487,000 (0.1%) against the 2003/04 adjusted revised revenue cash limit of £643.8m, this cash limit reflects the projected overspend of £1.042m as reported to the Cabinet in February 2004. As such the Education Service has managed a reduction in their overspend to £555,000.

1.6 The major variations against the revised cash limit are:

1.7 The County Council's policy is to carry forward into the following year 100% of net overspendings and 50% of net unplanned underspendings. Cabinet decides what use should be made of the other 50% underspending.

1.8 The strategy agreed for Education by Cabinet in February 2004 involves the 2003/04 overspend being met from reserves up to a value of £1.042m. This was agreed because of the Government's restrictions on central spending in the Schools Budget for 2004/05 which meant that the Service was not able to set the 2003/04 overspend as a first call on the 2004/05 budget. In February 2004 the overspend was anticipated to be about £1m, but Education has continued to manage its spending down towards the cash limit for the remainder of 2003/04.

1.9 The Service's business and trading units operate under arrangements agreed by the County Council which permits them to retain planned surpluses for purposes approved in their business plans or to take into account in setting future budget strategies. The outturn position on these units indicates a 16% reduction in overall reserves to £1.177m which is in line with the projections reported on the 20 January 2004. Over the next two years this surplus will reduce further.

1.10 On capital, schemes to the value of £44.97m started in the year and schemes to the value of £11.07m have been approved to be carried forward to start in 2004/05. In total this amounts to £1.622m less than the approved cash limit for the capital programme. Capital receipts from earlier years together with other allocations have been retained to reduce the shortfall in funding identified in future years.

Local Management of Schools

1.11 Any balance of budget allocation held by schools at the year end, whether surplus or deficit, must be carried forward into the next financial year. During 2003/04 the overall level of school reserves under LMS increased by a total of £12,000 ( Primary balances by +£137,000, Secondary by -£324,000, Special by +£124,000 and Nursery by +75,000). The cumulative reserves now stand at £28.343m which represents 5.4% of schools' allocations as shown in the table below:

1.12 The above figures are higher than anticipated from the indications received from schools earlier in the year, suggesting that they had plans to reduce balances. Despite this 55 schools were in deficit at 31 March 2004 after taking account of retrospective number on roll adjustments. This is the same total as at March 2003, although the mix between sectors is different. There are 33 primary (down from 35), 18 secondary (the same as last year) and 4 special (up from 2) schools in deficit situations. In line with good practice in previous years, officers will be asking all school governing bodies with surpluses for a plan indicating how they aim to use these surpluses.

1.13 One of the key criteria for the allocation of the one off Transitional Support Grant during 2004/05 was that all those schools in deficit (and those in receipt of more than £15,000 transitional support grant) have to produce an agreed, costed three year stability / recovery plan in order to be eligible to receive the grant. All except one school has done this and it is therefore expected that the level of deficits at the end of 2004/05 will be significantly reduced. Officers continue to assist the one school to finalise the required three year plan.

1.14 Further details on the main differences between the actual revenue expenditure and the revised budget for cash limited expenditure are given in Part A below, while details of revenue expenditure which is not included in the cash limit are contained in the appendices at the end of the report. The results of the trading units are reported in Part B. Part C deals with capital schemes. Part D explains the basis of the control assurance statement included as Appendix 8.

2 Part A - Revenue Expenditure under the Service's control

2.1 Revenue expenditure under the Service's direct control is subject to a cash limit. For 2003/04 the adjusted amount is £643.8m as set out in Appendix 1.

2.2 The final outturn was £487,000 less than the cash limit, although still £555,000 more than the original cash limit. The overall position is analysed in Appendices 2 and 3. Appendix 4 includes a more detailed statement of variations from the revised budget.

2.3 The 2003/04 budget included a number of priority areas which were allocated additional funding by the County Council. Some enabled services to be maintained despite the withdrawal of central government funds because the service was essential to the County Council securing other funding e.g. three education welfare posts in Gosport linked to LPSA targets. Others reflected a new or existing statutory requirement e.g. revision of the Agreed Syllabus for Religious Education. One enabled a service to more closely reflect increased client demand e.g. Parent Partnership service.

2.4 The most significant elements within the total net under/overspending are explained in the following paragraphs.

Central Management -£44,000

Minor variations on a number of school specific budgets including contingencies, supply cover and copyright licenses make up this under spend, which represents 1.2% of a total cash limit of £3,664,000

Inclusion (SEN) £95,000

Planning and controlling expenditure on demand-led budgets for pupils with special education needs continues to be a challenging management task. The outturn for the various non-delegated budget in 2003/04 shows a net overspend of £95,000 made up as follows:

· the reduction in out-county costs relates to a number of issues, for example two pupils moved out of need, 6 pupils were either not placed or placements were delayed, 1 pupil was permanently excluded.

· the increase in "statements in mainstream" is the result of some of the out-county pupils above receiving local provision, in addition to general pressure of more complex / more expensive provision.

· The increase in EOTAS partly relates to the circumstances surrounding Hawthorns School as reported to the committee previously. In addition it proved not possible to secure the necessary funding from the Capital Programme to reimburse the service for the cost incurred in providing additional classroom provision at one centre.

Early Years -£334,000

This represents a 2% variation in the budget and reflects lower than expected take-up , in particular by 3 year olds.

Other School Centrally held Budgets £47,000

In total, budgets managed centrally on behalf of schools, excluding elements of special education needs and home to school transport dealt with elsewhere, show a net overspend of £47,000. The most significant variations resulted from additional expenditure on premature retirements of staff in schools (£115,000), partially off set by under spending on boiler insurance being paid for via a schools Service Level Agreement rather than this central budget (-£28,000) and increased income from school balances due to higher interest rates (-£28,000).

Access (i.e. Home to School Transport and Pupil Support) -£235,000

The majority of this under spend relates to home to school transport (£189,000 against the revised budget of £18.663m) and reflects the continuing success of spend to save initiatives in reducing contract costs and higher levels of income, following management action to increase revenue. A further under spend of £60,000 on pupil support reflects lower than expected claims for school clothing allowances.

Youth Service £245,000

Whilst this is the first year for several years that this budget has overspent, a number of unique factors have caused this situation: improved staff recruitment and retention relatively late in the year (£75,000); an income miscoding of £88,000 which was not picked up until the end of the financial year; higher than expected relocation accommodation costs (£60,000). Management action has already been taken including a review of the budget monitoring within the service to ensure that the situation is not repeated.

Services to Schools and Support -£262,000

In total a net under spend of £262,000 resulted on a revised budget of £24.797m. This situation arises mainly from delays in replacing outdated ICT systems (£82,500), the lower than expected staffing related costs in a number of areas including: the Behaviour Support Teams (£20,900); the SEN Teacher Advisor budget (£28,500); Early Years core budget (£63,400). The remaining under spend is made up of small variations on a number of headings.

3 Part B - Trading Units

3.1 The trading activities of the Education business units during 2003/04 have resulted in an overall in-year deficit of £231,000, compared with a planned deficit of £182,000, on a gross budget of £24.8m. The outturn position on the Service's business and trading units are set out, in summary, below:

3.2 As a result of the a 2003/04 outturn, business units' cumulative surplus as at 31 March 2004 amounts to £1.177million. Current business plan for EFS, EPS and EdICT are forecasting deficits for 2004/05 as a result of additional costs necessary to provide medium term support to schools in respect of resource management, technological change and workforce remodeling. That and other service developments indicate a significant reduction in the overall surplus over the next three years.

3.3 In addition Minstead Study Centre will be using its reserves to part fund the improvement work at the centre which is due to commence in October 2004, while the Stubbington Study Centre will be using its reserves to fund further building work in 2005/06.

3.4 The summarised trading accounts of the individual business units and a comparison with the revised budget are shown at Appendix 5

3.5 Appendix 6 lists those items of expenditure which effect the Education Service but are not within the direct control of the service.

4 Part C - Capital expenditure 2003/04

4.1 The outturn for 2003/04 is set out below, with details of the total resources and of the individual schemes started in the year appearing in Appendix 7.

			Total
			£'000
Total resources			57,660
Value of schemes started in 2003/04			44,969
Value of schemes carried forward to 2004/05			11,069
Under commitment against the cash limit			1,622

4.2 The total starts limit for 2003/04 amounted to £57.66m and schemes to the value of £44.97m were started in the year.

4.3 Schemes approved to be carried forward to start in 2004/05 totalled £11.07m and included work at Brune Park Community School, Priestlands Community School, Eggars Secondary School and the Lanterns Early Years Centre, Winchester. The list of schemes started and carried forward are included in Appendix 7.

4.4 The combined value of schemes which started in 2003/04 and those carried forward to start in 2004/05 is £56.966m which is £1.622m below the cash limit and the balance of the cash limit can also be carried forward to 2004/05.

4.5 The table below sets out the pattern of devolved capital allocations to schools since its introduction in 2000/01, together with the pattern of expenditure. This shows the time lag and that currently there is £10.7m remaining to be spent by schools. This is in addition to revenue school balances.

4.6 In accordance with the County Council's Financial Procedures, the final costs of capital schemes completed in 2003/04 are listed in Appendix 7. "Completed" in this context means when the final payment has been made. Some of these schemes may have been in operation prior to April 2003, but the final payment was only made in 2003/04. Fourteen major schemes, with total contract values of £9.9m, were completed and included Whiteley Primary School, Brune Park Music / drama suite and laboratory refurbishment works at secondary schools.

4.7 Work continues on apportioning the final cost of the schemes completed in 2003/04 between the various funding arrangements. A statement will be submitted with the next monitoring report.

5 Part D - Departmental Assurance Statement

5.1 From 2002/03 the Code of Practice on Local Authority Accounting in the UK has required the County Treasurer to sign a statement on the system of internal financial control as a note to the published accounts. From 2003/04, the Leader and Chief Executive will also be required to sign a more general statement of internal control. As part of this process the Chief Internal Auditor is required to provide an independent opinion on the adequacy and effectiveness of the system of internal control operating in each department and in the County Council as a whole. These opinions are reviewed by the Standards Committee. Appendix 8 contains the statement relating to the Education Service and concludes that Education Service has a framework of control which provides reasonable assurance regarding the effective, efficient and economic achievement of the County Council objectives.

Recommendations

1 That the final acounts for 2003/04 be approved.

2 That the £555,000 over spending in 2003/04 as compared to the original budget, but met from central reserves as agreed by Cabinet in February 2004 rather than forming the first pressure on the 2004/05 budget.

Section 100D - 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 have been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

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

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