Contact: Anne Hibbert, ext 7533; e-mail: [email protected]

1 Summary

1.1 The following decisions are sought:

i) That the final accounts for 2003/04 be approved.

ii) That 50% (£141,000) of the underspending in 2003/04 be carried forward and added to the 2004/05 budget as set out in paragraph 1.9.

1 Reason

1.1 To approve the final accounts for Policy and Resources for 2003/04 and agree the basis for the carry forward of 50% underspendings to 2004/05.

1.2 Decisions on Policy and Resources revenue expenditure and capital programme impact on the financial resources available to Policy and Resources' direct services and the financial resources available to the central services that support all other County Council services. As such these decisions impact on the full range of corporate strategy aims:

i) maximising life opportunities

ii) stewardship of the environment

iii) achieving economic prosperity

iv) building strong and safe communities

v) improving services

vi) developing councillors and staff.

2 Other options considered and rejected - not applicable.

3 Conflicts of interest declared by the decision maker or other Executive Member consulted - not applicable.

4 Dispensation granted by the Standards Committee - not applicable.

5 Reasons(s) for the matter being dealt with if urgent - not applicable.

Approved by: Date:

............................................. ............................

Councillor: T K Thornber

Contact: Anne Hibbert, ext 7533, e-mail: [email protected]

1 Summary

1.1 This report summarises Policy and Resources spending in 2003/04.

1.2 It recommends that the final accounts for 2003/04 be approved and that 50% of the underspending be carried forward to 2004/05.

1.3 Decisions on Policy and Resources revenue expenditure and capital programme impact on the financial resources available to Policy and Resources' direct services and the financial resources available to the central services that support all other County Council services. As such these decisions impact on all six of the corporate strategy aims.

1.4 Overall there is a net underspending of £281,000 (0.7%) against the 2003/04 adjusted revised revenue cash limit of £38.540m. This represents a slightly larger underspending than the forecast of £131,000 reported to the Executive Member in April 2004.

1.5 The major variations are

	£'000	£'000
Chief Officer controlled budgets
Chief Executive - Community Planning grants - Best Value - "Hampshire Now" and "Spotlight" - Other services	-107 -27 -15 -3	-152
Personnel and Training - Departmental budget - Leading Success - Hampshire Learning Centre	25 -8 -67	-50
County Treasurer	-8	-8
Property, Business & Regulatory Services	9	9
Other budgets - Coroners - County Council elections - Audit fee - Members support costs - Other central and direct services	-57 -44 -26 29 18	-80
Net underspending		-281

1.6 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. On this basis £141,000 will be added to Policy and Resources cash limit for 2004/05.

1.7 An underspending of around £100,000 on community planning grants was predicted in the previous budget monitoring report due to delays in a number of projects and the Executive Member agreed the principle of allowing this underspending to be carried forward to 2004/05, subject to a decision when the final accounts were considered. It would be possible to carry forward this underspending in full, based on the following assumptions:

o that 50% of the underspendings of Chief Officer controlled budgets are carried forward, after allowing for the Chief Executive's revised budget being £29,000 above the cash limit, an anticipated overspending that did not materialize due to other savings in the final accounts.

o The normal practice would be carry forward the £9,000 overspending on Property, Business and Regulatory Services budgets. However due to underspendings on other budgets that need not be carried forward, it would be possible to limit the carry forward to £3,000. The cash limit has been adjusted to allow for the unused winter contingency for building maintenance of £103,000 which will also be carried forward to 2004/05.

1.8 Grants to New Forest Museum and Library were approved at the last Executive decision day, for which the funding arrangements need to be agreed. It is proposed that the grant of £50,000 towards the development scheme be met from the unallocated balance of £98,000 in the capital programme (paragraph 4.4). The one-off revenue grant of £25,000 to aid the relaunch of the centre could be financed from the balance of the contingency item of £300,000 for grants to voluntary organisations (£18,000) and by transferring £7,000 of the remaining unallocated capital programme provision to revenue.

1.9 On the basis outlined in paragraph 1.7 above, the amendments required in the 2004/05 budget for the carry forwards are:

	Overspending (+) Underspending (-)	Reduction (-) Addition (+) Carry forward to 2004/05
	£'000	£'000
Chief Executive - Community Planning grants - Other services Personnel and Training	-107 -45 -50	107 8 25
County Treasurer	-8	4
Property, Business and Regulatory Services	9	-3
Other budgets	-80	-
Carry forward balance	-281	141

1.10 The outturn position on the Service's business and trading units are in summary:

	Revised Budget		Actual
	£'000		£'000
Property, Business and Regulatory Services	457	surplus	547	surplus
Information Technology Services (ITS)	149	surplus	814	surplus
	606	surplus	1,361	surplus

1.11 All of the units operate under arrangements agreed by the County Council which permit them to retain planned surpluses for purposes approved in their business plans, either as a contingency against future trading risks, to finance future capital investment or to be returned to customers through lower prices. IT Services increased surplus clears a brought forward accumulated deficit of £429,000 from earlier years due to investment in IT 2000.

1.12 On capital, schemes to the value of £34.716m started in the year and schemes to the value of £8.138m have been approved to be carried forward to start in 2004/05. In total this amounts to £98,000 less than the approved cash limit for the capital programme.

1.13 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 9.

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 £38.540m as set out in Appendix 1.

2.2 The final outturn was £281,000 less than the cash limit. This represents a slightly larger underspending than the forecast of £131,000 reported to the Executive Member in April 2004. 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 2003/04's underspending is lower than in 2002/03 following very close results in the previous two years as set out below:

	Variations from Revised Budget
	£'000	%
2000/01	-1	-
2001/02	40	0.1
2002/03	-334	-1.0
2003/04	-281	-0.7

The most significant elements within the total net underspending are explained in the following paragraphs.

Chief Executive (-£152,000)

2.4 The budget for 2003/04 included additional provision for the introduction of Health Scrutiny, strengthening corporate performance work, the opening of the New Milton Information Centre, and the appointment of a new policy and research officer. The budgeted proposals were implemented and are achieving positive outcomes.

2.5 An underspending on community planning grants had been anticipated as a result of delays in projects to support the regeneration of Rowner and in support of the RETIS project. Other savings arose on the staff magazine, Spotlight, as a result of reducing the average size of the publication and achieving extra advertising income. Delay in the completion of the youth strategy and in the undertaking of corporate identity work also generated an underspending on the budget for Best Value consultation. These underspendings more than matched the extra Economic Development costs incurred as a result of meeting legal costs relating to the organization of farmers' markets which had been allowed for in the revised budget in excess of the cash limit.

Director of Property, Business and Regulatory Services (+£9,000)

2.6 As in previous years, expenditure was very close to budgeted levels. The department's largest revenue budget - repair and maintenance - underspent by £103,000 against the initial cash limit because the winter contingency held within the budget was not fully utilised and this has been carried forward to 2004/05 by adjusting the 2003/04 and 2004/05 cash limits. It has also been possible to contribute £60,000 to the Sir Harold Hillier Gardens Development Fund - one year earlier than had been included in the approved business plan. Other budgets show a small overspending of £9,000.

County Treasurer (-£8,000)

2.7 The increased provision in the 2003/04 budget has enabled the department to contain transitional costs associated with the phased SAP implementation, respond to new statutory and best practice initiatives, and assist in raising the Comprehensive Performance Assessment rating for Use of Resources from a three to the highest accreditation of four. Expenditure for the year was very marginally below the budget.

Personnel and Training (-£50,000)

2.8 2003/04 was a year of significant development for the Personnel and Training department. The strategy and proposed structure for the new Human Resources Department has been developed. This restructuring will involve significant change for the department in 2004/05 including:

o Moving to a new organisation structure, creating a flexible framework that responds to national pressures, future challenges and supports inter-agency working.

o Infrastructure development to facilitate service delivery, and provide the basis for improved service delivery at reduced cost.

o New accommodation.

2.9 The department successfully absorbed all additional spending pressures in 2003/04 related to the restructuring and other operational activity and ended the year £50,000 below the revised budget.

2.10 2003/04 was the first complete year in which Hampshire Learning Centre (HLC) delivered corporate training functions following the restructuring of the Hampshire Training Solutions in 2002/03. HLC exceeded its income targets due to higher than anticipated demand for its pay per place courses towards the end of the financial year and the earlier than expected completion of a number of contracts. However, the 2004/05 HLC business plan allows for greater expenditure on training for the County Council based upon these higher volumes of income.

2.11 The cash limited Personnel and Training budget was subject to additional pressures due to the increased workload required to plan the restructuring combined with backfilling key posts for sickness cover. Management action to pursue efficiencies reduced the effect of these pressures to £25,000 above the revised budget. The Occupational Health service was reviewed and the resulting increased Corporate funding utilised to improve the level of service to the County Council.

2.12 Approval was granted, during the year, for the carry forward to 2004/05 of £60,000 Corporate Leadership programme funding, enabling a better match against the timetable for the project's delivery. However, a small surplus of funding over expenditure of £8,000 did accrue. Expenditure on other budgets managed by Personnel and Training was £10,000 above budget. This was due to the increased level of trade union secondments paid for by the Authority.

3 Part B - Trading Units

3.1 The businesses in Property, Business and Regulatory Services, with a combined turnover of over £32m, achieved surpluses of over £500,000 which represented an improvement on the businesses' financial targets.

3.2 IT Services have eliminated their brought forward accumulated deficit of £429,000, following completion of the roll-out of IT 2000, as planned at the time that the IT 2000 strategy was approved. The surplus was higher than envisaged in 2003/04 as a result of slippage in the core network replacement programme and in the planned replacement of ageing IT 2000 hardware, together with some increased income from internal customers.

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 8.

4.2 The total starts limit for 2003/04 amounted to £42.952m and schemes to the value of £34.716m were started in the year.

4.3 Schemes approved to be carried forward to start in 2004/05 totalled £8.138m. The list of schemes started and carried forward are included in Appendix 8.

4.4 The combined value of schemes which started in 2003/04 and those carried forward to start in 2004/05 is £42.854m which is £98,000 below the cash limit and the balance of the cash limit can also be carried forward to 2004/05.

4.5 In accordance with the County Council's financial procedures, the final cost of capital schemes completed in the year are reported in service final accounts reports. The initial phase of the Enterprise Project to develop integrated Finance, Procurement and Human Resources systems was completed during the year and following a successful trial of the devolved functionality is now in the process of being rolled out to schools and other service delivery points. The final in-house staffing and consultancy cost of completing the development of the project was around £1m more than the cost reported in December 2002. Although the final cost had still to be confirmed, the increased cost had been anticipated in the planning of the 2004/05 to 2007/08 capital programme and will be recovered from the benefit realisation plan. From 1 April 2004, the Enterprise Project has been integrated into the IT Services business unit.

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 9 contains the statement relating to Policy and Resources and concludes that Policy and Resources has an effective 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 £141,000 of the underspendings in 2003/04 be carried forward and added to the 2004/05 budget as set out in paragraph 1.9.

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 has 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.

TITLE

2003/04 Final Accounts File

Summaries of actual spending 2003/04

Appendix Contents

1 Construction of the cash limit

2 Summary of revenue expenditure

3 Analysis of cash limited revenue expenditure over services

4 Major variations in cash limited expenditure

5 Analysis of expenditure on revenue repair and maintenance of buildings

6 Trading Units - summarised accounts 2003/04

7 Revenue expenditure 2003/04 not included in the cash limit

8 Capital expenditure 2003/04

9 Departmental assurance statement

Appendix 1

Policy and Resources

Revenue Expenditure 2003/04

Construction of cash limit

1 In the revised budget revenue expenditure under the service's direct control was subject to a cash limit set by Cabinet of £38.674m. Business rates was an exception because the level of business rates on the County Council's own properties could not be determined precisely when the revenue budget was set. Actual expenditure on rates is +£25,000 higher than was provided for in the revised budget and the cash limit has been adjusted accordingly.

2 Further adjustments to the cash limit have also been made in respect of costs of £10,000 associated with the disposal of land and buildings which, in a similar manner to business rates cannot be predicted in advance and are adjusted at the end of each year.

3 The adjustments referred to above are incorporated in the table below which summarises the position for the service in the year:

Appendix 2

Policy and Resources

Final Accounts 2003/04

Summary of Revenue Expenditure

Appendix 4

Appendix 6

Policy and Resources

Revenue Expenditure 2003/04

Trading units - summarised Trading Accounts 2003/04

The trading units in this statement operate under Financial Regulation 20. This statement summarises their trading positions and shows the movement in their reserve accounts.

Appendix 7

Policy and Resources

Revenue Expenditure 2003/04 not included in the cash limit

1 Capital charges (£11.616m)

Capital charges are made to services for capital assets used in the provision of services. The actual charges are £3.120m more than the budget due to an under estimation of deferred charges amortised to revenue in 2003/04. However, this will have no direct effect upon the overall budget requirements of the County Council as the capital charges are replaced by actual financing costs in the central asset management revenue account.

2 Central support services, repairs and maintenance of buildings (-£23.970m)

These items are within the control of Policy and Resources. Support services are apportioned to services in accordance with the level of services provided and office accommodation occupied. Control of the budget for repairs and maintenance of buildings is by the nature of work and where it is most required rather than by service.

3 Adjustment for pension and early retirement costs (-£0.2m)

This adjustment includes:

a) the difference between the cash value of employer's contributions to the Local Government Pension Scheme (LGPS) (included within the service's cash limited expenditure) and the current cost of pension benefits earned by members of the LGPS during 2003/04, as assessed by the County Council's actuary. This adjustment is required by the Code of Practice on Local Authority Accounting in the UK. A Statement of Recommended Practice (2003) (SORP) with effect from 1 April 2003. The adjustment is calculated in accordance with Financial Reporting Standard 17 (FRS 17) Retirement Benefits. It relates only to "defined benefit" schemes, including the LGPS, where the assets and liabilities of the scheme can be attributed to individual employers on a consistent and reasonable basis.

b) the costs arising from early retirement decisions and the granting of compensatory added years. These are within this service's cash limited expenditure, but are excluded from the cost of services, on the basis that the cost relates to past service.

4 Corporate and democratic core (recharge £0.7m)

Corporate and democratic core covers management and support costs that relate to member support and advice. They are within the control of Policy and Resources and so are charged against that service's cash limit. But they are then recharged to other services outside of the cash limit as the Best Value Accounting Code of Practice requires these to be included in the cost of services.

Appendix 8

Policy and Resources

Capital Expenditure 2003/04

Appendix 9

Policy and Resources

Departmental assurance statement for the year ended 31 March 2004

Introduction

The Accounts and Audit Regulation 2003 require the County Treasurer to maintain an adequate and effective system of internal audit.

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. To enable them to do this, the Chief Internal Auditor is required to provide an independent opinion on the adequacy and effectiveness of the control environment, comprising risk management, control and governance for each department and the County Council as a whole.

Responsibilities

It is a management responsibility to develop and maintain the internal control framework, and to ensure that resources are properly applied in the manner and on the activities intended. It is the responsibility of Internal Audit to form an independent opinion, based on reviews during the year, on the adequacy and effectiveness of the system of internal control.

Basis of opinion

The strategic and annual internal audit plans were prepared by the Chief Internal Auditor to take account of the characteristics and relative risks of the activities involved and were approved by the County Treasurer. The internal audit plan has been delivered in accordance with the Code of practice for internal audit in local government in the United Kingdom, issued by CIPFA.

Work has been planned and performed so as to obtain all the information and explanations which were considered necessary in order to provide sufficient evidence to give reasonable assurance that the internal control system is operating effectively. However, this assurance can never be absolute. The most that the internal audit service can do is to provide reasonable assurance that there are no major weaknesses in the system of control.

Opinion

These are the opinions for the departments that are grouped together within the Policy and Resources group of services.

Chief Executive

The Chief Executive's department has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are generally working in practice.

IT Services

The IT Services department has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are generally working in practice.

Property, Business and Regulatory Services

The Property, Business and Regulatory Services department has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are generally working in practice.

Treasurer's

The County Treasurer's department has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are generally working in practice.

Human Resources

The Human Resources department has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are generally working in practice.

Overall opinion

In order to provide an overall opinion for the Policy and Resources group of services, I have considered the overall impact for the whole group framework in achieving the County Council's objectives.

My overall opinion is that the Policy and Resources group of services has an effective framework of control that provides reasonable assurance regarding the effective, efficient and economic achievement of the County Council's objectives. Audit testing has shown that the controls are generally working in practice.

Ejner Knudsen

Chief Internal Auditor

County Treasurer's Department

Hampshire County Council

6 July 2004