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

1. Summary

1.1 The review indicates a few areas where revenue spending is likely to differ from the assumptions in the budget, but there are no major issues that require corrective action. An underspending is anticipated in 2004/05 on the Leadership project and the Accredited Community Safety Officers scheme. In all other areas, the Policy and Resources revenue budget overall is forecast to be in line with the cash limit.

1.2 Capital payments for the County Council at this early stage of the year are expected to be slightly below the forecast, not least because planned capital expenditure on South Hampshire Rapid Transit project (SHRT) will not now be incurred.

The following decisions are sought:

i) To note the current position on the monitoring of the revenue budget and capital programme

ii) To agree in principle the carry forward of planned underspendings relating to the Leadership project, subject to a decision when the actual underspending is known

iii) To note that the strengthening of the occupational health service will require a continuation of additional corporate and departmental funding

iv) To approve the transfer from capital to revenue of £25,000 to support the delivery of an effective health scrutiny function

v) To approve the addition of £148,000 to the capital programme for 2004/05 in respect of building works and computer equipment for the Hampshire and Isle of Wight Magistrates' Courts Committee

vi) To agree that the basis of control for the following lump sum schemes in the capital programme is changed from a starts basis to an expenditure basis with effect from 2004/05:

Education

Schools access initiative

Furniture and equipment

Environment

Structural maintenance

-Locally resourced

-Government supported

Low cost safety

Community safety initiative

Rural partnership schemes

Passenger transport information

Railway stations / interchanges

Air quality and noise monitoring

Local Transport Plan monitoring / initiatives

Recreational cycling

Coast Protection Act

vii) To recommend to the County Council that control totals for these capital schemes are amended where necessary as a result of this change in the basis of control, as listed in appendix 3.

viii) To recommend to the County Council that the Education capital programme limit be increased by £360,000 to reflect additional developer contributions.

2. Reason

2.1 Regular service budget monitoring reports are submitted to Executive Members to review whether any action is required to contain spending within cash limits and ensure that resources are utilised effectively.

2.2 Decisions on the Policy and Resources revenue budget and capital programme impact on the financial resources used by central services to support all other County Council services and as such relate to all the corporate strategy aims:

· Maximising life opportunities

· Stewardship of the environment

· Achieving economic prosperity

· Building strong and safe communities

· Improving services

· Developing councillors and staff.

3. Other options considered and rejected - Not applicable

4. Conflicts of interest declared by the decision maker or a member or officer consulted - Not applicable

5. Dispensation granted by the Standards Committee - not applicable

6. Reason(s) for the matter being dealt with if urgent - not applicable

Approved by: (signature) Date: (date of decision)

Councillor T K Thornber

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

1. Introduction

1.1 This report is the first monitoring report for 2004/05 and provides an overview of the position on:

· Policy and Resources own revenue cash limited budgets including an update on the implementation of growth proposals

· Policy and Resources business units

· Policy and Resources capital programme

· the County Council's capital payments and sources of finance

· adjustments to the 2004/05 capital programme to reflect a revised basis of control for some schemes.

1.2 The review indicates a few areas where revenue spending is likely to differ from the assumptions in the budget, but there are no major issues that require corrective action. An underspending is anticipated in 2004/05 on the Leadership project and the Accredited Community Safety Officers scheme. In all other areas, the Policy and Resources revenue budget overall is forecast to be in line with the cash limit.

1.3 Capital payments for the County Council at this early stage of the year are expected to be slightly below the forecast, not least because planned capital expenditure on the South Hampshire Rapid Transit project (SHRT) will not now be incurred.

1.4 The Policy and Resources revenue budget and capital programme includes financial resources for those central services that support all other County Council services and as such contribute to all the corporate strategy aims.

2. Policy and Resources cash limited revenue budget 2004/05

2.1 The latest cash limit for 2004/05 is £42.5m as set out in Appendix 1. Based on monitoring of expenditure up to the end of July 2004, some variations from cash limit are forecast. These are outlined below.

Chief Executive's Department

2.2 The forecast outturn for budgets under the control of the Chief Executive is expected to be in line with the cash limit.

County Treasurer's Department

2.3 There is some pressure on the County Treasurer's budget at this stage as some additional work continues to review and adjust business processes in order to exploit in full the use of the SAP system and consequently realise efficiency savings. Transitional costs have been incurred as payroll is reorganised to provide a service centre and additional staff are temporarily required in pensions services to allow for the time taken by the ongoing project to convert all records to an electronic basis. However, it is expected that spending will be managed down to the cash limit by the year end.

Human Resources Department

2.4 2004/05 is a year of significant change for Human Resources, bringing together some of its staff in service centres, rather than deploying them in particular departments. This involves the relocation of Resourcing Centre and Employment Practice Centre staff to new accommodation at Athelstan House, Winchester and Hampshire Learning Centre staff to Capitol House, Winchester. These office moves have been carefully planned and executed in order to minimise disruption to customers. The new structures have been created in order to further improve efficiency and effectiveness together with enabling the more responsive, flexible and innovative service to stakeholders outlined in aim five, `improving services', of the Corporate Strategy.

2.5 To facilitate these changes the 2004/05 cash limit includes growth of £500,000 transitional funding for telephone, contract management and other IT set up costs, removals and transitional staff costs. As implementation is being phased during 2004/05, the cash flow for these items is likely to fall over the 2004/05 and 2005/06 financial years. Consequently an underspending in 2004/05 may arise.

2.6 As part of the reorganisation it is necessary for Human Resources to have much greater control over its budgets. Therefore, cash limit adjustments from departments to Human Resources will be undertaken within the forthcoming budget process in respect of transferred services. These budgets will provide funding for the Resourcing and Employment Practice centres, and enable the corporate management of recruitment activity.

2.7 Expenditure on services whose management arrangements are unaffected by the reorganisation is anticipated to be in line with the cash limit.

2.8 In addition to delivering its core services, the Human Resources department also manages the delivery of corporate policy and strategy, including initiatives such as the Leadership project and the Pay and Benefits project. Additional staffing and consultancy for the Pay and Benefits project is expected to utilise in full the additional 2004/05 growth funding. In respect of the Leadership programme the volume of fourth tier managers yet to undergo the programme may dictate that some funding will be required to be carried forward to 2005/06, although the exact amount necessary is not yet clear. It is recommended that the carry forward of planned underspendings relating to the Leadership project be agreed in principle.

Property Business and Regulatory Services

2.9 Forecast net expenditure for the department for the year is anticipated to be in line with the cash limit. This does assume that, as in recent years, any additional costs arising from securing properties awaiting disposal (estimated at £70,000) will be covered by the capital receipts accruing. In addition, Cabinet agreed at its meeting on 26 July 2004 that any underspend within the Accredited Community Safety Officers scheme in 2004/05 will be carried forward to cover commitments in 2005/06 and beyond.

2.10 Part of the revenue repair and maintenance budget is always set aside as a winter contingency so that there is financial coverage in the event of unforeseen circumstances. This year's contingency includes the £104,000 unspent contingency brought forward from 2003/04. Clearly it will be several months before the position on the contingency is known, but in keeping with practice established last year, if there is an underspending, the cash limit will be adjusted to enable any unspent contingency to be carried forward.

Other non-departmental Policy and Resources budgets

2.11 Additional costs relating to libel and slander insurance and additional non-recurring staff costs for HMS Minerva in 2004/05 are likely to be offset by lower expenditure elsewhere, including a possible reduction in the external audit fee.

Summary

2.12 At the end of July 2004 the main variations from cash limit are forecast to be:

· Leadership programme - an underspending is predicted, though the amount is not yet clear.

· Accredited Community Safety Officers scheme - an underspending of £250,000 is anticipated.

3. Update in implementing 2004/05 growth proposals

3.1 The 2004/05 Policy and Resources budget included growth in the following budgets:

Table 1: Growth included in original budget

3.2 In addition, as summarised in Appendix 1, further allocations from the central contingency for community support officers, grants to voluntary organisations, IT and E-government, Human Resources Department restructuring, pay and benefits review and for Cabinet priorities totalling £2.678m have been approved either by the Cabinet or by the Executive Member following the consideration of reports earlier in the year. This section of this report deals with the plans for spending the additional resources of £853,000 summarised in Table 1.

Office accommodation (£220,000)

3.3 The increase in the budget for office accommodation has, in conjunction with contributions from departmental budgets, facilitated the accommodation of new staff, enabled new office leases or lease assignments to be taken in St Clements Street and Bridge Street Winchester, and subject to the successful completion of negotiations, resulted in further office space in Eastleigh. These properties will provide accommodation for up to 200 staff, enable improved accommodation to be provided for members, and reduce other existing office accommodation pressures.

3.4 The cost of this additional accommodation can be met within the current office accommodation budget in the short term, on the basis of the agreed level of departmental contributions, but a longer term view of the strategy for the provision and funding of office accommodation is being undertaken.

Central support services (£156,000)

3.5 This resource has been allocated to central departments to allow them to respond to the increased demand for support from Social Services. The allocation is being used in the following ways:

· to meet the increased volume of child care legal work

· to employ additional staff in Treasurer's department to carry out additional assessments of non-residential charges

· to support the revision of human resources guidance documentation for Social Services and other staff and to meet E-government initiatives.

Occupational Health (£80,000)

3.6 Following a review of the Occupational Health service conducted in 2003/04, an additional corporate contribution of £80,000 was included in the 2004/05 budget in order to strengthen the service, providing funding for 2.5 additional full-time equivalent staff. Departments have also made additional contributions of £40,000 per annum in 2003/04 and 2004/05, to supplement the additional corporate resource.

3.7 The impetus behind the decisions was the recognition that sickness absence within the County Council has a very substantial opportunity cost, together with more costs where agency staff and overtime costs are incurred to cover for absences. Consequently, there is scope for management of sickness absence to have a substantial impact on the County Council's service provision, and the focus for strengthening of the Occupational Health service is improving the effectiveness of the County Council's arrangements for managing sickness absence.

Repairs and maintenance of buildings (£397,000)

3.8 This allocation recognises the continued escalation of repair and maintenance costs at well above the Government and corporate inflation assumptions. Without the passporting resource, fair funding allocations to schools for repairs would have been some 6% lower, with a consequent impact on the quality of service and the fabric of school buildings.

4. Business Units

4.1 The Property Business and Regulatory Services department business units have a combined turnover of £33m and the approved business plans and budgets anticipate surpluses of £264,000. In recent years, the businesses have exceeded their financial targets, and the early indications for 2004/05 are that the businesses will meet their financial targets.

4.2 IT Services are currently forecasting a trading deficit in 2004/05 of up to £500,000. This depends on the level of investment on hardware and work on mainframe decommissioning. Other pressures include high demands for supporting the implementation of E-government solutions. It is expected that cash flows can be managed over the three year business period to balance the trading account.

5. Policy and Resources capital programme

5.1 Appendix 2 summarises the 2004/05 capital programme for Policy and Resources. A transfer of £25,000 from uncommitted capital resources to revenue is proposed to support the delivery of an effective health scrutiny function. The Department for Constitutional Affairs has recently allocated additional capital grant totalling £148,000 for building works and computer equipment in respect of the Hampshire and Isle of Wight Magistrates' Courts Committee. It is recommended that the capital programme be adjusted for these amounts. Taking account of these adjustments, carry forwards from 2003/04, capital receipts and previously agreed virements, the capital programme totals £44.277m.

5.2 Schemes to the value of approximately £9.9m had started by 31 July 2004, mainly relating to New Deal for schools condition work and major capital repairs.

6. Overall capital payments and sources of finance

6.1 The capital financing approved by the Cabinet in February was based on projected capital expenditure of £201.9m in 2004/05, adjusted to £206.3m to take account of the changes to the capital programme approved by the Cabinet in July.

6.2 Capital expenditure to 31 July 2004 totalled £37.6m. It is too early in the year to be able to forecast with any certainty the likely outturn level of capital expenditure, but based on previous capital expenditure profiles, it seems likely that expenditure will be slightly below the forecast in the financial plan, not least because planned capital expenditure on SHRT will not now be incurred.

6.3 Inclusive of the in-and-out schemes, capital receipts of £22.7m are allowed for in the latest financing plan. Actual 2004/05 capital receipts to 31 July 2004 amounted to £1.0m. Success in achieving the forecast, or an outcome close to the estimate in 2004/05, will be dependent upon progress in completing a small number of significant disposals.

7. Changing the basis of control for some lump sum capital schemes

7.1 The capital programme is currently controlled on a `starts' basis. This means that a scheme is considered to be committed against the capital programme's cash limit when the scheme has started. In practice, for a construction scheme, this is when the contract for the works has been let. The amount that counts against the capital programme's cash limit is the total cost of the scheme, irrespective of when the payments will be made. For large capital schemes, payments may be made over several years.

7.2 This is the most appropriate method for controlling the majority of schemes in the capital programme. The key action that commits the County Council to incurring expenditure is when the contract is signed. This follows the decision by the Executive Member to approve the design project appraisal and to agree that the scheme should go ahead (and, in the case of schemes costing more than £0.5m, the approval of the Executive Member for Policy and Resources). Once the contract is let, the County Council is committed to paying for the full cost of the scheme.

7.3 There are, however, some lump sum provisions in the capital programme that are spent on a large number of small schemes. It would be more practical to control these lump sums on an `expenditure' basis. This means that the charge against the capital programme's cash limit for the year is the total expenditure actually incurred in the year. This is the basis for controlling the revenue budget and a number of the lump sum provisions for which this change is proposed are similar to revenue budgets, for example, capital repairs of buildings and the structural maintenance of roads. A full list of the fifteen categories of project that are suitable for control on the new basis is attached in Appendix 3.

7.4 If the proposed change in the basis for controlling these schemes is agreed, it will be necessary to amend the control total for at least eight of the fifteen categories of project. This is because the forecast expenditure flows in 2004/05 and 2005/06 are marginally different from their existing starts values. The detailed position for capital repairs (including New Deals for Schools Condition Funding) will be reported to Buildings, Land and Procurement Panel in October in the context of the capital repairs strategy. Details are also shown in Appendix 3.

7.5 These proposed changes in control totals will not lead to any increase in the overall level of capital payments incurred by the County Council. From 2006/07, the capital programme limits for these projects will be unchanged from those in the current capital programme.

8. Adjustment to the Education capital programme limit

8.1 Since reporting to Cabinet on 28 June 2004 the revised 2004/05 capital programme limits incorporating the 2003/04 carry forward schemes, Education have received additional developer contributions of £360,000. It is recommended that the Education capital programme limit is increased by this amount.

9. Recommendations

9.1 The recommendations from this report are included on the covering decision sheet.

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

None.

Appendix 1

Policy and Resources Revenue budget - latest 2004/05 cash limit

Appendix 2

Policy and Resources 2004/05 capital programme