Archived decisions

Contact: Sheila Little, Education Finance Unit (01962 847545) ([email protected])

1. Summary

1.1 This report is the first monitoring report for the financial year 2004/05. It reflects the position after the only first five months of the year, and as such the implications are indicative at this stage. The focus of the report has been to highlight areas where budget pressures have altered since the budget was agreed in February 2004 or where 2003/04 pressures look likely to continue into 2004/05.

1.2 As the year progresses regular budget monitoring reports will be submitted to EDMT and Members to keep them fully informed and ensure appropriate management action can be taken early if necessary.

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

2. Cash Limit 2004/05

2.1 The cash limit agreed for 2004/05 by County Council in February 2004 is £665.7m and reflects the agreed strategy that the overspend in 2003/04 is met from reserves. This was agreed on the basis that Government's restrictions on central spending in the Schools Budget for 2004/05 meant that the service was not able to set the 2003/04 overspend as a first call on the 2004/05 budget.

3. Forecast Outturn 2004/05 up-date

3.1 The following paragraphs set out the areas of the budget where early indications are that there may be variations later in the year or where there may be expected to be pressures as a result of activity levels incurred during 2003/04. However, it is too early in the year to conclude that a final forecast outturn variation could occur.

Home to School Transport

3.2 This budget is historically difficult to forecast due, in particular, to the unpredictable nature of the contract price re-negotiation outcome. Over the past few years cost pressures within the transport industry have been considerably higher than the industry average. As a result a contingency was set up, which currently stands at £205,000 for 2004/05. Against the cash limit of £19.485m, an overspend is currently forecast, but the expectation at this stage is that the contingency should cover this overspend.

Inclusion (SEN)

3.3 There were significant budget pressures on these services (i.e. Statements, Out-County Placements and EOTAS) during 2003/04, most of which continue into 2004/05. Against a base budget of £18.55m, current forecasts indicate that:

· Statements / Out-County Placements (Cash limit £13.1m) - in addition to County Council funds, there is substantial Standards Fund money allocated by the DfES to this area annually. This Standards Fund money may be spent over a 17 month period and so grant for 2003/04 may be spent up to 31 August 2004. By applying around £400,000 of Standards Fund money in 2004/05 from the 2003/04 allocation, it is forecast at this relatively early stage that the budget pressures for 2004/05 on these budgets can be contained within the cash limit. This assumes that the estimated pupil numbers prove to be accurate. Caution is needed because even a small percentage variation can have a significant financial impact.

· Education Otherwise Than At School (EOTAS) (cash limit £5.45m) - The service is currently expecting to manage within their budget. Management action, in the form of even more robust budget monitoring, has been introduced, focussing on non-service staffing costs and external behaviour intervention support. Area managers have also been instructed to identify efficiency savings in their budgets to ensure this budget remains within cash limit while not detracting from the effective delivery of the service.

Services to Schools and Support - ICT costs £564,000

3.4 Against a cash limit of £1.25m the current outturn forecast indicates a significant projected overspend (£564,000) for a variety of reasons as outlined below:

· the increasingly technology driven processes across the department enabled through the IT2000 roll out has resulted in increased numbers of users (from approximately 710 estimate to 1400 actual). The full impact of annual charges, which are as a consequence more than budgeted, are now being borne (£310,000).

· there is an anticipated cost of approximately £150,000 to develop a central admissions system, required as a result of statutory changes which emerged too late in 2003/04 to be included in the budget for 2004/05. This will commit the department to annual maintenance costs of approximately £52,000.

· increased complexities in the system requirements for the SEN database and a number of smaller system enhancements / replacements (e.g. the Hummingbird reporting tool) account for the balance of the projected overspend (£100,000).

· A minimum contingency of £40,000 is available to cover any consumables which may be necessary during the remainder of 2004/05.

Whilst a freeze has been placed on new system developments, the reality remains that the budget does not reflect actual spend.

Ethnic Minority Achievement Service (EMAS) and Drug Advisory Response Team (DART)

3.5 The total cash limit for 2004/05 for the EMAS service is £705,000, which includes an additional £100,000 allocated to the service as a priority for 2004/05 only, to replace the loss of grant, while a longer term plan is implemented to refocus the service to match this reduced funding. The detailed plan for EMAS has been agreed and is being implemented with the expectation that the service will be within the cash limit in 2004/05 although this is subject to the final costs of redundancy.

3.6 The previous grant of £100,000 for DART ceased with effect from 2004/05 but the full amount was allocated to the service as a priority for 2004/05 while a plan to refocus the service is developed. Work is progressing on developing alternative funding from 2005/06.

Early Years -£234,000

3.7 Although the impact of a lower take up in 2003/04 than predicted had an impact on the first term of 2004/05, with an under spend of £234,000, it's too early to assume any greater savings than those identified above. Indeed, if take-up increases at a greater rate than expected for the latter two terms, then this under spend identified could be used to absorb any additional costs. An oral up-date will be provided at the meeting if further information is available.

Vosper Thorneycroft Southern Careers (VTSC) £331,000

3.8 Due to a change in service delivery arrangements for provision of the Connexions service outside the control of Hampshire County Council, VTSC will not be paying the annual dividend to the County Council in 2004/05 or for future years.

3.9 Management action is being taken to ensure that any residual costs as a result of the ending of the Connexions contract with effect from 31 July 2004 are met by the new direct delivery organisation, South Central Connexions Partnership.

3 Business Units

4.1 Based on the latest business plans, indications are that in total the education business units will reduce the cumulative surplus to £177,000, which had been projected according to the budget set in February 2004 at £897,000. This relates mainly to a projected increase in deficit within the EdICT business unit and a three year recovery plan is currently being prepared. The planned strategy of additional resource in the current financial year to support SAP rollout to schools in 2004/05 accounts for the remainder.

4 Hawthorns School £200,000

4.1 At the time of the closure of Hawthorns School with effect from 31 August 2004, the school had a deficit balance which is a budget pressure on the central spend element of the Schools Budget during 2004/05. Work is currently underway, in conjunction with the DfES, to explore the most appropriate way of accounting for this pressure. An up-date will be reported back to Education PRC Members once the way ahead has been determined.

5 Proposed Strategy

5.1 The major factor contributing to the Service's shortfall against the cash limit are the overspendings in the ICT budget and an unexpected loss of the VTSC dividend.

5.2 However, sources of funding which are available to cover any potential over spend include the Education Service general contingency (£243,000) as well as a central inflation allocation (£133,000). There is also the possibility of additional one-off non-specific grant funding.

5.3 Work will continue to identify measures to balance the budget and a further report will be brought back to Members at the next meeting explaining how any potential overspend can be covered.

5.4 In the meantime, all budget holders will monitor expenditure closely and alert senior managers of any potential increases and savings opportunities, including scrutinising all vacancies before allowing appointments to proceed. This will apply across the whole department and be reviewed regularly by the Education Department Management Team.

6 Capital

6.1 The Education Capital Programme for 2004/05 is summarised below, although in practice it is often supported by funding from Policy and Resources mainly in respect of repair and maintenance elements

6.2 The Executive Member for Education receives regular monitoring reports from PBRS Department on the capital starts programme at individual scheme level, where this is appropriate. The current situation is summarised in the following paragraphs

6.3 Resources totalling £57.324m have been allocated for the starts programme in 2004/05 (see table below). Of this total £21.880m relates to block allocations for Schools Devolved Formula Capital, Schools Access Initiative, Furniture and Equipment, Contingency and Retained Capital Receipts, leaving £35.444m for specifically identified schemes. Schemes to the value of £10.706m have started, with £24.738m still scheduled to start before the end of the financial year.

	£'m	£'m
Education Capital Programme 2004/05 - resources
Original Budget Book		39.659
Internal Funding Changes
Balance from 2003/04	1.622
Carry-over schemes from 2003/04	11.069
Share of 2003/04 capital receipts	1.788
Prudential Borrowing	0.750	15.229
Additional DFES Allocations and Grant
Additional Devolved Capital	0.104
Specialist Schools	0.748	0.852
Other Funding
Schools Contributions from Revenue	1.072
Others (inc NOF)	0.512	1.584
Total Resources		57.324

7 Local Management of Schools

7.1 At 1 April 2004 schools' balances, in total, stood at £28.343m, representing 5.4% of schools' allocations and a small increase over the balance as at 31 March 2003. Within this there are 55 schools in deficit.

7.2 The survey of school balances conducted in July 2004 found the main priorities identified to be:

· Building work £8.5m

· Staffing / workforce reform £6.5m

· Reserve for falling NOR £2.7m

· IT/ Refurbishment / Other £5.8m

7.3 For this years survey schools were also asked to profile expenditure across years as an approach to identifying more precisely the likely rate of reduction of the total balances. This suggests that 80% of the balances will be spent in 2004/05. However, given that last years survey suggested that balances were likely to reduce by possibly several million by 31 March 2004, when in fact they increased slightly, it is too early to estimate what total balances will be at the end of 2004/05

8 Legal Implications

8.1 None

9 Financial Implications

9.1 The financial implications are as set out in Section 6 and will be further reported to the next meeting.

10 Personnel Implications

10.1 None

11 Impact Assessment

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

12 Crime prevention issues

12.1 None

13 Views of the Local County Councillor

13.1 None

Recommendation

1. That the budget monitoring report and an early identification of costs pressures is noted.

Section 100 D - Local Government Act 1972 - background documents

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. - none

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