Contact: Adrian Thorne, (01962) 847526; [email protected]

1 Summary

1.1 The following decisions are sought:

a) That the final accounts for 2005/06 be approved.

b) That the proposed treatment of the £11.124m overspend in 2005/06 as set out in paragraph 1.9 in the main body of the report be noted.

c) That the combined cost of capital schemes completed in 2005/06 and the requested carried forwards, in excess of the 2005/06 cash limit (£0.808m) be deducted from the 2006/07 capital programme limit.

d) A further report on capital be presented to Cabinet in July to incorporate the requests for approval for the carry forward.

2 Reasons

2.1 To approve the final accounts for Adult services for 2005/06.

2.2 Decisions on Adult services revenue, expenditure and capital programmes impact on the financial resources available to this service to contribute to the following corporate strategy aims:

a) Aim 1 - Maximising life opportunities - through provision of high quality and accessible caring services for vulnerable people and their carers

b) Aim 5 - Improving services - ensuring services are inclusive and continuously improving to meet the changing needs of existing and potential service users

c) Aim 6 - Developing Councillors and staff - ensuring they have the appropriate skills, knowledge and resources

3 Other options considered and rejected - none.

4 Conflicts of interest declared by the decision maker or a member or officer consulted - none.

5 Dispensation granted by the Standards Committee - none.

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

Approved by Date:

Councillor Patricia Banks

Executive Member for Adult Social Care

Contact: Adrian Thorne, (01962) 847526; [email protected]

1 Summary

6.1 This report summarises the Adult Service's spending in 2005/06 and it recommends that the final accounts for 2005/06 be approved.

6.2 Decisions on Adult Services revenue expenditure and capital programmes impact on the financial resources available to this service to contribute to the following corporate strategy aims:

i) Aim 1 - Maximising life opportunities - through provision of high quality and accessible caring services for vulnerable people and their carers

ii) Aim 5 - Improving services - ensuring services are inclusive and continuously improving to meet the changing needs of existing and potential service users

iii) Aim 6 - Developing Councillors and staff - ensuring they have the appropriate skills, knowledge and resources

6.3 Overall there is a net overspending of £11.1m (4.5%) against the 2005/06 adjusted revised revenue cash limit of £249.3m.

6.4 The major variations against the cash limit are:

	£'000
Service Strategy & Regulation	-58
Older People	8,364
Younger Adults (All client groups)	2,895
Supported Employment	-72

6.5 Normally the County Council's policy is to carry forward into the following year 100% of net overspendings. However, in this case, given the level of overspend and the lateness in the financial year of the level of overspend being reported, an investigation was commissioned by Cabinet to examine these issues as well as a draft recovery plan. That report contained detailed explanations of the reasons for the overspend, which was then estimated at £11.3m. Those reasons remain valid in the context of the actual overspend of £11.1m and are not repeated in full in this report.

6.6 This report contains fuller information on the savings made during the year, which reduced spend by £2.6m, as required by the budget, and by an additional £2m of savings identified during the year in Management and Support Services. Additional cashable and Gershon efficiency improvements were also made, as set out in para 2.26. It is also worth noting, as set out in the Director's comments in paragraph 3.1 onwards, that performance indicators showed significant improvement in the year.

6.7 The outcome of the report to Cabinet was to recognise that there would need to be a corporate recovery plan to make provision for the £11.1m overspend for 2005/06 (including possibly some recovery from Adult Services) and for Adult Services to implement a recovery plan to bring expenditure arising from ongoing commitments from 2005/06 back into line with the 2006/07 budget levels. In addition there would be a corporate plan to mitigate the risks of a continued overspend in 2006/07, if full recovery is not possible within the year, and a review of budget cash limits for 2007/08 to rebalance service budgets as necessary.

6.8 Plans are already in place to achieve savings of £4.4m out of the assumed £6.4m savings in the 2006/07 budget, with the expectation that action will be taken to achieve the remaining £2.0m. In addition an action plan is being put in place to enable Adult Services to recover its financial position over a two year period.

6.9 Consequently there are no amendments required in the 2006/07 budget for the effects of the 2005/06 overspend.

6.10 On capital, schemes to the value of £2.8m were committed in the year and approval is sought to carry forward schemes to the value of £0.9m to start in 2006/07. In total this amounts to £0.8m more than the approved cash limit for the capital programme. An overall review of the Adult Services capital position will be taken to Cabinet on the 24 July to bring the 2005/06 overspend and those from previous financial years back into balance, and approval to carry forward projects to 2006/07 will be subject to the outcome of the review.

6.11 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. Part B deals with capital schemes. Part C explains the basis of the control assurance statement included as Appendix 7.

7 Part A - revenue expenditure under the Service's control

7.1 Revenue expenditure under the Service's direct control is subject to a cash limit. For 2005/06 the adjusted amount is £249.3m as set out in Appendix 1.

7.2 The final outturn was £11.124m more than the cash limit, representing a reduction of £0.2m on the projected variance of £11.3m reported to Cabinet on the 20 March 2006. The overall position is analysed in Appendices 2 and 3. Appendix 4 includes a more detailed statement of variations from the revised budget.

7.3 The final position for 2005/06 compared to the outturns for the previous three years is shown in the table below (note that variations relate to Social Services and include elements relating to Children and Families Social Care for the years 2002/03 to 2004/05):

	Variations from Revised Budget
	£'000	%
2002/03	-72	-0.03
2003/04	-784	-0.30
2004/05	+532	+0.17
2005/06	+11,124	+4.46

7.4 The last financial year has been the most difficult one faced by the Service, with an unprecedented overspend for the County Council. The main pressures during the financial year are highlighted below:

· Increasing numbers of vulnerable people

· Increases in the complexity of needs

· Changes in Health Service capacity, delivery methods and customer base leading to additional demand

· Funding difficulties for and performance pressures on the Health Service locally leading to disputes over continuing care

· Numbers of people receiving domiciliary or nursing care increased in 2004/05 with subsequent full year effect

· Inherited costs of packages from 2004/05 and the subsequent full year effect

· Transitional costs of opening new nursing care capacity

7.5 The following paragraphs describe in more detail some of the more significant variances across each client group, which include the impact of the management action taken during the year.

Service strategy and regulation -£0.06m underspend (-12.2%)

7.6 An underspend principally due to lower staffing and other expenditure in relation to the statutory complaints procedure (a demand led budget).

Older people +£8.36m overspend (+6.6%)

7.7 The following table summarises the significant changes incorporated into the 2005/06 budget and associated spending trends:

Inflation, Growth and Savings compared with 2004/05		Budget £m	Actual £m	Variance £m
Inflation		+2.8	+2.8	0.0
Growth and Pressures		+7.8	+17.7	+9.9
Savings		-1.5	-3.0	-1.5
Net increase		+9.1	+17.5	+8.4
Total Budget		125.8	134.2	+8.4

7.8 Extra funding for growth and to meet pressures principally related to the additional cost of the Enhance project and pressures arising from demographic changes. Savings were principally from more efficient processes in in-house units and better procurement.

7.9 Net expenditure on services for older people rose by £16.2m (13.7%) compared to 2004/05, significantly more than allowed for in the 2005/06 budget.

7.10 The principal pressure on purchased services arose on residential and domiciliary care. The total number of domiciliary care packages purchased is 5% above the level assumed in constructing the budget. The pressure on the residential budget is principally due to higher care needs of clients leading to the cost per client being almost 10% higher than anticipated in the budget. In addition to this slippage on the timetable for new nursing homes resulted in the additional purchase of 60 beds from the independent sector at a cost of £1.3m. In total a gross pressure of £11m arose on both in-house and purchased care for clients, with average client numbers being in excess of 12,000 for the year. As a result of the additional domiciliary care packages provided, income from non-residential charges is approximately £0.7m above the figure assumed in the budget. Overall income on residential and nursing care is slightly in excess of budget (by £0.1m) excluding income lost through slippage on the in house nursing homes.

7.11 Savings of £1.5m were incorporated into the 2005/06 budget through more cost effective placements, more effective staffing, reduced use of agency staff and improved work practices reducing delayed discharge fines and improving income collection. These were delivered, along with savings on management and support costs of £1.5m and other cashable efficiency savings of £3.4m, as summarised in paragraph 2.26.

Adults with a physical or sensory impairment +£1.79m overspend (+7.6%)

7.12 The following table summarises the significant changes incorporated into the 2005/06 budget:

Inflation, Growth and Savings compared with 2004/05		Budget £m	Actual £m	Variance £m
Inflation		+0.6	+0.6	0.0
Growth and Pressures		+0.3	+2.2	+1.9
Savings		-0.3	-0.4	-0.1
Net increase		+0.6	+2.4	+1.8
Total Budget		23.5	25.3	+1.8

7.13 Growth and pressures principally related to the additional placement costs arising from demographic and dependency changes and the impact upon Adult Services arising from Supporting People contract reviews. Savings were principally from more efficient procurement.

7.14 For adults with a physical or sensory impairment net expenditure increased by £2.4m (9.9%) compared to 2004/05.

7.15 There has been a significant increase in nursing care with a gross pressure of £0.8m due to increased client numbers. Domiciliary care and direct payments showed a pressure of £1.1m due to increased numbers of clients with complex care needs supported at home. Overall there was an increase of 72 high dependency packages. On average during the year approximately 1,620 clients have been supported in both in house and purchased provision, 10% more than anticipated in the budget.

7.16 Savings incorporated into the budget through better procurement, reducing the impact of Supporting People reviews and more efficient staffing (absorbing the cost of increments) were broadly met with no significant variance from the figures incorporated into the budget.

Adults with learning disabilities +£1.20m overspend (+2.3%)

7.17 The following table summarises the significant changes incorporated into the 2005/06 budget:

Inflation, Growth and Savings compared with 2004/05		Budget £m	Actual £m	Variance £m
Inflation		+1.2	+1.2	0.0
Growth and Pressures		+3.2	+4.7	+1.5
Savings		-0.2	-0.5	-0.3
Net increase		+4.2	+5.4	+1.2
Total Budget		52.1	53.3	+1.2

7.18 Growth and pressures principally related to the additional placement costs arising from demographic and dependency changes and the impact upon Adult Services arising from Supporting People contract reviews. Savings were principally from more efficient procurement.

7.19 For adults with learning disabilities there was a significant increase in net expenditure of £5.4m compared to 2004/05 (after adjusting for a one off virements in relation to health funding), an increase of 11.4%.

7.20 The increase relates to additional provision for existing clients due to deteriorating conditions, the loss of supporting people funding and higher needs assessments for new clients entering the system than for those leaving. This principally affects expenditure on residential care with gross expenditure £1.2m over budget but also affects nursing, day, domiciliary care and other client services, in total a pressure in excess of that allowed for in the budget of £1.5m. On average during the year, approximately 3,300 clients have been supported in both in house and purchased provision, 1% more than anticipated in the budget.

7.21 Savings incorporated into the budget through better procurement, reducing the impact of Supporting People reviews and more efficient staffing (absorbing the cost of increments) were broadly met with no significant variance from the figures incorporated into the budget. Additional savings on management and support costs and additional income (£0.3m in excess of that allowed for in the budget) also partially offset this pressure.

Adults with mental health needs +£0.12m overspend (+0.9%)

7.22 An overall adverse variance of £0.12m. On average during the year approximately 525 clients have been supported in both in house and external provision, 7% more than anticipated in the budget, giving rise to a pressure of £0.4m. To offset this pressure vacancy management provided savings of £0.3m on assessment and care management.

Other services -£0.29m underspend (-10.9%)

7.23 For other adult services there was a drop in expenditure of £0.133m (10.3%) compared to 2004/05. This was principally due to a reduction in the number of clients being funded for residential substance misuse treatment. This resulted in an underspend of £0.185m on the cost of service provision. Additional smaller savings included £24,000 on assessment and care management.

Supporting People

7.24 Total expenditure on the Supporting People programme in 2005/06 (including administration) was £32.0m. This is a decrease of £1.9m (5.5%) compared to expenditure in 2003/04, in line with the overall financial strategy to ensure a long term viable programme is maintained against a backdrop of loss of funding from the Government. The final grant allocation in 2005/06 amounted to £32.9m (including £0.8m for the administration grant and £0.5m bought forward from 2003/04 in accordance with the flexibility agreed by the Government). In line with the overall financial strategy £0.9m of the grant, not spent in 2005/06, will be used to temporarily fund expenditure in future years until the financial savings from service reviews have had an impact. There are approximately 780 schemes funded supporting approximately 20,000 people.

Savings Against the Budget

7.25 The Adult Services 2005/06 budget incorporated £2.6m of savings which resulted in budget reductions. As part of the management action taken during the year another £2.0m of additional savings were made on various management and support budgets to reduce the overall net overspend. These additional savings affected all client groups but principally older people (£1.5m).

Gershon Efficiency Savings

7.26 Of the £4.6m savings made against the budget, £2.1m count as cashable efficiency savings under Gershon rules. In addition approximately £3.4m of further cashable efficiency savings for Gershon purposes have been estimated; these did not reduce the budget, but enabled more to be delivered with the amount spent. The main areas were: more cost effective methods of domiciliary care provision, including the use of reablement packages of care to reduce longer term care costs and a reduction in the use of more expensive residential care (£1.4m) and economic procurement practice: whilst the department faced significant pressures from its providers for price increases (which the Government assesses for Gershon purposes as averaging 4.7% in Adult Social Care) the Department was able to keep average inflation to 3.5%, leading to a Gershon efficiency provisionally estimated at £2.0m. These efficiency savings will be incorporated into the Council's Annual Efficiency Statement.

1 Comments of the Director of Adult Services

7.27 An overspend of £11.1m for the year 2005/06 has undoubtedly cast a deep and broad shadow over the Adult Services Department as well as the whole County Council. In his comments in his 2005/06 Forward Budget Report to the Executive Member for Social Care on the 28 January 2005 the then Director of Social Services highlighted the growing pressures on social care services from the increased levels of activity from demographic trends and the continuing flow of new government requirements. He drew attention to several new responsibilities including the single assessment process, the protection of vulnerable adults, new guidance on choice and top up payments for placements in residential care services for children and families. My predecessor welcomed the passporting of an additional £13.5m of government money into social services but pointed out that most of these additional funds would have to be used for maintaining the status quo with no provision available for developing services either quantitatively or qualitatively.

7.28 The year 2005/06 saw the full year effect of the introduction of the new SWIFT caseload management system. The system went live for social services in January 2005. While the vast majority of records migrated successfully from the old system to the new, it became apparent that in the new financial year there were serious difficulties for staff in inputting data into SWIFT and in the operation of the interface between SWIFT and the financial system, SAP. Though these problems have largely been overcome, management information of reliable quality did not become available until very late in the financial year. Recent Cabinet reports refer to this, which contributed to the failure to report the full extent of the spending pressures until later in the year.

7.29 Demands on the department have increased and are well documented in the `Budget monitoring 2005/06 and Background to the 2006/07 Budget position' report made to the Adult Social Care Policy Review Committee and Executive Member for Adult Social Care in January 2006. The headlines are as follows:

· Growing pressures from the requirement to free hospital beds or be subject to a fining regime. Hospital delays have again been reduced by the Adult Services Department year on year (averaging 35 reimbursable patients per day in 2004/05 and only 28 in 2005/06 - a 20% reduction), while the amount of investment to keep one hospital bed clear remains extremely high. As an illustration to keep one hospital bed clear would require around 25 care episodes in a year if the average patient remains in that bed for a fortnight. Those care episodes may cost between £10-20,000 or more a year and the recipient of those services may require them for up to two, three or more years.

· Demands from demographic changes. For example, the number of people reaching the age of 85 years in Hampshire is increasing by 1,000 every year and it is likely that 250 to 300 of those will require service.

· Changes in the National Health Service over the years have reduced the number of beds in geriatric services and community hospitals and have reduced the investment in community nursing and community rehabilitation. While it is good to see the end of poor quality long stay geriatric hospitals, it is far from clear that the resources from these hospitals have been reinvested in the community rather than acute NHS services. In practice they are likely to have been used to offset deficits.

· There has been considerable national government investment in the NHS with a concomitant requirement to increase patient flow and turn-around which in turn deliver heightened requirement to which social care must respond. Social care has received comparatively modest central government growth and that modest growth has finished before the NHS investment cycle had been completed.

7.30 Hampshire County Council is not alone in reporting pressures of this nature. There are a number of other County Councils facing comparable overspends (5% overspends on their cash limits).

7.31 Management action was undertaken during 2005/06 and further action was developed as the extent of the overspend became known towards the end of the financial year. Further action has been instituted at the beginning of this financial year. These are outlined in the paragraphs below.

7.32 Management action in 2005/06 was as follows:

· Maximise use of in house services. High occupancy achieved in available places in our residential homes, though with some slippage in bringing new places on stream in the nursing homes.

· Introduce new in-house home care system to work with new users for six weeks to reable as much as possible and to reduce care costs later.

· Resettlement of people from two residential homes with two further homes to be reviewed.

· Reprovision of alternative learning disability services from a small learning disability unit (Merryfield).

· Use of a learning disability respite unit for long term care to reduce high cost private sector placements.

· Review high cost users to ensure NHS continuing care people are rightly supported by the NHS

· Increase use of the Governments Independent Living Fund (ILF) where possible.

· Negotiate firmly costs of young people in transition from Children's Services.

· Reduce use of transport.

· Use block contracts rather than spot purchases.

· Joint commissioning of services between supporting people and learning disability to gain efficiencies.

· Move LD users to independence by closing kitchens in day services.

7.33 Action since February:

· A number of actions have been in place since the scale of the overspend emerged in February. These include restrictions on training and vocational training including training for social work qualifications. There are unprecedented restrictions on recruitment, the only exception being the residential and nursing home sector. Such measures will be kept under review as some of them can become counter-productive for achieving the wider goals of savings and demand reductions.

· One of the objectives of restructuring is to reduce overheads and costs. There are discussions with Children's Services to ensure reduction in overheads.

7.34 Actions at the turn of the financial year:

· The Department enters the financial year 2006/07 with an estimated excess demand for service of £16m (the full year effect of 2005/06 pressures).

· A consultant with a background as Chief Executive and Director of Social Services has a brief to recommend action to address the excess demand faced by the Adult Services Department.

· An ex-Assistant Director of Social Services has been brought in to manage the care management and local purchasing side of the organisation. He has a track record of considerably reducing overspends in Cambridgeshire and Suffolk. In summary the areas being examined by both consultants are:

· Whether the current relevant funding between care groups looks fair.

· Is there any unexploited legal room to move within the eligibility criteria.

· Ensuring those passing successfully through the system meet the criteria.

· Ensuring the Panel process is efficient in agreeing packages of care

· Examining the balance between directly provided and in-house services

· Examining the use of temporary and agency staff

7.35 Achievements

7.36 While the shadow of financial problems was all pervading, it is nonetheless important to record the achievements of the financial year. Two star status was retained in the Autumn of last year and there has been an improvement in key performance indicators for 2005/06.

· Households receiving intensive care at home has moved from 8.4 to 9.1 per 1,000 people aged 65+

· Older people helped to live at home has moved from 84.6 to 88.3 per 1,000 people aged 65+.

· Hospital bed delays ascribed to Adult Services fell from an average of 35 per day to 28 per day

· Equipment delivered in seven working days has moved from 71.7% to 84%.

· Acceptable waiting times for assessment has moved from 78.7% to 87%.

· Clients receiving all services in care packages in four weeks of completion of assessment has moved from 86.3% to 88%.

· Adults and older people receiving direct payments has moved from 102 to 128.9 per 100,000 population, an increase of 582 recipients in the year.

It is not clear how this will compare to changes nationally but these will feed into the star ratings that come out next Autumn.

Other notable achievements include:

· `Innovations' project established in the south of the county, to bring together social workers and nurses working in the GP surgeries of four Primary Care Trusts (Fareham & Gosport, East Hampshire, Eastleigh & Test Valley South and the New Forest). The project is already improving the independence of people over 75 who live at home and reducing emergency admissions to hospital and hence the costs to Adult Services on discharge. The scheme will be extended to cover the whole county.

· ENHANCE, the project to build ten new nursing homes, continues. Six new homes are now completed. Where the nursing home has been built alongside an existing residential home, the residential home has also been refurbished.

· All the department's social workers are now registered with the General Social Care Council (GSCC) the new regulating body for social care workers, meeting the national deadline for registration.

· OT Direct, the department's fast-track phone line for occupational therapy advice and equipment, has won two national awards and one regional award.

7.37 These achievements are a product of Member support and a dedicated and hard working staff group who are committed to service improvements. However, there is no doubt that some of the Performance Indicators are linked to investment and the savings actions required in 2005/06 are likely to have an impact. This situation will be kept under review.

8 Part B - Capital expenditure 2005/06

8.1 The outturn for 2005/06 is set out below with details of the total resources and of the individual schemes started in the year appearing in Appendix 6.

		Total
		£'000
Total resources		2,908
Value of schemes started in 2005/06		2,855
Balance of Cash Limit		53

8.2 The total programme limit for 2005/06 amounted to £2.908m and schemes to the value of £2.855m were committed in the year. Part of the capital programme relating to block votes is controlled on an expenditure basis, while other projects continue to be controlled on a starts basis. Commitments in the year therefore represent a combination of expenditure on block votes and starts relating to other projects.

8.3 Schemes not started in 2005/06 and proposed for carry forward include minor works in residential and day care premises and furniture and equipment in office bases. The list of schemes started and proposed for carry forward are included in Appendix 6.

8.4 The combined value of schemes which started in 2005/06 and those proposed to be carried forward to start in 2006/07 is £3.716m which is £0.808m above the cash limit. . It was known that unavoidable commitments would run ahead of resources available pending the expected release of capital receipts and in accordance with that the Cabinet has deferred allocation of capital receipts shares to Adult Services pending a full review of the Capital Programme and its funding. The main reasons are variations of £0.235m on minor works in residential & day care premises, £0.074m on furniture and equipment in residential & day care premises and £0.501m on information technology.

8.5 In accordance with the County Council's Financial Procedures, the final costs of capital schemes controlled on a starts basis completed in 2005/06 are listed in Appendix 6. "Completed" in this context means when the final payment has been made. Some of these schemes may have been in operation prior to April 2005, but the final payment was only made in 2005/06. The final cost of the schemes completed in 2005/06 is £3.078m.

8.6 It is proposed that the additional cost of schemes which started in 2005/06 and those proposed to be carried forward to start in 2006/07 (£0.808m) is charged to the capital cash limit for 2006/07 and incorporated into the overall capital strategy for the service for 2006/07 and future years. Cabinet will receive a report on the 24 July reviewing this overall strategy, which will use future capital receipts income streams from the disposal of surplus property to fund the ongoing capital resources requirements of the service and the use of prudential arrangements to support any Invest to Save Schemes with a robust business case.

9 Part C - Departmental assurance statement

9.1 The Code of Practice on Local Authority Accounting in the UK requires the County Council within its Statement of Accounts to publish a Statement of Internal Control signed by the Leader and Chief Executive. 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 Governance Committee. Appendix 7 contains the statement relating to Adult Services and concludes that overall there is an appropriate framework of control which provides partial assurance regarding the effective, efficient and economic achievement of the County Council objectives.

10 Impact assessment

10.1 It is not considered that proposals in this report have a discriminatory impact.

Recommendations

1 That the final acounts for 2005/06 be approved.

2 That the proposed treatment of the £11.124m overspend in 2005/06 as set out in paragraph 1.9 be noted.

2 That the combined cost of capital schemes completed in 2005/06 and the requested carried forwards, in excess of the 2005/06 cash limit (£0.808m) be deducted from the 2006/07 capital programme limit.

3 A further report on capital be presented to Cabinet in July to incorporate the requests for approval for the carry forward.

Section 100 D - Local Government Act 1972 - background documents

The following documents discuss 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.

TITLE

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 Revenue expenditure 2005/06 not included in the cash limit

6 Capital expenditure 2005/06

7 Departmental assurance statement

Appendix 1

Adult Services

Revenue Expenditure 2005/06

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 £249.3m. Business rates other than relating to schools 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. As a result of revaluations actual expenditure on rates is £9,000 lower 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:

		£'000
Changes in Government Grants:
	Asylum Seekers	14
	Mental Health	-1
	Supporting People	-910
		-897
Transfers to / from Capital:
	Nursing Strategy	-248
	Non Residential Charging system	97
	Supporting Housing	100
		-51
Virements across Services
	Transfer from HR	130
	Virement from Children's Services	33
		163
Transfer by Health in lieu of Section 28a funding		871
Salary Sacrifice Scheme		-7

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

	£'000	£'000
Revised budget for 2005/06		249,170
Increase for the higher level of business rates payable	9
Variation in government grants	-897
Transfers from capital to revenue	-51
Virements across Services	163
Transfer by health in lieu of Section 28a funding	871
Salary sacrifice scheme	-7	88
Amended cash limit		249,258
Net expenditure		260,382
Net overspending against Service's controllable expenditure.		11,124

Appendix 2

Adult services

Final Accounts 2005/06

Summary of Revenue Expenditure

Appendix 3

Adult services

Revenue Expenditure 2005/06

Analysis of cash limited revenue expenditure over services

i)

Appendix 4

Adult Services

Revenue Expenditure 2005/06

Major variations in cash limited expenditure - overspending of £11.124m

Appendix 5

Adult services

Revenue Expenditure 2005/06 not included in the cash limit

1 Capital charges (£8.684m)

Capital charges are made to services for capital assets used in the provision of services. The actual charges are £1.846m more than the budget due principally to deferred charges arising on additional IT systems that have been acquired in the year. 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 (-£7.868m)

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 exercised on a functional basis rather than service basis, but actual costs are allocated to the relevant service.

3 Adjustment for pension and early retirement costs (£1.727m)

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 2005/06, as assessed by the County Council's actuary. This adjustment is required by the Code of Practice on Local Authority Accounting in the UK and 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 £.196m)

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. However, the Best Value Accounting Code of Practice requires these costs to be aggregated and separated from the cost of providing front line services.

Appendix 6

Adult Services

Capital Expenditure 2005/06

Appendix 7

Adult Services

Department assurance statement for the year ended 31 March 2005

3 Introduction

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

3.2 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 have also been required to sign a more general statement of internal control. To support this process, 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.

4 Responsibilities

4.1 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.

5 Basis of opinion

5.1 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.

5.2 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.

5.3 The Social Services department restructured during 2005/06 and two new departments were created, Adult Services and Children's Services. Our opinion is based on the audits that we carried out for Adult Services. All audits undertaken for the Children and Families section of Social Services have been reported in the Children's Services annual audit opinion.

6 Opinion

6.1 In forming our overall opinion we have taken into account the results of our own work, as well as the issues that came to light during the year with regards to budgetary control.

6.2 In my opinion the Adult Services department has an appropriate framework of control which provides partial assurance regarding the effective, efficient and economic achievement of the department's objectives. Audit testing has shown that the controls are working in practice with the exception of the analysis and reporting of the results of management actions and the escalation process with regards to the significant budget pressures.

Ejner Knudsen

Chief Internal Auditor

County Treasurer's Department

Hampshire County Council

15 May 2006