Contact: Ejner Knudsen, (01962) 847403; [email protected]

1 Summary

1.1 This report summarises the Environment service's spending in 2005/06.

1.2 It recommends that the final accounts for 2005/06 be approved together with adjustments to 2006/07 cash limits arising from the decisions of the Cabinet on 26 June relating to the carry forward of over and underspendings.

1.3 Decisions on the Environment service's revenue expenditure and capital programmes impact on the financial resources available to this service to contribute to the following corporate strategy aims:

a) maximising life opportunities

b) stewardship of the environment

c) achieving economic prosperity

d) building strong and safe communities

e) improving services

f) developing councillors and staff.

1.4 Overall there is a net underspending of £13,000 (0.01%) against the 2005/06 adjusted revised revenue cash limit of £96.6 million. This outturn is in line with the year's final budget monitoring report, presented to members during March, which indicated that the final outturn for the year was expected to be very close to the final approved allocations.

1.5 The major variations against the cash limit are:

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 £7,000 will be added to Environment service cash limit for 2006/07.

1.7 In considering the final outturn position compared to the service's cash limit, budgets and expenditure on highways winter maintenance (salting and snow clearance) are excluded. This is because special budgetary arrangements apply whereby any underspendings or overspendings against the winter maintenance budget provision, which is set at a level equivalent to average expenditure on this activity during the past four years, are reflected against the County Council's central balances.

1.8 During 2005/06 expenditure on highways winter maintenance totalled £2,950,000, which was £562,000 in excess of the budget provision. Salting operations took place on a total of 70 days which was considerably higher than would be expected during an average winter, reflecting the generally colder weather experienced during the November to February period.

1.9 On capital, schemes to the value of £43.0 million were committed in the year and schemes to the value of £2.6 million have been approved to be carried forward to 2006/07.

1.10 In total, this amount is equal to the cash limit for the capital programme, which includes the net value of variations to the programme approved by the Executive Member during the course of the year, in order that capital expenditure could meet Government spending targets. There are also some further variations to the programme which are set out in the appendices to this report.

1.11 Capital schemes to the value of £8.3 million, which are to be funded from developers' and other external contributions, were also started during the year.

1.12 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. Part D covers the requirement to report on the service's partnership accounts.

1 Part A - revenue expenditure under the service's control

1.1 Revenue expenditure under the service's direct control is subject to a cash limit. For 2005/06 the adjusted amount is £96.6 million as set out in Appendix 1.

1.2 The final outturn was £13,000 less than the cash limit. The overall position is analysed in Appendices 2 and 3. Appendix 4 includes a more detailed statement of variations from the revised budget.

1.3 The underspending during 2005/06 compares with the outturns achieved in recent years for the Environment services, as set out in the following table:

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

Highways and transportation services

Highways maintenance

1.4 Expenditure on routine highways maintenance (excluding winter maintenance salting and snow clearance - see paragraphs 1.7 and 1.8 above) totalled £19,738,000, representing additional expenditure of £166,000 (0.8%) compared to the cash limit for this division of service. The final outturn reflected higher planned expenditure on enhancements to bollards and signs, pre-surface dressing patching, depot drainage improvements and traffic systems monitoring equipment, together with a small overspending on technical surveys.

1.5 The outturn was in line with the plan, as reported in the final budget monitoring report in March, to allocate any savings on other budget headings identified during the latter stages of the year, to enable high priority items of highways maintenance expenditure to be brought forward to 2005/06 in order to ease pressure on the 2006/07 budget.

School crossing patrols

1.6 An underspending of £7,000 was recorded on this division of service, which was additional to the savings of £50,000 from staff vacancies identified and redistributed in preparing the 2005/06 revised budget. Again, this variation mainly relates to the ongoing staff recruitment difficulties that have been identified throughout the year in budget monitoring reports.

Public transport support

1.7 The budget for public transport support had been under considerable pressure during 2005/06 because of significantly higher costs arising from contract re-tenderings in the Gosport and Fareham areas, together with a number of commercial service de-registrations. Action was taken during the year to manage the position including the withdrawal of some bus services that no longer met the criteria for subsidy support. Additional support of £130,000 was also made available for public transport support in the 2005/06 revised budget from savings elsewhere within the Environment services' budget.

1.8 In the event, expenditure on public transport support has been successfully contained within the 2005/06 revised budget, with the final outturn showing a small underspending of £8,000 against the cash limit. The variation reflects a number of minor variations including lower contributions towards cross boundary bus services provided by other local authorities and savings on the administration of the minibus driver assessment and training scheme.

1.9 Also during 2005/06, the Government made available rural bus subsidy grant of £1,429,000 in support of rural bus services, which was fully consumed in supporting these services during the year.

Highways management and support services

1.10 Previous revenue budget monitoring reports during the year have referred to the management actions that were being taken to contain overall expenditure on the management and support services to the cash limit, which was reflected in the final 2005/06 outturn position.

1.11 Total expenditure on this division of service totalled £19,787,000, which was an underspending of £107,000 (-0.5%) compared to the revised budget. Savings from staff vacancies, office accommodation, advertising and printing and stationery contributed to the overall outturn position.

Planning and development services

1.12 Expenditure during 2005/06 on the planning and development services totalled £3,514,000, which was an underspend of just £7,000 (0.2%). Expenditure on this service reflects the allocation of staff and other costs from within the overall departmental budget, which is then apportioned over the various planning and development divisions of service headings, as prescribed by the CIPFA standard classification of accounts. This shows higher expenditure on development control and environment initiatives, being more than offset by lower costs of planning policy, when compared to the 2005/06 revised budget provision. These variations mainly arise from a revised basis of cost apportionment, based on latest staff time recording information, which was used to assess actual expenditure during the year.

Waste management

Contract related services

1.13 The final 2005/06 cash limit for the waste management contract related services was £41,204,000. This includes the final quarter's allocation of £1,464,000 from the central waste management contingency of £4,730,000, which was included in the 2005/06 budget to cover inescapable cost pressures arising from contract increases, higher waste volumes, increases in landfill tax and other waste contract cost pressures including contractual claims. During 2005/06 the total call on the waste management contingency amounted to £4,713,000, producing an outturn of £17,000 less than this central provision.

1.14 As reported in the most recent budget monitoring report in March, waste volumes were lower than expected last year. The outturn figures for 2005/06 showed that waste volumes actually fell by 0.5% compared with a year earlier, compared with assumed growth of 2.0% in the budget. Although household waste volumes increased by 0.8%, this was more than offset by a reduction in waste from recycling centres, which fell by 4.3%.

1.15 Approximately 60% of the annual expenditure on the waste contract related services arises from the reimbursement of fixed costs for the provision of waste disposal infrastructure. The balance of the contract expenditure is driven by variable cost factors such as the volume of waste being disposed. During 2005/06 savings of approximately £0.4 million arose from the lower than anticipated waste volumes, although these were largely counterbalanced by unforeseen higher costs resulting from the change in legislation for the disposal of paint and television monitors, as well as additional expenditure relating to the operation of the Little Bushy Warren composting site.

Other waste management services

1.16 Expenditure on the other (non-contract related) waste management services totalled £3,105,000, representing an underspending of £52,000 compared to the 2005/06 revised budget. This was mainly attributable to lower expenditure in connection with the disposal of abandoned vehicles which totalled £204,000 during the year, being an underspending of £46,000 compared to the revised budget provision. This variation reflects a reduction in the level of expenditure incurred by the agency district councils on behalf of the County Council, as a result of the continuing buoyancy in the market for scrap metal.

1.17 Other variations included savings in administration costs, due to delays in filling staff vacancies, and lower household waste recycling centre management costs. These were partially offset by higher expenditure on promotions and developments together with increased spending on closed landfill sites, to ensure that environmental and safety legislation requirements were met.

Carry forward to 2006/07 of underspending

1.18 As mentioned in paragraph 1.6, it is the County Council's policy that 50% of any net revenue underspendings can be carried forward and added to the service's budget in the following year, with the Cabinet deciding what use should be made of the other 50%. On this basis, the Environment service's share of the underspending would be £7,000 and it is proposed that this be added to the highways management and support services budget to help manage cost arising from planned organisational changes during 2006/07.

2 Part B - Capital expenditure 2005/06

Capital programme 2005/06

2.1 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.

	Locally resourced programme	Supported by Government approvals	Total
	£'000	£'000	£'000
Total resources	15,769	29,867	45,636
Value of schemes committed in 2005/06	14,466	28,539	43,005
Value of schemes carried forward to 2006/07	1,303	1,328	2,631
Variation against the cash limit	-	-	-

2.2 The total programme limit for 2005/06 amounted to £45.6 million and schemes to the value of £43.0 million were committed in the year. Part of the capital programme relating to block allocations 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 allocations and starts relating to other projects.

2.3 Schemes in the locally resourced County Council funded programme, including £1.3 million to be carried forward, exactly matched the level of capital resources of £15.8 million.

2.4 Commitments on the balance of the programme, which is supported by Government borrowing approvals, totalled £28.5 million, with an additional £1.3 million of schemes to be carried forward into 2006/07. This also matches the level of capital resources available after allowing for changes to the programme approved by the Executive Member during the year, aimed at ensuring that capital expenditure met Government spending targets. Any schemes that were deferred as part of this process have either already been included in preparing the 2006/07 capital programme or will be considered for inclusion in later years' programmes.

Capital payments 2005/06

2.5 Total capital payments during 2005/06 amounted to £53.9 million, of which £9.6 million is to be funded from external sources including contributions from developers, district and parish councils, and Government and European grants. Most significant is the use of £2.5 million of Government capital grant towards the A3 corridor bus priority scheme.

2.6 Payments on those capital programme schemes funded from local County Council resources totalled £13.5 million. The balance of the expenditure, £30.8m, is to be funded from credit approvals provided by the Government. This includes spending of £12.8 million on integrated transport projects, £14.6 million on capitalised highways and bridge maintenance and £3.3 million on the A3 corridor bus priority scheme.

2.7 The following table summarises capital payments during 2005/06 and the main sources of funding:

Completed capital schemes

2.8 In accordance with the County Council's Financial Procedures, the final costs of capital schemes completed in 2005/06 are listed in Appendix 6. This includes the completion of the A325 Blackwater Valley bus priority scheme, at a cost of £2.9 million, this project having been started during 2002/03. "Completed" in this context means when the final payment has been made. Some of the schemes may have been operational prior to April 2005, but the final payment was only made during 2005/06.

2.9 The total cost of the schemes completed in 2005/06 was £1,436,000 less than the final approved allocation for those schemes charged to the service's capital cash limit. However, this variation in expenditure has already been taken into account in assessing resources available to support other schemes in the capital programme.

3 Part C - Departmental assurance statement

3.1 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 the Environment services and concludes that overall there is a satisfactory framework of control which provides reasonable assurance regarding the effective, efficient and economic achievement of the County Council objectives.

4 Part D - Partnership accounts

4.1 Details are given in Appendix 8 for the Safety Camera, Life 3 and ESPACE partnerships in 2005/06. These are partnerships for which the County Council is the accountable body, but where no report is made to another committee or partnership board including members of the County Council and where the full expenditure and income is not included in the service's accounts.

5 Impact assessment

5.1 In compiling the 2005/06 final accounts an impact assessment has been carried out and that the proposals in this report are not considered to be discriminatory.

Recommendations

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

2. That the proposed treatment of the underspending of £7,000 to be carried forward from 2005/06, as set out in paragraph 2.18, be agreed.

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

Summary of accounts.

Appendix 1

Environment

Revenue Expenditure 2005/06

Construction of cash limit

1 Revenue expenditure under the service's direct control was subject to a cash limit of £93,230,000 (excluding highways winter maintenance), reflecting the 2005/06 revised budget presented as part of the 2006/07 revenue budget report to the Environment Policy Review Committee on 18 January 2006 and to the Executive Member - Environment at his decision day meeting on the same day.

2 The 2005/06 revised budget, included a request to the Cabinet to approve the carry forward to the 2006/07 budget of anticipated underspendings of £105,000 in connection with the implementation of the Traffic Management Act and £150,000 for the development of an asset management approach for highways maintenance. These carry forwards were subsequently approved by the Cabinet at their meeting on 10 February 2006.

3 A revised budget of £2,388,000 was set for highways winter maintenance salting and snow clearance, based on the average level of expenditure during the past four years. The special budgetary arrangements that apply to highways winter maintenance expenditure enable any underspendings or overspendings against the budget provision to be reflected against the County Council's central balances.

4 The overall County Council budget for 2005/06 included a contingency sum of £4,730,000 to cover anticipated higher expenditure on the waste management contract from growth in waste volumes beyond 2004/05 levels, future price increases, increases in landfill tax and other cost pressures. Periodic allocations are made from this contingency to the waste management budget, based on quarterly assessments of cost increases to the contract and related budgets.

5 The 2005/06 revised budget for waste management reflected the first and second quarter's calls on the contingency of £931,000 and £861,000 respectively. A further call on the contingency of £1,457,000 for the third quarter was subsequently made and included as an adjustment to the cash limit in the final budget monitoring report for the year, which was presented to members in March.

6 The final call on the waste management contingency, covering higher expenditure during the final quarter of the financial year was £1,464,000 and this sum has also now been added to the Environment service's 2005/06 cash limit. Overall, the call on the waste management contingency during 2005/06 amounted to £4,713,000, which was £17,000 lower than the contingency allowance.

7 An increase of £449,000 has been made to the cash limit to cover expenditure during 2005/06 in connection with the South Hampshire Rapid Transit project (SHRT1), including the cost of the former project team. Provision has been included in the accounts for anticipated reimbursement of past County Council expenditure, by way of Section 56 capital grant, from the Department for Transport.

8 The County Council is no longer responsible for the enforcement of the Reservoirs Act, 1975, this function having now transferred to the Highways Agency. A reduction of £26,000 has been made to the Environment service's cash limit to reflect this transfer of function.

9 Further minor cash limit reductions have been made in respect of the administration of salary sacrifice schemes (-£4,000), and lower business rates on the County Council's own properties, as this sum could not be estimated precisely when the revenue budget was set. As a result of revaluations, actual expenditure on rates was £1,000 lower than was provided in the revised budget and the cash limit has been adjusted accordingly.

10 No cash limit adjustments are required in respect of rural bus subsidy grant as the 2005/06 grant allocation of £1,429,000 was fully utilised during the accounting period. Similarly, the allocation of special Government grant of £428,000, relating to additional highways maintenance expenditure following the de-trunking of the A339, together with a sum of £85,000 in respect of planning delivery grant, have also been fully consumed during the year.

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

	£'000
Cash limit approved in the revised budget	93,230
Waste management contingency call - Q3	1,457
Waste management contingency call - Q4	1,464
South Hampshire Rapid Transit (SHRT1)	449
Reservoirs Act, 1975 - transfer of function	-26
Administration of salary sacrifice schemes	-4
Business rates - lower actual costs	-1
Amended cash limit (excl winter maintenance)	96,569
Net expenditure	96,556
Net underspending against service's controllable expenditure	13

Appendix 2

Environment

Final Accounts 2005/06

Summary of Revenue Expenditure

Appendix 3

Environment

Revenue Expenditure 2005/06

Analysis of cash limited expenditure over services

Appendix 4

Environment

Revenue Expenditure 2005/06

Major variations in cash limited expenditure - underspending of £13,000

Appendix 5

Environment

Revenue expenditure 2005/06 not included in the cash limit

Appendix 6

Environment

Capital Expenditure 2005/06

Appendix 7

Environment

Department assurance statement for the year ended 31 March 2006

Appendix 8

Environment

Partnerships

Safety camera partnership

· The Hampshire Safety Camera Partnership aims to improve road safety by using fine income to fund the installation of safety cameras.

· The partnership includes six partners: Hampshire County Council, Magistrates Court Committee, Southampton City Council, Portsmouth City Council, Isle of Wight Council and Hampshire Police Authority. Hampshire County Council is also the beneficiary of the funding from the Department for Transport.

· Project summary statement

	£
Opening balance 1 April 2005	161,146
Income	2,242,602
Expenditure	1,389,967
Closing balance 31March 2006	1,013,781

· The balance brought forward as at 1 April 2005 represents unallocated funding from 2004/05 including interest of £47,179.

· Expenditure received from DfT in the year was £2,209,962. Interest of £32,639 was earned on this account in the year.

· Expenditure on the account from 1 April 2005 to March 2006 totalled £1,389,967.

· The balance on the account of £1,013,781 represents £79,819 interest, £933,961 funding due to partners and unused DfT funding of £1 which will be carried forward to 2006/07 subject to agreement of the audited final claim for 2005/06. Payment from DfT in 2006/07 will be adjusted to incorporate unused funding from 2005/06.

Life 3

· The objective of the Life 3 project is to restore 604ha of wetland habitat in the New Forest candidate Special Area of conservation, and ensure their future sustainable management and regeneration.

· The project began 1 July 2002 and will run for four and a half years until 31 December 2006. The project has a total budget of €4,584,262, 40% of which is funded by the European Union (EU). The remaining funds are sourced from the six partners: Hampshire County Council, Environment Agency, English Nature, Forestry Commission, National Trust and the Royal Society for the Protection of Birds. Hampshire County Council is also the beneficiary for the EU funds, with responsibility for receiving, verifying and paying claims from partners for their share of the EU funding.

· All EU funds are received in Euros and all claims received from partners for their share of the EU funding are paid in Euros.

· Project Summary Statement

	€	£
Opening balance 1 April 2005	76,224	53,199
Income	554,830	387,230
Expenditure	516,306	360,343
Closing balance 31 March 2006	114,748	80,086

· The expenditure represents the payments to partners made in 2005/06.

· The first tranche payment from the EU, representing 30% of the total budgeted EU funding was received in October 2002. The second tranche payment of €550,111, representing 40% of the budgeted EU funding, was received in December 2005. Interest earned on the Euro account for the year 2005/06 amounted to €4,719.

· The closing balance of €114,748 will be carried forward to 2006/07.

Espace

· ESPACE (European Spatial Planning: Adapting to Climate Events) is an ambitious four year European project that aims to prepare for the impact of climate change and develop solutions. It will also underline the need to adapt to climate change at local, regional, national and European levels.

· The project commenced in September 2003 and will run for four years until 2007. The total project budget is €4.75million (approximately £3.2 million), of which Hampshire County Council's share is approximately £847,694, and is 50% funded by the INTTEREG IIIB North West Europe Programme (a European regional development fund). Further funding is received from the Office of the Deputy Prime Minister (ODPM) and the remaining balance is sourced from 10 partners: Hampshire County Council, Environment Agency, Regionnal Landschap Zenne Zuun en Zonien, South East Climate Change Partnership, South East England Regional Assembly, Surrey County Council, Waterschap Rivierenland, West Sussex County Council, Ministeria van VROM and Bayerisches Landesamt fur Wasserwirtschaft.

· Hampshire County Council is the lead partner in the ESPACE project and therefore responsible for receiving and verifying all partners' claims along with compiling the partnership claim, receiving and distributing funding from the INTTEREG IIIB and the ODPM.

· All EU funds are received in Euros and all claims received from partners for their share of the EU funding are paid in Euros.

· Project summary statement

	€	£
Opening balance 1 April 2005	172,704	118,583
INTTEREG Income	578,608	398,023
Expenditure	442,968	304,542
Closing balance 31 March 2006	308,344	212,064

· The closing balance of £212,064 is due to Interreg funding that was not distributed to partners as at 31 March 2006 and will be carried forward to 2006/07.