Contact: Sheila Little, (01962) 847545; [email protected]

1 Summary

1.1 This report summarises the newly formed Children's Services' 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 under spendings.

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

· Maximising life opportunities

· Economic prosperity

· Improving services

1.4 In addition, Children's Services contribute to the five key aims of the Children Act.

1.5 There was an under spend of -£260,000 against the 2005/06 adjusted revised revenue cash limit of £776.9m after taking account of the transfer of funding to ensure all the General Sure Start Grant was spent as discussed in previous Policy Review Committee papers. This under spend of £260,000 was used as an additional revenue contribution to meet part of the element of the shortfall in the former Social Services capital programme to fund SWIFT and other IT information systems.

1.6 In the March 2006 budget report to Children's Services Policy Review Committee a projected overspend of £285,000 was reported. The main change since this paper accounting for the difference relates to inter authority payments that arise because of pupils from across authority borders in mainstream schools who require extra support. The table below summarises the main variations against the revised cash limit for each of the main service budgets: Schools, LEA, and Children's Social Care:

	£'000	£'000	%
Schools Budget
· Centrally managed budgets for schools · Education Otherwise than at School · Other SEN · Early Years	+152 +29 -159 +178		+3.2% +0.4% -1.1% +0.6%
Total Schools Budget		+200
LEA Budget
· Strategic Management · Access · Continuing Education · Youth Service · Services to Schools and Support · Training and Curriculum Development	-168 -75 -45 +24 +24 -170		-3.1% -0.4% -3.3% +0.4% +0.1% -0.3%
Total LEA Budget		-410
Children's Social Care Budget
· Commissioning and Social Work · Children Looked After · Family Support Services · Other Children and Family Services · Asylum Seekers and other minor variations	+173 -99 -271 +132 +15		+1.0% -0.3% -4.1% +3.0% +4.5%
Total Children's Social Care Budget		-50
Revenue Contribution to Capital	+260	+260
Total		0

1.7 The County Council's policy is to carry forward into the following year 100% of net overspendings and 50% of net unplanned under spendings. Cabinet decides what use should be made of the other 50% under spending. However, as Children's Services has produced a balanced budget, there will be no effect on the Children's Services cash limit for 2006/07.

1.8 On capital, schemes to the value of £77.243m were committed in the year and schemes to the value of £17.355m have been approved/or approval is being sought to be carried forward to start in 2006/07. In total this amounts to £0.971m less than the approved cash limit for the capital programme.

Local Management of Schools

1.9 Any balance of budget allocation held by schools at the year-end, whether surplus or deficit, must be carried forward into the next financial year. During 2005/06 the overall level of school reserves under LMS increased by a total of £3,378,000 (Primary balances by £946,000, Secondary by £1,853,000, Special by £434,000 and Nursery by £145,000). The cumulative reserves now stand at £38.377m (including balances for community education) which represents 6.6% of schools' allocations as shown in the table below:

1.10 These amounts are higher than anticipated from the indications received from schools earlier in the year which suggested that they had plans to reduce balances. This overall increase in balances also includes a reduction in the numbers of schools in deficit and the total deficit amount. The number of schools with deficit balances fell from 37 to 30 between 31 March 2005 and 31 March 2006. After taking account of retrospective number on roll adjustments, there are 15 primary (down from 24), 11 secondary (unchanged), and 1 special (down from 2) schools with deficits. One of the key criteria for distribution of Transitional Support Grant (a Central Government grant paid to some councils to assist schools in financial difficulty), was schools in financial difficulty.

1.11 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. The results of the trading units are reported in Part B. Part C deals with capital schemes. Part D explains the basis of the control assurance statement included as Appendix 8. Part E covers the requirement to report on 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 £776,863 as set out in Appendix 1.

1.2 Although there was a final balanced budget outturn, there were budget variations within services and 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 most significant elements within the total spend are explained in the following paragraphs.

Schools Budget

Centrally Managed Budgets for schools +£152,000

1.4 This consists of an overspend on the Local Management of Schools contingency (budget share amendments), mainly as a result of temporary classroom rentals being higher than anticipated, +£65,000; and an increase in the number of occasions when schools require support to supplement staffing pressures, teachers on public and trade union duties, and head teachers representative groups.

Inclusion and Behaviour (Special Education Needs) -£130,000

1.5 The outturn for the various non-delegated budgets in 2005/06 shows a net under spend of -£130,000 made up as follows:

	£'000
Statements in mainstream education (low incidence)	-102
Out-County placements	+86
Inter authority special school recoupment	+235
Inter authority recoupment for pupils with statements	-323
Education Other than at School	+29
Behaviour Support Implementation	-55
	-130

1.6 Funding to schools for pupils with low incidence statements was under spent by -£102,000 on a net budget of £6,479,000. Due to IT problems it was not possible to make funding allocations to schools until March 2006, and this prevented the usual forecasts which could have highlighted the under spend earlier. Out-county placements has overspent by +£86,000 on a revised budget of £6,951,000 (net of LSC grant of £1,807,900). This compares with a projected overspend of +£176,000 forecast in March 2006 and reflects lower than expected end of year recharges for multi funded placements which are not confirmed until the year end.

1.7 The placement in other County Council special schools and units which give rise to inter authority recoupment, are due to parental preferences, foster placements to other local authority areas, and situations where the nearest appropriate placement is over the Hampshire border. These demand-led circumstances, and the practicalities of the recoupment process, present a challenge to budgetary planning and control and in 2005/06 there has been a net exporting of pupils to other local authorities creating an overspend of +£235,000 on a budget of £619,000. Measures are always under review with the aim of achieving an earlier warning of variations, while at the same time avoiding a disproportionate cost in terms of management resource.

1.8 Similarly, where pupils from across borders attend mainstream schools and receive extra support, inter authority payments arise against claims made one year in arrears. The effect of a variation in numbers and levels of support of cross border pupils attending Hampshire schools in 2004/05 and 2005/06 has resulted in a net saving of -£324,000. Note that while the net budget for 2005/06 was £273,500, estimated transactions for the two years totalled £2.1 million.

1.9 Although an overall variation of only +£29,000 (0.4%) on the EOTAS budget of £7,068,000, there are a number of variations within this. In particular, Basingstoke School Plus under spent against the revised budget by -£81,000 and the income from schools in respect of emotionally vulnerable and unwell pupils has exceeded expectations by -£115,000. Recruitment difficulties at the beginning of the year within the drugs team has led to an under spend of -£51,000, although this is not expected to be repeated in 2006/07. Conversely, the education centres have overspent against their revised budget by +£276,000 mainly due to more preventative activities taking place than anticipated.

Early Years +£178,000

1.10 This overspend arose as a result of receiving less New Opportunities Fund (NOF) grant income than had been anticipated in the budget assumptions. As previously reported there was an underspend on Early Years with £2.5 million of eligible expenditure being charged to the General Sure Start Grant (GSSG), which would otherwise have been charged to Hampshire funded Children's Services budgets. All but £2,000 of the £9.862m GSSG has been spent and claimed from DfES. Despite this during 2004-2006 significant improvements were achieved by the Early Education and Child Care Unit:

· Over 1000 settings were registered to provide nursery education; two-thirds of which are in the private, voluntary and independent sector

· Nursery education take up increased to an average of 4.19 sessions per week for three year olds and 4.62 sessions per week for four year olds

· The Area SENCO team was completed

· The number of registered childcare places increased to 45,600 - the highest for any local authority in England. This represents 3.1% of all the childcare places in England - well above the 2.5% percentage of children nationally who are resident in Hampshire

· The quality of early years education and childcare measured by Ofsted was found to be generally better than our statistical neighbours (similar local authorities).

LEA Budget

Schools Centrally-held Budgets (strategic management) -£168,000

1.11 This overall variation represents 3.2% of a total budget of £5.390m. Within this, the premature retirement compensation budget under spent by -£77,000 reflecting a reduction in numbers; the SEN audit and moderation budget under spent by -£46,000 because of the temporary suspension of the process during a major review in 2005; insurance premiums were lower by -£24,000 and other minor variations account for the remaining -£21,000 under spend.

Access (e.g. pupil support and home to school transport) -£75,000

1.12 The main saving relates to lower than expected levels of claims for school clothing allowances in the pupil support budget, -£63,000 on a revised budget of £390,000. A further saving of -£25,000 was made due to lower than expected expenditure on escorts. Minor variations of +£13,000 account for the remaining balance.

Continuing Education (e.g. home to college transport) -£45,000

1.13 There was a saving on home to college transport of -£45,000 on a revised budget of £888,000 reflecting higher than anticipated income.

Youth Service (including Youth Offending Team - YOT) +£24,000

1.14 This outturn includes the education service contribution to Youth Offending Team, of £340,000. The YOT contribution was -£19,000 underspent because the actual costs for the contribution were less than the budgeted unit costs agreed at the start of the year.

1.15 The Youth Service, with a cash limit of £5.053m had an overspend of +£43,000 mainly due to the impact of the backdated pensions contribution.

1.16 In 2005/06 the Youth Service had an extra budget allocation of £250,000 allocated to Youth Workers for increased direct work. Utilising this budget the Youth Service has increased detached work by setting up additional youth work teams in each of the 11 districts, and extending already existing work within this area. These teams have been responding to community safety issues involving young people and have delivered outcomes in relation to all of the 5 key aims of the Children Act as illustrated by the examples below:

· Being healthy - Young people meeting on the streets in Eastleigh had access to Chlamydia and STD testing as a result of a joint project with health services.

· Staying Safe - In Aldershot a group of young men identified by the police were taken by youth workers to the army sports facilities where they participated in a number of new sports. As a consequence a number of the group have now set their sights on joining the army and developing a career within it

· Enjoy and Achieve - A double-decker bus was used in the Hart rural area to ensure young people who had not experienced youth work took part in new opportunities

· Making a positive contribution - As a result of detached work a number of groups were able to lobby their District councils for improved or new facilities including skate parks, youth shelters and new youth clubs. An example of this is the work carried out by young people on the design and art project for the new Rowner youth provision. Without the detached work those young people would not have been able to influence the new provision.

· Achieve Economic Well Being - Vulnerable young women living in sheltered accommodation in Hart have been offered a range of personal development programmes and advice and guidance on issues such as eating and sexual health as part of a programme to support them to independent living.

Services to Schools and Support +£24,000

1.17 With a total cash limit of £26.7m this variation represents less than 0.1% and comprises a number of variations including: an under spend on ICT of -£128,700 due to delays in implementation of system changes originally planned for 2005/06; off-set by various overspends on staffing related budgets and; and increased spending on the department restructure.

Training and curriculum development -£170,000

1.18 The cash limit for this budget is £53.749m and is for professional development of teachers and support of various curriculum priorities. A significant proportion of this budget is devolved to schools and spent on relief teachers to enable teaching staff to attend in service training. A shortfall in the number of Advanced Skills Teachers that could be recruited resulted in a saving on the County Council contribution to match Standards Fund grant of -£102,000. Further, unexpected income of -£59,000 in relation to costs incurred in 2004/05 was received. Other minor savings of -£9,000 explain the remaining variation.

Children's Social Care

Commissioning Social Care (e.g. social worker salaries) +£173,000

1.19 This represents a variation of 1.0% on a cash limit of £17.6m. There was a net overspend on salaries of +£72,000 as a result of using agency staff to cover vacancies that could not be recruited to with permanent staff and agency staff are more expensive. There was an over spend of +£76,000 on staff travel costs, and a further +£25,000 on miscellaneous items such as office furniture.

Children Looked After (e.g. NCPs / IFAs , Children's homes, secure unit) -£99,000

1.20 Non-County Placements (NCPs) were overspent by +£241,000 on a revised cash limit budget of £9.3m, many complex with expensive disabilities where the average cost of a placement is approx. £100,000. Independent Foster Payments (IFAs) were under spent by -£340,000, (on a cash limit of £5.6m) partly because recent success in Family Placement work has avoided the use of IFAs. There has been a decrease throughout this financial year of 14 placements.

1.21 The table below summarises the movement in NCP and IFA provision 2005/06:

Provision	Client numbers at 01/04/05	Client numbers at 31/03/06
Non-County Placements (NCP)
· Non-disability	21	19
· Children With Disabilities (CWD)	48	50
Total NCP	69	69
Independent Fostering Agency (IFA)
· Non-disability	118	100
· Children With Disabilities (CWD)	7	11
Total IFA	125	111
Grand Total	194	180

1.22 Although the overall number of NCPs at the beginning and the end of the year remained the same, during the year there was turnover of 45% with 31 new placements matched by 31 ceased placements during the year. Although the level of turnover matches with the trend in previous years, there was a noticeable increased cost of the new placements over those ceased across all areas of the County. Further, the majority of the increase relates to children with non-disabilities rather than Children With Disabilities.

1.23 As well as NCPs and IFAs as discussed above, children looked after also includes children in residential placements. In total the number of children looked after has increased during the financial year 2005/06 by 36 to 1066. However, the authority was able to stabilise the number of IFAs through increased in-house provision through increases in Kinship Care and an increased Fostering provision with relatives or friends.

Family Support Services (e.g. family centres, home care) -£271,000

1.24 This under spend of -£271,000 is on a cash budget of £6.7m has arisen as the focus of the service has been on securing permanent places for children with complex needs and can be broken down illustrated in the table below:

Service	2006/07 Actual
	£'000
Children's Services home care	-141
Services to under 8s	-36
Direct Payments	-34
Section 17 payments	-81
Other minor variations	+21
Total	-271

Other children and family services (e.g. adoption, care leavers) +£132,000

1.25 Leaving care and adoption settling in grants are still relatively recent statutory responsibilities and the demand and take-up of the service is still being established.

Asylum seekers +£15,000

1.26 Expenditure not recouped by grant.

2 Part B - Trading units

2.1 Since 1990, a range of support services has been provided to schools through Service Level Agreements. This allows school governing bodies to choose the level of service that best meets their need and schools pay the Units for the services purchased. The business units have an annual turnover of £26m and the level of overall surplus has varied from year to year, reflecting the volatility of the environment within which each operates. It is not unreasonable for a balance of 5% overall surplus to be held.

2.2 The trading activities of the Education business units during 2005/06 have resulted in an overall in-year surplus of £460,000 compared with a planned deficit of £152,000. The outturn position on the service's business and trading units is set out, in summary, below:

	Surplus / - deficit 2005/06	Reserves brought forward 01/04/2005	Total reserves at 31/03/2006
	£'000	£'000	£'000
Education Financial Services	-3	-27	-30
Education ICT	+687	-159	+528
Education Personnel Services	-231	-17	-248
Hampshire Governor Services	+36	+135	+171
Hampshire Inspection and Advisory Service	+16	+855	+871
Stubbington Study Centre	+90	+246	+336
Minstead Study Centre	-107	+122	+15
Hampshire Music Service	-28	+165	+137
Total Education Business Units	+460	+1,320	+1,780

2.3 The outturn position on the service's business and trading units indicates an increase in overall reserves to £1,780,000. The major variations from planned levels of activity are: a much higher level of purchase from schools for the EdICT activities than anticipated (further details below); use by Minstead Study Centre of £100,000 of their reserves for new sustainable dormitories and refurbishment to the Victorian buildings; off-set by Stubbington Study Centre contributing further to their reserves as part of their 10 years refurbishment strategy; and the continued employment within EPS of staff to assist with the roll out of SAP HR to schools.

2.4 The EdICT's reserves were £159,000 in deficit at the start of 2005/06 prompting management to re-consider pricing and financial risk management as between EdICT and Hampshire schools. Schools were given the choice of the level of support they deemed necessary at the start of the financial year and agreed an up-front price and service level. More schools than business planning anticipated signed up to EdICT's services resulting in EdICT achieving higher levels of income for the service.

2.5 All of the units operate under arrangements agreed by the County Council which permits them to retain planned surpluses for purposes approved in their business plans or to take into account in setting future budget strategies. These strategies include:

· Plans to use £248,000 worth of the EdICT surplus to contribute to the funding of further Children's Services IT information system developments in 2006/07 to meet the statutory requirements of ICS and ISI.

· An expectation that up to £648,000 of the HIAS surplus will be required in 2007/08 to fund the new requirements to increase school improvement partner time in Primary schools. Further, this will be an on-going pressure into 2008/09 which will require further balances or alternative funding being secured.

· The impact of the reduction by Southampton City Council of their support for the study centres for 2006/07 and withdrawal from the service level agreement from 2007/08 has meant charges for Southampton schools have been revised and the impact on study centre balances is being monitored carefully.

· Recognition that the implications of pay and benefits will have to be absorbed within existing business unit balances. Although this cannot be costed at this stage it is expected that figures will become known during 2006/07.

· A proposal to re-allocate balances across business units to recognise the contributions made by a number of these Units to the extensive roll out of SAP to schools.

2.6 The impact of the above is likely to reduce balances by around £900,000 over the next two financial years, reducing net balances to around £900,000 or 3.5% of turnover.

2.7 The summarised trading accounts of the individual business units and a comparison with the revised budget are shown in Appendix 5.

2.8 Appendix 6 lists those items of expenditure, which affect the Children's Services but are not within the direct control of the service.

3 Part C - Capital expenditure 2005/06

3.1 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 7.

		Total
		£'000
Total resources		95,568
Value of schemes started in 2005/06		77,242
Value of schemes carried forward to 2006/07		17,355
Under commitment against the cash limit		971

3.2 The total programme limit for 2005/06 amounted to £95.568m and schemes to the value of £77.242m 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.

3.3 Schemes approved to be carried forward to start in 2006/07 included Whiteley Primary School (£1.438m), Sundridge Special School (£5.150m), and Micheldever Primary School (£1.980m). The list of schemes started and carried forward are included in Appendix 7.

3.4 The combined value of schemes which started in 2005/06 and those carried forward to start in 2006/07 is £94.597m which is £0.971m below the cash limit and the balance of the cash limit can also be carried forward to 2006/07.

4 Part D - Departmental assurance statement

4.1 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 8 contains the statement relating to Children's Services and concludes that overall there is an appropriate framework of control which provides reasonable assurance regarding the effective, efficient and economic achievement of the County Council objectives.

5 Impact assessment

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

Recommendations

That the Executive lead Member for Children's Services be advised:

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

2 That the reduced cost of capital schemes started in 2005/06 be added to the 2006/07 capital programme limit.

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. - none

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 Trading Units - summarised accounts 2005/06

6 Revenue expenditure 2005/06 not included in the cash limit

7 Capital expenditure 2005/06

8 Departmental assurance statement

9 Partnerships