Contact: Paul Carey-Kent (01962) 847524; [email protected];

Rea Mattocks (01962 847200; [email protected]

1 Summary

1.1 This report is the first budget monitoring of the financial year. It covers the first two months and indicates serious pressure on the Adult Services budget, actions that are in place, and likely year end out turn.

1.2 The following decision is sought:

That the Executive Member note the current budget position and the measures being taken.

2 Reason(s)

Aim 1 Maximising life opportunities

Aim 5 Improving Services

3 Other options considered and rejected:

3.1 None

4 Conflicts of interest declared by the decision maker or other Executive member consulted

4.1 None

5 Dispensation granted by the Standards Committee

5.1 None

6 Reason(s) for the matter being dealt with if urgent

6.1 Not Applicable

Approved by: Date:

Councillor Patricia Banks

Contact: Paul Carey-Kent (01962) 847524; [email protected];

Rea Mattocks (01962 847200; [email protected]

7 Summary

7.1 This is the first budget monitoring report for 2006/07, and is based on data to the end of May. The headlines are as follows:

· The total cash limit for the service is £256.9m, the predicted outturn at the end of May 2006 is estimated to be £274.4m, an overspend of £17.5m.

· This compares with an anticipated overspend range of £16m up to £20m as reported to the Adult Services Member Review Panel on 23 June.

· The overspend includes commitments from 2005/06, and allows for the judgement that a proportion of the required savings target of £6.4m remains uncertain. There are clear and achievable plans for £4.7m (73%) of this £6.4m; further work is taking place to ensure achievability of the remaining plans. The pressures are partly offset by £1m of separate savings in management and support.

7.2 This £17.5m figure projects the current overspend until the end of the financial year if no further remedial action was taken. The department however is taking actions and these are discussed below:

· A review of the outstanding savings already within the budget with a view making the full £6.4m savings

· There is a contingency of £3m, which was set aside in the first instance to make repayments of the 2005/06 overspend. In the event, the Cabinet is not requiring any such repayment. At this stage, therefore, this £3m is available to deal with any new pressures arising in the remainder of the year (e.g. additional demand) or in so far as it is not needed for that purpose, might in due course be able to be offset against the headline pressures or any failure to make savings, so reducing the projected overspend. This will be appraised and reported on as the financial year progresses.

· Plans are being developed for longer term recovery and will be reported to next Adult Services Review Panel. Although this report does not cover those savings in detail, initial estimates show £4.5m recovery savings in 2006/07 and an additional £8.4m recovery savings in 2007/08.

- The latest care management statistics are showing signs of some reduction in the number and average costs of care packages, which may lead to a reduction in the outturn predictions in the June monitoring

7.3 The predicted overspend is therefore £17.5m (6.8% of the cash limit) as at 31 May, but with prospects for potential improvement in the position.

8 Overall position

8.1 The position by client group may be summarised as follows:

Client Group	Budget £m *	Forecast Spend £m	Variance £m	Variance %
Older People	117,084	132,238	15,154	12.9
People with Physical Disabilities	21,801	23,845	2,044	9.3
People with Learning Disabilities	49,403	51,286	1,883	3.8
People with Mental Health Needs	12,333	11,970	-363	-2.9
Management and Support Services	20,901	19,847	-1054	-5.0
Supporting People	31,939	31,939	0	0
Other	0,340	0,199	-141	-41.5
Contingency	3,078	3,078	0	0
Total	256,879	274,402	17,523	6.8

Note: There have been adjustments during April 2006 which have reduced the budget by £61,000 from the original cash limit. Budgeted savings are attributed to the relevant client groups, and the deficit includes those categorised as `red'. Note also that the table above analyses the budget in terms of management responsibility and is not, therefore, the same as the presentation used in the budget book, which follows the external reporting requirements of CIPFA's best value accounting code of practice.

8.2 The appendix sets out the detail across client groups, together with the activity data for the first two months compared with the position in March. That shows that activity remains at a constant level, which is reflected in the outturn forecast at this stage which is based on the full year effect of 2005/06 demand occurring in 2006/07. That represents a prudent forecast, but management action is planned to reduce demand and initial figures for June show that this might be starting to have some effect.

8.3 The main reasons for the projected level of overspend are:

· The full year effect of demand pressures that have arisen in previous years. For example a care package arranged at the beginning of January at a cost of £1,000 per month will have cost £3,000 in 2005/06. However, it will produce commitments of £12,000 in 2006/07, should the package continue for the full year. Of course, it is more complex than this as packages start and finish at different times, but this does go some way to explain why an overspend of £11.1m translates into pressures of £15m-20m the following year. In addition, the Department must and is addressing a continued rise in overall demand and dependency level.

· The budget monitoring takes account of the plans included in the budget to make £6.4m of redeployment and efficiency savings. To date, while plans have been identified for £1.7m (26%) of these savings, and this sum is included as part of the predicted overspend, there is not yet sufficient confidence they will be achieved. However, the Department has firm plans for 73% of its required savings (£4.7m).

· Savings are planned for Management and Support (£1m) and this is an area where they were made in 2005/06 and are therefore seen to be deliverable

· Clearly the financial position remains very serious. Reducing the levels of activity will be key in reducing the overspend, and there are some signs in the initial June care statistics to show that this is beginning to happen, but these reductions are not reflected in the figures used in this report.

9 Progress in Implementing Budget Savings

9.1 At the start of the financial year Adult Services DMT agreed that a `Red / Amber / Green' system should be used in monitoring progress in achieving the £6.4m of savings included in the 2006/07 budget. In summary the position for implementing budget savings in comparison with the previous month is shown below:

9.2 Although the position has improved since the end of April the value of savings in red is still too high. Management action is required by the Department immediately to review all projections in the red area and report to DMT within the next budget monitoring process what remedial action will be taken to realise the saving. The assumption is that amber projects have been included as being achieved, but clearly there is some risk here, too, which impacts particularly on learning disability, which has the majority of the amber saving category.

9.3 Some of the specific actions being taken by the department (which relate to both sets of saving plans) are shown below for information:

· Older People (with emphasis on Domiciliary Care and Residential and Nursing)

o Indicative targets have been set for panels to assist them in their budgeting

o Maximising the efficiency of in-house services.

o Decisions on what further savings can be found in home care and in house residential and nursing provision

o Guidelines are being issued on benchmark levels for domiciliary packages and packages over the benchmark will be reviewed

For People with Physical Disability:

o Identification of cases where a transfer from residential or nursing accommodation to supported living or more cost effective care is possible

o Maximising ILF or continuing care funding

o Reviewing all packages of care

o Reviewing all services contracts, especially those for non-statutory services

· For People with Learning Disability:

o Review all high cost placements and 1:1 support

o Review direct payments

o Contract remodelling with domiciliary care provision in SW Hampshire

· For Mental Health management action include

o Review of all high cost care

o Ensure all packages are entered correctly on Swift

o Monitoring and review processes in place to ensure tight application of eligibility criteria

o A review of all contracts and grants

9.4 To summarise the position the following table projects the likely range of possible outturns for the rest of the financial year and will become firmer as the saving plans become more robust

10 Actions and Conclusions

10.1 The plans to make the originally budgeted £6.4m of savings in full are being pursued as matter of urgency and will be reported as part of the next budget monitoring.

10.2 The May budget monitoring does not yet reflect work being done as part of the financial recovery plans, although the management actions highlighted will overlap. These plans will become part of the monitoring process as they become available.

10.3 Bringing levels of demand down will be key in bringing spend back into line with the budget. No reductions were achieved in the first two months: this will form a key part of the recovery plans, but despite some initially promising early data from June, this is likely to take time.

11 Recommendations

That the executive member note the current budget position and the measures being taken.

Appendix 1

Client Group Analysis

For Older People the overspend is primarily due to the significant pressures within the budget for purchased services for residential, nursing and domiciliary care as shown below:

In addition the table below shows changes in total client order numbers ( including in-house provision) for the main services during the financial year to date. Overall they have decreased. Further work is being undertaken as part of the recovery plan to reduce demand, and this is expected to show in the June figures.

Examples of management action currently under way with a focus on Domiciliary Care and Residential and Nursing include:

· Clarification of the number of placements in nursing and residential care that have been budgeted for in the current year in order to set indicative targets for panels to assist them in their budgeting

· Maximising in house occupancy

· Clarification of what further savings can be found in home care and in house residential and nursing provision

· Guidelines are being issued on benchmark levels for domiciliary packages and packages over the benchmark will be reviewed

· Review of all low cost packages in domiciliary care where it is indicated that eligibility criteria are not met

For People with a Physical Disability / Sensory Need the overspend is primarily due to pressures within the budget for domiciliary care and nursing care as shown below:

In addition the table below shows changes in total client order numbers during the financial year to date:

Examples of management action being taken include:

· Identification of cases where a transfer from residential or nursing accommodation to supported living or more cost effective care is possible

· Maximising ILF or continuing care funding

· Reviewing all packages of care

· Reviewing all services contracts, especially those for non-statutory services

For People with Learning Disability the pressures are across the service areas, as shown below:

In addition the table below shows changes in total client order numbers during the financial year to date. The overspend for this service includes an adjustment for estimated costs of transition clients from Children and Families not yet shown as a commitment in Swift.

Examples of management action being taken include:

· Review all high cost placements and 1:1 support

· Review direct payments

· Contract remodelling with domiciliary care provision in SW Hampshire

For People with Mental Health needs there is a small underspend which is shown below:

In addition the table below shows changes in total client order numbers during the financial year to date.

Examples of management action include:

· Review of all high and low cost care

· Ensure all packages are entered correctly on Swift

· Monitoring and review processes in place to ensure tight application of eligibility criteria

· A review of all contracts and grants

For Management and Support (an area where savings were achieved in 2005/06) the budget monitoring is showing a saving of £1m. Areas where savings have been planned include vacancies being held in Partnership & Performance and Resources, only essential purchases in respect of renewal of office equipment, reductions in training expenditure, vacancy management, removal of relocation allowances and reductions in compensatory added years, but these will need to be monitored during the financial year.

For Supporting People the funding is from a ring fenced specific grant, which will have no impact on the bottom line of the outturn if savings were made. Outturn has been assumed therefore as per the budget.

The main element of the Other Client Group relates to Fieldwork and Other Care and is showing a saving of £141,000. The main area of saving relates to vacancy management.

Health

As with previous years there is a significant amount of Health debt due to the Department outstanding as at the 26 May. In total £1.9m relating to 2005/06 is owed, of which £1.5m relates to Section 28a or joint finance / funding. Whilst the level of debt due from health has decreased it is still significant and should any amounts need to be written off it could significantly worsen the financial situation. There are currently ongoing discussions with Health relating to a whole series of financial issues of which this is one. The outcome of these discussions will be reported as part of the next budget monitoring.

Adult Services recovery plan

The Member's Panel set up by Cabinet received monitoring information on the progress of the financial recovery plan for Adult Services on 23 June 2006.

The Panel concentrated on the search for additional savings to bring the projected overspend back towards the 2006/07 budget cash limit. Difficult decisions have already been taken to increase income from charges, after consultation, and they will make a very helpful contribution. Other themes being pursued are:

· demand management, for example raising eligibility criteria and re-directing clients to other solutions at the point of referral - the aims being an overall reduction in the number of clients and a reduction in the average cost of packages of care

· restructuring the department, with an associated reduction in the workforce to achieve a more economic staffing level

· modernising in house services, using external contracts and developing alternative services, again lowering unit costs (for example "extra care sheltered housing").

The estimated savings from these approaches are anticipated to be £4.5m in 2006/07, rising to £12.9m in 2007/08. However these savings are still at a relatively early planning stage. They are based on initial estimates that will need to be monitored closely. In broad terms the expectation is:

Table 3: additional savings, Adult Services

In addition there are a number of proposals which need further appraisal before an estimated amount can be added to the figures in table 3. The two main themes of these further proposals are "changes in staff mix" and "reducing unit costs". All need further analysis and evidence and the likelihood is that their impact in 2006/07 will be low. This includes the procurement review. Initial analysis suggest that procurement of residential care is below costs elsewhere. No savings targets are yet available but the most promising areas include procurement of domiciliary care and tightening up on local discretion on procurement.

Gershon Savings

For Efficiency Savings as part of the Gershon efficiency saving agenda in order to achieve the target level of savings of 2.5% another £1.5m (i.e. 0.6% of the budget) of cashable or non cashable efficiencies need to be made. There is still a proportion of efficiency savings included in the budget which are highlighted in 3.1 and 3.2 and remedial action is being undertaken to ensure these savings are made. In addition the savings made as part of the recovery plan will be examined by the DFU to ascertain how much is appropriate to be counted against the Gershon savings. This is a subsidiary issue given the scale of the budgetary issues, but will be included within budget monitoring as individual plans become more robust.

Actions

The plans to make the originally budgeted £6.4m of savings in full are being pursued as matter of urgency.

The budget monitoring does not yet reflect work being done as part of the financial recovery plans, although the management actions highlighted will overlap . These plans will become part of the monitoring process as they become available.

Bringing levels of demand down will be key in bringing spend back into line with the budget, but there will be an overlap with the recovery plans and this will take time.

Conclusions

The projected outturn although within the upper limit reported to Cabinet is at a significant level.

Total client numbers were steady during April and May (though according to the latest care management statistics demand, they are now beginning to decrease slowly)

· The financial recovery plan will be in place by the end of July and will be monitored from then on

· Specific actions have been put in place as a result of the monitoring and will be reviewed in the next cycle.

Recommendations

That the executive member note the current budget position and endorse the measures being taken.