Contact: Anne Hibbert, (01962) 84 7533; [email protected]

1 Summary

1.1 This report is the last monitoring report for 2006/07 and provides an overview of the position on:

· Policy and Resources own revenue cash limited budgets

· Policy and Resources business units

· Policy and Resources capital programme

· the County Council's capital payments and sources of finance.

The final outturn will be reported to Cabinet in June 2007.

1.2 At the end of February 2007 the outturn for Policy and Resources overall is forecast to exceed the cash limit by £142,000 (0.3% of the revised budget). As previously reported, the main pressures relate to Property and Regulatory Services and Coroners. Under-spends are forecast in respect of election expenses, corporate hospitality, Members' expenses, Treasurer's department, the audit fee and grants to voluntary organisations. In accordance with the County Council's financial management policies, any overspending at the year end would be expected to be carried forward to 2007/08. The treatment of over and under-spendings within the overall Policy and Resources budget will be considered when the final outturn is known.

1.3 Capital payments for the County Council for 2006/07 are forecast to be within the revised estimate of £192.7m reported to Cabinet on 9 February 2007. Capital receipts are forecast to be close to the revised target reported to Cabinet in February.

1.4 The Policy and Resources revenue budget and capital programme includes financial resources for a range of direct services and for central services that support all other County Council services and as such contribute to all three priorities of the corporate strategy.

Recommendations

1 To note the current position on the monitoring of the revenue budget and capital programme.

2 To defer consideration of the treatment of over and under-spendings against the 2006/07 revised budget until the final outturn position is known.

3 To approve the carry forward of schemes in the 2006/07 capital programme that are not started by 31 March 2007, subject to the cost of the shemes being accommodated within the approved programme limit.

1 Policy and Resources cash limited revenue budget 2006/07

1.1 The latest cash limit for 2006/07 is £51.7m as set out in Appendix 1. This includes one adjustment since the revised budget report in January 2007; an additional £3,000 has been added to the cash limit to cover initial costs of a regional recruitment portal being developed by Hampshire County Council on behalf of authorities within the Hampshire and Isle of Wight region. The increase is funded by grant from the Government's capacity building fund.

1.2 Based on monitoring of expenditure up to the end of February 2007 some variations in cash limited expenditure are forecast. These are outlined below.

Chief Executive's Department (including Human Resources)

1.3 Departmental expenditure is expected to remain within the cash limit for 2006/07. Overall HR has achieved the SAP target of £310,000 for 2006/07 and absorbed £109,000 additional costs in relation to the Pay and Benefits project. This has been possible due to an underspend on recruitment resulting from efficiency improvements.

1.4 There are two areas where carry forwards were agreed as part of the revised budget report to the Executive Member in January. They relate to:

· Emergency Planning who are planning to underspend by £30,000 and carry this forward to fund a 'logging system' used in responding to major emergencies. It details issues arising in emergency situations and generates a time line or 'log' of decisions and subsequent actions.

· Futures Group - in the current year a sum of £20,000 was made available for the work of this group. The main area of expenditure is a Schools Competition and there is likely to be an underspend of approximately £8,000. As the work of the Group is on-going this funding will be used in 2007/08.

The cash limit in Appendix 1 already takes account of these carry forwards.

1.5 Under-spends are forecast for election expenses (-£30,000) due to the fact that there have been no by-elections this year, corporate hospitality (-£15,000) and on Members expenses (-£30,000). The latter is mainly in relation to training and development and special responsibility payments. These budgets are not treated as Chief Officer controlled budgets so that the impact will have to be reviewed within the context of the overall Policy and Resources budget.

County Treasurer's Department

1.6 As mentioned in the previous monitoring report in December, the County Treasurer's department has many pressures this year: the on-going SAP savings, with a further £186,000 in 2006/07, a reduction in contractual income from the Police Authority and constraints on the Financial Training Team. With this in mind there has been careful management of staff vacancies and turnover which has resulted in a potential under-spend of £50,000.

Property Business and Regulatory Services

Property Services

1.7 Due to the actions taken throughout the year to bring spending within cash limit the outturn will be only marginally in excess of the revised cash limit. This has been achieved through a freeze on recruitment and temporary redeployment of staff together with a range of efficiency measures relating to IT and travel in particular.

Corporately held land

1.8 The position of the Corporate Estate budget continues to be difficult as the costs of unavoidable repairs and maintenance work on surplus property continue to be extensive. However, the provision of £129,000 of funding to support the cost of security on properties awaiting disposal has assisted in reducing the likely overspend to £60,000. The shortfall in income on the development account continues to be in the region of £60,000.

County Farms and Sites for Gypsies and Travellers

1.9 Both these budgets continue to experience shortfalls in income against budget and a combined overspend in the region of £120,000 is expected.

Scientific Service

1.10 The pressure on income from external clients as reported to the previous meeting is persisting and options to increase income and reduce costs continue to be pursued and a reduced overspend of £40,000 is anticipated. This is expected to be contained within the overall cash-limit for Regulatory Services in view of the savings that have been made with the new management structure.

Summary of actions

1.11 Efforts to contain net costs within cash limits are continuing. The recruitment freeze has now been in place for six months and although not sustainable into the longer-term it is providing some flexibility to position the department better to deal with the pressures and changes that will be required in 2007/08. Spending on agency assignments and consultant appointments has been significantly reduced, the department's Travel Plan will be in place early in the new financial year and IT savings totalling £100,000 have been identified for 2007/08.

HM Coroner Service

1.12 There is no change in the forecast outturn for Coroners which is expected to be £100,000 in excess of the budget. This level of expenditure results from higher mortuary fees, court attendance costs and the requirement for special analyses and examinations. Work is on-going to develop a service level agreement to provide a framework for mortuary charges in future years and a review of financial and procurement arrangements for the services is nearing completion. The Coroner Service budget is not treated as a Chief Officer controlled budget so that the impact will have to be reviewed within the context of the overall Policy and Resources budget.

Other non-departmental Policy and Resources budgets

1.13 A budget saving in relation to the audit fee was identified in the revised budget in January. Now that this year's audit work relating to grant claims is complete the forecast saving has been increased to £60,000. Following decisions on the 1 March 2007, there is an under-spend on the grants to voluntary organisations budget of £13,000. No other significant variations on non-departmental budgets have been identified in this review.

Summary

1.14 At the end of February 2007 the anticipated variations in cash limited expenditure are:

Chief Officer controlled budgets:		Total
Treasurer's Department	- £50,000
Corporately held land	+ £120,000
County Farms	+ £59,000
Sites for Gypsies and travellers	+ £61,000	+ £190,000
Other budgets:
Election Expenses	- £30,000
Corporate Hospitality	-£15,000
Members' Expenses	- £30,000
Coroners	+ £100,000
Audit Fee	- £60,000
Grants to Voluntary Organisations	- £13,000	- £48,000
Overall forecast for Policy and Resources		+£142,000

1.15 The treatment of over and under-spendings within the overall Policy and Resources budget will be considered when the final outturn is known.

Business Units

Property, Business and Regulatory

1.16 The revised target overall surplus for the business units in 2006/07 is £40,000. HC3S continues to face difficult trading conditions with meal numbers below target. Measures planned and taken to contain and reduce costs have substantially offset the reduction in income but it remains possible that the revised business plan target will not be met. The pressures on customer purchasing budgets are likely to have an impact on the turnover of the other businesses but all units are currently expected to achieve targets.

IT Services

1.17 There has been a further modest improvement in the trading position for 2006/07, due to a combination of growth and further slippage in projects. The major projects, reported in earlier monitoring reports, have commenced but most of the expenditure is now expected to fall into 2007/08 and 2008/09. The forecast trading surplus is now likely to exceed £300,000 and this should largely eliminate the accumulated trading deficit.

1.18 However there remains some uncertainty as late growth, particularly in HPSN services, may increase costs before year end. There is also a risk that some of the planned income, for which contracts remain to be agreed with customers, may not be received by year end. Headcount at the end of 2006/07 is somewhat below plan, but the high number of unfilled vacancies may drive increased spend on external contractors.

1.19 IT Services are predicting a balanced trading account in 2007/08 and a small surplus 2008/09 which will eliminate any remaining accumulated trading deficit by March 2009.

2 Policy and Resources capital programme

2.1 The Policy and Resources capital programme for 2006/07 amounts to £87.2m, as set out in Appendix 2. This takes account of a transfer to revenue of £33,000 to fund a grant to `The Lights' theatre in Andover.

2.2 The capital repairs programme, including New Deal for Schools, totals £35.5m and is controlled on an expenditure basis. The balance of £51.7m, including £40.2m for the Ashburton Court refurbishment, is controlled on a starts basis.

2.3 As at 28 February, expenditure on capital repairs totalled £26.5m, and schemes to the value of £43.7m had started, representing an overall commitment of £66.9 m.

3 Overall capital payments and sources of finance

3.1 As at 28 February, capital payments for the County Council for 2006/07 are forecast to be within the revised estimate of £192.7m reported to Cabinet on 9 February 2007.

3.2 The revised capital financing plan approved by Cabinet in February 2007 included estimated capital receipts for 2006/07 (including in-and-out schemes) of £27.3m. Actual capital receipts to 28 February 2007 amounted to £23.5m. Cabinet agreed in February that the estimated temporary shortfall of resources for 2006/07 will be covered using unsupported borrowing.

4 Carry forward of 2006/07 capital schemes not started by 31 March 2007

4.1 The County Council's policy is to allow the carry forward of capital schemes not started by 31 March subject to the cost of the schemes carried forward being contained within the programme limit. Approval is sought for the carry forward of schemes on this basis. Details of the scheme carried forward will be reported to the Cabinet in June in the report on the 2006/07 final accounts.

5 Impact assessment

5.1 The proposals in this report are the result of budget monitoring carried out in accordance with the County Council's financial management policy. This policy applies equally to all services and ensures consistent financial management decisions across all services. The proposals in this report are not considered to be discriminatory.

OR

This proposal does not link to the Corporate Strategy but, nevertheless, requires a decision because: N/A

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 1

Policy and Resources Revenue budget - latest 2006/07 cash limit

Appendix 2

Policy and Resources 2006/07 capital programme