Archived decisions

Overall financial planning and budget strategy

Commentary

Budget strategy related to corporate priorities, as reflected in corporate strategy, local public service agreement, improvement plan and four member priorities.

Linkages to corporate priorities identified in considering budget proposals with specific funding earmarked for local public service agreement and local area agreement pump priming.

Growth and saving plans to be submitted to the appropriate executive member, identifying planned outcomes and performance improvements for budget growth and mechanisms for achieving any significant savings.

2006/07 savings plans monitored by the Cabinet on a quarterly basis.

Ensure that the long-term level of revenue commitments does not exceed long-term funding likely to be available including reasonable expected levels of future grant settlement and council tax.

Provisional budget limits set for each service in 2008/09 and 2009/10 based on assumed freeze in the County Council's government grant.

Ensure integration of medium term financial and service planning.

Links between workforce and financial monitoring strengthened in 2006/07. Corporate business plan developed in conjunction with three year budget plan for 2007/08 to 2009/10.

Maintain multi-year budget projections based on the Government's spending review cycle in order to set the likely context for making final resource allocation decisions on an annual basis.

Multi -year budget projections currently extend beyond the Government's spending review cycle, which would otherwise require a one year financial plan.

Minimise levels of non-earmarked reserves, with a target not exceeding 2% of the budget requirement, subject to risk assessment, in order to maximise use of available funds on service provision.

Risk assessment included in 2006/07 budget identifying the need for higher balances in 2006/07 of £10.8m to reflect uncertainty about the achievability of savings targets and other specific risks.

Review the rationale and adequacy of earmarked reserves on at least an annual basis.

Reviewed twice-yearly in conjunction with approval of budget and final accounts.

Build up an earmarked reserve in recognition of the transitional costs of implementing Pay and Benefits proposals and create a new modernisation, restructuring and efficiency plan reserve.

Further contributions to Pay and Benefits transitional cost reserve made in 2006/07 to provide funding of £17.8m for equal pay compensation and legal costs. Balance on modernisation, restructuring and efficiency reserve used to reinstate balances in July 2006.

Seek to minimise the degree of instability in the employers' contribution to the Hampshire Pension fund, subject to objective of securing 100% funding in the long-term.

Employers rate increased from 250% to 275% of employees rate in 2006/07, in accordance with the stepped increase agreed following the 2004 actuarial valuation.

Continue policy of increasing budgets for social care in line with increases in national spending plan- providing that to do so does not have an unacceptable impact on the quality of other services or the level of the council tax.

Policy continued to be applied in 2006/07.

Set a schools budget in consultation with the Schools Forum based on specific grants allocated by the Government.

2006/07 budget set in consultation with the Schools Forum with a County Council contribution of £155k to reflect new services delegated to schools

Manage the application of the grant equalisation reserve in order to protect services and limit the council tax impact of the loss of transitional Education funding and, the loss in 2006/07 of the additional Government Grant made available on a one-off basis in both 2004/05 and 2005/06, and future grant loss from the 2006/07 revised formula.

Strategy for application of the reserve amended to reflect further substantial loss of grant from the 2006/07 review of the formula grant methodology expected to take effect from 2008/09.

In order to allow services to operate within firm cash limits, allocate provision for inflation to services at the start of the financial year and require excess inflation to be absorbed.

All 2006/07 inflation allocations relating to cash limited budgets made prior to the beginning of the year.

Services expected to contain spending within the approved cash limit, with no supplementary allocations being available other than in exceptional circumstances unless a specific contingency provision made within the budget.

Provision made for additional spending of £10.9m on Adult Services in 2006/07 revised budget in view of the exceptional circumstances relating to the 2005/06 overspend, and the proposed two year recovery plan. No other supplementary allocations agreed during 2006/07.

Services expected to carry forward 100% of any overspending against the overall service cash limit, but are allowed to retain up to 100% of any planned underspendings identified prior to the approval of the following year's budget. 50% of any unplanned underspendings can automatically be carried forward.

Proposed that policy be applied in making decisions on 2006/07 final Accounts, but recognising that it would not be practical to carry forward the 2006/07 Adult services overspending in view of the two year recovery period agreed.

Value for Money

Commentary

Require the continuing identification of efficiencies by expecting services to absorb any net cost arising from the annual cost of salary increments.

Applied in 2006/07 and 2007/08 budgets, requiring savings of £1.8m to be made to absorb the cost of increments in 2007/08.

Encourage service chief officers to submit applications for specific grants/partnership funding designed to maximise the resources available to the County Council, by allowing capital and revenue cash limits to be adjusted to reflect changes in grant levels.

Policy applied in setting cash limits for 2006/07 and in adjusting them for variations in grants during the year.

Require services to review the level of fees and charges at least annually and set budget limits on the assumption that the level of charges will be increased in line with assumed inflation on gross expenditure.

Budgets for 2006/07 and 2007/08 set on this basis, with proposals for reviewing charges considered by Executive Members.

Seek to deliver efficiency gains that exceed the targets set by the Gershon review.

Appendix 7 of this report contains the County Council's draft 2006/07 backward look Annual efficiency statement identifying efficiency improvements in 2006/07 in excess of the Gershon target.

Seek best value in spending, bearing in mind that considerations of quality, risk, sustainability, environmental impact, local economic development and equalities may all be relevant in addition to price.

Corporate procurement strategy achieved cashable and non-cashable efficiency improvements in 2006/07 totalling £1.1m

Seek to retain relatively low council taxes in Hampshire, with the aim of setting a tax in the lowest quartile of County Council taxes.

2007/08 council tax in lower quartile of those County Councils without fire funding responsibilities.

Capital programming

Commentary

Review capital strategy on an annual basis and prepare four year capital programme in accordance with the strategy.

Strategy reviewed in July 2006 and new four-year programme approved in February 2007.

Seek to maintain the level of the locally-resourced capital programme by continued recycling of surplus assets to generate capital receipts.

Programme for 2007/08 to 2010/11 based on planned capital receipts of £142m over the period.

Allow services to retain at least 25% of the value of their capital receipts and where necessary to finance investment in replacement assets, up to 100%.

Proposed that services retain £17.1m (70%) of 2006/07 capital receipts.

Adopt a Public Private Partnership (PPP) approach, including the use of the Private Finance Initiative (PFI), where this provides best value for the Council.

The County Council has submitted an outline business case in conjunction with West Sussex County Council and Southampton City Council for a Street Lighting replacement PFI project, based on the Government's decision to channel support for major street lighting projects through PFI credits.

Make full use of Government supported borrowing, where this is financially advantageous.

Full use of supported borrowing (£39.1m) made in financing 2006/07 capital payments.

Seek to maximise capital resources by developing capital schemes in conjunction with external partners where appropriate.

£20.7m of capital payments funded by contributions from external partners in 2006/07.

Approve the use of unsupported borrowing within the framework of the County Council's prudential code

- business unit investment where the financing costs will be funded by charges made to customers

- `invest to save' projects generating savings which will enable the financing costs to be funded, capital receipts which will enable borrowing to be repaid, or alternative costs to be avoided.

Unsupported borrowing of £22.9m undertaken in 2006/07 offset by a repayment of £5.7m, bringing the level of unsupported borrowing to £50.6m at the end of 2006/07, and it is expected to increase to £68m by the end of 2009/10, in accordance with the policy.

Effective management of budgets

Commentary

Devolution of financial management to service departments combined with appropriate financial training, provision of appropriate systems to generate management information and a framework of sound internal controls including Financial Regulations and procedures.

User group established to develop SAP reporting to meet financial information requirements more efficiently. A review of financial limits undertaken in conjunction with the democratic review to simplify the current framework of financial procedures and regulations. Extensive financial training continues to be provided.

Rigorous annual budgeting and budget monitoring processes.

2006/07 saw the development of improved linkage between spending and activity data in budget monitoring reports. Adult Services Financial Recovery plan has been effective in addressing the issues resulting in an overspending in 2005/06.

Maintain integrated accounting and budgeting systems and set a consistent overall financial framework across the authority, including for schools.

Implementation of SAP has delivered further integration of HR, finance and procurement and will be extended with development of SAP property module. Schools use of corporate systems is fundamental to this process.

Ensuring good practice and probity

Commentary

Assess the need for training in financial skills in line with the practices required by Investor in People status, and arrange delivery and evaluation of that training.

IIP assessment due in 2007/08 for Hampshire County Council. Internal health check showed good processes for delivery and evaluation of training

Recognise the statutory and corporate finance roles of the Chief Financial Officer in ensuring lawful and financially prudent decision-making through his membership of the Corporate Management Team.

County Treasurer is a member of the Corporate management Team.

Report internal audit's strategy to the Governance Committee.

Reported to the April meeting of the Governance Committee.

Provide annual internal audit assessments for each department as part of the review of effectiveness of controls for the statement of internal control.

Assessments provided accordingly.

Develop IT systems designed to enhance the provision of financial management information to users.

SAP and Swift are designed to achieve this, work continues to improve the interface between these. There is an increasing emphasis on self-service in such areas as Payroll and Pensions information and local budget management.

Maintain Head of Profession arrangements whereby the head of each devolved finance unit has defined responsibilities for ensuring that both corporate and departmental needs are met.

The framework remains in place and is working well, with six Heads of Profession, now aligned to departments as set up following the Children Act .

Maintain and work with Chief Officers to apply Financial Regulations and associated financial procedures in support of good practice in financial administration and corporate governance.

Part of the annual audit report and assurance statement refers specifically to the compliance with financial regulations and other procedures which comprise the control framework.

Maintain an effective and efficient internal audit function which works co-operatively with the Council's external auditor.

The Audit Commission continues to rely on the work of internal audit and to comment favourably on quality and professional standards achieved in the annual management letter.

Comply with the CIPFA Code of Practice for treasury management.

Code complied with, as confirmed by external audit.

Comply with accounting and audit standards contained in the relevant Codes of Practice and CIPFA guidance.

All standards complied with.

Efficient and accessible processing of transactions

Commentary

Best practice in relationships with local contractors and suppliers, including paying of bills in line with Government prompt payment targets.

The Government's target of 100% is probably not realistic, but at over 96% the County is one of the better performers for this indicator.

An emphasis on continuous improvement driven by a customer focus as the best way to deliver good financial services.

The Quality Review carried out in Autumn 2004 continued this focus, and has informed the County Treasurer's service plan along with an emphasis on electronic transactions and making the most of the Council's web presence.

All services to be available electronically in line with Government timescales, including moves towards employee self service.

Achieved during 2005 as planned: this includes availability of on-line payment facilities. Employee self service continues to be developed with travel and expenses being piloted, as well as managers self service in SAP. Pensions have successfully piloted self service for employers, enabling them to enter their own data.

Obtain the Charter Mark for services dealing directly with the public, and seek to apply a similar approach to internal customers.

Pensions Services and Student Support currently hold the Charter Mark. Financial Assessments will apply in 2007.

Keep transaction costs within the lowest 25% of costs among county councils.

Benchmarking continues to show good results. The "overhead" represented by finance as a proportion of the County Council's total spend continues to reduce, mainly due to the Benefit Realisation plan following SAP implementation. This is expected to reduce the costs of the finance function by £1.2m per year. Reductions of £0.8m towards this target had been achieved by 2006/07.