Contact: Ejner Knudsen, Assistant Treasurer, 01962 847403;

David Howells, Director of Corporate Services, 023 8064 6834

1 Summary

1.1 This report summarises the spending of the Authority for the last financial year. Overall there was an underspending of £277,000 against the revised budget.

1.2 This report sets out for Members consideration proposals as to how those proposed contributions could be varied to take account of the actual year end position.

1 Revenue expenditure

1.1 Although the overall position was very close to the revised budget, there were some significant variances which are set out in full in Appendix 1 and summarised in the following paragraphs.

Wholetime firefighters pay and allowances (-£138,000)

1.2 A small underspend, given the size of the budget (£32.3m), which reflects fewer trainees being recruited than originally planned.

Retained firefighters pay and allowances (+£208,000)

1.3 This budget has overspend as a result of a successful campaign to recruit retained trainee firefighters and carrying out Home Fire Safety Visits which was partly offset by the successful implementation of the Automatic Fire Alarm reduction policy.

Support staff pay (-£124,000)

1.4 This saving occurred mainly as a result of increased turnover in the latter part of the year. Ina addition a post has been held vacant/deleted (what exactly?) s in the Business Education Unit to offset the reduction in commercial training income.

Training expenses (-£132,000)

1.5 To follow - Bob Ratcliffe

Buildings and grounds maintenance (-£177,000)

1.6 The schedule of works was reprioritised to achieve savings to offset overspends on business rates and cleaning and refuse collection.

Business rates, cleaning and refuse collection (+£146,000)

1.7 The revaluation of the headquarters site for business rates has resulted in higher business rates (£93,000). Additional cleaning and refuse costs (£53,000) are also now being incurred at HQ.

IT and Communications (+£199,000)

1.8 This overspend has arisen mainly due to charges for the use of SAP for procurement and Managers desk top being agreed at the end of the year that relate to 2005/06 and 2006/07.

Commercial course training income (+£130,000)

1.9 This shortfall is the result of the strategic decision made to reduce the provision of commercial training courses to businesses in the latter part of the year. It was partly offset by savings in support costs of £28,000.

Secondments and other income (-£128,000)

1.10 This additional income has resulted from further secondments to the National Firelink and FireControl projects, New Dimensions and the FBU. More income was received than expected in relation to NVQs., fire behaviour and Assessment and Development Centres.

Interest payable (-£84,000)

1.11 As a result of lower capital payments and additional grants to that assumed interest payable was £84,000 lower than the revised budget.

2 Pensions (-£46,000)

2.1 Overall pensions expenditure for which the Authority is responsible for underspent by £46,000. There were three main areas that had large variances which fortunately offset each other. Transfer values received and paid (that related to starters and leavers before 1 April 2006) overspent by a net £120,000 (£310,000 for transfer values paid less additional transfer values received of £190,000). This was in turn offset by an underspending of £200,000 for the budget for ill-health charges the Authority has to pay into the new pensions account which fortunately was not required in 2006/07.

3 Capital

3.1 Capital payments during the year totalled £6.3m compared with the £6.8m forecast in December 2006. Full details are given on a scheme by scheme basis in Appendix 2 with details of those with significant variances in the following paragraphs.

Cosham Fire Station

3.2 Members will be aware of the situation on this scheme. Portsmouth City Council has refused to sell the Authority it's preferred site so until an alternative site is found there will be no further progress on this project.

HQ development

3.3 Whilst the individual phases show under and overspends against the payments profiles overall they are just £261,000 (8%) behind what was assumed. The schemes are both still on target to be completed within the overall budget.

Vehicles 05/06 (+£12,000)

3.4 This overspend is a result of a net underspend on frontline vehicles offset by an additional costs incurred converting a second hand vehicle into a water support unit that was purchased as part of the 2005/06 starts. The vehicle will be financed partly from savings from the 05/06 frontline vehicles and partly from identified savings from the 2006/07 vehicle starts programme. Full details of this will be presented to the Committee in July as part of the first Budget Monitoring report for 2007/08.

Vehicles 06/07 (-£373,000)

3.5 The main reasons for this variation is that there is some slippage on frontline appliances and support vehicles partly due to factory closures and delaying the placing of orders to coincide with lease end dates early in 2007/08. Currently there are no variations to overall project costs to report but as in the above paragraph full details will be reported next month.

Station-end ICT equipment (+£238,000)

3.6 Work has been progressing quicker on this scheme than assumed when the capital payments cash flow was compiled. The scheme should be completed during the 2007/08 financial year and within budget.

Financing

3.7 The capital payments can be financed as follows:

3.8 The Authority received an allocation of £1,524,000 for supported borrowing for 2005/06. At the start of the year the balance of unused supported borrowing was £3,356,000. The excess of payments over supported borrowing for the year leaves a balance at the end of the year of £2,093,000. The forward capital programme assumes that all of this will be used during 2007/08 and that the Authority will require the use of unsupported borrowing.

4 Treasury Management

4.1 The debt management strategy approved by the Authority in February 2006 was followed throughout the year.

4.2 The Authority took out one new long-term loan. It is a 31 year loan at a fixed interest rate of 4.2%.

4.3 Daily surpluses and deficits on the bank balance were lent to or borrowed by the County Council at the local authority seven-day rate which averaged 4.85% over the year.

4.4 The final prudential indicators for 2006/07 are set out in Appendix 3.

5 Financial Management Strategy

5.1 The Authority managed its financial affairs in accordance with it's agreed Financial Management Strategy. Appendix 4 sets out the details.

6 Provision for uninsured losses

6.1 Payments made from this provision totalled £115,000 during the year. A re-assessment of the risks has resulted in the balance being reduced by a further £53,000 to the balance of £57,000 as at 31 March 2007.

7 Reserves and general balance

7.1 The revised budget required the following contributions to/from reserves and the general balance:

7.2 The contributions from the transitional grant and capital payment reserves have been made in line with the revised budget as the reduction in the grant occurred and the capital payments have been made.

7.3 It is suggested that given that the 2007/08 budget allows for a £354,000 contribution to bring the general balance back up to the target £2m level that the deficit assumed at the revised budget stage of £170,000 should stand.

7.4 This leaves the modernisation reserve. It has throughout the year, for monitoring purposes, always been used to the extent by which it is needed to balance the revenue budget and not the total spend which could be set against it. Given the overall position at the end of the financial year it is now possible to reduce the contribution from the reserve to £145,000 rather than the £422,000 contribution required at the time the revised budget was approved.

7.5 The movements in these reserves, including the proposed adjustments to reserves can be summarised as follows:

8 Equality impact assessment

8.1 An impact assessment has been made on the proposals within this paper and shown that they are not discriminatory. They are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1988 and the Race Relations (Amendment Act 2000).

Recommendations

1 That the accounts for 2006/07 be approved together with the proposed £145,000 contribution from the Modernisation Reserve.

2 That capital payments for the year be financed as set out in paragraph 4.7.

3 That the Treasury Management Activities set out in paragraph 5 and prudential indicators on appendix 3 be approved.

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.

Fire - Final Accounts 2006/07

I:\Treasurers\Corporate Finance\Jane\Fire\Final\Final 06 07\HFRA Finance and General Purposes Committee 28.06.07 Final Accounts 2006 07.doc