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

1 Summary

1.1 This is the first revenue budget monitoring report for the financial year 2007/08. The report also outlines the final position for 2006/07 and the implications for 2007/08. For 2006/07 the service achieved a balanced budget, addressing the forecast overspend of £561,000 in period 8 (when the 2006/07 revised budget and the 2007/08 budget were prepared).

1.2 Details of the 2006/07 variations within the three budgets areas (Schools, Local Education Authority (LEA) and Children's Social Care) were provided in the Cabinet report on 25 June 2007 setting out the County Council's overall 2006/07 outturn.

· Within the Schools Budget it has been possible to carry forward £4.1m of Dedicated Schools Grant (DSG), of which £1.6m relates to capital repairs, £1.6m relates to items agreed by Schools Forum and a further £0.9m relates to net underspends across various budgets.

· Within the other budgets, the anticipated overspend of £233,000 has also been eliminated without using the full amount of business unit surpluses that was set aside for this purpose.

1.3 The final 2006/07 revenue outturn, therefore, presents a better position than expected and provides some flexibility for dealing with significant pressures in 2007/08. This paper examines some of these issues and how they are to be addressed.

1.4 The provisional results of the January 2007 school and pupil census indicated that the early estimate of Dedicated Schools Grant used in the 2007/08 budget calculations was understated by £2.15m. Schools Forum discussed the use of these additional funds for the Schools Budget at its 1 March 2007 meeting and agreed that it should be used for :

· costs associated with the early years 15 hour Pathfinder £800,000;

· additional rates costs in schools £584,000;

· additional pupils in primary schools £220,000;

· long term sickness costs in schools £205,000;

· ICT in schools £204,000; and

· Education Otherwise than at School £127,000.

1.5 At this stage it is too early to provide a detailed forecast outturn position for 2007/08. However, based on information received to date there are a number of areas of pressure and savings that have been highlighted. These, together with issues highlighted within the 2006/07 final accounts, and other ongoing or emerging pressures, require further analysis. Managers will prepare more detailed information as part of the June reporting cycle and the Executive Members will be informed of progress.

2 Recommendations

The Executive Lead Member for Children's Services (Education) is recommended to:

1 Note the final outturn position for 2006/07 for the department and the potential impact on 2007/08

2 Agree the current financial issues that are being addressed within the 2007/08 budget

3 Note the latest financial position of the Wessex Youth Offending Team and the CAMHS Trust.

4 Approve the use of an additional £2.15m Dedicated Schools Grant in 2007/08, as agreed by Schools Forum on 1 March 2007 and set out in paragraph 1.8 of this report.

3 Final Accounts 2006/07

3.1 The County Council's final accounts were approved by Cabinet on 25 June 2007.

3.2 The outturn position for 2006/07 shows a balanced budget as compared to the projected outturn against revised budget. The table below summarises the movement between period 8 (when forward budgets were set), period 10 (last reported figure to the Executive Lead Member) and outturn. The Cabinet report on 25 June 2007 includes an overall summary and an appendix detailing the main variations within the service. This appendix is attached for information, while the table below summarises the position:

	Period 8	Period 10	Final Outturn	Change Period 10 to Final
	£'000	£'000	£'000	£'000
Schools Budget	+328	+214	0	-214
LEA Budget	-813	-915	-1,160	-245
Children's Social Care Budget	+1,846	+1,411	+1,381	-30
	+1,361	+710	+221	-489
Less Business Units	-300	-300	-221	+79
Sub Total	+1,061	+410	0	-410
Less GSSG	-500	-100	0	+100
Total	+561	+310	0	-310

3.3 Cash limits are adjusted during the financial year to reflect adjustments to specific grants, including any allowed `carry forward' arrangements. It has been possible to carry forward specific government grants to the value of £10.1m, made up of £4.1m of Dedicated Schools Grant (DSG) and £6.0m of other grants. The cash limit for 2006/07 was reduced to reflect these carry forward arrangements and, therefore, they are not shown in the accounts as underspends. These are detailed later in the report.

3.4 The balanced end of year position means that the £561,000 set aside in the 2007/08 budget (£328,000 DSG, £233,000 other services) to meet the 2006/07 projected overspend is available to meet other service pressures.

School Balances

3.5 School balances have increased by £3.511m overall, with the detailed breakdown across sectors summarised in the table below:

		Balance	Allocations	Net	Balance	As % of	Change in
		31 March 2006	2006/07	Spend	31 March 2007	Allocation	Balance
		£000	£000	£000	£000	%	£000
Nursery		352	1,475	1,419	408	27.7%	56
Primary		21,011	300,320	299,540	22,038	7.3%	1,027
Secondary		14,294	282,632	280,603	16,323	5.8%	2,029
Special		2,720	29,140	28,741	3,119	10.7%	399
		38,377	613,567	610,303	41,888	6.8%	3,511

3.6 Despite the increases in balances, 14 primary schools are in deficit (down from 15 on 31 March 2006), 11 secondary schools (unchanged), and one special school unchanged).

3.7 Within the Scheme for Financial Management of Schools there is a new provision for uncommitted balances above 5% in secondary and 8% in primary at the end of the financial year to be clawed back, subject to certain criteria as set out within the Scheme. For 2006/07 schools reported no such uncommitted balances.

Dedicated Schools Grant (DSG)

3.8 2006/07 has been the first year of the new schools funding arrangements involving the introduction of this new specific grant. This grant is ring-fenced and any unused or underspent grant has to be carried forward to the following financial year. A small overspending of £328,000 was predicted in the revised budget, but the end of year position has resulted in a nil balance with a DSG carry forward into 2007/08 of £4.1m (in addition to £3.5m added to schools' balances).

3.9 The elements comprising this DSG carry forward are:

· Schools Forum agreed carry forward in March 2007 (£1.476m). This comprises Children's Centres revenue costs (£1.267m), Combined Budget (£0.1m) and Basingstoke School Plus (£0.109m). Each was agreed to ensure funds are available in the required financial year

· Capital repairs (£1.6m). This is a combination of a number of factors, including scheme delays.

· Teachers pay reform payments (£0.618m). This represents payments for supply teachers for September 2006 to March 2007 to be processed through 2007/08 accounts (£0.218m) and fewer claims than expected by schools for teachers entitled to such payments (£0.4m)

· Early Years (£0.160m). This reflects the application of eligible Early Education and Childcare Unit (EECU) expenditure to General Sure Start Grant (GSSG), as agreed by Schools Forum in March 2007

· Other service variations (£0.261m underspend). As detailed in the report to Cabinet on 25 June this represents the net effect of a number of over and under spends compared to the forecast position at revised budget stage.

3.10 There will be further discussion with Schools Forum about the implications of this carry forward.

Other grants

3.11 Other grants that have been carried forward into 2007/08 total £6.0m, and comprise £5m ring-fenced grants and £1m non-ring-fenced grants. These have been achieved through the flexibility to spend over 17 months for Standards Fund grants, and slippage in relation to actual commitments being delayed beyond 31 March 2007.

Impact on 2007/08 Budget

3.12 The key areas to be considered are:

· Schools Budget:

· Schools Forum agreed to fund Schools Budget overspends carried forward into 2007/08 which have not now materialised. (See appendix for detailed year end variances.)

· Schools Forum agreed to fund projected on-going Special Education Needs (SEN) pressures of £480,000 in 2007/08, on the assumption of a continuing pressure that matched 2006/07 projections. The final outturn was a pressure of £328,000, a reduction of £152,000.

· Other Budgets:

· The release of £233,000 Local Public Sector Agreement (LPSA) funding set aside to meet any 2006/07 overspend, which is not now required

· The ongoing impact of pressures identified at the time the 2007/08 budget was set e.g. Children Looked After

· The achievability of savings targets set in the 2007/08 budget

· The monitoring and treatment of grants.

4 Revenue Budget Monitoring 2007/08 as at 31 May 2007 (Period 2)

4.1 As part of a wider review of the financial framework for Children's Services, a new budget monitoring process is being implemented in the department which enables integration and consistency across the whole department as well as improving the quality of reporting and forecasting.

4.2 However, for period 2, detailed budget monitoring has not been prepared because:

· Some allocations of growth and savings were dependent on the final outturn for 2006/07 and more work on determining detailed allocations is underway

· The carry forward proposals on grants were also subject to approval of the final accounts and, therefore, these are not yet reflected in the 2007/08 cash limits

· Further review of Government grants will ensure that their use is maximised.

4.3 Attention has focused on the higher risk budget areas and some potentially significant variations have already been highlighted:

· Savings proposals (shortfall) +£705,000 (£955,000 reported to Cabinet less £250,000 set aside for Pay & Benefits - see below)

· Home to School/College Transport +£600,000

· Interest on schools balances (additional) -£200,000 (higher level of balances and higher interest rate than assumed in the budget)

· Children Looked After. Whilst no detailed figures are yet available, work to date forecasts that, on current activity, pressures would be contained within budget as the total number of children looked after has fallen. The paragraphs below provide some update on activity levels and areas that are being monitored.


Home to School/College Transport (+£600,000, +2.7%)

4.4 Since the 2007/08 budget was prepared there has been an increase of £700,000 (4.2%) in contract costs, offset by savings of approximately £100,000 on contract reviews. Since October 2006 the number of contracts has increased by 63 (4.9%), from 1,290 to 1,353 (May). The increased costs are mainly associated with children with Special Education Needs (SEN), where there has been an increase of almost £200,000 since February 2007, the largest element of this relates to Education Otherwise Than At School (EOTAS).

Children Looked After (CLA)

4.5 This graph below shows the recent trends and that the total number of children looked after at the end of May has fallen to its lowest level (1,024) since January 2005:

4.6 The following table shows some of the key activity areas:

4.7 There has been a net increase in IFA numbers between 31 March 2007 and 31 May 2007 of 13. This consists of 18 new placements less five ended placements. These placements have arisen primarily as a result of specialist requirements (such as specific care needs, sibling groups etc), breakdown of other placements and lack of in-house capacity.

4.8 The budget was set based on a number of assumptions around activity levels. The table above shows budgeted numbers as at 30 June 2007. At the end of May these numbers for both NCPs and IFAs are being exceeded. A more detailed analysis of the financial impact will be made at the end of June.

4.9 A new single contract has been entered into with a number of independent foster care providers, effective from 1 June 2007. The result of this tender process is a reduction in prices for new placements of about 8 or 9%. In the long term this is expected to provide considerable savings - up to £0.5m. However, this is dependent on all placements being within the contract arrangements. Negotiations are underway with existing providers to transfer current placements (as well as new ones) onto the new price structure. This is having limited success but it is anticipated that the £100,000 savings estimated in the budget will be achieved. A further update will be provided in the next budget monitoring report.

4.10 At the meeting on 17 May the Executive Lead Member for Children's Services considered a `Children in Care Commissioning Strategy', which included the following elements:

· To increase the capacity of in-house foster care in order to be able to reduce the level of purchased care

· To review some residential care services to consider options to develop intensive community support, including those on the edge of care

· To reduce the level of purchased residential care by changing the purpose of some in-house units

· To reinvest in preventative services to those on the edge of care and to be able to better support care placements under pressure.

4.11 Budgets are being re-aligned to reflect this strategy and the decisions made (e.g. the change in use of Stonecroft from a children's home to provision of support services). The monitoring of activity and costs associated with this strategy is also being developed, including forecasting and benchmarking work. These approaches are expected to impact later in the year, as the services are developed, new foster carers recruited and new support services come on stream.

5 Savings

5.1 Savings of £2.328m (plus Hantsdirect of £0.535m) that were identified in the 2007/08 budget need to be considered in the light of any potential shortfalls. £545,000 of the total savings are `one-off' in 2007/08. As reported to Cabinet on 21 May 2007, £955,000 (excluding Hantsdirect but including a balance of £250,000 for Pay & Benefits) of these savings are still to be confirmed. However, provision has been made for both Hantsdirect and Pay & Benefits savings, leaving an unconfirmed balance of £705,000 still to be resolved:

· Youth support services £100,000

· Duke of Edinburgh Awards £60,000

· Family group conferences £50,000

· Teenage pregnancy £25,000

· Contract support £50,000

· Invest to save of LPSA reward grant in fostering services £300,000

· Regional fostering contract £100,000

· Children's social care grants £20,000

· Total £705,000

5.2 It is known already that some of these savings will not be realised in full, perhaps up to £200,000. The impact of investment in fostering services will realise savings later in the year. Managers are reviewing all these areas and, where necessary, alternative savings will be identified. An update will be included in the next budget monitoring report.

5.3 When actual savings on Hantsdirect and further savings to fund Pay & Benefits are realised this will release funds to offset any savings shortfalls and/or other pressures.

6 Grants Monitoring

6.1 As detailed above, in addition to the DSG carry forward, another £6m of grants were carried forward to 2007/08. The department will ensure that both these carry forward amounts and new grants in 2007/08 will be closely monitored to ensure most cost-effective use is made of them.

6.2 From 2007/08 several grants, including current Standards Fund grants, are pooled together under the Local Area Agreement (LAA). For 2007/08 the pooling has not resulted in allocation changes but this is being reviewed with the intention that, from 2008/09, all these pooled funds will be allocated by the LAA Board. The precise governance framework is currently being developed. This will impact on the carry forward flexibilities, there will not be a 17 month period for the affected Standards Fund grants although it is understood that there will be a 5% carry forward limit.

7 Partnerships

7.1 The County Council is seeking to further develop best practice in terms of financial reporting. In part this involves ensuring significant partnerships are regularly reported. Within Children's Services there are two partnerships that fall within this category - Wessex Youth Offending Team (YOT) and the Hampshire Children's Trust.

Wessex YOT

7.2 The total budget for Wessex YOT is £7.6m in 2007/08. It is funded primarily by the Youth Justice Board and partner organisations (whose contributions may be in cash and/or contributions in kind). The Children's Services contribution for 2007/08 is £2.079m.

7.3 The Wessex YOT Management Board receives regular finance and performance reports. At its meeting on 21 June 2007 the Board received the 2006/07 final accounts, which showed an overspend of £224,000. This reduced the surplus held in reserve to about £36,000. The main reason for this was a number of one-off investments during the year that were agreed by the Board.

The Child and Adolescent Mental Health Services (CAMHS) Trust

7.4 At its meeting on 4 June 2007 the Trust's Management Board received a report on its final financial position for 2006/07 and budget for 2007/08. In 2006/07 there was an underspend of £1.2m. Regular reports to the Trust identified potential underspends and agreed that an element (£0.5m) would be repaid to partners and the balance would be carried forward to 2007/08 to meet the costs of `one-off' projects (£0.7m).

7.5 The Trust's total budget for 2007/08 is £2.3m. This is made up of partner contributions of £1.6m and a surplus carried forward from 2006/07 of £0.7m. The Children's Services annual contribution is £675,000.

8 Consultation

8.1 The forecast outturns are based on ongoing financial monitoring in consultation with partner organisations where appropriate e.g. Youth Offending Team.

9 Legal implications

9.1 None.

10 Financial implications

10.1 The financial implications are summarised at paragraph 1.

11 Personnel implications

11.1 None.

12 Impact assessment

12.1 The proposals contained in this report are not considered to be discriminatory .

13 Crime prevention issues

13.1 None.

14 Views of the Local County Councillor

14.1 No specific consultations or views sought.

15 Conclusion

15.1 The 2006/07 outturn shows a balanced budget, which has freed up some resources to help with other significant pressures that are emerging in 2007/08. However, it is too early to provide detailed analysis. Executive Members will be kept informed of the financial position and the next formal report to the Executive Lead Member for Children's Services (Education) will be in October 2007 (based on August figures)

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