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Contact: Adrian Thorne, Ext: (01962) 846195, email: [email protected]

1. Summary

The following decision is sought:

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

· That the Executive Member note the final accounts for 2006/07.

2. Reasons

2.1 This report links to the corporate strategy in the areas of; Making Hampshire safer and mores secure for all, Maximising well-being and Enhancing our quality of place by ensuring sound financial information is available.

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 Felicity Hindson

Executive Member for Adult Social Care

Contact: Adrian Thorne, (01962) 846195; [email protected]

1 Summary

This report covers budget monitoring for the first two months of the financial year as well as giving an overview of the final accounts for 2006/07 which resulted in an overspend of £7.5m. The report shows the 2007/08 projected overspend position as at the 31 May to be £1.9m if no further management action is taken between now and the end of the financial year.

Decisions on Adult Services revenue expenditure and capital programmes impact on the financial resources available to this service to contribute to the following corporate strategy aims:

i) Aim 1 - Hampshire safer and more secure for all - includes protection of vulnerable people, and helping young adults to live positive lives

ii) Aim 2 - Maximising wellbeing - Maximising life opportunities - through provision of high quality and accessible caring services for vulnerable people and their carers. Improving services - ensuring services are inclusive and continuously improving to meet the changing needs of existing and potential service users and providing opportunities for people to help themselves

iii) Aim 3 - Enhancing our quality of place - Providing excellent services/facilities including residential homes and supported living and planning for the future

This is the first budget monitoring report for 2007/08, and is based on data to the end of May. The headlines are shown below.

The total cash limit for the service at period 2 is £273.249m. The predicted outturn based on the position at the end of May 2007 is estimated to be £275.123m, an overspend of £1.9m. Broadly the overspend is split, half relating to operational issues and half to financial recovery. Remedial action is being taken to bring the outturn back into line with the budget as necessary.

The major areas of pressure contributing to the forecast overspend are:

A budget strategy was put in place as part of the budget setting process in February with the aim of reaching financial stability by the end of the current financial year. Within the budget for 2007/08 are growth pressures of £19.9m which are funded from:

· redeployment of resources of £12.4m

· extra guideline growth of £6.0m

· with the balance of £1.5m to be met from the contingency as a permanent adjustment

Following the closure of the 2006/07 accounts, Cabinet has agreed to allow Adults Services to carry forward £2.0m unused contingency from 2006/07.

In addition, Cabinet has approved the carry forward of unspent government grant of £3.507m. However, only £1.892m is available for the main service and this is earmarked for specific service areas in line with the agreed carry forward procedures. The remaining £1.615m is ring fenced for Supporting People.

Further details of the overall budget position and projected outturn for 2007/08 are set out in Part A below.

For the final outturn for 2006/07 there was a net overspend of £7.5m (2.9%) against the 2006/07 adjusted revised revenue cash limit of £257.174m (see Appendix 3).

At the start of the 2006/07 financial year an operational overspend of £19m was predicted if no remedial action was taken. During the financial year this figure has steadily decreased in line with remedial action taken by members and the department.

The major variations against the 2006/07 cash limit (see Appendix 5) are:

	£'000
Contingency	-2,000
Older People	6,167
Younger Adults (All client groups)	3,884
Other Adult Services	-557

The revised budget for 2006/07 was agreed in February at £10.9m above the cash limit, inclusive of an unallocated contingency of £2m against the possible effects of the winter and other unforeseen spending pressures. No significant winter pressures were experienced and together with the impact of a further reduction in client numbers and progress on the modernisation of services, particularly Home Care, savings of £3.4m were achieved against the revised budget, resulting in an overspend of £7.5m against the cash limit.

Normally the County Council's policy is to carry forward into the following year 100% of net overspendings. However, the Cabinet agreed in February to write off the estimated overspending of £10.9m against balances and that if a lower overspending was achieved at the year end then the first call on any savings would be to allow the unallocated sum to be carried forward to 2007/08 to assist in dealing with budget pressures in 2007/08. The Cabinet agreed in June that £2m contingency be carried forward by Adult Services to 2007/08.

The savings target for 2006/07 of £6.4m was achieved during the financial year.

On capital, schemes to the value of £4.363m were committed in the year and Cabinet approval has been given to carry forward schemes to the value of £2.484m to start in 2007/08. The combined value of schemes started and to be carried forward is £6.487m, which is equal to the programme limit.

Further details on the main differences between the actual revenue expenditure for 2006/07 and the revised budget for cash limited expenditure for 2006/07 are given in Part B below. Part C covers capital expenditure. More detailed information is contained in the appendices at the end of the report.

2.4 Part A - 2007/08 Overall Budget position and projected outturn

2.1 This is the first budget monitoring for 2007/08 and needs to be treated with some caution at this early stage because of:

· The departmental restructure and the impact on budgets

· Some specific variations which may change as the year progresses

· £1.5m inflationary growth that has been held back

· Further work which is required to ensure that financial recovery monitoring is consistent with budget monitoring

· More intensive monitoring of pressures included in the budget is being undertaken

The original budget was formulated on the basis of client groups (Older People, Learning Disability, etc), the budget now has been formulated on the basis shown below. Further analysis is required to make sure the budgets have been correctly allocated and this will be reviewed on a monthly basis. Future budget monitoring reports will drill down to the different client groups so that Members can continue to see the impact of activity movement on individual client groups. The overall position by business group may be summarised as follows:

* Notes

· 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.

· The Contingency is made up of:

o Contingency in the base budget £3.0m

o Inflationary growth currently held back £1.5m

o One off carry forward of 2006/07 Contingency £2.0m

o Less permanent transfer to offset budget shortfall (£1.5m)

o Sum to be allocated to main service £0.643m

o Total £5.643m

The current overall forecast variance is an overspend of £ 1.874m. The major variations are:

· Director, Deputy Director

Performance& Business Management &

Contingencies/Centrally held +£0.142m

· Commissioning, Partnerships, Provisions +£0.462m

· Wellbeing & Community (OP & PD) +£0.935m

· Wellbeing & Community (LD-Operations) +£0.335m

(Total Wellbeing & Community variation is £1.270m)

2.4 The current overspend includes £1m of financial recovery savings which are at risk. Practically all of this figure relates to Wellbeing and Community. They largely relate to Modernising Day Care and Maximising Income. The shortfalls in Day Care are partly covered by savings within In-House Day Care and Maximising Income is spread across the different client groups and thus neither figure is covered in the narrative below which covers the operational aspects.

2.5 The Director, Deputy & Performance & Business Management pressure relates to restructuring coding changes. These are being investigated and will be transferred to the main service in due course.

2.6 The Commissioning, Partnerships & Provisions overspend is due to:

- a £0.133m overspend in Mental Health - (Operations) mainly reflecting higher forecast pressure on Early Onset Dementia

- and a higher than budgeted pressure of £0.329m in Residential and Nursing

2.7 The Wellbeing & Community (for Older People and Physical Disability) overspend of £0.935m is primarily due to £1.141m on purchased Residential care. This assumes the £1m pressure for demographic growth will be fully required.

Wellbeing & Community (for Learning Disability Operations) are forecasting a £0.335m pressure at this stage reflecting pressures on purchased residential care and savings on purchased home care.

Future budget monitoring will break this analysis into the traditional client groups to show the movement in client numbers and the impact on the budget.

2.8 The overall position after period 2 is a projected overspending for the year of just under £2m. However this is an early indication only of the likely outcome for the year after just two months activity. As such, it must be treated with caution because the variations are volatile and will move as the year progresses. Although the overspend is covered by the contingency further remedial action is being taken to monitor client activity as well as specific projects to bring the predicted outturn back into line with the budget. For example, systems are being put in place to reduce the number of hospital discharges going directly into residential care. At this stage of the year the contingency needs to be kept intact to cover winter pressures as well as any potential shortfalls in financial recovery.

2.9 Corporate budget planning in February expected, and made provision for, the 2006/07 overspend. This means the 2006/07 overspend of £7.5m will not be charged to Adult Services in 2007/08, but will be met corporately.

2.10 The 2006/07 revised budget was set at £10.9m more than the cash limit however the final overspend was £3.4m less. In managing the budget during 2006/07 the unallocated contingency sum of £2.0m was held back with the intention of carrying forward the spending approval to 2007/08. Cabinet have subsequently agreed a £2.0m carry forward of unused contingency from 2006/07 to 2007/08 to offset 2007/08 pressures. This has been added to the 2007/08 cash limit and can only be used for one off pressures.

2.11 Cabinet has also approved the carry forward of unspent government grant of £3.507m. However, only £1.892m is available for the main service and this is earmarked for specific service areas in line with the agreed carry forward procedures. It includes grants for training, delayed discharges, preventative technology and mental health. The remaining £1.615m is ring fenced for Supporting People.

2.12 In setting the budget for 2007/08 in February the following key assumptions were provided for :

Budgets have been set for the client groups at levels to meet current demand as well as demographic pressures

Saving plans are ambitious but the service plans to closely monitor their progress during the financial year, report to Members on a regular basis and take remedial action where appropriate

2007/08 will be a year of significant modernisation of the service and will require significant project management

The budget is constructed at the cash limit and allows for:

Category	£m
Pressures	19.9
Savings	(12.4)
Net Growth	7.5
4.3% Cash Increase	(6.0)
Use of Contingency	(1.5)
Balance	0

2.13 Since October 2006 (the numbers on which the budget was set) client numbers across the main clients have fallen by 926 (5%). The fall in Direct Payment users was due to the review of packages and changes in the scheme and the withdrawal of scheme A. A number of clients chose to manage their care without our involvement.

2.14 The fall in domiciliary care and day care numbers is due to several factors. The introduction of more rigorous panel processes and service reviews improved demand management in terms of numbers. The general trend has been that more reviews result in an increase to the package than result in a decreased package. The relatively mild winter meant that the demand management actions were not disrupted. With more consistent application of the eligibility criteria, the service has improved the way people are sign-posted to alternative services. Particularly in Learning Disabilities, new clients are opting to access universal services such as college rather than day care.

2.15 The move towards reablement has also started to manage the pressure by reducing the length and size of care packages beyond the reablement period. Over the period May 2006 to June 2007, 699 in house domiciliary care clients had their care packages closed after reablement. Underlying this is the growth in the level of need and consequently the size of care packages.

The movement in the individual client groups is summarised below and detailed in Appendix 1.

Care Type	Oct-06	Mar-07	May-07	Movement Oct06 to May 07
Nursing & Residential Care	5,310	5,191	5,288	-22
Domiciliary Care	8,095	7,638	7,566	-529
Day Care	3,676	3,498	3,478	-198
Direct Payments	814	625	678	-136
Other	241	207	200	-41
Total	18,136	17,159	17,210	-926

2.16 Given the reduction in the client numbers it could have been expected that there may have been an under spend, but this is not the case and is due to the impact of financial recovery and the reconfiguration of the budgets due to the restructure. In addition, it is a very early stage in the new financial year with only two months activity to base predictions on and the forecast needs to be dealt with cautiously.

2.17 Subsequent budget monitoring will have a more detailed analysis of the link between client number movement and the expenditure predictions.

2.18 The budget remains on course with a modest overspend forecast subject to the above provisos. The underlying key drivers and pressures are demography and the impact of an ageing population, the themes of recent policy, the need to maintain and improve performance, and the need to recover financially. To assist the department a significant contingency has been put in place to cover these factors but none of this is committed at this stage.

2.19 The budget contains proposals as part of the financial recovery plan to meet the challenges of the drivers and pressures set out above. Planned saving of £12.957m are included in the estimates. So far, savings of £1.967m have been achieved, a further £9.915m are in progress and a further £0.068m are planned. This leaves a shortfall of £1.007m mainly due to income shortfalls and delays in the Day Care Modernisation Programme (the planning process is taking longer than anticipated). Additional work is being undertaken to fund this from alternative sources. Appendix 2 summarises the overall financial recovery position to date.

2.20 As the overall spending position becomes clearer, subsequent monitoring reports will report management actions taken, and remedial actions proposed, to constrain the overspend within acceptable levels. The key messages from the first budget monitoring are:

o the figures are based on two months information and needs to be treated with caution

o further action is being taken to enhance the quality of the monitoring

o action is being taken to bring the outturn back into line with the budget

o no use will be made of the contingency to offset the overspend at this stage

Part B - 2006/07 revenue expenditure under the Service's control

Revenue expenditure under the Service's direct control is subject to a cash limit. For 2006/07 the adjusted amount is £257.174m as set out in Appendix 3.

The final outturn was £7.494m more than the cash limit, representing a reduction of £3.4m against the revised budget of £269.147m. During the year 2006/07 the overspend has been reduced by a combination of actions taken by management as well as the implementation of a financial recovery plan which has been agreed by and reported to Members on a regular basis. The overall final position is analysed in Appendices 4 and 5. Appendix 6 includes a more detailed statement of variations from the revised budget.

The final position for 2006/07 compared to the outturns for the previous three years is shown in the table below (note that variations relate to Social Services and include elements relating to Children and Families Social Care for the years 2003/04 to 2004/05):

	Variations from Revised Budget
	£'000	%
2003/04	-784	-0.30
2004/05	+532	+0.17
2005/06	+11,124	+4.46
2006/07	+7,494	+2.90

The last financial year has been another difficult one faced by the Service, but with a lower overspend for the County Council than the previous year. Furthermore, the overspend has been managed down successfully from a forecast £19m overspend at the start of the 2006/07 financial year, to a £7.5m final overspend position. The main pressures during the financial year were the full year effect of the 2005/06 overspend which was not fully funded in the 2006/07 budget.

The following paragraphs briefly describe some of the more significant variances across each client group.

Older people +£6.167m overspend (+4.8%)

The primary reason for the overspend in older people was the pressure of £6.79m on domiciliary care. This represents an overspend of £8.28m on purchased domiciliary care, mainly reflecting pressure brought forward from 2005/06 of £5.2m due to the average number of clients receiving care throughout the year greatly exceeding the budgeted number (in 2006/07 there were 5,225 actual clients on average compared to a budget of only 3,705). A further contributing factor has been an increase in the number of hours per client, reflecting a trend of greater dependency levels leading to a higher service required. The overspend on purchased provision has been offset in part by an underspend of £1.49m on in-house domiciliary care, due to a reduction in client numbers from 1,018 at the beginning of the year to 606 at the year end, as a result of the Home Care Modernisation Programme.

Client numbers reduced by 6% over the year and savings targets were exceeded, however the full year impact of the pressures brought forward from 2005/06, particularly in relation to purchased domiciliary care detailed above, more than offset this.

Adults with a physical or sensory impairment +£0.918m overspend (+3.8%)

Despite exceeding savings targets and a reduction in clients numbers of 9% this was offset by the full year effect of the pressure brought forward from 2005/06 along with increases in demand due to ongoing demographic factors resulting in increases in the average cost of packages especially in purchased domiciliary and purchased residential.

Adults with learning disabilities +£2.896m overspend (+5.3%)

Whilst there was significant progress in securing a reduction in the client base of 2% this has been offset by the full year effect of demand brought forward from 2005/06 especially on purchased residential and domiciliary care of £2.5m, increased complexity of care needs and ongoing difficulties associated with securing continuing care.

Adults with mental health needs +£0.070m overspend (+0.6%)

Ongoing pressures in the operational care budgets have been offset by strict staff vacancy management.

Other services -£0.547m underspend (-21.8%)

The underspend was principally due to planned residential placements for substance misuse either not taken up or completed by clients, also savings from rigorous reviews and contract negotiation.

Savings Against the Budget

The savings target for 2006/07 was £6.4m. The final position was £5.2m savings achieved against the original target with the balance of £1.2m being covered by savings elsewhere.

Part C - 2006/07 Capital expenditure

The outturn for 2006/07 is set out below with details of the total resources and of the individual schemes started/completed in the year appearing in Appendix 7.

	Total £'000
Total resources	6,847
Value of schemes started/completed in 2006/07	4,363
Balance of Cash Limit	2,484

The total programme limit for 2006/07 amounted to £6.847m and schemes to the value of £4.363m were committed in the year. Part of the capital programme relating to block votes is controlled on a starts basis, while other projects are controlled on an expenditure basis. Commitments in the year therefore represent a combination of starts on block votes and expenditure relating to other projects.

Schemes not started in 2006/07 and proposed for carry forward include the Challenger Way Older Person's Day Centre, minor works in residential and day care premises and furniture and equipment in office bases. The list of schemes started and proposed for carry forward are included in Appendix 7.

The combined value of schemes which started in 2006/07 and those proposed to be carried forward to start in 2007/08 is £6.847m which is equal to the cash limit.

In accordance with the County Council's Financial Procedures, the final costs of capital schemes controlled on an expenditure basis completed in 2006/07 are listed in Appendix 7. "Completed" in this context means when the final payment has been made. Some of these schemes may have been in operation prior to April 2006, but the final payment was only made in 2006/07. The final cost of the schemes completed in 2006/07 is £3.420m.

Impact assessment

It is not considered that proposals in this report have a discriminatory impact.

Recommendations

That the current budget position for 2007/08 and measures proposed be noted.

That the final acounts for 2006/07 be noted.

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 Contents

1 Client activity

2 Financial Recovery Programme 2007/08 as at period 2

3 Construction of the 2006/07 cash limit

4 Summary of 2006/07 revenue expenditure

5 Analysis of 2006/07 cash limited revenue expenditure over services

6 Major variations in 2006/07 cash limited expenditure

7 Capital expenditure 2006/07

Appendix 2

Appendix 3

Adult Services

Revenue Expenditure 2006/07

Construction of cash limit

1 In the revised budget revenue expenditure under the service's direct control was subject to a cash limit set by Cabinet of £258.2m. (It should be noted that the revised budget was set at £269.1m i.e. £10.9m higher). Business rates were an exception because the level of business rates on the County Council's own properties could not be determined precisely when the revenue budget was set. As a result of revaluations actual expenditure on rates is £18,000 lower than was provided for in the revised budget and the cash limit has been adjusted accordingly.

2 Further adjustments to the cash limit have also been made in respect of:

		£'000
Changes in Government Grants:
	Training Support	-233
	Mental Health	-234
	HIV	16
	Mental Capacity	-81
	Delayed Discharges	-847
	Preventive Technology	-497
	Supporting People	-1,615
		-3,491
Transfers to Capital:
	Nursing Strategy (Enhance project)	-430
Virements across Services
	LPSA Performance Grant for LAA Flagship	28
	Virement from Children's Services	686
		714
Transfer by Health in lieu of Section 28a funding		2,150

3 The adjustments referred to above are incorporated in the table below which summarises the position for the service in the year:

Appendix 4

Adult services

Final Accounts 2006/07

Summary of Revenue Expenditure

Appendix 5

Adult services

Revenue Expenditure 2006/07

Analysis of cash limited revenue expenditure over services

Appendix 6

Adult Services

Revenue Expenditure 2006/07

Major variations in cash limited expenditure - overspending of £7.494m

Appendix 7

Adult services

Capital Expenditure 2006/07