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Contact: Erica Meadus, Ext: (01962) 846195, email: erica.meadusmailto:@hants.gov.uk

1 Summary

1.1. This report is the third budget monitoring of the financial year. It covers the first six months and action is being taken to address a small overspend and to bring the outturn back in line with the budget.

1.2. The following decisions are sought:

· That the current budget position for 2007/08 and management actions be noted.

· That a further £0.5m, making £1m in total, of the £1.5m held for operational pressures, be utilised to reduce the pressure on in-house nursing.

· That the £1.512m virements within OP & PD, which reflect a revised income apportionment methodology, be approved and also Cabinet approval be requested for these virements.

2 Reasons

This report links to the corporate strategy in the areas of: Making Hampshire safer and more 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:

None

4 Conflicts of interest declared by the decision maker or other Executive member consulted

None

5 Dispensation granted by the Standards Committee

None

6 Reason(s) for the matter being dealt with if urgent

Not Applicable

Approved by: .................................. Date: .......................

Councillor Felicity Hindson

Executive Member for Adult Social Care

Contact: Erica Meadus, (01962) 846195; Email: [email protected]

1 Summary

1.1 This report covers budget monitoring for the first six months of the year. The report shows the 2007/08 projected overspend position to be £1.074m at 30 September if no further management action were to be taken between now and the end of the financial year. However, management will continue to take action the bring the outturn back in line with the budget.

1.2 This is the third monitoring report for 2007/08 and is based on data to the end of September. Since the last report the overspend has reduced from £2.361m to £1.074m. The main reasons for the reduction of £1.287m in the overspend since the last report are set out in section 2. The major movements bringing about the reduction are:

· a reduction of £1.544m in Older People & Physical Disability

· an increase of £0.466m in Director, Deputy Director, Performance, Business Management (PBM) and Unallocated/Winter Pressures due to a reallocation of budget pressures (para 2.5 refers).

1.3 The main reasons for the current overspend of £1.074m are set out in section 3 which explains the current position for each business group. The major variances are:

· An overspend of £0.613m in Director, Deputy Director & PBM

· An overspend of £0.521m in Older People & Physical Disability

· An overspend of £0.353m in Learning Disabilities and Mental Health

1.4 The total cash limit for the service at period 6 is £273.786m. There is an increase of £0.479m since the last report, which is due to an additional carers grant of £0.359m, and invest to save grant of £0.120m. The invest to save grant is to strengthen the centre of the community and help it form an integrated framework of community support for older people.

2 Movement from the last reporting period

2.1 This section explains the movement in the overspend since the last report which showed the position at the end of July. At that time, after taking account of management action, an overspend of £2.361m was forecast. The latest outturn projections are based on the data from the first six months of the year and forecast an overspend of £1.074m (0.4%) . The major reasons for the reduction of £1.287m in the overspend since the previous report are shown in Table 1 below and explained in the following paragraphs. It is intended to continue management action to bring the outturn back in line with the budget.

2.2 The main reason for the £1.287m reduction in the overspend in table 1 above is a net £1.544m reduction in Older People & Physical Disability. This movement of £1.544m is made up of a £2.074m reduction in care management budgets offset by Director Residential & Nursing Operations overspend £0.530m . These movements are explained below.

2.3 The OP & PD £2.074m reduction in the care management overspend since July (period 4) is mainly due to:

· a £1.463m reduction in in-house and purchased domiciliary care due to increased NRC income projections, detailed reviews of commitments to take into account breaks in service, the negotiation of a lower rate with a large provider in the west, and large packages migrating to nursing and residential care.

· an increase of £0.159m in purchased nursing due to a short term increase in client numbers in August.

· a reduction of £0.777m on Assessment & Care Management is mainly due to the unrealised Hants Direct project required savings being moved to Performance & Business Management (PBM) and further slippage in recruitment to vacant posts.

2.4 The Operations Director Residential & Nursing Care forecast outturn has increased by £0.530m. This is after the allocation this month of a further £0.5m from monies held for operational pressures in addition to the £0.5m allocated in the October report. This gives a total of £1.0m from monies held for operational pressures. The £0.530m increase is due to:

· an increase in residential costs, including provision for redundancies

· reduced income following the rescheduling of the Better Housing Solutions programme.

· a reduction in forecast income for nursing due to the rephasing of the opening of the beds and a reduction in income from continuing care beds.

2.5 The Director, Deputy, Performance & Business Management (PBM) and Unallocated/Winter Pressure movement, £0.466m, is primarily due to the re-allocation of £0.639m unidentified Hants Direct project required savings from OP & PD to PBM.

2.6 The Learning Disabilities and Mental Health overspend has reduced by £0.134m mainly the result of reviews focussed on right-sizing of packages and robust contract renegotiation with care providers.

3 Current Position

3.1 The main reasons for the current overspend of £1.074m are set out in this section which explains the current position for each business group and gives explanations of major variances and the management actions that continue to bring the service provision in line with allocated budgets.

3.2 Table 2 outlines the latest forecast position for each business group.

Notes

* Total Older People & Physical Disability variance is £0.521m overspent.

**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.

3.3 Director, Deputy Director and Performance & Business Management

3.3.1 The Director, Deputy & Performance & Business Management pressure mainly reflects the re-allocation of £0.639m unrealised Hants Direct project required savings from OP & PD to Performance & Business Management.

3.4 Commissioning & Partnerships

3.4.1 The underspend is the result of vacancy management and a review of discretionary spend across a range of budgets within the Commissioning & Partnership budgets.

3.5 Older People and Physical Disability (OP & PD Care Management and Operations Director Residential & Nursing Care)

The overall overspend position for Older People & Physical Disability is summarised below and explained in the following paragraphs.

OP & PD Care Management Underspend -£0.171m

Operations Director Res & Nurs Care Overspend £0.692m

Overall Overspend £0.521m

3.5.1 OP & PD Care Management (underspend £0.171m)

The main variances contributing to the £0.171m underspend are shown in table 3 below and explained in the following paragraphs.

Table 3 - Care Type	Variance £'000
Assessment & Care Mgt	-1,003
Purchased Residential	1,646
Direct Payments	-1,187
Purchased Home Care	321
Other Variances	52
Total	-171

3.5.2 The Older People and Physical Disability (OP & PD) underspend of £0.171m mainly relates to underspends on Direct Payments (£1.187m) and Assessment & Care Management (£1.003m), offset by an overspend on purchased residential care (£1.646m). There is also a significant overspend on purchased PD domiciliary care (£2.148m) which is largely offset by an under spend on purchased OP domiciliary care (£1.827m).

3.5.3 Although the Direct Payments budget is underspending by £1.187m, it is the aspiration of the directorate to expand this type of service delivery. The budget levels remain high with each District Service Manager working towards a set target. PD clients remain to be the main users of this service, where elderly clients are more reluctant to take on the administration of their own care, and likely to opt for a service administered by the Council. There are 147 Older People who have opted for Direct Payments to date, representing 3% of the total OP home care service users, whilst 338 PD clients have opted for Direct Payments to date representing 31% of demand for PD home care service.

Action: Individual targets have been set for District Service Managers to increase activity (and therefore spend) to achieve 2007/08 performance targets. Any increased spend hasn't been reflected in the forecast outturn, as it is anticipated that it will be offset by reductions in the forecast spend and activity on other care types. However, even with these targets, client numbers are still reducing slightly, as clients are leaving the scheme at a faster rate than new clients joining.

3.5.4. The £1.003m underspend on Assessment & Care Management is due to tight vacancy management pending the restructure. The forecast outturn includes provision for posts that are currently vacant but anticipated to be filled before the year end, however the current staffing levels are considered to be unsustainable, and there is a risk that the underspend will reduce if it is deemed necessary to fill additional vacant posts before the financial year end.

Action: Work to determine the new teams for the restructure will enable senior management to review from December the vacant posts that need to be recruited to, and forecasts will be adjusted accordingly later in the year.

3.5.5 The pressure on purchased residential care of £1.646m is due to the average package cost being above the budgeted average cost. This is the result of an increasing number of capital depleters, hospital discharges to residential care, an increase in the number of dementia clients (with more expensive packages), and the impact of benchmarking for domiciliary care (clients who would otherwise have been given domiciliary care are placed in residential care because the costs would be above the agreed benchmark level).

Action:

· Management action on increasing Direct Payments activity and spend is planned to transfer activity from residential, thereby reducing the residential overspend.

· Monthly performance at a district and team level will be calculated and discussed at the OP/PD Operational Managers Team meetings to address any variations in performance between localities.

· An analysis of C72 (Older people admitted into residential or nursing care on a permanent basis) has established that a high proportion of the admissions are from people leaving hospital who were previously not receiving a service from Adult Services. Work is currently ongoing with the hospital teams to ensure alternatives to care home admission are being explored with patients, where appropriate. The impact of this action is anticipated to take effect in the final quarter of 2007/08.

· This analysis has also identified that on average 5 of the admissions made each week into residential and nursing care are capital depleters. Work is currently ongoing to establish how the number of capital depleters could be reduced.

· Work is being undertaken to explore setting up short term reablement schemes within care homes that would allow a person leaving hospital to be placed in a care home on a temporary basis with the view to them moving back home.

3.5.6 The pressure on PD purchased domiciliary care of £2.148m is caused by an increase in client numbers since the budget was set (as shown in Appendix 1 Detailed), although client numbers have decreased slightly in August and September. There has been an increase in average cost per client resulting from clients with low cost packages being replaced by clients with higher cost packages, and the full year effect of increases in 2006/07.

The £1.827m underspend on OP purchased domiciliary care is due to a decrease in client numbers since the budget was set, and increased income projections. This underspend is in addition to £0.753m planned savings from the Home Care Modernisation Programme (HCMP) which are already reflected in the budget, and forecast to be fully achieved.

The HCMP aims to deliver intensive home care for an initial period of six weeks for clients who are being released from hospital. The in-house home care team carries out the work. If the clients remain in need of help after the initial period, further work is purchased through the external market. Over the period May 2006 to July 2007, 714 in-house domiciliary care clients had their care packages closed after reablement.

The purchased domiciliary care variances explained above are after reflecting virements totalling £1.512m referred to in para 3.11.3 (£1.413m for OP, £0.099m for PD), to more accurately align the income budgets following improvements to the income reporting system. This is pending approval from the Executive Member and Cabinet.

Action: The spend is being closely monitored and reviews are being undertaken of high cost packages. Also, under the HCMP a budget was set aside in OP purchased domiciliary care to cover the purchased care costs of long term service users transferring from the in-house service. The cost of PD clients transferring under the programme has been identified at £500k, and therefore this amount will be allocated to PD, reducing the PD overspend to £1.648m but conversely reducing the OP underspend to £1.327m.

3.5.7 Operations Director Residential & Nursing Care (overspend £0.692m)

3.5.8 The main variances contributing to the £0.692m overspend are shown in table 4 below and explained in the following paragraphs.

The £0.692m overspend on Operations Director Residential & Nursing Care is mainly due to overspends of £0.323m on nursing, £0.211m on day care and £0.505m on Management & Support, offset by residential savings of £0.373m.

3.5.9 There is pressure on in-house nursing units. So far a high percentage of clients placed with in-house service are those with more substantial level of need. This is affecting the minimum statutory staff /client ratio that is required for nursing homes. Coupled with difficulty in recruiting staff and employment of more expensive agency staff this is putting the delivery of the service within allocated budgets under pressure. Although this pressure has so far been largely offset by the transfer of £1m from monies held for operational pressures, it will still require very tight budget management.

Action: Management action to bring the remaining £0.323m overspend back in line with the budget includes:

· re-profile the opening of the remaining 40 nursing beds at Forest Court and Westholme (including an ongoing review of the impact on purchased nursing budgets and the Enhance saving in the FRP).

· recruiting permanent staff where possible to reduce overtime and agency payments, including liaising with HR to develop a targeted recruitment campaign.

· a dependency management tool has also been introduced in order to manage the level of need of clients coming into the service.

3.5.10 The £0.211m pressure on in-house Day Care is due to a reduction in clients from other local authorities leading to a reduction in income, and furthermore, the linked reduction in staff numbers assumed in the budgets have not yet arisen due to limited staff turnover.

3.5.11 The nursing continuing care income targets are held within Management & Support, and the £0.505m pressure in this area is due to the underachievement of these targets. The budget is based upon receiving income for 20 continuing care clients at £850 per week throughout the year. Actual client numbers are rising from 2-3 at the start of the year to 8-9 in September, but are still only planned to reach 15 by the year end.

3.5.12 The £0.373m under spend on in-house residential is mainly due to an overachievement of client contributions, and savings due to units not operating at full capacity, offset by a budget cut for a financial recovery plan saving on night care staff that is not forecast to be fully achieved.

3.6 Learning Disabilities & Mental Health

3.6.1 The Learning Disabilities & Mental Health overspend of £0.353m is due to:

- a £0.150m overspend in Mental Health - (Operations) mainly reflecting higher forecast pressure on Early Onset Dementia

- and £0.203m for Learning Disabilities mainly reflecting a higher than budgeted pressure in purchased residential care offset by underspends on purchased homecare and in-house day care.

3.6.2 A review has been undertaken of the projected demographic pressures and mitigating action is ongoing to reduce or delay the impact.

3.7 Unallocated/Winter Pressure

3.7.1 At the October meeting, a virement of £0.5m from unallocated operational monies to in-house nursing was approved, to offset nursing pressures. However, substantial pressures still remain on in-house nursing and so a further £0.5m is proposed to be released from these unallocated funds (this has been reflected in the table 3 presentation i.e. the Unallocated/Winter Pressure budgets have been reduced by £1.0m and the Operations Director Residential & Nursing Care budget has been increased by £1.0m).

Apart from that it is proposed that the Unallocated/Winter Pressure budgets remain available to meet winter pressures, as well as shortfalls in financial recovery.

3.7.2 As part of 2008/09 budget process the department has reviewed the risk register and future possible financial impacts. It seems prudent to plan to seek to increase the level of Unallocated/Winter Pressure over the next three years. This could be achieved by carrying forward any unused allocation at the end of this financial year should there be an underspend (assuming there are no requirements to fund any other pressures between now and the end of the financial year and the outturn remains within the cash limit).

3.8 Client Activity

3.8.1 Client activity is analysed in Table 5. The movement in the individual care types is summarised. The old basis of client activity analysis is used for the period October 2006 to July 2007. The new basis of client activity analysis is used for the period July 2007 to September 2007. Further analysis is in Appendix 1 as follows:

· summary (client group activity by care type)

· detail (client group activity by care type and by external & in-house provider).

3.8.2 Between July and September, the client numbers have reduced by 99. The main reductions are in residential care 47 and day care 39. There has been hardly any change in nursing care client numbers over this period.

3.8.3 The movement between October 2006 and July 2007 shows client numbers reducing overall by 957. The main reductions are in domiciliary care 586 and day care 209. However, the figures show for nursing care that clients have increased overall by 102, with 153 increase in in-house nursing care and 51 reduction in external nursing care client numbers.

3.8.4 Appendix 1 provides further analysis of client activity.

3.8.5 The clients that are being transferred to residential care generally have more substantial needs, requiring higher level of care that is reflected in unit costs. As well as higher unit costs, there is an increase in the number of clients whose savings are falling below the threshold (known as capital depleters), and are therefore no longer able to make a contribution towards their care costs.

3.8.6 A detailed analysis is being carried out to establish cost behaviour against client activity.

Table 5 - Client Activity Summary

Note: Basis of Client Management Activity (CMA) statistics reporting has changed from July 07.The new basis has a tighter authorisation check (which reduces the client numbers re orders not properly authorised) and removes derived end dates for overlapping orders (this increases the numbers for nursing and residential care only, as partially cancelled orders were causing correct open orders to be disregarded).

3.9 Financial Recovery Update

The budget contains proposals as part of the financial recovery plan to meet the challenges of the drivers and pressures set out above. Planned savings of £12.957m are included in the estimates. So far, savings of £6.802m have been achieved, a further £4.701m are in progress and a further £0.576m are planned. The exceptions, £0.878m, relate mainly to a rescheduled Day Care modernisation programme and better housing solutions project, and individualised budgets. Although, not all of the initial targets are achievable, additional savings have been delivered in order to meet the recovery programme. Appendix 2 summarises the overall financial recovery position to date.

3.10 Other Factors

3.10.1 Hants Direct

3.10.2 The original Adult Services budget was reduced by £0.866m to fund a share of the Hants Direct running costs. At present savings of £0.639m remain to be identified to meet the original target and are currently included in the forecast as unachievable.

3.10.3 The delay in the implementation of Hants Direct will result in additional costs being incurred by Adult Services. Following planning workshops, a detailed project plan has been developed and agreed with the Hants direct team and work continues to identify the full financial impact which will include additional costs of £0.150m associated with phased implementation and additional resources that have been allocated to the project. The additional costs will be met from the Unallocated/Winter Pressure money.

3.10.4 Pay & Benefits

3.10.5 Pay & Benefit Realisation costs will also be an added pressure. The budget has been reduced by £0.690m for this.

3.10.6 The Local Government pay award gives all staff 2.475% with lower paid staff 3.4%. The existing budget provision allows for 2.25%. This will put an added pressure on the budget approximately of £0.2m and will be met from the Unallocated/Winter Pressure money.

3.11 Summary of Management Actions since the last meeting

3.11.1 The management action reported last time, has been taken to bring down spending in Performance & Business Management, and this has partly offset the requirement to make the Hants Direct savings.

3.11.2 The nursing pressure is being addressed by utilising £1.0m from the monies held for operational pressures and an action plan is in place to reduce the remaining overspend.

3.11.3 Within OP & PD, £1.512m virements from in-house domiciliary care to purchased domiciliary care reflect a revised income apportionment methodology resulting from improvements to the income reporting system, (which allows income to be allocated on a team basis rather than area basis as previously) has been agreed by the County Treasurer. These adjustments have been reflected in the presentation of this month's monitoring figures pending Executive Member and Cabinet approval of virements.

Impact assessment

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

Recommendations

1.That the current budget position for 2007/08 and management actions be noted.

2.That a further £0.5m, making £1m in total, of the £1.5m held for operational pressures, be utilised to reduce the pressure on in-house nursing.

3.That the £1.512m virements within OP & PD, which reflect a revised income apportionment methodology, be approved and also Cabinet approval be requested for these virements.

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.

TITLE

Appendix 1 (Summary) - Client Group Activity by Care Type

Note: Basis of Client Management Activity(CMA) statistics reporting has changed from July 07.The new basis has a tighter authorisation check (which reduces the client numbers re orders not properly authorised) and removes derived end dates for overlapping orders (this increases the numbers for nursing and residential care only, as partially cancelled orders were causing correct open orders to be disregarded).

Appendix 1 (Detailed - Client Group Activity by Care Type and by External & In-house Provider)

Note: Basis of Client Management Activity (CMA) statistics reporting has changed from July 07.The new basis has a tighter authorisation check (which reduces the client numbers re orders not properly authorised) and removes derived end dates for overlapping orders (this increases the numbers for nursing and residential care only, as partially cancelled orders were causing correct open orders to be disregarded).

Appendix 2 - Adult Services Financial Recovery Plan 07/08