Archived decisions

Agenda Item: 2

MAIN REPORT

1) Purpose of the Report:

1.1. To present details of the first quarter's revenue budget monitoring position for the 2008/09 financial year, in order to provide reassurance that services are being managed within approved cash limits, in accordance with financial regulations.

2) Contextual Information:

2.1. The report presents the outcome of the first monitoring review for the 2008/09 financial year, covering the Environment services' revenue budget, which was carried out in consultation with departmental budget holders during the summer.

2.2. The Environment department's budget monitoring process reflects a comprehensive approach including a series of review meetings between finance section staff and those departmental officers with delegated service budget responsibilities. During this process plans for service spending during the year, together with trends in expenditure and income, are reviewed in comparison with the approved budget plan, in order to update the forecast outturn projection for each of the main service headings. The outcome of this process is initially reported to the department's management so that any necessary actions can be considered.

2.3. An update of the 2008/09 revenue budget cash limit is also provided, taking into account recent budget changes.

3) Key Issues:

3.1. In summary, the overall revenue budget monitoring position is satisfactory for this stage in the financial year and the expected outturn is currently shown to be in line with the approved cash limit. However, this forecast assumes that action will be taken as required to fully attain the various savings assumptions built into the 2008/09 budget and that any further pressures on services that emerge during the remainder of the year are absorbed.

4) 2008/09 Cash Limit Changes:

4.1. The original 2008/09 cash limited budget for the Environment services, which was confirmed by the County Council at its meeting in February, was £111.841 million.

4.2. A number of changes have subsequently been made to the cash limit, increasing the figure to £115.122 million. These adjustments include a transfer from capital to the highways maintenance revenue budget for the re-pricing of budgets following the implementation of the new Term Highways Contract, adjustments to the road safety revenue budget arising from a lower net County Council contribution to and loan repayment from the Hampshire and Isle of Wight Safer Roads Partnership, variations in expenditure being funded from Government grant, including a significantly higher than anticipated provisional allocation of Housing and Planning Delivery grant, and a number of other agreed changes. A summary showing all of the cash limit changes is set out in Appendix 1.

4.3. The cash limit adjustments include an increase of £12,000 (rounded) being this department's share of the £23,000 unplanned underspending recorded during the closure of the 2007/08 accounts. This sum has been added as a contingency within the department's budget for staffing and support costs to help towards the funding of any unforeseen pressures that may emerge during the course of the year.

4.4. Further adjustments to the cash limit will be made throughout the year to cover further quarterly allocations from the central waste management contingency, together with any subsequent budget transfers and adjustments that may be required, such as the corporate funding towards the implementation of the pay and benefits review, once this has been agreed.

4.5. Appendix 2 provides a summary of the 2008/09 revenue budget over the standard divisions of service headings, together with details of assessed expenditure to 31 July 2008. No overspendings or underspendings are predicted in comparison with the cash limits for the individual services at this stage of the financial year. Appendix 3 sets out details of key volume and activity indicators for the first quarter. The main issues arising from the budget monitoring review are discussed in the following paragraphs.

5) Highways Maintenance:

5.1. The adjusted 2008/09 cash limited revenue budget for routine highways maintenance is £28.681 million, including the transfer of £1.975 million from capital to adjust budgets for the impact of price variations under the new Term Highways Contract. The adjusted cash limit also allows for the transfer of the sum of £250,000, which was originally carried forward from the 2007/08 budget, to capital to help finance the ongoing expenditure under the Safe and Secure Communities programme.

5.2. Routine maintenance works allocations to the various departmental and agency district council budget holders currently total £28.291 million, leaving an unallocated sum of £390,000 to cover any routine operational pressures that may emerge later in the year. This reserve sum is at a similar level to the position at an equivalent stage in the 2007/08 financial year. Expenditure on routine highways maintenance is being progressed in accordance with the budget plan and no variations from the overall cash limit are currently expected.

5.3. Provision has been included in the programme to reflect the outcome of the re-tendering process earlier in the year for the energy supply contract for street lights, illuminated signs and bollards, and traffic signals. Energy prices have increased by 16.0% compared to 2007/08, including the Climate Change Levy which has added 6.4% to the overall price, resulting in an overall budget requirement of £3.876 million. This outcome is £50,000 higher than forecast when the budget was originally prepared and adjustments have been made to accommodate this pressure within the overall street lighting programme.

5.4. The department's capital programme allows for structural highways maintenance expenditure of £28.8 million, which at this stage of the year is also expected to be fully spent. This budget includes the additional one-off sum of £1 million for potholes and other road maintenance repairs which was allocated by the Cabinet on 23 June 2008, together with a further sum of £500,000 for repairs and maintenance of pavements, including temporary repairs as appropriate to Winchester High Street.

5.5. An additional sum of up to £600,000 has also been provided by the Cabinet towards the Street Lighting PFI project, which has been reserved to cover the first year costs, reflecting the anticipated funding gap after taking into account the PFI credits available from the Government and the payment streams to the PFI service provider. It is expected that this one-off sum would be allocated to the department's cash limit during 2009/10.

6) Public Transport:

6.1. The January 2008 report on the 2008/09 revenue budget identified that there were likely to be significant continuing pressures on the public transport service from contract re-tendering, the fall out of Government funding towards community transport and the ongoing impact of other initiatives such as the Hampshire rural transport pilots. These would need to be contained within the cash limit by reviewing services following the area review process, implementing lower cost options and seeking contributions from other sources, together with the utilisation of excess savings of some £250,000 from service reconfigurations which were achieved during the 2007/08 financial year, but were not subsequently required to meet corporate budget priorities.

6.2. The current budget monitoring position suggests that overall passenger transport expenditure is expected to be contained within the service cash limit. However, the current level of assessed commitments against the bus subsidies budget, assuming the recommendations elsewhere on this agenda are accepted, leaves a contingent sum of only £40,000 available within the budget, on an ongoing full-year basis (the equivalent figure in the current financial year, taking into account the part-year effect of known cost variations, being £98,000). This sum would be required to meet any future cost pressures arising from contract variations, excess inflation from higher fuel prices and other issues, so the financial position will need to be regularly reviewed during the remainder of the year.

7) Road Safety:

7.1. The adjusted 2008/09 cash limit for the road safety service is £913,000. This sum includes an additional Department for Transport Government grant allocation of £100,000 for Local Authority Cycle Training to be utilised by 31 March 2009. The grant allocation will enable an additional 2,500 children to be trained to Level 2 of the National Standard. This additional training is to be provided by an external service provider and a contract is expected to be let shortly.

7.2. In setting the budget for 2008/09 a sum of £1.537 million was provided for the County Council's contribution towards the Safer Roads Partnership (SRP), funded from the revenue element of the £2.245 million Road Safety Grant allocation, leaving £708,000 available which has been used to support casualty reduction capital programme. However, the 2008/09 budget for the partnership has since been pared back and the County Council's contribution has reduced by £72,000.

7.3. During 2007/08 the other partners' road safety grant was insufficient to meet their pro-rata share of the costs of the SRP, so the County Council covered the difference by "loaning" the partnership the shortfall. This was with the proviso that when the partnership began to receive a new income stream from charges arising from the new Driver Awareness Training scheme, this income would first be applied to repaying the Hampshire loan. In 2007/08 the County Council loaned the partnership £489,000 and a further amount of £377,000 has been loaned in 2008/09, resulting in a total loan of £866,000.

7.4. Of this sum, £472,000 has now been repaid during early 2008/09, with the outstanding balance of £394,000 forecast to be repaid towards the end of 2008/09 or early in 2009/10. The Driver Awareness Training income stream is expected to reduce the County Council's future ongoing annual contribution towards the assessed share of the running costs of the partnership by between £400,000 and £500,000 from 2009/10 onwards, although this would be dependent on actual future levels of receipts from this income stream.

7.5. The £472,000 SRP loan repayment, together with the £72,000 reduction in the contribution to the partnership for 2008/09, has therefore provided £544,000 of additional resources for the Environment 2008/09 revenue budget.

7.6. Of this sum, £75,000 will be applied to provide continued funding of the Pass Plus new driver training scheme, as indicated by the Executive Member for Environment at the County Council meeting on 21 February 2008. In addition, £60,000 will be set aside to resource the "Choose 30" advertising campaign, together with the allocation of pump-priming funding towards the enforcement of speed limits in villages which are being rolled out in the safe and secure communities "Village 30" capital programme, which is currently estimated at £190,000 in 2008/09 and £195,000 in 2009/10.

7.7. After allowing for the above funding commitments, a sum of £219,000 remains available from the £544,000 SRP reduced funding and loan repayment. This sum has been currently retained as a contingency within the road safety revenue budget, but could be carried forward to 2009/10 as a contribution towards the enforcement costs next year and any continuation of Pass Plus or extension of the "Choose 30" advertising campaign, or to meet capital programme pressures. These figures will be reviewed as part of the proposals for the 2008/09 revised budget and 2009/10 revenue budget and capital programme in January.

8) Waste Management:

8.1. The 2008/09 original budget for the waste contract related services budget was £45.833 million, based on estimated commitments at the time it was prepared during November 2007. No allowance was included in the 2008/09 base budget for growth in waste volumes beyond predicted 2007/08 levels, nor for future price increases, changes to landfill tax rates or other contract cost pressures.

8.2. As in previous years, a contingency amount has been set aside within the overall County Council budget to cover these inescapable pressures, the sum for 2008/09 being £4.377 million. Periodic allocations will be made throughout the year to increase the waste management cash limit, based on quarterly assessments of cost increases.

8.3. Overall waste disposal volumes during the first three months of the year have been lower, by 3.8%, compared with the corresponding period of 2007/08 and the allowance for growth of 2.2% included in the make-up of the central waste contingency. Within this figure, volumes from household waste collections have increased slightly by 0.2% year-on-year, but household waste recycling centre volumes have reduced significantly by 12.6%, reflecting the new contract arrangements for the management of the recycling centres and the introduction of trade waste controls.

8.4. The first quarter's call on the waste contingency has been assessed at £648,000, reflecting variations in the cost of the waste contract during this period, including contract price changes and increases to landfill tax. This sum has now been added to the service's cash limit. However, it is too early in the year to predict any trends in waste volumes, or whether the contingency sum of £4.377 million will be sufficient to cover higher waste contract expenditure during 2008/09.

8.5. The total 2008/09 budget provision for the non-contract waste management services is £2.711 million. It is currently anticipated that overall expenditure will be contained within the cash limit for this part of the waste management budget, which covers the main non-contract related activities such as facility management, promotions and development, the disposal of abandoned vehicles and waste management administration. It is expected that the new contractual arrangements for end of life vehicles will significantly reduce the previous level of financial uncertainty within this service area.

9) Environment Department Staffing and Support Costs:

9.1. The overall 2008/09 budget for departmental staffing and support services is £27.447 million, mainly covering the running costs of the Environment department, together with the remaining agency arrangements with the district councils.

9.2. Planned savings totalling £726,000 in staffing and support costs were identified in constructing the 2008/09 original budget to offset a number of budget pressures, including staff salary increments, office accommodation, the ongoing higher cost of the 2007/08 pay award, additional resources to cover work transferred from districts and contributions towards corporate IT systems developments. These planned savings and other budget adjustments were reflected in the detailed cost centre budget allocations to budget holders at the beginning of the year and the outcome of the first quarter's budget monitoring review suggests that these savings are being achieved in accordance with the budget plan.

9.3. In addition, the 2008/09 budget includes the normal annual allowance for incidental savings that are expected to arise during the course of the year from staff turnover, vacancies and other housekeeping efficiencies. For 2008/09 this turnover allowance has been set at £625,000, which is £125,000 higher than in the previous financial year.

9.4. The achievement of these savings will be tracked throughout the year in the various quarterly monitoring reports. For 2008/09 the first quarter's budget monitoring review has already identified actual and projected savings of £289,000, or just over 46% of the total requirement for the year. As in previous years, the position will need to be monitored carefully to ensure that savings assumptions are achieved and also in case any significant excess savings materialise, which could be utilised in preparing proposals for the 2009/10 budget.

10) Conclusions:

10.1. A number of adjustments have been made to the Environment services' cash limit, increasing the overall budget by £3.281 million to £115.122 million. Further adjustments will need to be made throughout the remainder of the year for the quarterly allocations from the central waste management contingency.

10.2. Expenditure on routine highways maintenance is being progressed in accordance with the latest approved programme. Highways maintenance revenue reserves currently stand at £390,000 which will be allocated to budget holders on a phased basis throughout the remainder of the year to cover operational pressures as they emerge.

10.3. On public transport only £40,000 remains uncommitted, on an ongoing full-year basis, to meet any further cost pressures arising from contract variations, higher inflation or other issues.

10.4. The budget for road safety education has been increased by £100,000 following a distribution of Government Local Authority Cycle Training grant, together with an additional sum totalling £544,000 reflecting the re-allocation of reduced funding for the Hampshire and Isle of Wight Safer Roads Partnership.

10.5. Waste management disposal volumes show an overall reduction of 3.8% year-on-year based on the available figures for the April to June period. However it is too early to predict any longer term trends in waste volumes from this information, or whether the overall waste contingency sum of £4.377 million will be sufficient to fully cover waste contract related expenditure during 2008/09.

10.6. The 2008/09 budget for departmental staffing and support costs includes planned savings of £726,000 which are being achieved in accordance with the budget plan.

11) Summary Recommendation:

11.1. That the actions being taken to manage expenditure be approved.

1756Rpt/226/BI

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