Agenda Item No. 4

 

The Vale of Glamorgan Council

 

Corporate Performance and Resources Scrutiny Committee: 22nd March 2018

 

Report of the Managing Director

 

Revenue Monitoring for the period 1st April 2017 to 31st January 2018

 

Purpose of the Report

  1. To advise Scrutiny Committee of the position relating to the revenue budget for the period 1st April 2017 to 31st January 2018 and the anticipated achievement of the approved savings targets for the year.

Recommendation

It is recommended that :-

  1. The position with regard to the Authority's 2017/18 Revenue Budget be noted.

Reason for the Recommendation

  1. That Members are aware of the projected revenue outturn for 2017/18.

Background

  1. On 1st March 2017, Council approved the original Revenue and Housing Revenue Account (HRA) Budgets for 2017/18 (minute nos. 864 and 862 respectively).  Cabinet approved the amended budgets for Revenue and the HRA for 2017/18 on 20th November 2017 (minute nos. C140 and C141).

Relevant Issues and Options

  1. Some services are anticipating an adverse variance at year end and will require the use of reserves to balance budgets.  The table below shows the forecast for the 2017/18 Revenue and HRA budgets and details where services are anticipated to draw down funding from reserves to cover budget overspends.

Directorate/Service

2017/18

Original Budget £000

2017/18

Amended Budget £000

2017/18 

Projected Outturn £000

Variance

Fav (+)

Adv (-)

£000

Learning and Skills

       

Schools

82,957

82,957

82,957

0

Strategy, Culture, Community Learning & Resources

11,735

11,014

11,121

-107

Directors Office

235

235

205

+30

Achievement for All

3,841

3,840

4,407

-567

School Improvement                    

1,121

1,102

1,022

+80

Use of Reserves to Offset Overspend

0

0

(564)

+564

Social Services

       

Children and Young  People       

15,124

15,168

15,368

-200

Adult Services

41,910

41,838

42,638

-800

Use of Reserves to Offset Overspend

0

0

(1,000)

+1,000

Resource Management & Safeguarding

267

270

270

0

Youth Offending Service

701

697

697

0

Environment & Housing

       

Visible Services  

19,914

20,211

20,936

-725

Use of Reserves to Offset Overspend

0

0

(725)

+725

Transportation

4,841

4,841

4,841

0

Building Services

0

0

0

0

Regulatory Services

2,166

2,169

2,169

0

Council Fund Housing

1,126

1,257

1,257

0

Public Sector Housing (HRA)

(131)

127

127

0

Managing Director &Resources

       

Resources

728

1,199

1,199

0

Regeneration

2,091

2,059

2,059

0

Development Management

968

1,012

1,012

0

Private Housing

11,003

11,038

11,038

0

General Policy

15,692

15,513

15,513

0

Total

216,289

216,547

216,547

0

 

 

2017/18

Original Budget

£000

 

2017/18

Amended Budget

£000

 

2017/18 

Projected Outturn

£000

 

Variance Fav (+) Adv (-)

£000

Met from Council Fund

(700)

(700)

(700)

0

Authority Total 

215,589

215,847

215,847

0

 

 

Learning and Skills

  1. The projected outturn has improved from the position previously reported and is now anticipated to breakeven after a transfer of £564k from Learning and Skills reserves.   The Directorate has taken a number of steps to mitigate the complex needs overspend including freezing non-essential expenditure and holding budgeted posts vacant.  It had been proposed that £258k would be funded from the Council Fund however this may now not be necessary. 
  2. Schools - The delegated budget relating to schools is expected to balance as any under/over spend is carried forward by schools.
  3. Strategy, Culture, Community Learning & Resources - It is projected that the service will outturn with a favourable variance of £182k after drawing down £289k from reserves. There is an adverse variance of £75k relating to the schools long term supply scheme, however, premiums will be increased from April 2018 to ensure the scheme is sustainable in the future. There is an adverse variance of £14k anticipated on education transport which is managed within the Environment and Housing Directorate.  This is offset by favourable variances of £84k relating to staffing, £34k on ICT SLA income from schools, £54k from payments to non maintained nursery schools, £32k in Libraries, pension payments of £41k, £17k relating to Broadband and union backfilling of £9k.  The Catering service will draw down £16k from the Catering reserve to outturn at budget to fund urgent gas works required in schools as well as the school holiday enrichment programme.  The Schools Invest to Save Reserve will be used to cover the £99k adverse variance in relation to redundancies in schools, which is covered by a statutory requirement to be funded centrally. £105k from the Rationalisation reserve will be used to fund revenue costs in relation to the Barry Secondary school transformation, £22k from the Rationalisation reserve will be used to fund one off staffing costs at Penarth Learning Community, a further £20k of the Rationalisation reserve will be used to fund the cost of Welsh immersion for primary pupils transferring from English medium to Welsh medium schools and £17k will be transferred from the rationalisation reserve to cover amalgamation costs at St. Helens Primary school.  £10k of the Adult Community Learning reserve will be used to cover the adverse variance which is as a result of maintaining the service following a reduction in funding from Cardiff and Vale Colleges.
  4. Directors Office - It is anticipated that this service will underspend by £30k due to a freeze on expenditure and non-replacement of one post which has been held vacant in order to partially mitigate the overspend on complex needs.
  5. Achievement for All - This service is currently predicted to outturn with an adverse variance of £567k which will be partially met by transfers from reserves of £275k resulting in an adverse variance at year end of £292k.  A £403k adverse variance is projected on the recoupment income budget.  This budget is set for recouping income from other Local Authorities that purchase placements at Ysgol Y Deri.  The budget has been under pressure for a number of years as a result of a demographic increase in the number of Vale pupils presenting with complex needs which has resulted in less placements being available for other Authorities to purchase.  In addition, other Authorities have developed their own provision and the level of demand has reduced.   The adverse variance will be partially offset by a transfer from the School Placement Reserve of £200k.  It is anticipated that the Social Inclusion and Wellbeing service will overspend by £38k due to the remodelled guidance to engage NEETs prevention service and this overspend will be offset by a transfer from the Youth reserve.  A £186k adverse variance is projected for the pupil placements budget.  Occasionally the Council is unable to meet the needs of very complex pupils within Vale of Glamorgan resources and placements are purchased from independent schools or other Authorities.  Unit costs are typically very high and as a result this budget can be volatile as one new pupil can have a dramatic effect on the outturn.  There has been a significant increase in the number of pupils with social and emotional behavioural issues at key stage 3 and 4 whose needs cannot be met within our schools or the Pupil Referral unit.  As a result the Directorate has found no alternative but to place these pupils with external providers which has increased the adverse position in this area.  This overspend will be partially offset by a transfer from the Excluded Pupil reserve of £37k.  There are projected favourable variances of £60k on staffing.
  6. School Improvement - It is anticipated that this service will underspend by £80k due to a freeze on expenditure and non-replacement of a senior post which has been held vacant in order to partially mitigate the overspend on complex needs.
  7. Provision has been made within the budget to make unsupported borrowing debt repayments in relation to the Schools Investment Strategy of £598k per annum and any favourable variance on debt repayments will be directed into the Schools Investment Strategy.

Social Services

  1. The forecast for Social Services at year end has now improved to a potential overspend of around £1m.   
  2. Children and Young People Services - The major issue for this Service continues to be the pressure on the children's placements budget, which has resulted in an overall projected £200k overspend at year end.  This is due to the increasing complexities of the children currently being supported, which results in their placement in very high cost units.  Work continues to ensure that children are placed in the most appropriate and cost effective placements.  However, it should be noted that due to the potential high cost of each placement, the outturn position could fluctuate with a change in the number of looked after children and/or the complexity of need. The service holds the Social Services Pressures reserve which has been set aside to offset the impact of high cost placements.  If required, this reserve will be used to fund the potential deficit at year end. 
  3. Adult Services - The major issue concerning this service is the continuing pressure relating to the Community Care Packages budget.  The anticipated position has improved from previous months and is currently projecting an overspend at year end of around £800k.  However, a letter was received from Welsh Government on 14th February 2018 offering grant funding of £369,265 to support Social Services delivery over the period January to March 2018.  This funding can be used to fund domiciliary care, short term residential care and minor home adaptations.  It is therefore anticipated that this funding will further improve the year end position however a full assessment will need to be undertaken of the actual impact to ensure compliance with the grant's terms and conditions.  It should be noted that this funding is one off during 2017/18 and will not be received in 2018/19.  The outturn position is still difficult to predict with certainty as this budget is extremely volatile.  The service continues to strive to manage growing demand. 
  4. It is proposed that up to £800k is used this year from the Social Services Legislative Changes fund and £200k from the Social Services Pressures reserve to cover the shortfall.

Environment and Housing

  1. It is currently projected that for the service to outturn within target at year end, a £725k contribution from reserves will be required.
  2. Highways & Engineering - There is currently a £156k favourable variance against the profiled budget. The main reason is due to vacant posts currently within the department, however, key posts have been filled on a temporary basis by Agency staff and therefore it is currently projected that the budget will outturn on target.
  3. Waste Management - There is currently an adverse variance of £279k to the profiled budget. The variance to date is due to overspends on staffing and transportation costs. The waste management budget was reduced in 2017/18 for further vehicle savings however the department are unlikely to be able to make these in the short term. It is currently anticipated that the budget will outturn with an adverse variance of £200k however this will be funded from reserves which was set aside from an underspend against the 2016/17 budget.
  4. Leisure - There is currently a small adverse variance to the profiled budget. The main reason is due to high costs for vehicles during the start of the Grounds Maintenance season. These costs are reducing over the winter months and therefore it is currently projected that the overall budget will outturn on target.
  5. Transportation - There is currently a favourable variance of £52k against the profiled budget. Staffing costs within the division are lower than budgeted to date. There is also a slight underspend within the supported buses budget which is assisting the current favourable position. It is currently anticipated that this service will outturn within budget.
  6. Visible Services Reshaping Services Savings Target - In 2017/18 there is a savings target of £525k allocated to Visible Services from the current Reshaping Services programme.  The proposed means of achieving this saving was approved by Cabinet on 24th April 2017 and is through the introduction of a new target operating model for the service.  This savings target is currently being held centrally within Visible Services.  Staff consultation ended on 31st July 2017 and a number of changes have been considered as a result of the consultation.  It was originally anticipated that the structure would start to be populated from late September 2017, however due to the scale of the transformation, it is anticipated that the restructure will take effect fully from April 2018. It is envisaged that there will be a shortfall in the savings of £525k for 2017/18 and this will be met from the Visible Services reserve. 
  7. Regulatory Services - The allocation of £2.169m represents the Vale of Glamorgan's budget for its share of the Shared Regulatory Service (SRS). A separate set of accounts is maintained for the SRS and periodically reported to the Shared Regulatory Service Joint Committee.  It is anticipated that the SRS will outturn on target.
  8. Council Fund Housing - It is anticipated that this budget will outturn on target, however, this is after a planned transfer from reserves of £25k to fund specific posts and issues arising as a result of the introduction of the Housing Act.
  9. Public Sector Housing (HRA) - The HRA is expected to outturn on target and any underspends in year will be offset by additional contributions to Capital Expenditure thus reducing the reliance on Unsupported Borrowing.

Managing Director and Resources

  1. It is currently projected that this service will outturn within target at year end.
  2. Resources - The service is anticipated to outturn within budget overall, however, it is anticipated that ICT will overspend by £200k.  ICT has a savings target of £400k this year however it is anticipated that only £200k will be identified through the staff reorganisation and review of contracts.  There are underspends elsewhere in the Finance division from staff vacancies and supplies and services which should offset this position.
  3. Regeneration - This budget covers the Countryside, Economic Development and Tourism & Events functions. There is currently a small favourable variance against the profiled budget even though income due to be generated from commercial opportunities at Country Parks and car parking at Cosmeston have not yet been implemented.   The position has also been mitigated by occupancy on workshop and office units being high therefore rental income is buoyant and rates costs are reduced due to less units being vacant.   The position has also improved as all non-urgent expenditure within the division has been on hold.
  4. Development Management - There is currently a small favourable variance against the profiled budget due mainly to higher than anticipated building regulation fees. It is anticipated that the position will level off through the winter period so at this time it is forecast that this service will outturn on target.
  5. Private Housing - As part of the Initial Revenue Budget Proposals 2018/19 report, which was approved by Cabinet on 20th November 2017, an underspend of £570k was projected on the Council Tax Reduction Scheme, due to a lower than anticipated take up.  It was approved that this sum would be transferred into reserves.  This budget is therefore on profile and a balanced budget is forecast at year-end.
  6. General Policy - As part of the Initial Revenue Budget Proposals 2018/19 report, which was approved by Cabinet on 20th November 2017, it was projected that there will be a favourable variance of £1.83m relating to capital charges and a £1.6m positive variance relating to Council Tax given the continued effectiveness of collection. 
  7. A sum of £4m has now been set aside in reserves.  

2017/18 Savings Targets

  1. As part of the Final Revenue Budget Proposals for 2017/18, a savings target of £4.017m has been set for the Authority.  Attached at Appendix 1 is a statement detailing each savings targets with an update of progress.  Currently it is projected that there will be a shortfall of £1.009m in the achievement of this year's target. 
  2. Each savings target has been given a RAG status.  Green indicates that it is anticipated that the target will be achieved in full within the year, amber indicates that it is considered that the saving in the year will be within 20% of the target and red indicates that the saving to be achieved in year will be less than 80% of the target.
  3. With regard to the Social Services savings targets which relate to the Care Package Budget reductions, while there is significant pressure on this budget and it is anticipated to overspend, schemes have been put in place to deliver savings in this area by transferring domiciliary care clients to direct payments and by establishing a review team and therefore the saving is projected to be achieved in full.
  4. It is anticipated that the £244k Transport Review saving for Visible Services will not be achieved this year.  As detailed earlier in this report, funding has been ringfenced in the Visible Service Fund to cover part of the projected shortfall for this year.
  5. Visible Services also has a savings target of £525k under the current Reshaping Services programme which will be achieved by the introduction of a new target operating model.  As stated earlier in the report it is now anticipated that the structure will not be fully populated until April 2018. This will therefore require the £525k shortfall to be met from the Visible Services Reserve.  It is anticipated that the savings target will be achieved in full in 2018/19.

Medium Term Financial Plan

  1. The latest Medium Term Financial Plan (MTFP) 2017/18 to 2020/21 was presented to Cabinet on 18th September 2017.  The Authority needs to review the assumptions on which the Plan is based on a regular basis, throughout the year, to ensure that they are still reasonable.  Any significant change needs to be highlighted and the impact on the financial projections needs to be assessed.
  2. The current MTFP assumed a reduction in Welsh Government funding of 3% for the years 2018/19, 2019/20 and 2020/21.  This resulted in the requirement to find savings of £20.941m over this period, with £9.326m currently being identified.  There were therefore further savings to be identified of £11.615m over the 3 year period.  The latest Plan factored in a managed level of cost pressures, a notional increase in Council Tax of 2.6% each year, price inflation of 0.5% and annual pay awards of 1.6% each year from 2018/19.
  3. Details of the final budget settlement for 2018/19 were received from Welsh Government in December 2017 and final proposals were presented to Cabinet on 19th February 2018.   Taking into account adjustments for transfers into the Revenue Settlement Grant and new responsibilities, there was a cash reduction of 0.41% (£634k).  This is a smaller reduction than the 3% (£4.486m) projected in the MTFP, although it does not take into account inflation.  As part of the final settlement, WG has also provided an indicative figure for the change in AEF for 2019/20 which is a further reduction of 1%.  Taking these factors into account the final revenue budget proposals shows savings required over the next 3 years of £16.909m which is a reduction of £4.032m from the figure included in the MTFP.  This projection also included a projected increase in Council Tax in 2019/20 and 2020/21 of 3%, in line with the current level of CPI.  Pay inflation has been included at 2% with a higher rate for pay point 19 and below and a targeted level of non-pay inflation.

Resource Implications (Financial and Employment)

  1. As detailed in the body of the report.

Sustainability and Climate Change Implications

  1. As detailed in the body of the report.

Legal Implications (to Include Human Rights Implications)

  1. There are no legal implications.

Crime and Disorder Implications

  1. There are no crime and disorder implications.

Equal Opportunities Implications (to include Welsh Language issues)

  1. There are no equal opportunity implications.

Corporate/Service Objectives

  1. Effective monitoring assists in the provision of accurate and timely information to officers and Members and in particular allows services to better manage their resources.

Policy Framework and Budget

  1. This report is for Executive decision by the Cabinet.

Consultation (including Ward Member Consultation)

  1. Each Scrutiny Committee will receive a monitoring report on their respective areas. This report does not require Ward Member consultation.

Relevant Scrutiny Committee

  1. All

Background Papers

None

Contact Officer

Carolyn Michael

Operational Manager - Accountancy

Officers Consulted

All Directors

Responsible Officer:

Carys Lord

Section 151 Officer