Agenda Item No. 7

 

The Vale of Glamorgan Council

   

 

Environment and Regeneration Scrutiny Committee: 12th July 2018

 

Report of the Director of Environment and Housing

 

Closure of Accounts 2017/18

 

Purpose of the Report

  1. The accounts are complete and this report is to inform Scrutiny Committee of the provisional financial position of the Council for the 2017/18 financial year.

Recommendation

  1. That Scrutiny Committee consider the report and the financial measures taken and proposed.

Reason for the Recommendation

  1. To make Members aware of the provisional financial position and actions that have been taken.

Background

  1. Following the end of the financial year, Scrutiny Committee are provided with provisional outturn figures for the Council. The Statement of Accounts will be approved by Council before 30th September, which will normally follow the audit by Wales Audit Office.

Relevant Issues and Options

Council Fund

  1. Council on the 1st March 2017 (minute no. 864) agreed the Authority's budget requirement for 2017/18.
  2. Appendix 1 amends the revised budgets to take account of the following adjustments. These adjustments have no overall effect on the net budget of the Council and are accounting adjustments largely outside the control of services.

IAS 19 Retirement Benefits - The purpose of this Standard is to ensure that the operating costs of providing retirement benefits to employees are recognised in the accounting period in which they are earned by the employees. Figures provided by the actuary differ from that estimated and the movements need to be incorporated into the accounts.

 

Asset Rents - This charge can vary each year due to an increase / decrease in the valuation of assets. The movements need to be incorporated into the accounts.

 

Leave Accrual Adjustment - An accrual is made for the cost of holiday entitlements earned by employees but not taken before year end.  The movement for school staff changes between years depending on when the Easter holiday falls.  It has been assumed that there is no movement between years for non-school staff.

 

Carbon Reduction Commitment Scheme - The scheme requires the Authority to report on carbon dioxide emissions associated with the use of electricity and gas within its buildings. Payment is then made to the Environment Agency to cover the charge in respect of those emissions. 

 

Recharges - These represent changes to inter-service recharges and transfers.

  1. The following table compares the amended budget and the actual expenditure, including transfers to and from reserves, for this Committee.  The final column shows the net transfers to reserves for the Committee which have been included within the actual expenditure figures. 

Service

Year - 2017/18

Original Revenue Budget

Amended Revenue

udget

Total Provisional Actual

Variance +Favourable  () Adverse

Net Transfer to /(From) Reserve

 

       £000

       £000

       £000

       £000

 

Environment and Housing

         

Visible Services

15,381

15,566

15,639

(73)

 

Transportation

4,841

4,870

4,793

+77

 

Building Services

0

37

37

0

 

Regeneration

2,091

2,124

2,113

+11

 

Development Management

968

1,084

1,084

0

 

TOTAL

23,281

23,681

23,666

15

-924

  1. The main reasons for the variances are set out in the following paragraphs. 
  2. Visible Services and Transportation - Favourable variance of £4k  

In 2017/18 there was a savings target of £525k allocated to Visible Services from the Reshaping Services programme.  The proposed means of achieving this saving was approved by Cabinet on 24th April 2017 and was through the introduction of a new target operating model for the service.  This savings target had been held centrally within Visible Services.  Staff consultation ended on 31st July 2017 and a number of changes were 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, the restructure did not take effect fully until April 2018. This shortfall in the savings of £525k for 2017/18 was met from the Visible Services Reserve.

 

The favourable variance of £292k as detailed below has been offset by a transfer to reserves of £288k. Of this sum, £68k will be set aside in the Winter Maintenance reserve and £220k has been set aside in the Visible Services reserve, of which £40k is to complete works at Sully Moor Roundabout, £100k for schemes within Highways, £70k to undertake further work on the WELTAG studies for Dinas Powys and Junction 34 and £10k to replace equipment for the Leisure & Play team.

  1. Waste Management & Cleansing - Adverse variance of £35k

There have been a number of adverse variances during the year totalling £554k.  Employee costs had an adverse variance of £164k mainly due to the level of waste collection resources not decreasing as previously intended. Transport costs also have an adverse variance of £318k for the same reason. The waste collection service currently has a large amount of downtime in travelling to the waste disposal points which are situated within Cardiff. Officers are currently working with Welsh Government with a view to funding a waste transfer station within the Vale of Glamorgan to reduce this level of downtime. The income budget for waste management also has an adverse variance of £72k which is mainly due to the high level of concessions given for the Bulky Waste service, which limits the paid income received for this service.

 

There have been a number of favourable variances during the year totalling £362k. Supplies & Services budgets had a favourable variance of £228k which is mainly due to lower than budgeted costs for the disposal of waste. Additional grants/income of £134k was also received during the year. This contributed to costs of food waste disposal and also income from the transfer of the contract for organic waste disposal to Dwr Cymru.

There was a transfer from the Visible Services reserve of £157k to cover the shortfall.  In addition there was a planned transfer from the Visible Services reserve of £32k.

  1. Highways & Engineers - Favourable variance of £235k

There have been a number of adverse variances during the year totalling £1.569m.  Transport costs have an adverse variance of £90k mainly due to the higher than budgeted cost of the winter maintenance vehicles. Supplies and Services budgets have an adverse variance of £1.348m.  Around £1m of this is due to work on one off Highways Capital projects for which additional income is also received. The remainder is mainly due to expenditure on Winter Maintenance costs and also Coastal Surveys for which grant income was obtained from the WG. Internal recharges from other departments also had an adverse variance of £131k.

 

There have been a number of favourable variances during the year totalling £1.470m.  Employee costs have a favourable variance of £465k due to the level of vacant posts within the service. There was a favourable variance of £299k for government grants from Welsh Government, mainly for Winter Maintenance costs and the Coastal monitoring surveys mentioned previously.  There was a favourable variance of £706k for income received for capital schemes.

 

To offset some of the adverse variances above, an additional £334k was drawn down from reserves, of which £303k was from the Winter Maintenance reserve and £31k from the Visible Services reserve.

 

There were planned transfers from the Visible Services reserve for the Big Fill initiative of £546k, £300k for Patching and £70k for other highways initiatives.

  1. Civil Protection Unit - Favourable variance of £15k

This favourable variance was mainly due to lower than budgeted expenditure on standby/call out payments.

  1. Transportation - Favourable variance of £77k

There is a favourable variance on employee costs of £55k mainly due to vacant posts. There is a small favourable variance of £6k on Supplies & Services and £16k for additional income into the service. 

 

There was a planned transfer from the Visible Services reserve of £20k to purchase a new Greenlinks vehicle.

  1. Building Services - Breakeven

The Building Services trading unit had a turnover of £5.6m and made a surplus of £3k. The Building Cleaning & Security trading unit had a turnover of £2.6m making a surplus of £67k. In addition the Courier Service made a surplus of £6k. 

 

The Building Services Twin Hat function had a favourable variance of £15k at year end. This was mainly due to underspends against transport budgets and general supplies and services budgets.

 

All of the above were offset by a reduction of £47k in the recharge for maintenance repairs works from Building Services to the Housing Revenue account and a transfer of £44k to the Building Services Reserve to fund the future costs of apprentices within the area.  This was after a planned transfer from reserves of £99k towards the costs of the Public Building Compliance team.

  1. Regeneration  - Favourable variance of £11k

There have been a number of adverse variances of £86k.  £60k relates to the Cosmeston Country Park income budget as it was not possible to achieve the proposed target for car parking fees.  Costs within the workshop facilities managed by the Division exceeded the budget by £13k mainly as a planned drawdown from reserves for the BSC 2 did not take place. Premises costs also exceeded their target by £13k due to essential repairs being required.

 

There have been a number of favourable variances during the year totalling £100k.  Staffing costs were £32k lower than anticipated, due mostly to staff vacancies. The Major Project Managers exceeded their income target by £68k as a higher than anticipated level of their work was rechargeable. 

 

This position allowed a transfer of £3k to the Regeneration and Planning reserve. 

 

During the year, there were planned drawdowns of £85k from the Regeneration and Planning reserves with £6k for refurbishing the workshop at Porthkerry, £25k for Rural Development Programme matchfunding and £54k planned drawdown to cover the Economic Development Team. As in previous years, the budget also included a planned drawdown from reserves of £228k for Vale-wide events, including Christmas 2017.

  1. Development Management - Breakeven

There was an adverse variance of £102k relating to Development Control income. Though workload remains high, some of the application types received did not generate the expected fees.

 

There have been a number of favourable variances during the year totalling £146k.  There was a favourable variance of £58k relating to Building Regulation fee income as applications have once again been high in 2017/18.  A slowdown in the workload on the Local Development Plan (LDP) during 2017/18 resulted in a £23k favourable variance. Staff vacancies/secondment income during the year resulted in a favourable variance of £30k.  High income within the Building Control Section meant that they had a favourable variance of £26k. There were also other small favourable variances of £9k.

 

This favourable position allowed the £23k underspend on the LDP to be transferred into the LDP reserve and a further £21k to be transferred into the Regeneration and Planning reserve to support the Planning function.

 

A net transfer of £121k was made into the Building Control reserve for the year relating to the Trading Account.

Capital

  1. Council on the 1st March 2017 (minute no. 863) agreed the Authority's capital budget for 2017/18.
  2. Attached at Appendix 2 is a breakdown of the 2017/18 capital programme by scheme.  The overall outturn for this Committee is a variance of £2.49m. 
  3. Visible Services Highway Improvements - Slippage of £106k

Resurfacing works planned towards the end of last financial year, to conclude the highway maintenance 3 year plan, were unable to proceed due to the poor weather conditions experienced during March.  The outstanding work has now been completed in the new financial year and therefore it has been requested that £106k is carried forward into 2018/19.

  1. Dimming of Street Lighting/Fitting of LED lanterns - Slippage of £131k

The procurement process for the installation of the new LED lanterns was completed in January 2018.  Arrangements for legal exchange of contracts and the development of a detailed programme for installation followed, resulting in the works for the conversion of standard LED lantern units in residential street subsequently being commenced. The overall programme requires some 14 weeks for completion, which is estimated to be late June / early July 2018.  It has therefore been requested that £131k is carried forward into 2018/19 to fund these works.

  1. Boverton Flooding - Slippage of £187k

The construction phase of the scheme had been delayed due to the on-going technical nature of the works, various site constraints and limited area of working, resulting in a significant overrun on the contract and a completion date in 2018/19.  The completion of the construction phase has recently been certified as Friday 18th May 2018 and it has therefore been requested that £187k is carried forward to finalise the account.

  1. Vehicle Replacement Programme - Slippage of £334k

Following the Visible Services Reshaping Programme and the creation of the Neighbourhood Services and Transport model, a number of areas have been streamlined and operation functions changed. To co-ordinate with this, the Vehicle Replacement Programme has been delayed. With the new areas becoming operation from April 2018, the replacement programme will now recommence and it has therefore been requested that £334k is carried forward into 2018/19.

  1. Five Mile Lane - Slippage of £794k

This variance is due to some slippage in the commencement of the main works and the slow draw down on the land payments elements.  Overall the profile should catch up over the next few months.  It has therefore been requested that £794k is carried forward into 2018/19.

Reserves

  1. A reserve is an appropriation from a revenue account and does not constitute a cost of service until the expenditure is eventually incurred. A reserve does not cover a present obligation or liability and is a voluntary means of setting aside monies for future requirements either capital or revenue.
  2. A provision is a charge to revenue and is included as part of the cost of the relevant service at the point the provision is created. A provision covers a present obligation or liability that has occurred to a past event and is compulsory under accounting regulations.
  3. Attached at Appendix 3 is a schedule showing the Committee's reserves as at 31st March 2018.
  4. The condition of the roads in the Vale of Glamorgan is an important issue to the Council.  £500k was set aside in the Visible Services reserve for additional road and pavement resurfacing works in 2018/19 as part of the Final Revenue Budget Proposals report in February 2018.  The Council had committed funding for the Big Fill initiative until 31st March 2019. There is still further works to be carried out across the Vale and therefore £500k has been transferred into the Visible Services reserve to allow the Big Fill initiative to continue into 2019/20 and this will be part of the revenue budget.  As part of this report, an additional £400k has also been transferred into the Visible Service reserve to fund further resurfacing works in 2019/20.
  5. The Events reserve has also been increased by £200k. 
  6. There have been transfers into reserves for reimbursements from services for works where the initial cost was funded from that specific reserve e.g. the Energy Management Fund and Vehicle Renewals Fund.
  7. The transfers detailed above have been included in Appendix 3.

Resource Implications (Financial and Employment)

           Revenue (Including Savings Targets)

  1. As part of the Final Revenue Budget Proposals for 2017/18, savings targets were set for this Committee.  Progress on the achievement of these savings has been monitored and reported to Committee during the year.  Appendix 4 to this report confirms the final status of these savings at the end of 2017/18.  The services have been able to find savings to the value of £34k which is 4% of the required target.   
  2. Visible Services had a savings target of £525k under the Reshaping Services programme which was to be achieved by the introduction of a new target operating model.  As stated earlier in this report the structure was not fully populated until April 2018 and therefore the shortfall of £525k was met from the Visible Services Reserve.  It is anticipated that the savings target will be achieved in full in 2018/19.  The £244k Transport Review saving was allocated to Waste Management however it was not achieved this year and funding had been ringfenced in the Visible Service Fund to cover part of the shortfall for this year.

    Capital

  1. As a result of the capital underspend in 2017/18, Managing Director's Emergency Powers, have been used to approve slippage into 2018/19.  This will fund the completion of schemes as shown in Appendix 5.

Sustainability and Climate Change Implications

  1. There are no sustainability and climate change implications resulting from this report.

Legal Implications (to Include Human Rights Implications)

  1. The provisional outturn figures for the Council have been used in the preparation of the Statements of Accounts, which under the Accounts and Audit Regulations, must be certified by the Section 151 Officer by the 30th June 2018.

Crime and Disorder Implications

  1. There are no crime and disorder implications resulting from this report

Equal Opportunities Implications (to include Welsh Language issues)

  1. There are no equality implications resulting from this report

Corporate/Service Objectives

  1. To provide sound financial and reliable advice in relation to all issues affecting the Council including the production of the statutory accounts.

Policy Framework and Budget

  1. This is a matter for Executive decision by Cabinet.  Slippage has been approved via the use of Managing Director's emergency powers.

Consultation (including Ward Member Consultation)

  1. The appropriate Chief Officers have been consulted on this report. This report does not require Ward Member consultation.

Relevant Scrutiny Committee

  1. Corporate Performance and Resources.

Background Papers

None

Contact Officer

Carys Lord

Officers Consulted

Corporate Management Team

Responsible Officer:

Miles Punter

Director of Environment and Housing