Unrestricted. REVENUE EXPENDITURE OUTTURN 2011/12 Borough Treasurer

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1 TO: EXECUTIVE 3 JULY PURPOSE OF REPORT REVENUE EXPENDITURE OUTTURN 2011/12 Borough Treasurer 1.1 The Council, at its meeting on 2 March 2011, approved a revenue budget for 2011/12 of m. This report informs Members of the outturn expenditure position, subject to audit, for the financial year 2011/12 highlighting that the Council is within budget for the fourteenth successive year and under spent by 1.886m. The Council has therefore returned 0.296m to General Balances as opposed to a budgeted withdrawal of 1.590m. 1.2 The Accounts & Audit Regulations (England) 2011 require the Annual Statement of Accounts to be signed by the Borough Treasurer by 30 June and approved by the Council or a specific committee by 30 September. The Council has established a Governance and Audit Committee which will meet on 25 September to approve the Annual Statement of Accounts. This report focuses on the outturn position and a separate report is on tonight s agenda which provides the Executive with the commitment budget update and forward projection as the first step to setting a budget for 2013/14 and beyond. 2 RECOMMENDATIONS That the Executive: 2.1 Note the outturn expenditure for 2011/12, subject to audit, of m, which represents an under spend of 1.886m compared with the approved budget. 2.2 Note the budget carry forwards of 0.501m (see paragraph 5.6 and Annexe C). 2.3 Recommends to Council the Treasury Management performance in 2011/12 as set out in Annexe B. 2.4 Recommend to the Governance and Audit Committee the earmarked reserves as set out in Annexe D. 2.5 Approve the virements relating to the 2011/12 budget between 0.050m and 0.100m and recommend those over 0.100m to Full Council for approval (see Annexe E). 3 REASONS FOR RECOMMENDATIONS The recommendations are intended to inform the Executive of financial performance against budget in the 2011/12 financial year. 4 ALTERNATIVE OPTIONS CONSIDERED 4.1 The report sets out the Council s actual financial performance in 2011/12 and the consideration of options is not therefore appropriate.

2 5 SUPPORTING INFORMATION General Fund Revenue Expenditure 2011/ The Council approved a revenue budget of m for 2011/12. In addition transfers to and from earmarked reserves ( m) have been made during the course of the year. These are shown in table 1 below and explanations for the use of the reserves are set out in the following paragraphs. Table 1: Transfers From Earmarked Reserves/Budget Carry forwards Department Carry Forwards from 2010/11 Bus Contracts (S106) Other S106 Structural Changes Other Earmarked Reserves Total Corporate Services Children, Young People and Learning Adult Social Care and Health Environment, Culture & Communities Non departmental budgets ,610-2, Total ,489-2,836 Carry Forwards from 2010/11 In accordance with the Council s constitution, budget under spends can be carried forward to the following year in exceptional circumstances. The Corporate Management Team approved 0.410m to be carried forward from 2010/11. Bus Contracts from S106 There are three S106 agreements which make provision to support the costs of providing specific bus services to and from developments. Specific bus contracts were negotiated during the course of the year with the funding to be provided from S106 resources. Other S106 Revenue funding for two part time posts to work on SANGS (Suitable Alternative Natural Green Space) plans and planning policy and for the funding of the Grow Our Own Project have also been provided from S106 resources. The Grow Our Own project supports employment training and skills levels in Bracknell Forest. Structural Changes One off costs associated with restructuring and the staffing changes required in particular to deliver the 2012/13 budget proposals were met from the Structural Changes Reserve during the year ( 0.840m). Other Earmarked Reserves A number of other transfers have been made to or from reserves during the year, the most significant being the transfer to the Schools Reserves ( m) and in particular for Primary Schools ( m). In addition virements were processed for new reserves:

3 to fund future demographic pressures and projects within Adult Social Care ( m); for the Property Searches Chargeable Account which is a statutory ring fenced account that must break even over time. This account went into surplus in 2011/12 and this surplus has been transferred to the earmarked reserve ( m). to hold revenue grants where grant income has been received without outstanding conditions but has not been spent ( m). The revenue grant will be released from the reserve as the associated expenditure is incurred. Carry forwards to 2012/13 are also included in Table 1 (within other earmarked reserves) and are covered in more detail in paragraph 5.6. Provisional Outturn Position 5.2 Table 2 analyses by department the outturn compared with the original budget. These figures inevitably remain subject to minor change, pending external audit. However, no significant movement is anticipated. Table 2 Projected Outturn Expenditure Department Original Approved Budget Carry Forwards & Virements Current Approved Budget Outturn Variance Corporate Services 7, ,600 6, Children, Young People and Learning 21, ,961 22, Adult Social Care and Health 25, ,769 23, Environment, Culture & Communities 37,642 2,496 40,138 39, Non Departmental Budgets -15,519-6,481-22,000-22, Transfers to/from Earmarked Reserves -50 2,837 2,787 4,832 2,045 Total 76, ,255 74,369-1, The current approved budget takes into account virements actioned during the course of the year. The most significant being: Reallocation of budgets for non cash items to reflect actual costs ( 5.7m), in particular: o the requirement to charge to service revenue accounts capital expenditure not adding value to assets ( 2.8m); o downward revaluation of properties ( 2.9m); o capital charges ( 3.7m) o revenue expenditure funded from capital under statute ( 1.8m); o pension adjustments (- 5.5m). Adjustments relating to the accounting for the waste PFI (- 0.6m). Allocations from the Contingency Fund ( 1.0m).

4 These reallocations have no overall effect on the amount raised from tax payers as they are reversed out within the non departmental line. 5.4 Explanations for significant variances by service are set out in Annexe A and more detail can be found in departmental QSR s. Variances to be highlighted are: An under spend of m within Finance and m within the transport unit in Corporate Services. The former is primarily due to reductions in external and internal audit fees and savings on insurance and the latter from efficiency savings and the generation of additional income. Changes to grant funding from April 2011 and the mainstreaming of school grants into the Dedicated Schools Grant has resulted in the 2010/11 unspent grant that can be spent up to 31 August 2011 being available as an under spending (- 0.3m). After the in-year allocation of 0.9m from the corporate contingency, support to Looked after Children, including childcare solicitors but excluding staffing, over spent by 0.2m. This reflects a significant increase in the number of children coming into the care system and reverses the trend from previous years of falling numbers and costs. A number of services within Children, Young People and Learning subject to savings in 2012/13 were able to implement changes early, resulting in overall savings of m. These most notably occurred in the Family Information Service (- 0.08m) and Finance (- 0.02m). A significant under spend on supporting people with learning disabilities primarily because the forecast cost increases arising from demographic pressures did not materialise in full (- 1.0m). The Concessionary Fares budget under spent by - 0.2m as the number of passenger journeys was fewer than expected. Within Waste Management, under spends occurred on the Waste PFI contract, Re3 management costs and on the recycling promotions budget (- 0.2m). Additional income at the Cemetery and Crematorium (- 0.12m) and Coral Reef (- 0.10m), and within Legal Services (- 0.05m), Learning and Achievement (- 0.17m) and the Registration Service (- 0.06m). Significant under spends on devolved staffing budgets within Corporate Services (- 0.2m) and Environment, Culture and Communities (- 0.1m). Cash balances available for investment and the additional income generated from the pre-funding of the Council s pension contribution were both higher than originally forecast. Maturities on a proportion of the investment portfolio were also lengthened in the last quarter of the year which increased yields (- 0.3m). A number of council wide expenditure items have realised savings when compared to the original forecast. They primarily relate to increases in employers pension and national insurance contributions, the impact of the extra bank holiday, carbon allowances and a nil pay award for all grades and spinal points (- 0.5m). 5.5 Given the magnitude of the under send in 2011/12 all variances will be reviewed in detail to establish whether any are ongoing and can, therefore, contribute towards future year s budget savings. In practice, many of the variances will be one off (e.g. the mainstreaming of school grants into the Dedicated Schools Grant) or already included in

5 the 2012/13 budget (e.g. Family Information Service and devolved staffing budgets). It would not be unreasonable, however, to expect some additional savings to be identified (e.g. external audit fees, transport contracts, cemetery/crematoria income and waste management costs) that can be used to bridge the potential funding gap in future year s budgets. CMT will be concluding a review of all variances over the summer with the aim of including any ongoing under spends as part of the 2013/14 budget package. Changes to Reserves 5.6 The Council set up an earmarked reserve in 2009/10 to cover any potential losses on its deposits in Icelandic Banks and in particular to guard against the possibility that preferential creditor status was rejected for Glitnir. The Council s preferential creditor status for the Glitnir deposit was confirmed during the year and a payment of 2.5m made by the Winding up Board in March. Due to the developments on Glitnir, 2.2m of the balance on the earmarked reserve has been released back into general reserves. This is shown as an under spend against earmarked reserves. 5.7 Following allocations during the year, the balance on the Structural Changes Reserve reduced to 0.075m. Given the continued financial challenges facing the Council, 0.75m of the Council s under spend has been transferred to the Structural Changes Reserve to pay for any costs associated with the delivery of future budget reductions. This is shown as an over spend against earmarked reserves. 5.8 Four new corporate reserves have been created to: manage the volatility in business rates income expected to result from its localisation and the impact of the town centre redevelopment (see below); support investment in service innovation and improvements; support initiatives that focus on early intervention and preventative work (as agreed by Council when setting the 2012/13 budget and Council Tax); support the regeneration of the local economy and town centre. These are shown as an over spend against earmarked reserves ( 3.5m). Impact of Town Centre Redevelopment on Business Rate Income 5.9 The government plans to reform the funding of local government from April 2013 by localising Business Rates. This incentive-driven funding mechanism will see local authorities financed by keeping a share of its local Business Rates, rather than through the current complex and opaque Formula Grant. This offers the potential opportunity for authorities to increase their funding by encouraging and supporting growth in their local economy, whilst also facing the risk of falling income where their local Business Rates tax yield declines This new funding mechanism will introduce a number of new challenges for local authorities both in terms of managing current levels of income but also projecting forward estimates for financial planning purposes. The risks facing Bracknell Forest are particularly acute as this new funding mechanism will be implemented at the same time as the Council forges ahead with the regeneration of the town centre. Whilst it is not clear exactly how the new funding system will operate, further consultation with the local government sector will take place throughout the 2012, it appears certain that the planned regeneration of the town centre will have an impact on the level of Business Rates collected over the next 4-5 years and as such is likely to impact on the Council s funding Assuming demolitions begin in February 2013, it is not expected that the regenerated commercial property will begin contributing Business Rates until 2016 at the earliest. It is

6 estimated that these businesses currently contribute 500,000 per annum in Business Rates and as such the Council will forgo a proportionate share of this income during the intervening period. However the planned replacement commercial properties will generate significantly more Business Rates yield and as such significantly more income for the Council from 2016 onwards, with an early estimate of at least four times as much. There is also the expectation that car parking income will increase as the redeveloped town centre attracts more shoppers Given both the near term risk from the town centre regeneration, and the longer-term risks associated with the uncertainty over future levels of Business Rates it would be prudent to set up a specific reserve both to equalise out the short-term Town Centre impact and to mitigate where possible future uncertainty. This should also avoid the need to make unnecessary savings in the short term to balance the annual budget when there is a realistic expectation that the resources will increase above their current level in the medium term. It is recommended that 2m be set aside in a Business Rate Equalisation Reserve to manage this financial risk. Treasury Management 5.13 Annexe B contains a detailed analysis of the Council s treasury management performance during 2011/12. An annual report is required to comply with the Prudential Code for Capital Finance as performance in this area can have a significant impact on the Council s overall financial position and balances. Budget Carry-forwards 5.14 In accordance with the Council s Constitution, some unspent budget provision is permitted to be carried forward to the following year in exceptional circumstances. This would include where expenditure was budgeted for and planned in a particular year, but due to unforeseen circumstances has had to be deferred to the following year. Table 3 summarises the carry forwards by department and a detailed breakdown is included in Annexe C. All the carry forwards have been approved by CMT. Table 3 Budget Carry Forwards Department (Details in Annexe C) Requested Carry Forwards 000 Corporate Services 81 Children, Young People and Learning 90 Adult Social Care and Health 42 Environment, Culture & Communities 288 Total 501 Balances (General Reserves) 5.15 The actual outturn for 2011/12 was an under spend of 1.886m. The Council has therefore returned 0.296m to General Balances as opposed to a budgeted withdrawal of 1.590m. The General Fund balance at 31 March 2012 is therefore m A detailed review of all existing reserves and provisions has been undertaken as part of the accounts closedown process. The proposed changes to reserves and balances are included in Annexe D.

7 5.17 The Governance and Audit Committee will formally consider the level of reserves and provisions as part of the Statement of Accounts on 25 September. Virement requests 5.18 Financial Regulations require formal approval by the Executive of any virement between 0.050m and 0.100m and of virements between departments of any amount. Full Council approval is required for virements over 0.100m. A number of virements have been made since the February Executive meeting which require the approval of the Executive and in some cases Full Council. These have been previously reported to the Corporate Management Team who recommend them for approval. They have been included in the Quarterly Service Reports. Details of the virements are set out in Annexe E. 6 ADVICE RECEIVED FROM STATUTORY AND OTHER OFFICERS Borough Solicitor 6.1 There is nothing to add to the report. Borough Treasurer 6.2 The financial implications of this report are included in the supporting information. 6.3 None. Equalities Impact Assessment Strategic Risk Management Issues 6.4 The Council needs to maintain reserves to aid cash flow and to protect itself from fluctuations in actual expenditure and income. The review of reserves undertaken by the Borough Treasurer ensures that the Council has adequate and appropriate earmarked reserves to manage future risks. 7 CONSULTATION Not applicable. Background Papers None. Contact for further information Alan Nash Alan.nash@bracknell-forest.gov.uk Arthur Parker Arthur.parker@bracknell-forest.gov.uk