How To Revise The 2011/12 Budget For The Council

Transcription

1 Part I Release to Press Meeting: Executive Agenda Item: Portfolio Area: Resources 5 Date: 13 September st QUARTER MONITORING REPORT GENERAL FUND AND HOUSING REVENUE ACCOUNT KEY DECISION Author Anita Thomas Ext No 2430 Lead Officer Scott Crudgington Ext No Contact Officer Clare Fletcher Ext No PURPOSE 1.1 To update Members on the General Fund and Housing Revenue Account (HRA) projected 2011/12 net expenditure and to seek approval for the revisions to the 2011/12 revenue budgets. 1.2 To update Members on the General Fund and HRA savings and forward plan items approved for 2011/ To update Members on the Council s reserves and balances available to support revenue expenditure. 2. RECOMMENDATIONS 2.1 That the 2011/12 1st quarter net expenditure adjustment to the General Fund of 81,900 (overspend) be approved. 2.2 That the 2011/12 1st quarter net expenditure adjustment to the HRA of 218,160 (overspend) be approved. 2.3 That the Strategic Director (Resources) in liaison with Stevenage Homes Limited reviews the impact and possible mitigation of these variations on the latest HRA self financing model. 2.4 That a transfer of 39,330 from the Deminimus Capital Earmarked Reserve be approved to fund highway and town centre works and irrigation equipment that are below the qualifying value ( 5,000) for capital works. 2.5 That a transfer of 70,000 from the ICT reserve be approved to fund server upgrades as detailed in the Capital Monitoring report. 2.6 That Members approve a General Fund net expenditure increase of 18,490 to the 2012/13 budget.

2 2.7 That Members note the progress of the 2010/11 approved savings and forward plan items. 3. BACKGROUND 3.1 The Council undertakes a complete review of all budgets on a quarterly basis. This is the 1st quarter budget monitoring report for 2011/ General Fund The Council s General Fund net revenue budget of 10,744,400 was approved at Council on 23 February Subsequently Members have approved 2011/12 net budget reduction of 241,840 and carry forwards of 254,050 as part of quarterly monitoring reports. These budget adjustments are detailed in table one. Table One 2011/12 General Fund Working Budget Working Budget Original Budget 10,744,400 4 th Quarter budget adjustments ( 241,840) Carry Forwards approved at 3 rd Quarter 9,180 Carry Forwards approved at 4 th Quarter 244,870 Total Working Budget 10,756,610 (Key: + = increase in spend / decrease in income, ( ) reduction in spend / increase in income) 3.3 Housing Revenue Account (HRA) The Council s net HRA revenue budget of 66,250 was approved at Council on 26 January Subsequently Members have approved 2011/12 net budget increase of 150,000 to facilitate the Housing Options Appraisal in January and a reduction of 409,500 as part of 4 th quarter monitoring report in July. These budget adjustments are detailed in table two. Table Two HRA Working budget Working Budget Original Budget 66,250 January Executive adjustments 150,000 4 th Quarter budget adjustments ( 409,500) Total Working Budget ( 193,250) 3.4 Savings and Forward Plan Bids Included within the 2010/11 General Fund budgets were savings options totalling 1,652,960 and forward plan bids of 114,590, approved at Council on the 23 February Included in the 2011/12 HRA budgets were savings options totalling 338,071 and forward plan bids of 230,000 approved at Council on 26 January REASONS FOR RECOMMENDED COURSE OF ACTION AND OTHER OPTIONS 4.1 General Fund Budget 2011/12-2 -

3 4.1.1 As a result of the 1st quarter budget monitoring review the General Fund net expenditure is now projected to be 10,838,510 an increase of 81,900 over the current working budget of 10,756,610. Appendix A details the 1st quarter variances on the General Fund. 4.2 Economic Climate and Pressures Economic conditions remain challenging for the Council with further erosion of income for the Indoor Market. Officers have worked with Market traders to raise the profile of Stevenage s indoor market, however, vacant shop units within the town centre are available at similar rates to the larger pitches in the Indoor Market. Furthermore, the letting of the larger market pitches continues to be difficult. Market income shortfall has been included in the Medium Term Financial Strategy (MTFS) presented to Members in July Rental Income from garages is also projected to be 62,820 lower than anticipated. While void rates have increased to 12.2%, essential repair works have also impacted on income. The 2011/12 programmed repairs should mitigate this impact by March Car park income budgets have been reduced over the last few years, however at the 2011/12 1st quarter review there is currently no adverse variance to car park income streams. By contrast on street car parking income is currently 6.4% down compared to last year which equates to 13,670 shortfall. Neighbouring authorities continue to face pressures on car park income and this area remains volatile with seasonal fluctuations Investment balances fluctuate throughout the year and the current projection for investment income is an increase of 21,830. This is despite a slight change to the projected average interest rate of 0.93%, (compare to 0.94%) and the use of investment balances to finance capital expenditure, which has resulted in a reduction in borrowing interest costs of 103, Housing and Council tax benefit expenditure, subsidy and overpayments raised, are monitored monthly as part of the Council s Key Performance Indicators (KPI s). There has been a reduction in overpayments raised against budget for which the Council receives 40% in subsidy and a 100% of the overpayment (if recovered). This may be in part due to new initiatives such as the ATLAS project with the DWP. The caseload for rent allowances has also increased 9% against an estimated 3% and expenditure on Council Tax benefit also has increased. The net impact of these changes is an adverse variance of 125,910. The total expenditure on Benefits is projected to be 40,795, In setting the 2011/12 budget a number of savings options led to service re-design and a reduction of staff numbers. Following staff consultation a number of options have been revisited resulting in a slight delay in implementing these savings. This delay has meant that 46,940 of the identified saving cannot be achieved in 2011/12. There is only a minor impact in future years which has been included in the July MTFS The major variances are summarised in table three overpage: - 3 -

4 Table Three Major General Fund Variances Garage Income 62,820 Reduced borrowing and higher investment interest (125,540) Lower Benefit Overpayments raised and Subsidy +125,910 changes Higher Fuel costs (vehicles) +48,150 Delay in implementing 2011/12 savings options +46,940 Other (76,380) Total 1st Quarter adjustments 81, In addition to the variances identified above and detailed in Appendix A, further revenue saving of 10,000 is achievable in 2011/12 if the capital budget programme for replacement servers is approved as part of the capital monitoring report presented to this committee. This saving would arise from lower electricity and support costs At the 1st quarter there were no carry forward requests. 4.3 Review of Balances Officers have reviewed the balance sheet at the 1st quarter and no adjustments to the bad debt or insurance provisions are required Following the 4th quarter General Fund and HRA budget monitoring report Members asked for further information regarding the level of outstanding debt held by the Council. The type of debt and age of debt at the 30th June is shown in the following charts. Type of Debtor as at 30 June 2011 HRA debtors Housing Benefit Overpayments Tenancy Deposits Depot Garages Debtors Commercial Properties Sundry Debtors 0% 20% 40% 60% 80% 100% within term out of term over two years old - 4 -

5 Outstanding Debt by Type Year end 2010/11 Qtr /12 1,200 1,000 ' Sundry Debtors Commercial Properties Garages Debtors Depot Tenancy Deposits HB Overpayments HRA rents Bad Debt Levels General Fund - As at the year end sundry debt levels stood at 2,796,603 of which 1,169,931 related to benefit overpayments. As at the end of June sundry debts stood at 2,436,750 of which 1,160,707 related to benefit overpayments a decrease in outstanding debt of 359,853. Debt aged over two years is fully provided for in the bad debt provision with younger debt provided for based on the ability to collect and type of debt. No increase in General Fund bad debt provision has been made. Bad Debt Levels HRA - As at the 31 March 2011 rent, service charge and sundry HRA debtors levels stood at 1,042,891 compared to 1,419,681 as at the end of June, an increase of 376,790. Of this 186,252 relates to increased debt on current weekly rent accounts and 124,333 relating to HRA suppliers which has since been paid. A higher debt provision is made for Rent arrears for former tenants ranging from 50% to 90% based on the age and type of debt. Provision for current tenants is lower, 5% to 50% based again on age and type of debt, as there is greater ability to recover this debt. The bad debt provision for HRA debtors currently stands at 351, Earmarked Reserves The total value of earmarked reserves available for the Council to spend as at 1 April 2011 was 1,148,335. All earmarked reserves have been reviewed and Officers recommend the following adjustments: Deminimus Capital Expenditure Reserve Essential town centre works adjacent to the clock tower (total value 10,500) and highway works (total value 7,000) no longer qualify as capital works as the value of these works falls below the deminimus level. In addition irrigation equipment (totalling 21,830) is required at the golf course, but there is no headroom within the capital programme to fund this. To mitigate the pressure on the General Fund expenditure a transfer of 39,330 from the reserve is requested to fund these works. ICT Reserve It is requested that 70,000 be transferred from the ICT reserve to facilitate a revenue contribution to capital to fund replacement servers which - 5 -

6 should result in an on-going saving per year of 31,000 if approved. This is contained in the Capital Monitoring report to this Executive It is anticipated that the total transfer from earmarked reserves in 2011/12 to fund specific projects is 109,330 and these are shown in the table four below: Table Four Earmarked Reserves Balance as at 1 April 2011 Requests to Fund Expenditure Transfer to Reserve/ Budgeted Balance as at 31 March Capacity Building (251) (251) De-minimis Capital (195) 39 (15) (171) Interest Equalisation (294) (74) (368) Single Status (61) 61 0 Planning Delivery Grant (347) 186 (161) New Homes Bonus 0 (53) (53) ICT 0 70 (75) (5) Total Earmarked reserves (1,148) (1,009) The balance on earmarked reserves as at 31 March 2012 projected to be 1,009, Investments and Loans The Council s investments as at 30 June are 21.9million and are detailed in Appendix B. The average investment rate has fallen slightly to 0.93% compared to budgeted average investment rate of 0.94%. Year end balances are projected to be 13.95million which is lower than the initial forecast of 16.0Million. The current Treasury Management policy is to not to borrow to fund capital expenditure (typically 5% at 25 years), but to use investment or cash balances which only achieve investment interest of 0.93%, so minimising the cost to the Council. Borrowing to fund the General Fund capital programme in 2011/12 was anticipated, however, while cash balances remain high, this borrowing has been deferred The Council has loans of million with the Public Works Loan Board (PWLB). These monies have been borrowed to fund the decent homes programme, of which the majority of costs are charged to the HRA and refunded via the housing subsidy system /12 General Fund Out-turn Position The projected outturn position on the General Fund resulting from the adjustments included in this report and detailed in Appendix A are summarised in table five overpage - 6 -

7 Table five General Fund Out-turn Position Working Budget Original Budget 10,744,400 Carry Forwards + 254,050 Approved in year budget adjustments identified at 4 th Quarter ( 241,840) Total net expenditure approved to date 10,756,610 1st quarter budget variations detailed in Appendix A + 81,900 Total Net Expenditure post 1st quarter review 10,838,510 General Fund balance Brought Forward ( 2,721,397) Spend In year 10,838,510 Core resources ( 10,580,093) General Fund balance carried forward ( 2,462,980) (Key: + = increase in spend / decrease in income, ( ) reduction in spend / increase in income) The July Medium Term Financial Strategy anticipated a 2011/12 General Fund balance of 2,540,936. The General Fund Balance is now projected to be 2,462,980, a decrease of 77,956, and still within the minimum level of General Fund balances recommended for 2011/12 of 2,000, /13 General Fund Budget The 1st quarter budget review identified ongoing net pressures of 18,490 which will impact on 2012/13 budgets. This does not include a number of savings which have been identified and will be incorporated into the General Fund as part of the 2012/13 budget setting process. 4.8 Savings and Forward Plan Bids Approved for 2011/12 (General Fund) The Council approved savings of 1,652,960 as part of the 2011/12 budget setting process. The 1st quarter review identified that 46,940 of these identified savings could not be achieved this year due to a delay in implementing savings associated with staff reductions. These delays will not result in any ongoing pressures for 2012/ The Council approved forward plan bids of 114,590 as part of the budget setting process. All forward plan bids have been implemented. 4.9 Housing Revenue Account (HRA) As a result of the 1st quarter budget monitoring review the 2011/12 HRA expenditure is now projected to be a 24,910 deficit, an increase in costs of 218,160 over the current working budget surplus of 193,250, approved by Members in July The 1st quarter variances are detailed in Appendix A Contained within the 2011/12 1st quarter HRA review were a number of significant budget variations relating to tenant rental income (associated with the de-pooling of service charges) and Leaseholder service charges. The Chief Finance Officer consequently formally requested explanations from Stevenage Homes Limited - 7 -

8 (SHL) on the reasons for these variations, the ongoing impact to the HRA medium term financial strategy and 30 year HRA business plan. For 2011/12 there is an overall adverse variance of 218,160 which includes: a) An adverse variance on the tenants rental budget of 665,290 reflecting the impact of de-pooling service charges. This is based upon current rent collection experience. b) A positive variance of ( 698,740) on service charges to tenants reflecting the impact of de-pooling from the rents budget and additional charges. c) A positive variance of ( 191,700) relating to income from leaseholders reflecting new service charges and increased management fees. 74,560 of this relates to one off charges related to TV access. d) A positive variance of ( 120,000) reflecting actual void rates being lower than the void allowance made by the water authority this relates to for the period 2003/04 to 2011/12. These balances had previously been held on the Council s balance sheet. e) An adverse variance of 496,330 reflecting assumed income from de-pooling that will not be achieved. It is thought this budget was an initial view of the impact of de-pooling service charges The 2012/13 ongoing affect of these variations is forecast to be 369,800, and the overall impact on the current 30 year HRA business plan forecast could result in an adverse variance of 11 million, without corrective action At the time of writing this report, SHL officers were still investigating the reasons behind these significant variations. The Chief Finance Officer has requested that a detailed briefing is made available to the Executive in advance of the meeting, and sought assurances on SHL s internal financial quality assurance and governance processes, and details on SHL s mitigation proposals in order to address these adverse variances. SHL s Board has been made aware of the problem The projected HRA balance as at 31 March 2011 is summarised below in table six. Table Six Housing Revenue Account Out-turn Position Budget Original Budget 66,250 Approved adjustments January 2011 Executive + 150,000 Approved in year budget adjustments identified at 4 th Quarter (includes return of SHL surplus) ( 409,500) Total net expenditure approved to date ( 193,250) 1st quarter adjustments detailed in Appendix A + 218,160 Total Net Expenditure 24,910 HRA balance brought forward ( 3,685,311) Spend in year 24,910 HRA balance carried forward ( 3,660,401) (Key: + = increase in spend / decrease in income, ( ) reduction in spend / increase in income) - 8 -

9 /13 HRA Budget An increase of 369,800 budget adjustments to the 2012/13 HRA budget were identified as part of the 1st quarter monitoring Savings and Forward Plan Bids Approved for 2011/12 (HRA) Savings identified as part of the 2011/12 budget setting process ( 326,980) are on course to be achieved with the exception of the savings relating to Wellfield Court of 52,800, (includes a saving to the General Fund of 11,090) is at risk of not being achieved. 5. IMPLICATIONS 5.1 Financial Implications This report is financial in nature and consequently financial implications are included above. The total General Fund variance reported at 1st quarter is within the 400,000 variation limit delegated to the Executive The total HRA variance reported at 1st quarter is within the 250,000 variation limit delegated to the Executive. 5.2 Legal Implications The objective of this report is to outline the projected General Fund and HRA net expenditure for 2011/12 and the impact on the General Fund and HRA balances. While there are no legal consequences at this stage Members are reminded of their duty to set a balanced budget. 5.3 Equalities and Diversity Implications This report is of a technical nature reflecting the projected spend for the year for the General Fund and HRA. None of the budget changes reported will change any existing equalities and diversity policies and it is not expected that these budget changes will impact on any groups covered by statutory equalities duties. 5.4 Risk Implications A risk based assessment of General Fund balances is undertaken and reported to Council as part of the General Fund Budget setting process. The required level of 2011/12 General Fund balances was calculated at 2,000,000. This report forecasts General Fund balances of 2,462,980 and earmarked reserve balances of 1,009,275, which is above the minimum balances required. The July MTFS requires General Fund balances of 2,540,936 as at 31 March The HRA balances are projected to be 3,660,401 this is higher than the minimum level of balances required in 2011/12 for the HRA of 1,000,000. However there are potentially significant financial pressures facing the HRA including Self Financing implementation and the affordability of the identified works to the Council s housing stock

10 Description of risk Mitigation Residual Risk Level 1. Income streams to the Council are reduced. Economic conditions are considered as part of the MTFS and incorporated into the budget setting process M 2. Balances fall below prudent levels 3. Unplanned expenditure has not been budgeted for. Key Financial indicators are presented to SMB monthly highlight adverse variances early. Officers identify risks when setting prudent level of balances. In addition reserves and provisions have been established to deal with possible unbudgeted risks. L L 5.4 Policy Implications The budget framework represents a development of a policy led budgeting approach across Council services and the overall Medium Term Financial Strategy. BACKGROUND DOCUMENTS 2011/12 Budget Report General Fund and HRA The July MTFS for the HRA and the General Fund APPENDICES Appendix A Variances to the 2010/11 General Fund Budget and HRA Budget. Appendix B Investment and Loans Portfolio