Budget Monitoring 2008/09 General Fund, HRA and Capital Programme

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1 Open Decision Item 1 One Corby Policy Committee 17 th February 2009 Budget Monitoring 2008/09 General Fund, HRA and Capital Programme SYNOPSIS This report sets out the latest forecasts for the year in relation to the General Fund, the Housing Revenue Account (HRA) and the Capital Programme based on April to December expenditure. Whilst the expenditure for the HRA is roughly in line with the budget, there are significant pressures within the General Fund which mean that there will be an overspend, however, this will need to be minimised through positive action. 1. Background Details In line with corporate budgetary control procedures, reports on the latest financial forecasts for 2008/09 in relation to both revenue and capital programmes are brought to this committee on a quarterly basis. This is the third full report for 2008/09 therefore, and represents a full year forecast based on the period April to December. The credit crunch effect amounts to 372k in lost income against the budget, made up of 230k in reduced planning fees, 73k in local land searches and 69k in building control work. These are the biggest factors in a projected General Fund overspend of 349k. Other major features include 44k of extra recycling costs, linked to the collapse in the market for recyclables, an 85k increase in concessionary fares and significant extra utilities costs. 2. Report General Fund Revenue The General Fund shows a projected overspend of 381k, against a gross budget of 42m. This represents a shift of 165k from the figure reported in July and is largely due to income pressures for planning fees, land searches and building control. There are also several projected over and underspends and these are broken down by Service Level in Appendix A. The key points to note are as follows: Assistant Chief Executive there have been several vacant posts, including the sustainability officer, and policy and strategy officers, during the year, totalling 37k. These have been partially offset by IT and additional training costs of 3k, equalities inspection costs of 3k and place survey costs of 8k. Corporate Director Operations a full analysis of the concessionary fares expenditure has now been undertaken which shows an overspend of 85k for the year. This is due to a higher than expected demand and the costs of our discretionary elements, such as the companion travel and pre 9.30am travel. Reducing this figure by 10k is a less than budgeted contribution to NNDC. Neighbourhood Pride - the underspend relates to net salary savings. Corporate Director Resources the overspend is for additional audit commission fees. Environmental Quality - the overall variance is made up several underspends, including a 7k saving on bulky collections, 11k of additional export licences income, 23k of agency/wages savings due to over accruals carried forward from 2007/08, 162.doc 1

2 13k of additional income from Hackney Carriages and 29k of combined savings within Deene and Grosvenor House from rents and NNDR refunds. However, there are overspends on recycling of 44k, fly tipping for 8k and funerals of 8k. Regeneration and Growth - the overspend is largely due to income shortfalls, partially offset by 82k of net salary and consultancy savings, and 46k of over accrued expenditure from the previous year. There is an estimated shortfall in income of 69k for Building Control Fees, representing 35% of income, although this has been reduced by 10k to allow for previous years income previously unclaimed. This represents an increase of 24k from the figure previously reported. Development Control Income will also be down, and the latest estimate is a shortfall of 230k, equating to 40%, This represents an increase of 100k from the figure previously reported. There is also an underspend of 50k for Planning Inspectorate Fees within the Local Development Framework although this is not allowed for in the figures, since the budget will need to be carried forward into next year. This is due to a reassessment of the LDF timetable. Culture & Leisure - part of the overspend is made up of unforeseen costs at the time of setting the budget of 23k that have previously been reported to this committee. An overspend on the pool of 17k, due to a combination of additional utilities costs and income shortfalls, is roughly offset by an extra 18k of income in relation to Corby Active grant funding previously unaccounted for and 3k of additional golf course income. However, there is also an additional 43k of old gas bills dating back to 2005, shared between the Pool and the Willows. Further overspends include a reduction in income of 6k at East Carlton Park Café and of 15k for catering and bars at Lodge Park, several repairs and maintenance pressures totalling 23k and additional utilities costs totalling 10k at West Glebe. Financial Services several salary and supplies and services variances have produced a net saving of 15k, although these have been partially offset by additional Discretionary Rate Relief payments of 6k. The mid year subsidy return is also showing that we are likely to receive an additional 27k grant income for minimising housing benefit overpayments due to Local Authority error. Legal & Democratic Services the overspend represents a projected shortfall in land charges income of 73k as a result of a slow down in land searches. This represents a further increase of 20k from last month and reflects the slowdown in the market. Members allowances savings of 6k and other combined underspends of 1k make up the difference in the net position. Although offset by a vacant post saving, there is also a figure of 15k allowed within the projections for legal costs in respect of the LABGI case. Property Services the net overspend is made up largely from net shortfalls in projected rental income of 73k and additional NNDR costs of 10k, partially offset by a vacancy saving of 22k. The shortfall in income takes account of lost Fresh Express rental, fire damage costs, and Post Office dilapidations. Customer First the overspend relates to additional security collection costs. Human Resources the underspend is the net effect of salary savings of 26k and additional training costs of 7k. There is also an underspend of 8k on the single status budget. J:\MEETINGS\REPORTS\ \162.doc 2

3 General Funds and Reserves The 2008/09 budget was set on the basis that the utilisation of balances during the year, in support of achieving One Corby priorities, would result in the balance at the end of the year being at the prudent minimum of 800k. It is imperative that this position is maintained, given the already challenging savings target for 2009/10. Any net overspend in 2008/09 would therefore require additional compensating savings in 2009/10 or 2010/11. The previous report indicated that the 250k single status reserve would be used to offset any overspend 2008/09. Given that the current projected overspend of 349k exceeds this amount, there is a requirement to reduce the overspend by 99k if we are to maintain balances without the need to make further budget savings in the future. Housing Revenue Account The HRA shows a projected overspend of 10k against the latest budget. This represents an improvement of 12k since the last report and this is largely due to salary savings that have offset additional materials costs. It is expected that as the year continues further salary savings will be realised and an underspend will be reported by the end of the financial year. There are several projected over and underspends and these are broken down by Service Level in Appendix B. The key points to note are as follows: Responsive Repairs although there is additional income from rechargeable works 70k, net salary and wages savings of 24k and gas servicing savings of 5k, there are also contractor and materials overspend of 216k, along with additional fleet transport costs of 10k and asbestos costs of 15k. Part of the contractor and materials overspend is due to voids repairs costs that have been treated as capital expenditure in previous years, since there has been sufficient capacity to do so. The increase in expected income for rechargeable works has led to an increase in the bad debt provision, which is outlined below, under technical adjustments. Preplanned Maintenance/General Management the underspends are due to salary savings. Sheltered Housing the overspend comes from increased utility prices of 8k and shortfalls in service charge income of 4k, that are almost offset by salary savings of 10k. Hostels/Community Alarms the underspends are due to salary savings. Supporting People it is expected that there will be a shortfall in the grant, based on income received so far, although this continues to be monitored. Special Services the underspend is due to salary savings. Technical Adjustments it is likely that we will now not need to make a rent rebates contribution of 99k to the housing subsidy pool. In addition, the draft final subsidy calculation shows that our contribution will be 72k less than budgeted for. However, the provisional bad debt calculation, based on higher levels of rechargeable works and current and previous years rental collection rates, shows that we will need to make an increased contribution of 49k. Income/Dwelling Rents there is shortfall in garage rent of 45k projected for the year, as the number of garages let has reduced by 89 since the start of the financial year. In terms of dwelling rents, there is also a net shortfall of 25k. This is because at 84, the number of void properties is currently 34 higher than the 50 figure budgeted for. However, this is partially offset by fewer right to buy sales than previously expected. J:\MEETINGS\REPORTS\ \162.doc 3

4 There is also likely to be a shortfall in interest income credited to the HRA of 51k. Capital Programme A breakdown of the latest capital programme for 2008/09 and expenditure to the end of December is shown in Appendix C. As reported in the September report, a saving of 30,000 on the regeneration schemes at Lincoln, Arran and Finland way is forecast against the latest budget. A number of additional capital budgets have been set-up requiring approval, mostly funded from external grants, see the table below: Budget Funding September Latest Budget 42,401,720 Oakley Vale Community Centre 103,000 funded Section 106 contributions Oakley Hay Footpath 15,000 funded Section 106 contributions Stanion funding 15,000 funded Section 106 contributions Insulation budget 69,000 funded British Gas grants Money for Youth 46,660 funded from County grants Server hardware and support 16,240 funded from own resources December Latest Budget 42,666,620 A budget of 103,000 has been set-up for the initial build costs for Oakley Vale Community Centre funded from Section 106 contributions. Also funded from Section 106 contributions are a budget for 15,000 for Oakley Hay Footpath and a 65,000 contribution for CCTV at Stanion. An insulation budget of 69,000 has also been set-up funded by British Gas grants. An additional budget of 46,657 has been set-up for Money for Youth projects, funded from the County. The only budget which will increase the draw on the Council s own financial resources is for 16,240. This is to purchase server hardware and support to enable credit card and debit card payments at the Swimming Pool. Three virements also require approval. 30,000 has been vired from the Abingdon Pavilion budget to the Lodge Park Refurbishment. A new housing voids capital budget has been set-up for 70,000, vired from Central Heating Replacement Works ( 50,000) and Rewiring ( 20,000). Further 6,000 has been vired from Flat Roof Maintenance at Danesholme to increase the budget for Entrance Doors. 3. Options to be considered (if any) This report demonstrates that whilst the Housing Revenue Account is showing a relatively healthy position, there are projected areas of overspend within the General Fund. Whilst some action plans have been formulated in order to avoid overspends, further plans will need to be developed during year along with a robust approach to budget monitoring to ensure that expenditure is kept as close to budget as possible. Although the single status reserve of 250k has previously been set aside for any overspend up to this amount, the current projection exceeds this by over 120k. Consideration should therefore be given to introducing such measures as freezes on recruitment and non urgent or committed expenditure between now and the end of the financial year. 4. Issues to be taken into account:- Financial This report considers the financial issues in some detail. Overall the Council is maintaining effective budgetary control. However, external pressure results in a projected overspend against the General Fund budget. J:\MEETINGS\REPORTS\ \162.doc 4

5 Legal The statutory requirement to maintain revenue balances on both the General Fund and HRA will be met at 31/3/08. Performance Information Financial performance should be considered in the context of levels of performance achieved in delivering services. Best Value, Community Safety, Human Rights, Equalities, Sustainability There are no issues in relation to these arising directly from this report. 5. Conclusion Whilst the Housing Revenue Account is showing a relatively small overspend, the position within the General Fund is more worrying. In view of the shortfalls within income, and pressures for concessionary fares, recycling and utilities costs, there will be an overspend for 2008/09. Notwithstanding the fact that a significant proportion of the projected overspend can be covered by the Single Status Reserve not now required, officers will continue to seek to minimise such an overspend. The medium term financial strategy highlights the need to remain within budget as there are significant pressures on our level of resources over the next few years. A robust approach to budgetary control continues with further scrutiny being applied during the financial year, including the 2009/10 budget process. A number of variances that have so far been identified will continue to be monitored during the course of the year with CMT and Heads of Service continuing to work up action plans to contain overspends within their service areas as far as possible. 6. Recommendations That members: (a) Note the financial position of the General Fund, the Housing Revenue Account and the Capital Programme contained in this report. (b) Instruct CMT and Heads of Service to review expenditure with a view to freezing recruitment and non essential or committed General Fund expenditure between now and the end of the financial year. (c) Approve the virements of capital schemes as detailed under the Capital Programme section above. Background Papers Budget Monitoring Working Papers External Consultations None List of Appendices Appendix A General Fund Budget Monitoring Appendix B HRA Budget Monitoring Appendix C Capital Programme Monitoring Wards All Wards Officer to Contact Adrian Sibley, Head of Financial Services, Ext J:\MEETINGS\REPORTS\ \162.doc 5