WOLVERHAMPTON HOMES BOARD (17/02/14) Revenue Expenditure Forecast for 2013/14 to 31 st December 2013

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1 WOLVERHAMPTON HOMES BOARD (17/02/14) AGENDA ITEM 8A Open Report Title Status Author Contact No: Recommendations Key Risks or Contentious Issues Revenue Expenditure Forecast for 2013/14 to 31 st December 2013 For Information Philip Toni Board members are asked to note the revenue expenditure position to 31 December 2013 and the forecast outturn for the year. We are forecasting an underspend against the budget of 155,000. The key risk to achieving this is expenditure on voids. We have put an extra 500,000 into voids this year, and still forecast an overspend of 342,000 in addition to this. However there is evidence that the increase in void numbers has slowed down and the forecast overspend is now lower than the forecast to the end of October. Following a mild December and January combined with underspending areas within the budget we can now be more confident that there is unlikely to be an overspend against our overall budgets for 2013/14. 1) Purpose of report 1.1 This report sets out the revenue expenditure position against budgets as at 31 December 2013 and the forecast to 31 March Details of areas where there are significant over and under spends and changes to the position reported previously are included within the report. 2) Background to the report 2.1 Monitoring of budgets by Wolverhampton Homes is carried out on a monthly basis and discussed with managers. The latest available position is reported to each finance committee and at regular intervals throughout the year to meetings of the Board. 3) Budget Monitoring Summary 3.1 Overall we are forecasting that Wolverhampton Homes will achieve a modest underspend of 155,000 for 2013/14. This is in effect summarising a range of possibilities into a single figures. Although at this stage in the year we be can

2 reasonably confident behind this, we know that void expenditure, repairs and the impact of the winter could still vary greatly over the coming months. With that in mind the following table gives a view on a range of options for the out turn: Potential year end Overspend / Underspend And our assessment of how likely this is... Underspend of 500,000 30% Break Even 60% Overspend of 500,000 10% Our assessment is that we are forecasting close to a break-even position but with a bias towards a modest underspend. The chances of an overspend have been subjectively assessed as only one in ten. Expenditure Budgets breakdown by directorates Our central position is broken down as a forecast overspend of around 415,000 on Property Services balanced with a forecast underspend on Housing of 380,000 and savings on central budgets of 190,000. Expenditure Budgets breakdown by expenditure types 3.2 Pay budgets are forecast to underspend by 227,000. This underspend has reduced by 25,000 from the position reported at the end of October ,000 under Other Employee Expenses was set aside to support the LEAP programme as a one-off in 2013/14. As there is an overall underspend on the salaries budget to which the costs of LEAP trainees is charged, it is now unlikely that the full amount will need to be drawn down. This is forecast to have a positive impact of 150,000 on our reserves. Future Leap employment costs will be met from salary budgets (as funded mainstream roles are changed to Leap roles where appropriate). 3.4 Payments to date on property rental costs are forecast to overspend by 62,000. The main driver for this is private sector leasing costs. This element of the overspend is forecast to be offset by increased rental income. 3.5 The budget for repairs and maintenance contracts is forecast to overspend by 185,000. This is due to higher than budgeted spending on voids related contract costs ( 288,000) offset by an underspend against Asset Management contracts of 103, The forecast overspend against subcontractor budgets has been revised down to 171,000. Subcontractor spend is about the most variable and difficult to forecast part of the budget. This is because they are used to meet peaks in demand and for specialist areas where demand can vary. 3.7 We have revised the expenditure forecast for materials budgets to an overspend of 48,000, down by 77,000 from the October position. Of this, 73,000 of the

3 overspend is against voids with slight underspends against other budgets. 3.8 The forecast for expenditure on minor works, fencing, garages and parking was revised downwards for the end of October forecast to reflect what realistically is likely to be spent by 31 st March. We now anticipate an under spend of at least 426,000 against these budgets overall. The Board approved 200,000 to be carried forward from under spends on minor works and parking in 2012/13. This additional budget is not needed and resources in the current year are sufficient to provide for the amount of work that will be completed by the year end. 3.9 The Fencing budget is forecast to underspend by 100,000 against a total budget of 900,000. The start to this year s programme was delayed with issues regarding the start of the strategic construction partnership. The balance of the underspend relates to the minor works programmes. This programme consistently under-spends year on year The voids expenditure position is being closely monitored and was the subject of a separate report to the meeting on the 4 th December. The increase in void numbers has actually slowed down during November and December. The number of completed voids to the end of December is 14% higher than the same period last year. This has reduced from a 22% increase at the end of October. We have been able to see this reduction reflected in the expenditure and it has had the impact of reducing the overall voids overspend from the 429,000 forecast at the end of October to 342,000. It is important to note that this overspend is after having increased the budget by 500,000. The overspend compared to the original budget is 842,000. Income Budgets 3.11 Trading income budget forecasts were significantly revised when reporting on the end of October position and there is no significant change to this forecast. The budgets are anticipated to under achieve by 585,000. Of which, 300,000 is Adaptations income (3.4) and 100,000 is Asbestos income. Income for the Planned Improvement Programme is forecast to under-achieve by 200,000. This is in line with the capital programme budget for the PIP programme. Good progress has been made to date and we still expect to complete this year s programme We have previously reported the additional grant income for Social housing fraud ( 105,000) and family support ( 32,000). Around 70,000 of the fraud grant will be carried forward to 2014/15 to reflect the fact that appointments to the posts were made part way through the year. The forecast has been reduced by this amount As reported to the December meeting, we are forecasting additional rental income from Private Sector leasing properties of 38,000, as referred to in 3.4. Forecast additional income is forecast to match off the additional expenditure on paying landlords. From a risk point of view, our obligation to pay landlords is fixed, but the collection of the matching income is subject to us successfully collecting the rent. However, a margin of error has been built into our private sector leasing model to allow for shortfalls on rent collection. Outlook for the rest of the year

4 3.14 Budget monitoring to end December 2013 has not seen any major change from the forecast reported at the end of October. Although we are now forecasting an underspend, this is still very finely balanced and could be subject to change. We have seen increases in expenditure this year, particularly on voids, although voids expenditure does seemed to have slowed down from an all time high in September Therefore the forecast position for the year overall is only achievable based on the assumption of underspends on salaries budgets, asset maintenance contracts and parking, minor works and the fencing budgets. Should we have been in a position where these budgets were fully spent we would be facing an overspend We may have had a mild January but there is still a very real risk that we could face severe weather conditions over the next couple of months that impact on our costs. This forecast assumes normal levels of expenditure on fuel, overtime and materials over the final quarter of the year based on previous years. The budget is not put together based on the costs of an extreme winter. We budget based on a normal winter. In effect savings from mild winters contribute to reserves and the impact of severe ones are a draw on reserves. Value for Money and Financial implications As at end December 2013 we are forecasting an under spend of 155,000, although there are variances within that position and some services will be challenged to stay within budget. The main purpose of the report is to demonstrate to the Board that we have provided our services within available resources. Increasing our reserve levels as a result of efficiencies and not reductions in service levels puts us in a good position to protect services against inflationary pressure. Health and Safety implications Impact on Environment and Community Leaseholder implications Consultation/Feedback with Tenants Long Term consequence for the organisation No implications proposed in this report No impact from this report No impact from this report on leaseholder services None required, this report does not propose or forecast any impact on direct services to tenants. However tenants expectations with regard to parking and minor works schemes may not be met Budget pressures in this report have been taken into account in preparing the Medium

5 Employees interests Impact on business relationships with suppliers, customers and others Maintenance of high standards of business conduct Impact on the Wolverhampton Homes Management System (WHMS) (i.e up-dates to policies, strategies, procedures etc) Term Financial Strategy The report does not propose any changes to staffing levels or terms and conditions of service Reduction of subcontracted work will have an impact on suppliers. No impact from this report NO If yes and approved by Board Members, update to go on to Wolverhampton Homes Management System (WHMS) by: Date: Officer responsible: Has an Equalities Impact Assessment been carried out: NONE The proposals set out in this report have no direct impact on customers we serve. APPENDICES: Summary budget position to