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MAIDSTONE BOROUGH COUNCIL
CABINET
13 FEBRUARY 2013
REPORT OF HEAD OF FINANCE & CUSTOMER SERVICES
Report prepared by Paul Holland
Senior Accountant (Client)
1. BUDGET MONITORING THIRD QUARTER 2012/13
1.1 Issue for Decision
1.1.1 To consider the
capital and revenue budget and expenditure figures for the third quarter of 2012/13
and the issues.
1.1.2 To consider other financial matters with a material effect on the medium term financial strategy or the balance sheet.
1.2 Recommendation of Head of Finance & Customer Services
1.2.1 It is recommended that:
a)
Cabinet
note the satisfactory revenue position at the end of the third quarter 2012/13;
b)
Cabinet
agree the proposals for slippage and re-profiling in the capital programme to 2013/14;
c) Cabinet note the detail in the report on the collection fund, general fund balances and treasury management activity.
1.3 Reasons for Recommendation
1.3.1 The Director of
Regeneration & Communities is the Responsible Financial Officer, and has
overall responsibility for budgetary control and financial management. However
in practice day to day budgetary control is delegated to service managers, with
assistance and advice from their director and the finance section. This report
advises and updates Cabinet on the current position with regards to both
revenue and capital expenditure against the approved budgets, and also includes
sections on Collection Fund performance and Treasury Management performance.
1.4
Revenue
1.4.1 The budget used in
this report is the revised estimate for 2012/13 as detailed elsewhere on this
agenda. Actual expenditure to December 2012 includes all major accruals for
goods and services received but not paid for by the end of the quarter.
1.4.2 An analysis that is summarised by Portfolio, of the full year budget, the profiled budget to December 2012 and expenditure to December 2012, is attached as Appendix A. The profiled budget shows the total amount expected to be spent by December 2012 after considering the expected pattern of spend throughout the year for each budget head. An indicative projected year end outturn figure is also shown.
1.4.3 Appendix A shows actual spend
is £0.24m less than the budget at the end of quarter three, compared to a
figure of £0.33m less than the budget at the end of quarter two. A detailed
analysis of the figures at cost centre level shows 116 out of a total of 213
cost centres are currently reporting actual spend less than budget, which
mirrors the position at the end of quarter two.
1.4.4 As part of a series of changes to the budget monitoring and reporting process the financial analysis in Appendix A is based on direct expenditure only. This removes the influence of internal recharges and accounting adjustments upon the variance analysis. At this time it is expected that final outturn will report an under spend, after adjustment for resources to be carried forward into 2013/14, of approximately £0.30m.
1.4.5 Also shown at Appendix A is an analysis by subjective across all services. This identifies that £300,000 of the under spend relates to employee costs, due to continuing vacancy levels.
1.4.6 In addition to the under spend in employee costs the subjective analysis shows that income receipts are creating an adverse variance against expected budget to date. The third table at Appendix A summarises the position specifically with regard to fees and charges income. This was the subject of a separate report to Cabinet in December 2012 as this has been an area that has been adversely affected by the economic downturn. At the end of the third quarter income is £34,879 under the target figure. It should be noted that within this variance a number of areas are reporting income in excess of budget which has reduced the adverse variance, and it is anticipated that the variance will be reduced by year end.
1.4.7 The adverse variances in Parks & Open Spaces, at the Market, in Land Charges and on the Park & Ride service are discussed in more detail in the next section of this report. The other area of concern is income from Pay & Display Car Parking. Whilst there is a shortfall in income, which is reflected in the performance report elsewhere in this agenda, the budget pressure has been offset by a significant reduction in running costs.
1.4.8 A number of service areas are reporting positive variances through significantly less spend or additional income than was budgeted for at the end of quarter three. Brief details on these areas are given below:-
a)
The
Community Development budget is showing a favourable variance of £38,494
against the budget. This is because external funding has been received for a
number of projects which have either only just started or have yet to commence,
so it is anticipated that this variance will reduce during the final quarter.
b) The budget for Maidstone House is showing a favourable variance of £53,340. This is a consequence of additional income, some of which relates to previous years. There have been ongoing discussions with the landlords on a number of issues, some of which have been resolved, and some of which are still continuing, so there may be further adjustments due on this budget.
c)
The
overall budget for Planning is showing a favourable variance of £59,876. The
most significant element of this is Development Control Applications, where
additional planning fee income is producing a favourable variance of £133,686. This
is due to an increase in the charge for planning fees and in applications, and
new staff will be recruited to deal with the increased workload. However, Land
Charges is showing an adverse variance of £43,486, which is due to less than
anticipated income. This is a consequence of the downturn in the housing
market, which cannot be directly influenced by the Council.
d) The Environmental
Enforcement budget is showing greater than anticipated income of £72,104 from
Fixed Penalty Fines for litter. Officers are looking at options for utilising
this excess income within the Street Scene operational area, in particular
exploring options to fund equipment that will improve street cleanliness. There
are also ongoing discussions to fund the legal costs of prosecution. In
addition to this £25,000 will be transferred to the Parks & Open Spaces
budget on a one-off basis, as this area has been experiencing difficulties in
income generation and with unanticipated costs arising from tree works and
insurance excesses.
e)
On-Street
Parking is showing greater than anticipated income of £58,512, as well as less
than anticipated expenditure of £27,793. The Transport & Parking Services
Manager has indicated that a programme of works for lines and signs has been
identified, and this will be undertaken in bulk by the end of the financial
year, thus benefiting from economies of scale. The under spend on the repairs
and maintenance should therefore reduce by the end of the financial year. However
this is partially offset by expenditure on Residents Parking, which is
currently £35,745 greater than budget. This is mainly due to a shortfall in
Penalty Charge Notices income for the year to date. The Transport & Parking
Services Manager is aware of the position and is currently investigating the
reasons behind the shortfall.
1.4.9 A number of areas are showing significantly more spend or a shortfall in income than was actually budgeted at the end of quarter three, and these are reported below:-
a)
The
Sundry Corporate Property budget is reporting expenditure greater than budget
of £92,102. The main element of this is the vacant retail unit underneath King
Street Multi-Storey Car Park, for which business rates are still due, as well
as there being no rental income received. Cabinet have agreed to demolish the car
park and re-develop the site as a surface car park. It is expected that this
budget pressure will reduce but not be completely removed during the remainder
of the financial year due to the impending demolition meaning a period of restricted
options to generate income. Whilst the performance report elsewhere on this
agenda does not currently show problems in relation to this issue, the pending
demolition means that members should expect to see an effect on performance by
the year end.
b) The projected overspend for the Museum was reported to be £131,569 at the end of the second quarter. £54,443 of the overspend continues to relate to the Museums NNDR bill which has been challenged, the outcome of which will not be known until August 2013. A further £34,000 continues to relate to one-off utility and building costs that will not be incurred in 2013/14. Management action has been taken to reduce the overspend, including the use of external grants and additional income arising from the commercial use of the collections and this has been reduced to £85,000. It will be difficult to further reduce the current projected overspend in the remaining quarter, although further options for management action are being considered in consultation with Finance.
The Museum is
continuing to configure its service in line with the requirements of the new
facility and putting into place the activities set out in the business plan.
The service configuration together with the management action being taken will
ensure a balanced budget for 2013/14 onwards.
c)
The
Market is now showing an adverse variance of £41,308. This is a combination of
a downturn in income from both the Tuesday and Saturday markets, and from the
operator of the site,
reflecting the current low level of occupancy. Efforts are continuing to
encourage a greater level of trading activity at the Tuesday and Saturday
markets.
d) Park & Ride
continues to show a significant shortfall in income, with the adverse variance
now standing at £90,707. This follows the trend for the previous two quarters,
and reflects the ongoing decline in the number of passengers using the service
as referenced in the performance report elsewhere on this agenda. A reduction
in the contract costs budget has been implemented in readiness for a reduction
in service levels in January 2013. A report to fund the shortfall by using a
carry forward of £0.117m from On Street Parking was agreed by Cabinet and has
been confirmed by Kent County Council.
e) There is also a continuing problem with the Homeless Temporary Accommodation budget showing expenditure greater than budget, with the variance now standing at £83,616, which reflects the position reported for the previous two quarters. This budget experienced similar problems during the last financial year, with expenditure on providing temporary accommodation being significantly higher than the budgeted figure. Growth of £60,000 was approved as part of the budget strategy for 2012/13, but demand for this service continues to be higher than anticipated. The service manager is working with the Cabinet Member to bring forward proposals to reduce the pressure but it is unlikely that this budget pressure will be reduced during this financial year. The performance report elsewhere on this agenda demonstrates the increased level of demand for this service that has caused this budget pressure and includes in its appendices an action plan to manage the demand.
1.4.10 The report
identifies no risks that require action by Cabinet at this time. Allowing for
the continuation of the issues detailed as budget pressures above, the
predicted outturn for 2012/13 is a favourable variance of £0.30m.
1.4.11 Through the budget
strategy for 2012/13, savings and efficiencies were identified totalling £1.9m.
These savings are being monitored corporately and it is anticipated that the
target will be met in year, with a number of staffing related savings delivered
early as reflected in the projected underspend.
1.5
Balances
1.5.1 Balances as at 1st April 2012 were £10.1m. The current medium term financial strategy assumes balances of £5.1m by 31st March 2013.
1.5.2 The major reason for the movement in balances during 2012/13 relates to the use of carry forwards approved by Cabinet in May 2012. In addition, the balance of £5m at 31st March 2013 assumes the use of the 2011/12 underspend.
1.5.3 The position set out above allows for the minimum level of balances of £2.3m, as previously agreed by Cabinet, to be maintained.
1.6
Collection
Fund
1.6.1 The collection
rates achieved for the third quarter, and the targets set, are reported below.
The rate is given as a percentage of the debt targeted for collection in 2012/13.
|
|
Target % |
Actual % |
|
NNDR |
87.9 |
86.5 |
|
Council Tax |
87.8 |
87.0 |
Both have marginally missed their respective targets and this reflects the
experience at other billing authorities in Kent, although it should be noted
that Maidstone has the highest collection rate for the year to date in Kent for
Council Tax. This performance is also reviewed in the performance monitoring
report elsewhere on this agenda.
1.6.2 Whilst the percentage variances are small, the gross values of Council tax and Business Rates collected each year are significant. These variances represent approximately £0.75m of income that is now behind the profiled collection schedule. The Head of the Revenues and Benefits Partnership follows a recovery timetable and action will be taken before year end to attempt to bring collection rates back to target.
1.6.3 Prior year arrears collection is on target and officers will continue to pursue payment of any developing arrears along with the arrears from prior years.
1.6.4 The changes to the
local government finance system, in particular the Business Rates Retention
Scheme which comes into effect from April 2013 will create a level of risk for
the Council that is new and as yet untested. Robust monitoring of the
collection rates as well as early warning systems will be critical to ensure
timely management action can be taken to minimise any adverse variances.
1.7
Capital
Expenditure
1.7.1 Attached as Appendix
B is a summary of the current capital programme for 2012/13, as agreed by Council.
This includes the initial capital programme for the financial year plus amounts
carried forward from 2011/12. It also reflects the slippage that was identified
in the second quarter report.
1.7.2 The table in Appendix B gives the following detail:
|
Column |
Detail. |
|
1. |
Description of scheme, listed in portfolio order. |
|
2. |
Approved budget for 2012/13 after the adjustments detailed above. |
|
3. |
Actual spend to the end of December 2012. |
|
4. |
Balance of budget available for 2012/13. |
|
5 7. |
Quarterly analysis of expected spend for the remainder of 2012/13. |
|
8. |
Balance of budget that will slip into 2013/14. |
|
9. |
Budget no longer required. |
1.7.3 Capital expenditure
to the end of the third quarter of 2012/13 is shown as £2.8m. £1.7m of this
spend is in relation to the major projects at Mote Park and in the High Street.
1.7.4 The figures for the High Street project include preliminary expenditure incurred in respect of phase 2 of the scheme, covering initial investigation and design costs. These costs will be funded from the budget agreed for phase 2.
1.7.5 Following the third quarters monitoring, officers anticipate that £0.871m will need to be reprofiled into 2013/14. This is detailed in column 8 of Appendix B. These are items where the programmed works have been rescheduled to now take place during 2013/14.
1.8
Capital
Financing
1.8.1 The agreed capital programme 2011/12 to 2014/15, as approved by Council in March 2012, and subsequently amended by Cabinet in May 2012 and again in July 2012, identifies sufficient resources to finance the 2012/13 programme.
1.8.2 Resources that can currently be confirmed are:
|
Funding Source: |
£.m |
|
Grants & Contributions |
2.1 |
|
Capital Receipts |
3.0 |
|
Revenue Support |
3.9 |
|
|
9.0 |
The capital receipts figure includes the disposals of Hayle Place and 13 Tonbridge Road which took place in April. Progress is also being made on a number of other potential disposals, which could realise further receipts during the year.
1.8.3 Based on the current projected expenditure shown at Appendix B there are sufficient resources to fund the programme for the current year without the need to borrow.
1.8.4 The slippage and
re-profiling proposed for approval elsewhere in this report will mean that net expenditure
of £0.871m will be re-profiled into 2013/14 if Cabinet agree this
recommendation.
1.9
Treasury
Management
1.9.1 The Council has adopted and incorporated into its Financial Regulations, the CIPFA Code of Practice on Treasury Management 2009 (Revised) in Local Authorities. This Code covers the principles and guidelines relating to borrowing and investment operations. In March 2012 the Council approved a Treasury Management Strategy for 2012/13 that was based on this code. The strategy requires that Cabinet should be informed of Treasury Management activities quarterly as part of budget monitoring.
1.9.2 During the quarter
ended 31st December 2012:
The Bank of
England November 2012 Inflation Report has again pushed back the timing of a
return to trend growth and the rate at which inflation will fall back towards
the target rate of 2%;
Retail sales
in the high street have weakened where consumers are looking to repay debt.
However sales elsewhere have remained constant;
Employment
continued to rise, but slower than anticipated;
There has been a 0.4% quarterly fall in GDP in this quarter which leaves growth for 2012 at about -0.1%.
1.9.3 The Councils
Treasury Management Advisors, Sector Treasury Management, provide the following
forecast:
·
There
is potential for more quantative easing in 2013;
·
The
main rating agencies have all made it clear they are reviewing the UKs AAA
status in early 2013. There is a chance of the current ratings being downgraded;
·
Bank
rate is not expected to start rising until quarter 1 of 2015;
·
PWLB
long term rates are expected to reach 5.2% by March 2016;
·
As
at 31st December 2012 the Council held £31.1m, in investments. A
full list of the investments held is given in Appendix C. £18.1m of
investments in the appendix are in accounts which can be called upon
immediately or for a short notice period.
1.9.4 During the first quarter of 2012/13 investment income has been above target. Income of £0.22m has been received compared to a budget of £0.19m. This is due to investment rates being higher than expected in the first part of the year, however recent rates have fallen.
1.10 Alternative Action and why not Recommended
1.10.1 The budget
monitoring process could be left to officers. The Constitution already
requires officers to report budget variances to the relevant Cabinet Member in
specific circumstances. The absence of any such reports would then suggest
that no specific items have been identified for consideration.
1.10.2 If such an approach
were taken Cabinet Members would have a reduced financial awareness. This
could restrict Cabinets ability to meet service requirements and achieve the
Councils corporate objectives.
1.11 Impact on Corporate Objectives
1.11.1 This report
monitors actual activity against the revenue and capital budgets and other
financial matters set by Council for the financial year. The budget is set in
accordance with the Councils medium term financial strategy and is therefore
focused on the strategic plan and corporate objectives.
1.11.2 Regular monitoring by Cabinet ensures that actual activity is in accordance with the plan set out in the budget and that the Council is able to achieve its objectives.
1.12
Risk
Management
1.12.1 The Council has produced a balanced budget for both capital and revenue expenditure and income for 2012/13. This budget is set against a backdrop of limited resources and an economic climate that is still challenging. Regular and comprehensive monitoring of the type included in this report ensures early warning of significant issues that may place the Council at financial risk. This gives Cabinet the best opportunity to take actions to mitigate such risks.
1.12.2 The current revenue budget does not exhibit the level of risk identified in previous years and a small contingency exists for any significant budget pressures that may yet develop. Risks to council finance relating to the business rates retention scheme have been highlighted in terms of collection fund performance.
1.12.3 The capital
programme is reporting slippage. Funding for the ongoing programme has been
secured.
1.12.4 Reporting on other issues such as council tax and non-domestic rates collection and treasury management activity ensure that the report covers all major balance sheet items in addition to the capital programme and revenue budget. No significant risks are identified in any of these areas although the impact of the new business rates retention scheme from April 2013 will need to be closely monitored in terms of the collection rates.
1.13 Other Implications
1.13.1
|
1. Financial
|
X
|
|
2. Staffing
|
|
|
3. Legal
|
|
|
4. Equality Impact Needs Assessment
|
|
|
5. Environmental/Sustainable Development
|
|
|
6. Community Safety
|
|
|
7. Human Rights Act
|
|
|
8. Procurement
|
|
|
9. Asset Management
|
|
1.13.2 Financial
implications are the focus of this report through high level budget
monitoring. The process of budget monitoring ensures that services can react
quickly to potential resource problems. The process ensures that the Council is
not faced by corporate financial problems that may prejudice the delivery of
corporate objectives.
1.14 Conclusions
1.14.1 The third quarter
monitoring report shows a positive evaluation of the period. Revenue
expenditure, balances and treasury management are all satisfactorily at or
above target. Council tax and NNDR collection are both marginally below
target.
1.14.2 Capital expenditure reports from officers show an expectation to re-profile £0.871m into 2013/14. However, funding of the ongoing programme still requires further capital receipts from asset disposals.
1.14.3 All other items monitored are at or above target for the third quarter.
1.15 Relevant Documents
1.15.1 Appendices
Appendix A Revenue Budget Report
Appendix B Capital Programme 2012/13
Appendix C List of Investments as at 31st December 2012
|
IS THIS A KEY DECISION REPORT?
Yes No
If yes, when did it first appear in the Forward Plan?
..
This is a Key Decision because: ..
.
Wards/Parishes affected: ..
.. |
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