Decision details

(a)  To consider the capital and revenue budget and expenditure figures for the second quarter of 2014/15; and

(b)  To consider other financial matters with a material effect on the medium term financial strategy or the balance sheet.

(a)  That the satisfactory revenue position at the end of the second quarter of 2014/15 be noted;

(b)  That the proposals for slippage and re-profiling in the capital programme to 2015/16, as set out in Appendix ‘B’ to the Report of the Director of Regeneration and Communities be agreed; and

(c)  That the detail in the report on the collection fund, general fund balances and treasury management activity is noted.

The Directorof Regeneration & Communities is the ResponsibleFinancialOfficer,andhas overallresponsibilityfor budgetarycontrolandfinancialmanagement.However in practice day today budgetarycontrol is delegatedto service managers, with assistance and advicefromtheirdirectorand the finance section. This report advised and updated Cabinetonthe current positionwithregards to bothrevenue and capitalexpenditure against the approved budgets, andalsoincluded sections on Collection Fundperformance andTreasuryManagementperformance.

Revenue

The budget used in the report of the Director of the Director of Regeneration and Communities was the agreedestimate for2014/15and includedthe carry forwardresources agreedbyCabinet in May 2014.Actualexpenditure to September 2014 included allmajor accrualsforgoods andservices receivedbutnot paidfor bytheend ofthequarter.

An analysisthat was summarised byportfolio,of the fullyearbudget,the profiled budget to September 2014 and expenditure toSeptember 2014 was attachedas AppendixA to the report of the Director of the Director of Regeneration and Communities.The financialanalysis wasbased on direct expenditure only.This removed the influence ofinternalrecharges and accountingadjustments upon the variance analysis.An indicative projectedyearend outturnfigurewas alsoshown.

AppendixA to the report showedthatactualspend was£461,040 less than the budgetatthe end ofthe second quarter.A detailedanalysis ofthe figures at costcentre level showed 139 out ofa totalof 233 costcentres were currently reporting actual spend less thanbudget.The projectedoutturnat31March 2015 is currently £361,040.

Also shownatAppendix A to the report wasa subjective analysis across allservices. Thisidentified that withinthe net underspend £189,248 (Q12014/15

£114,618) related toemployee costs,due to continuingvacancylevels.

Thethird table atAppendixA to the report summarised the position specifically withregardto fees andcharges income. Atthe end ofthe secondquarterthisincome is £18,564 above the target figure. It was notedthatwithinthistotalthere were anumber ofareas reportingincome below budget. Further detailsof service areas where major variations from budgetedfees andcharges were givenlater in thissection ofthe report.

In accordance with best practice,virements are reportedto Cabinetas partof quarterly budget monitoring.A virementrepresents thetransfer ofa budget betweenobjectives that occurs subsequent tothe formal approvalofthe budget by Council.Four virementstotalling £402,410 were undertaken inthe secondquarterrelatingto:

a)  £120,000 temporary funding for developmentcontrolappeals, as agreedbyCabinet when considering the Q1 budget monitoringreport;

b)  £51,410 fundingfor Information Manager post,as agreedbyCabinet in August 2014;and

c)  £230,000 funding forvarious schemes,as agreedbyCabinet in August 2014.

A number of service areas are reportingpositivevariances throughsignificantly less spend or additionalincome than was budgetedfor atthe end ofthe secondquarter.Briefdetailson these areas are givenbelow:-

d)  There was apositive variance of £52,122(Q1 2014/15 £32,358) onpayanddisplaycar parks whichis attributable to acombinationof anunderspendon running costsandhigherthanexpectedincome.Two carparks,KingStreet andLockmeadow are performingsignificantlyabove their income targets.However, income fromseason tickets has continuedto decline andthe underspendwill be substantiallyoff-set bythe overspend in off-street parkingenforcement.

e)  On-street parking was showinganunderspendof £37,514 (Q1 2015/14 £10,391) which islargelydue tolowerthanexpectedrunning costs.Income is £7,000above target overall, althoughitwas noted that withinthis total,income from PCNsis£8,000below target.However,thisincomeisringfencedso this does not representa generalunderspend.

f)  The benefitssectionwas showinganunderspendof £39,067 (Q12015/14 £15,681) which was mainlydue tovacantposts.

g)  There wasa positive variance of£81,207(Q1 £84,009) which mainlyrelated tolowerthanexpectedexpenditure onwheeledbinsandcontinuedreceipts fromthe bulky domesticrefuse collection service andgreenwaste binhire.No problems areanticipatedatyear-end,althoughWeekendFreighter costsmay increase substantially. Theweekendfreighter does not form partof the contract andanyincrease would be adirect costto the Council.

h)  Recyclingcollection wasunderspentby £96,953 at the endof thesecond quarter(Q12014/15 £46,964) as aresultof higherthanexpectedincome levels and a smallpositive variance on controlledrunning costs.

i)  The environmentalenforcementsection was showinganunderspendof £38,608.This wasdue toa combination ofsmaller underspendsinthe controlled running costs for this serviceandisa continuationof the position atthe endof the firstquarter.

A number of areas showed significantlymore spendor ashortfallinincome compared to the amountsactuallybudgetedatthe endof the secondquarter,andthese are reportedbelow:-

j)  The Homeless TemporaryAccommodationbudget has continuedto showexpenditure greater thanbudget,with anadverse variance of

£289,711 at the end of the secondquarterof 2014/15 (Q12014/15

£99,166).Cabinet was made aware thata project was underwayto target reductionsin thecost oftemporaryaccommodation andone ofthe new properties became operationalduring the secondquarter.It is anticipatedthatthis willresultin areductioninfutureexpenditure ontemporaryaccommodation,althoughat this stageitistoo earlyto identify anysignificantimpact.

k)  There is anadverse variance of £78,667(Q1 2014/15 £15,028)against the crematoriumbudget due tolower thanexpectedincome.There has been arecentupturninbookings which will help to address this variance, andthe situation is beingmonitoredclosely by the servicemanager.However, itwas notedthatthe income levels achieved in 2013/14were exceptional due to theclosure ofMedwaycrematorium for refurbishmentduring the year.

l)  The procurement sectionis showinganadverse variance of

£31,276 (Q1 2014/15 £13,402) which wasa resultof income targetsnot beingachievedduring the firsthalfof the year. Thisisa continuation of the trendobservedfor the past two financialyears.

m)  The museumbudget is overspentby£35,449atthe end ofthesecond quarter(Q12014/15 £22,853). This was a result oflowerthanexpectedincome and reactive building maintenance during thefirsthalfof the year.

n)  Cobtree Manor Park is currently showing an overspendof £31,540due to extrastaffcosts fromMBS tocover weekendsupervisionand necessaryworks due toa substantial increase in visitornumbers.These costs willbe recharged to the Trustatyearend which willbring expenditure back in line withthe budget.

o)  There was anadverse variance of £100,941 (Q1 2014/15 £114,234)arising from the Mid KentPlanning Support Service.This additionalcost willbe shared across the three authorities involvedinthepartnership,andthe requirement for additionalresources isanticipatedto continue through to the endof the financialyear.Budgetaryarrangements for this service are currentlybeing agreed with partner authorities and the council’s share of thisvariancewillbe addressed once these measures are finalised.

Allowing forthe continuation of theissuesdetailedas budgetpressures above, thepredictedoutturnfor2014/15isan underspendof £361,040.

The budget strategyfor 2014/15identifiedsavings andefficienciestotalling £1,254,000. These savings are being monitoredcorporatelyand it is anticipatedthatthis target willbemet bythe end oftheyear.

Balances

Balances as at1stApril2014were £15.4m. The currentmediumtermfinancialstrategyassumes balances of £3.6mby 31st March2015.

The major reason for the movement in balances during 2014/15related to the use ofcarryforwards approvedbyCabinet in May2014.

The position set outabove allows for the minimum level ofbalancesof £2.3m, as previously agreedbyCabinet, to be maintained.

Collection Fund

Followingtheintroduction oflocalcouncil taxsupportfrom 1 April 2013 and the approvalof the Business Rates pooling arrangementwith KentCountyCouncil, enhanced monitoring ofthe collection fund has beenput inplace to provide adequate assurance around developments affectingthe assumptions made inthe current year’sbudget.

The collection rates achievedatthe end ofthe secondquarter,andthe targets set, are reportedbelow.The rates are given as a percentage ofthe debt targetedfor collection in2014/15.

The target collection rate has been marginally missedfor Council Tax andmarginallyexceededfor NNDR.It was notedthatMaidstone’s collection rate for the yearto datewasinline withtheother Kentdistricts.

Whilstthe percentage variances are small, the gross values of CounciltaxandBusiness Rates collected eachyearare significant. The Headof the Revenues and BenefitsPartnershipfollows arecoverytimetable andactionis currentlybeing taken to attemptto bringcollectionrates for CouncilTax back to target.

Prior yeararrears collection wason target andofficers would continue to pursue paymentof anydeveloping arrears alongwiththe arrears fromprior years.

CouncilTax Support– The actualcollectionrate is 52.8% (44.77%;Q2 2013/14).

The levelof localcouncil taxsupportrecordedatmid-yearshows acaseloadof 10,196claimants (10,602; Q2 2013/14). For MaidstoneBoroughCouncilthe support providedis £1.49m (£1.42m; Q22013/14) compared to an estimated supportof £1.60used tocalculate the budget.

While there are a significant proportion ofpensionable age claimants the overallreductioninclaimants showeda positive correlationbetweenreductions inthose claiming jobseekers allowance inthe borough andthe reduction in caseload.Members shouldnote that asthe year progresses,changes in caseloadhave aproportionatelyreduced effect on thefullyearcost.

Retainedbusinessrates– the currentcollectable business rates is

£53.9m comparedto aninitialestimate of£53.7m, representing aminornet increase of £0.2m.

The major riskfromappeals has beenprovisionedandthis remainsadequate when comparedto the level ofchange due to appealsdecisions witnessedto date.

Capital

AttachedatAppendix B to the report of the Director of Regeneration and Communities wasa summaryof the currentcapitalprogramme for 2014/15, as agreedby Council. Thisincluded the initialcapitalprogramme for the financialyear plusamountscarriedforwardfrom2013/14.It also reflected the slippage that wasidentifiedinthe monitoring reportfor the first quarterof 2014/15.

Thetablein Appendix B to the report gives the following detail:

Capitalexpenditure tothe end ofthe second quarterof 2014/15 was shownas £0.7m. The budget for the year, adjusted for slippagedetailedinthe first quarterbudget monitoringreport was£7.2m.Thiscomprised of anumberof plannedprojects forwhich significantexpenditureis yet to be incurred, including £1.5m for acquisitionof commercialassets,£1.0m for continued improvements to playareasand£1.6mhousinggrants.

Followingthe secondquartermonitoring,officers anticipate that

£1.3m willneed to bereprofiledinto 2015/16.Thisis detailedincolumn8 ofAppendix B to the report.These are items where the programmed works have beenrescheduledto nowtakeplace during 2015/16.

CapitalFinancing

The agreedcapitalprogramme for the period 2014/15 to2018/19, asapprovedbyCouncil in March 2014, identified sufficient resources to finance the 2014/15programme.

Resources thatcan currently be confirmed are:

Theslippage and re-profilingproposed for approvalelsewherein the report would meanthat a netexpenditure of£1.3m would be re-profiled into2015/16 subject to this recommendation beingagreed.

TreasuryManagement

The Councilhas adoptedand incorporated into itsFinancialRegulations,the CIPFA Code ofPractice on Treasury Management in LocalAuthorities.This Code covers the principles and guidelinesrelating to borrowing and investment operations.In March 2014, theCouncilapproveda TreasuryManagementStrategyfor 2014/15 thatwas based onthiscode. The strategyrequires that Cabinetshouldformallybeinformedof treasurymanagementactivities quarterly aspartof budget monitoring.

Duringthe quarter ended30September 2014:

·  Inflation (CPI) has remained at1.5%.This is thelowestit hasbeensince 2009 and is expected to fallfurther later in the year.

·  GDPhas grownby3.2%.

The Council’s TreasuryManagementadvisors,CapitaAsset Services,have provided the followingforecast:

·  The markets are now expecting tosee anincrease in the Bank Rate during the third quarter of 2015.

·  The Governor oftheBankof Englandhas repeatedlystatedthatthese increases willbe slow andgradualdue to concerns over theimpacton consumers withlowerthaninflation pay increases.

·  Economic growthis expectedto continue through to2016.

·  The fall inunemployment is expectedto continue and averagepay is expectedto increase.

The latestinterestrates andPWLBrate forecasts are listed below.

At30September 2014the council held investments totalling

£29.83m (Q1 2014/15 £26.53m).  A full listof investments held wasincludedat Appendix C to the report of the Director of Regeneration and Communities.£21.83m (Q1 2014/15 £21.53m) ofinvestments arein accountswhichcan be calleduponimmediatelyor for a shortnotice period. Thisis due to theshortertermrates beingmore appealing than longer term.

Investmentincome is below target witha balance of £101,000 (Q1 2014/15 £47,000) compared toa budget of £125,000 (Q1 2014/15

£57,000).The average interest rate for this periodis0.69% (Q12014/15 0.68%). The lowinterestrates are aconsequence ofGovernmentsupportfor lendingschemes which have prompteda reductionin needforadditionalcash byfinancialinstitutions.

Treasurymanagementperformance is regularlybenchmarkedagainstsimilarcouncils and this has shown that these resultsare in linewiththe benchmark group.

There has been no borrowing duringthe secondquarterof 2014/15.

The budget monitoringprocess could be leftto officers.The Constitution already requires officers to reportbudget variances tothe relevant Cabinet Member in specific circumstances.The absenceof anysuch reports would then suggest thatno specificitems havebeenidentifiedfor consideration.

Ifsuch anapproachwere taken the leadershipteamwould have areduced financialawareness. This couldrestricttheirabilityto meetservice requirements and achieve the Council’s corporate objectives.