Decision details

Budget Monitoring 3rd Quarter 2014/15

Decision Maker: Cabinet.

Decision status: Recommendations Approved

Is Key decision?: No

Is subject to call in?: Yes

Purpose:

(1)  To consider the capital andrevenue budget andexpenditure figures for the thirdquarterof 2014/15; and

(2)  To consider other financialmatters witha materialeffect on themedium termfinancialstrategyor the balance sheet.

 

Decision:

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

(2)  That the proposals for slippage and re-profiling in the capital programme to 2015/16 be approved;

(3)  That the detail in the report on the collection fund, general fund balances and treasury management activity be noted;

(4)  That approval be given to utilising £106,500 of the projected underspend for the advancement of the review of office accommodation; and

(5)  That approval be given to set aside £400,000 of the projected underspend for 2014/15 to fund specific projects which support the delivery of the Council’s strategic priorities.

 

Reasons for the decision:

The Directorof Regeneration & Communities is the ResponsibleFinancialOfficer,andhas overallresponsibilityfor budgetarycontrol andfinancialmanagement.However, in practice day today budgetary control is delegatedto service managers, with assistance and advicefromtheirdirectorand the finance section. The report advised and updated Members onthe currentpositionwithregard to bothrevenue and capital expenditure againstthe approvedbudgets, and alsoincluded sections on Collection Fundperformance andTreasuryManagementperformance.

 

The reportuses anumber ofterms thatmayrequire definition and aglossaryof termswasgiven insection 1.14.3 ofthe report of the Director of Regeneration and Communities.

 

Revenue

 

The budget used in this report was the agreedestimate for2014/15whichincluded the carryforwardresources agreedbyCabinet in May 2014.Actualexpenditure to December 2014 included allmajor accrualsforgoods andservices receivedbut notpaidfor bythe end ofthequarter.

 

An analysisthat is summarised byportfolio,of the fullyearbudget,the profiled budget to December 2014 and expenditure to December 2014 was attachedas Appendix A to the report.The financialanalysisis based ondirect expenditure only. Thisremoves the influence of internalrecharges and accounting adjustments upon the variance analysis. Anindicative projected yearend outturnfigure is also shown.

 

AppendixA to the report showedthatactualspendis£687,682less thanthe budgetatthe endof the thirdquarter.A detailedanalysis ofthe figures atcost centre levelshows 139out ofa totalof 232cost centres arecurrently reporting actualspend less than budget.The projectedoutturnat31March 2015 is currentlyanunderspendof £587,682.Proposals for utilisation ofthe underspendare detailed at paragraphs 1.4.7and1.4.8 of the report.

 

Also shownatAppendix A was asubjective analysis across all services.Thisidentifies that withinthe net under spend £474,989 (Q22014/15 £189,248) relates toemployee costs,due to continuingvacancylevels

 

Thethird table atAppendixA summarised the position specifically with regardto fees andcharges income. Atthe end ofthethirdquarterthisincome is £96,324 above the target figure. It should benotedthatwithinthistotalthere are anumber ofareas reportingincome below budget. Further detailsof service areas where majorvariations frombudgetedfees andcharges are 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.  One reportablevirementwas undertaken duringthe third quarter,relatingto arent reduction of £1,530at the Masters Tower,Old College.

 

In August 2014, Cabinet approvedfunding of £90,000 to progress thereview ofoffice accommodation and prepare the Council for 2023when the current accommodation comes to the end ofitsleaseperiod.At this timeit was agreed thatfurtherfundingwouldbeidentifiedin accordance with the recommendations ofthe reviews. Followingthe completion of theinitialreviews, it has beenidentifiedthatfurther fundingof £106,500 willbe required forthe advancement ofthe project throughto the end of 2014/15.This amount includes the works requiredto relocate the ContactCentre to the Gateway,whichis additionalto the originalscope of the project.It isrecommendedthat thisisfundedfromtheunderspendfor the current year.A detailedreporton the development ofworkstreams forthisproject andfurther funding required willbe presented to Cabinet in March 2015.

 

Itis also proposed that£400,000of the remainingunderspendisearmarkedfor the progression of asmallnumber ofspecific projectswhichsupportthe council’s strategic priorities. A listof potentialprojects identifiedto receive this funding willbe presented to Cabinetin March.

 

A number of service areas are reportingpositivevariances throughsignificantly less spend or additionalincome than was budgetedfor atthe end ofthe third quarter.Briefdetails onthese areas are givenbelow:-

 

(a)  There is apositive variance of £73,474(Q22014/15 £52,122) onpayanddisplaycar parks whichis attributable to acombinationof lowerthanexpected running costsandhigher thanexpectedincome.Two carparks,King Street andLockmeadow areperforming significantly above their income targets.In additionto this, on-streetparking is showing an underspendof £79,952 (Q22015/14 £37,514) whichislargelydue tolowerthanexpectedrunning costs andhigherthanexpectedincome from parkingmetersandPCNs.Thisis detailedfurtherinthe Quarter 3Key Performance Indicator reportelsewhere onthis agenda.However,it should be noted thatthisincome is ringfenced so this does notrepresenta generalunderspend.

(b)  There is anunderspendof £53,420 (Q2 2014/15
 
£27,396) relatingto residents parking, where income from
 
residentand visitor permitshas beenhigherthan
 
anticipated.

(c)   The ParkandRide budget is reporting anunderspend
 
of £34,534(Q22014/15 £10,530) whichisa continuation
 
of the trend observed in the first two quarters of the year.
 This isa resultof areductioninincome budgets following a
 
reductionin the contractprice,and season ticket income,
 
whichis currently below targetnow beingreportedas a
 
separate income stream.However, it shouldbe noted that
 this service has marginallymissed its targetfor the number
 
of on-boardtransactions this quarter,as detailedinthe 
 Key PerformanceIndicator report which was also on the  
 agenda.

(d)   There is a positive variance of £39,859 (Q2  2014/15 £26,684)against corporate management whichislargelya result ofa reductionin the externalauditfee set bythe AuditCommission.This represents 6% ofthe profiled budget at the endof the thirdquarter.

(e)  There is avariance of£32,886(Q2 2014/15 £1,533) withingrantsarising from the ‘Make Maidstone Smile’ budget which isyet tobe utilised.

(f)  There are underspends against HumanResources and 
 
Learningand Developmentof £31,391 (Q2 2015/14
 £22,139)
and £49,079 (Q2- £6,583) respectively, which
 relate
to unspent carryforwards.

(g)  The environmentalenforcementsection is showinganunderspendof £47,894 (Q2 2014/14 £38,608).Thisisdue toa combinationof smallerunderspendsin the controlledrunningcosts for this serviceandisa continuationof the position attheend ofthesecond quarter.

(h)  The privatesector renewals budgetis reporting anunderspendof £35,553 (Q2 2014/15 £10,410) which relates to lowerthanbudgetedcontrolledrunning costs.The variance represents 1.5%of the totalbudget forthe year.

(i)  The homelessness prevention budget is reporting an underspendof £34,302 (Q2 2014/15 £12,486) whichisa combination of unspentcarryforwards and lower thanbudgetedcontrolledrunningcosts.

 

(j)  Developmentcontrol income has continued to exceedthe budgeted figure,witha positive variance of£154,935 (Q2 2014/15 £19,767)atthe end ofquarter three.

A number of areas are showingsignificantlymore spendor ashortfallinincome compared to the amountsactuallybudgetedatthe endof the third quarter, and these are reported below:-

 

(a)  The Homeless TemporaryAccommodationbudget has continuedto 
show expenditure greater thanbudget,with anadverse variance
of £354,664 at the end ofthe third quarterof 2014/15(Q2
2014/15 £289,711).  Cabinet will be aware that aproject is underwayto target reductionsin thecost oftemporaryaccommodation andone ofthe new properties became operationalduring secondquarter.It is anticipatedthatthis willresultin areductioninfutureexpenditure ontemporaryaccommodation.Duringthe thirdquarterthe council saved £32,190 after runningcosts, incomparison to thecost ofalternative sourcesof temporaryaccommodation. AylesburyHouse was fully occupiedthroughoutNovember andDecember although it should be notedthatthe savings arenot sufficientto compensate for the overspend.

 

(b)  There is anadverse variance of £116,621(Q2 2014/15 £78,667)against the crematoriumbudget, largely due to lowerthanexpectedincome,which is currently 10% below the target.  Repairsandmaintenance costshave also beenhigher thanbudgeted.  There has been a recentupturnin bookings which willhelpto address this variance,andthe situation is beingmonitoredcloselybythe service manager.However,itshouldbe noted thattheincomelevels achieved in 2013/14 were exceptionaldue to theclosure ofMedwaycrematorium for refurbishmentduring the year.

(c)  The procurement sectionis showinganadverse variance of

£41,443 (Q2 2014/15£31,276) which isa resultof income targetsnot beingachievedduring the firsthalfof the year.Thisisa continuation of the trendobservedfor the past two financialyears.

(d)  There is anoverspend of £42,955(Q22014/15 £35,449)on theMuseum budget which represents 7% of the profiledbudget atthe endof the thirdquarter.Thisisa consequence ofincome being lowerthanexpected, reactive maintenance workand installation ofa fire alarm.

(e)  There is anoverspend of £39,766(Q22014/15 £12,344)showingagainst the non-pooled ICT budget. Thisisdue toa number of commitments for whichfunding is yet tobe confirmed.

(f)  There is anadverse variance of £37,206 (Q2 2014/15 £10,530)appearing within unapportionable centraloverheads.Thisrepresents a2% variance and relates to pension accruals wherecontributions have been higherthanthe figures anticipatedat thetime the budget was set.

(g)  There is anadverse variance of £31,130arising from lowerthanexpectedinvestment income due to lowinterestrates.This wasdetailedin the report of the Director of Regeneration and Communities atparagraph1.9.5.

(h)  Budgets have now been establishedfor theMidKent PlanningSupportservice,which is currentlyreportinganunderspendof £49,204k across the three authorities in the partnership.However,itshouldbe noted that this willbe off-set by implementation costswhich are currently£96,060k.

(i)   The reportidentified a number of areas whichrequired action by Cabinet at this time andthese were set outinthe recommendations at section 1.2 of thereport. Ineach case theproposed actions are setout inthe recommendations at paragraph1.2.1 ofthe report.Allowingforthe continuation of theissuesdetailedas budgetpressures above, thepredictedoutturnfor 2014/15isan underspendof £587,682.

(j)   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 £4.5mby 31st March2015.

 

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

 

The position set outabove allows for thelevelof balances of £2.3m,as previouslyagreedbyCabinet,to be maintained.

 

Collection Fund

 

Followingtheintroduction oflocalcouncil taxsupportfrom1 April2013 andthe approval ofthe Business Rates poolingarrangementwith KentCountyCouncil, enhanced monitoring ofthe collection fund has beenput inplace to provide adequate assurance around developments affectingthe assumptions made in the currentyear’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.

 

 

Target %

Actual%

CouncilTax

86.79

86.50

NNDR

85.82

85.57

 

The target collection rate has been marginally missedforbothCouncilTaxandNNDR. Itshould be notedthat however that Maidstone’scollection rate for theyearto dateis above average compared withother Kentdistricts.

 

Whilstthe percentage variances are small, the gross values ofCouncil TaxandBusiness Rates collected eachyearare significant. The Headof the Revenues and BenefitsPartnershipfollows arecoverytimetableandactionis currentlybeing taken to attemptto bringcollectionrates backto target.

 

Prior yeararrears collectionison target andofficers willcontinue to pursue paymentof anydeveloping arrears alongwiththe arrears fromprior years.

 

CouncilTax Support– The actualcollectionrate is 66.72% againsta target of 59.11%.

 

The levelof localcouncil taxsupportrecordedat the endof quarter3 showsa caseloadof 10,054claimants (10,471; Q3 2013/14).For Maidstone BoroughCouncilthe support providedis £1.52m (£1.62m;Q3 2013/14)comparedto anestimatedsupportof £1.60mused to calculate the budget.

 

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

 

Retainedbusiness ratesthe current collectable business rates isshowinga minor net increase of £0.4m againstthe original estimate.

 

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

 

Capital


AttachedatAppendix Bto the report wasa summaryof the currentcapitalprogramme for 2014/15, as agreedby Council. Thisincludes the initialcapitalprogramme for the financialyear plusamountscarriedforwardfrom2013/14.It also reflects the slippage that wasidentifiedinthe monitoring reportfor the first two quarters of 2014/15.

 

Thetablein Appendix B gave the following detail:

 

Column

Detail.

1.

Descriptionofscheme, listedinportfolioorder.

2.

Approvedbudget for2014/15 afterthe adjustmentsdetailed above.

3.

Actualspendto theendofDecember 2014.

4.

Balanceofbudget availablefor2014/15.

5– 7.

Quarterlyanalysis ofexpectedspendfor theremainder of2014/15.

8.

Balanceofbudget thatwill slipinto 2015/16.

9.

Budget nolonger required.

 

Capitalexpenditure to the endof the thirdquarterof 2014/15 is shownas £1.39m. The budget for the year, adjustedfor slippagedetailedinthe first and second quarterbudget monitoring reports is £5.97m.This comprises anumber of plannedprojects for whichexpenditureisexpected to be incurredinthe finalquarterof theyear,including £0.88m for acquisition of commercialassets,£0.28mfor continuedimprovements toplay areas and £1.17mhousinggrants.

 

Followingthe third quartermonitoring,officers anticipate that £1.89m willneed to be reprofiledinto 2015/16. Thisis detailedincolumn8 ofAppendix B.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, identifies sufficient resources to finance the 2014/15programme.

 

Resources thatcan currently be confirmed are:

 

FundingSource:

£m

Grants & Contributions

0.5

Revenue Support

10.2

PrudentialBorrowing

Capitalreceipts

6.0

0.2

16.9

Theslippage and re-profilingproposed for approvalelsewherein thisreportwillmeanthat netexpenditure of £1.89mwillbe re-profiled into 2015/16 subject to this recommendationbeingagreed.


 

TreasuryManagement

 

The Councilhas adoptedand incorporated into itsFinancialRegulations,the CIPFA Code ofPractice on Treasury Management in LocalAuthorities.This Code covers the principlesandguidelinesrelating 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 ended 31 December 2014:

 

·  Inflation (CPI)fell to1.0%in November.  Thisis thelowest ithas beensince 2002 and is expected to remainatthislevel for theremainder of2015.

 

·  GDPhas grownby2.6%.

 

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

 

·  The markets are now expecting tosee anincrease in the Bank Rate towards the end of2015.

 

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

 

·  Economic growth hasslowed in the third quarterbutis expectedto continue through to 2016.

 

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

 

The latestinterestrates andPWLBrate forecasts are listed below.

 

AnnualAverage%

BankRate

%

PWLBBorrowingRates %(includingcertaintyrateadjustment)

 

 

5year

25year

50year

Mar2015

0.50

2.20

3.40

3.40

Jun2015

0.50

2.20

3.50

3.50

Sep2015

0.50

2.30

3.70

3.70


 

Dec2015

0.75

2.50

3.80

3.80

Mar2016

0.75

2.60

4.00

4.00

Jun2016

1.00

2.80

4.20

4.20

Sep2016

1.00

2.90

4.30

4.30

Dec2016

1.25

3.00

4.40

4.40

Mar2017

1.25

3.20

4.50

4.50

Jun2017

1.50

3.30

4.60

4.60

Sep2017

1.75

3.40

4.70

4.70

Dec2017

1.75

3.50

4.70

4.70

Mar2018

2.00

3.60

4.80

4.80

 

At30September 2014the council held investments totalling

£30.06m (Q22014/15 £29.83m).  A full list ofinvestments held wasincludedat Appendix C to the report.£19.06m (Q2 2014/15 £21.83m) 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 £156,000 (Q22014/15 £101,000) comparedto abudgetof £187,500(Q22014/15

£125,000).  The average interest rate for this periodis0.69%(Q22014/15 0.69%). 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 third quarter of2014/15.

 

Alternative options considered:

The budget monitoringprocess could be leftto officers.The currentConstitution 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 areducedfinancialawareness. This couldrestricttheirabilityto meetservice requirements and achieve the Council’s corporate objectives.

 

 

Contact: Paul Holland Ext.2038 Email: paulriley@maidstone.gov.uk.

Report author: Paul Holland

Publication date: 13/02/2015

Date of decision: 11/02/2015

Decided: 11/02/2015 - Cabinet.

Effective from: 21/02/2015

Accompanying Documents: