Decision details

1.  That the provisional outturn figures for revenue and capital for 2009/10 be noted.

2.  That £0.38 million of balances be set aside as a contingency against future activity relating to the Kent International Gateway.

3.  That the £1.77 million available from the refund from HM Revenue and Customs be set aside for the funding of future priorities.

4.  That the provisional funding of capital expenditure in 2009/10 be agreed.

5.  That the carry forward of revenue resources of £1.3 million for the financing of future capital expenditure be agreed.

6.  That the carry forward requests, as set out in Appendix C to the report of the Head of Finance, be agreed, subject to the following amendments:

  a)  Reduce the two tier working resources to £25,000;

  b)  Retain the resulting reduction of £25,000 from two tier working resources in balances;

  c)  Delete the carry forward request for concessionary fares; and

  d)  Carry forward the balance of unused resources from 2009/10 to support the capital programme in 2010/11.

7.  That the impact on the balance sheet of the provisional outturn 2009/10 be noted.

Final expenditure figures for revenue and capital will be reported to  June Cabinet meeting, along with the key issues from the Statement of Accounts and Treasury Management performance.  These reports will be followed, at the July Cabinet Meeting, by the initial Budget Strategy report for the following financial year and the Medium Term Financial Projection for a further four years.

The purpose of this report is to facilitate good financial management.  This report gives Cabinet provisional figures for revenue and capital outturn, to allow early consideration of any issues resulting from them not only in the current financial year but in terms of any impact on the Medium Term Financial Strategy.

Revenue

Attached at Appendix A to the report of the Head of Finance is a summary of the revenue outturn for 2009/10 compared to the revised estimate approved by Cabinet in February 2010 and Council in March 2010.  Also shown is the amended revised estimate, taking into account any changes in financing capital costs necessitated by changes in actual capital spend.  This is provided to ensure a more accurate comparison with the outturn position, as it eliminates fluctuations in capital spend, which is dealt with later in this report.  Appendix A to the report of the Head of Finance shows a net unadjusted underspend of £4.0 million.

In the third quarter’s budget monitoring report, considered by Cabinet in February 2010, it was reported that a small number of significant budget pressures were projected to adversely affect the outturn position by £0.55 million. At that time cabinet approved the set aside of £0.25 million of budgetary provision in preparation for its need at year end. In addition Cabinet requested continued management action to alleviate the problem further.  The outturn position for those services identified is £0.58 million and in addition three other adverse variances have developed in the final quarter of 2009/10 totalling £0.11 million. 

The additional adverse variances relate to income from investments which are below budget due to last quarter cash flow being below expectations; Conservation Service income from fees for advice, which is below expectation; and additional costs of set up for the Licensing Partnership, the savings from which have been declared in previous years.  The adverse variances are all summarised in Appendix B to the report of the Head of Finance.

The outturn also includes three unreported variances that are significant and favourable. These relate to the use of balances to fund the cost of the Kent International Gateway (KIG) enquiry, the repayment of VAT due to the Council as a result of the Fleming review and the revenue budget set aside to support capital expenditure in 2009/10. Greater detail on these variances is given in the paragraphs below.

Final costs for the KIG enquiry is £1.32 million, which is £0.38 million less than the projected cost, of £1.7 million, previously reported to Cabinet. The major reason for this variance is that the final cost of legal advice was less than projected. As Cabinet approved the majority of this funding from balances, the amount no longer required has not been taken from balances. It is recommended that this amount remain in balances as a contingency against any future activity relating to KIG.

As part of the early budget strategy work for 2010/11 Cabinet considered the possibility that a claim against HM Customs and Revenues, under the Fleming review, might return some overpaid VAT to the Council. At that time a prudent view was that a repayment of £0.75 million would be possible. Cabinet identified a use for £0.45 million and agreed to await a confirmed figure before considering any further use. In March 2010 the Council received £1.2 million in repayment from HMCR and, in April 2010, a further £1.1 million was received for interest. The total sum of £2.3 million has been accrued to the 2009/10 accounts.  Cabinet has already identified the use of £0.45 million in 2010/11 and a further £78,500 is due to be paid to the Consultants who assisted the Council in achieving this repayment.  This leaves a usable balance of £1.77 million. It is recommended that Cabinet place this sum into balances at the end of 2009/10 for use on the funding of future priorities.

The capital programme, detailed later in this report, includes a level of slippage that means resources identified from revenue budgets to finance capital expenditure are not required until 2010/11. The variance of £1.3 million remains essential to the financing of the future capital programme.  It is recommended that this money is set aside for use in 2010/11 in order for the capital programme to remain affordable.

After adjusting the outturn for the income from the Fleming refund and the unapplied revenue resources for the funding of capital expenditure, there remains a positive variance of £0.47 million. This variance does not include the reported underspend on three positive variances reported in paragraphs 1.4.4 to 1.4.7. This positive variance is, in the main, the effect of employee vacancy levels along with a number of budgets that were not utilised but must be available in 2010/11 and require approval as carry forward requests.

Attached as Appendix C to the report of the Head of Finance is a schedule of provisional carry forward requests, into 2010/11, totalling £0.62 million. These have been categorised according to the criteria used for decision making by Cabinet last year. This gives three categories in the table:

a)Budget available and a contractual commitment exists; 

b)Funded schemes that have no timeline;

c) Other requests.

The full list of requests for carry forward cannot be approved as the balance available is £0.15 million less than the sum of the requests. It is recommended that Cabinet consider the requests in Appendix C to the report of the Head of Finance and give approval up to the level of available resources.

Capital

Attached at Appendix D to the report of the Head of Finance is a summary of capital spend against the revised estimate. This has identified further slippage of £2.3 million that is detailed in the appendix. This figure is the net effect of slippage into and from 2010/11, where long term schemes have spent additional money in 2009/10 this has been set off against future available resources.

The final analysis of costs against the new offices project is now available and the costs within 2009/10 are £399,449. Resources available to finance this come from the compensation claims made by the Council. This will leave a balance of £63,000 requiring funding from capital resources. Officers are continuing to negotiate over compensation issues and any additional sum agreed during 2010/11 will repay the use of capital funding required in 2009/10.

The expenditure outlined in Appendix D to the report of the Head of Finance can be funded from capital resources. Proposed funding is summarised in the following table:

This funding proposal is developed on the basis of using the most flexible resources last. This means that grants and capital receipts have been utilised in preference to revenue support. The consequence of this decision is detailed in paragraph 1.4.6 which recommends the carry forward of revenue resources set aside to finance capital expenditure as this is the resource that remains unused. It is recommended that Cabinet consider and approve this provisional financing of the capital programme.

Balance Sheet

The provisional outturn figures have an impact on various elements of the Balance Sheet and these are summarized as follows.

The revised estimate assumed Capital Receipts for 2009/10 of £3.2 million.  The provisional actual figures show cash backed Capital Receipts, net of costs, of £0.8 million, a shortfall of £2.4 million which relates, in the main, to the minor unexpected asset sales at the Bowling Green and Station Road, set off against the delay in disposing of Armstrong Road Depot. An additional £0.2 million was received in relation to compensation payments for acquisitions relating to the Fremlins development in a back to back funding arrangement with the developers.

Investments – the Treasury Management Strategy report to Cabinet agreed in February 2010 anticipated year end investments of approximately £7.7 million.  The actual investment at March 2009 totalled £8.7 million.  The provisional assessment of the increase shows that the main elements of the increase include the following:-

The overall changes to the level of investments will have no impact on the Strategy itself.  The changes will have a short term impact as resources are required or obtained during the course of 2010/11.

Daily monitoring of cash-flow has confirmed that the Prudential Indicators that Council set for 2009/10 have been complied with.

Fixed assets – the capital investment achieved in 2009/10 has resulted in investment in the Council’s property portfolio of £6 million out of a total spend of £12.9 million.  The balance of the spend is in areas such as support for social housing, renovation grants, etc. which do not contribute to the Authority’s asset base and have been written off, through the revenue account, as deferred charges.

Useable capital receipts – as a result of the level of capital investment and the level of capital receipts received in 2009/10, the level of useable capital receipts has decreased from £8 million at March 2009 to nil at March 2010.

Balances – as set out in Appendix E to the report of the Head of Finance the overall level of balances at March 2010 will be £8.4 million, compared to £7.2 million at March 2009.  However, after allowing for the commitment to carry forwards and the planned use in 2010/11, the provisional level of uncommitted balances is £5.7 million, which includes those balances that are provisionally allocated but not planned for use in 2010/11.

The reporting of revenue outturn could wait until June Cabinet, when final figures are available in the statement of accounts prior to external audit.  Providing provisional outturn to Cabinet at this time facilitates good financial management and aids consideration of issues within the current financial year and helps inform future budget strategy.