Revised Recommended Template s4

*PART 1 – PUBLIC DOCUMENT AGENDA ITEM No. 10

TITLE OF REPORT: SECOND QUARTER REVENUE BUDGET MONITORING REPORT 2009/10

REPORT OF THE STRATEGIC DIRECTOR OF FINANCE, POLICY & GOVERNANCE PORTFOLIO HOLDER: COUNCILLOR T.W. HONE

1. PURPOSE OF REPORT

1.1 The purpose of the report is to inform Cabinet of the summary position on income and expenditure as at the end of the period July to September 2009 for the General Fund and the Council’s trading account, Careline.

1.2 This report will highlight significant variances (+/- £25K or +/- 25%) on the working budget with explanations and impact upon next year’s base budget and the position of the Careline trading account.

1.3 The report also highlights, with the use of a traffic light system, the position with regard to the carry forward balances and efficiencies and investments approved for the year.

1.4 Key items that greatly influence the ‘financial health’ of the Council are monitored and reported here as key Corporate Health indicators.

1.5 This report also includes an update on the Council’s treasury management for the 2nd quarter and the reserve balances of the Council.

2 FORWARD PLAN

2.1 This Report does contain a recommendation on a key decision that was first included in the Forward Plan on 1 September 2009.

3 BACKGROUND

3.1 Members approved the General Fund 2009/10 estimates in February 2009 and approved General Fund net expenditure of £19.318million. In addition to the 2009/10 original budget, (on which the Council Tax increase of 3.9% was based), Members have approved carry forward budgets of £0.563million, (17 February 2009 £0.318million, 23 June 2009 £0.145million and a contribution into the strategic priorities fund of £0.100million) and a net increase to the base budget of £0.030million. The total original budget for 2009/10, was therefore, £19.911million. As part of an early start to the Corporate Business Planning process for 2010/11 Officers have completed a further detailed budget review and identified £0.093million of budgets that can be realised as efficiencies in 2009/10. The working budget for 2009/10, was therefore £19,818million.

CABINET (15.12.09) 3.2 The 2009/10 General Fund estimates included efficiencies of £1.172million and investments of £0.225million agreed as part of the Corporate Business Planning process and an allowance of £0.630million in reserves following a financial assessment of the risk register.

3.3 In September Members approved a General Fund budget of £19,991million, an increase of £0.173 million on the working budget of £19,818million. Members were also advised that the 2009/10 projected General Fund balance was projected to be £1.657million, a decrease of £0.173million over that previously reported.

4. ISSUES

General Fund – Income and Expenditure 4.1 The projected net expenditure on the General Fund is now estimated to be £19,965million, this is a reduction of £26k on the working budget of £19,991million, (the working budget includes carry forwards of £0.563million and any Directorate virements). The significant changes (+/- £25K or +/- 25% of the working budget) to the General Fund expenditure are detailed in table 1. Effects on the 2010/11 budget total an increase of £0.023million. The significant increase in Housing Benefit and Council Tax benefit claims may impact on the net expenditure during 2009/10 and a more detailed review is being completed to be reported in the month 8 budget review (see paragraph 4.17 for more details.

Table 1: Significant changes to the General Fund Increase Effect on Working Revised Expenditure/ (+)/ 2010/11 Budget Estimate Decrease Comment Income Budget £’000 £’000 (-) £’000 £’000 Salaries 13,991 13,860 -131 The budget for 2009/10 assumed pay inflation of 2%. The actual inflationary pay award was lower at 1%. The ongoing effect of this has already been included in the general fund estimates for 2010/11 onwards. Bank Charges 50 60 +10 Most of the charges are based on +10 usage, and an inadequate budget provision was made. A budget adjustment will be made in the 2010/11 budget. Child Care 9 0 -9 The existing child care assistance Assistance scheme which provided vouchers to assist members of staff with childcare costs has been terminated. It is planned that a new salary sacrifice scheme will be implemented during 2010/11. Investment 1,592 1,627 -35 Longer term deals by the Cash Interest Managers have managed to keep the level of interest above the budgeted figure despite a reduction of in house interest. Vacancy Control -402 -346 +56 The salary lag target will not be achieved, due to a reduction in staff turnover.

CABINET (15.12.09) Increase Effect on Working Revised Expenditure/ (+)/ 2010/11 Budget Estimate Decrease Comment Income Budget £’000 £’000 (-) £’000 £’000 Parking Service - 1,818 1,782 +36 Car park income is likely to +32 Car Park income underachieve by £49k, and penalty charge income by £15k. The variances are offset by additional income from residents parking permits of £28k. A condition survey of the public conveniences has identified repair Waste and maintenance requirements. Management – 5 25 +20 These are expected to be £20k more Repairs than budgeted. This is offset by savings on the public conveniences contract. Waste A new contract for public Management – convenience cleansing was let in Public 171 109 -62 -61 May 2009, which is significantly Conveniences cheaper than the previous contract. contract An appeal against the cemetery Burial Service – rateable values was successful, and 29 20 -9 Business Rates a refund has been received for overpayments made since 2005. The income target for sale of recycled produce is unlikely to be Waste achieved, mainly due to a reduction Management 663 573 +90 in the volume of paper which is +99 -Recycling recycled. The fall in the income is Income thought to be due to the current economic climate. Customer Service 19 13 -6 The spend on the Council’s landlines Centre - External is lower than budgeted. This is due telephones to a combination of more staff home working, and contract discounts negotiated by the Service Manager. Estates 7 13 +6 Consultants have been employed for -Consultancy commercial property rent review costs work. The additional costs should be offset by additional rental income which will be generated in future years. CCTV - 70 58 -12 There has been an increase in the -12 equipment, number of partners joining the CCTV furniture and partnership. The greater volume of materials work has lead to economies of scale. Therefore, the annual camera maintenance price has reduced. Other minor +20 -45 variances Total increase in General Fund -26 +23 expenditure

CABINET (15.12.09) Trading Accounts-Income and Expenditure 4.2 The 2009/10 budgeted surplus for Careline is £6.7k and the 2009/10 projected outturn remains unchanged.

2009/10 Carry Forward Budgets 4.3 There are a total of £0.563million carry forward budgets of which £0.150million relates to the strategic priorities fund and £0.138million relates to Area Committee budgets.

4.4 A condition of carry forwards is that there is a clear plan for spending the budget in the first half of the year. The carry forward budgets are given a traffic light code to signify whether there is a problem with spending or completing the project in this time. There is one carry forward at red status as at the end of September 2009, and seven carry forwards at amber status.

Table 2: Progress of carry forward budgets – Amber status Amber/Red Working Revised Expenditure/ Increase (+)/ Budget Estimate Decrease (-) Comment Income £’000 £’000 £’000 Performance A 5 5 0 Funding for printing of & Quality Corporate Plan 2010/11, currently in electronic form a decision will be made shortly as to whether the plan will be printed.

Capital R 17 5 -12 Revenue contributions to two Financing capital schemes. One scheme has now been completed at lower than estimated cost, leading to an underspend of £12k. This was reported at Quarter 1. Childrens A 5 5 0 Funding to support a youth Services – provision programme in the youth villages. Grants to development organisations totalling £2k funding have been committed, it is anticipated that the funding will be released by the end of November. The remaining £3k is earmarked for projects in three villages. All funds will be awarded by November 09. Parking A 14 14 0 Funding carried forward for the Services – Market Place Scheme in General Hitchin. Works are currently maintenance progressing and will be completed by 24th November. Leisure and A 10 10 0 Funding to support computer Cultural modelling of sports facilities Strategy and printing of a new overarching strategic document. All funds will be

CABINET (15.12.09) Amber/Red Working Revised Expenditure/ Increase (+)/ Budget Estimate Decrease (-) Comment Income £’000 £’000 £’000 spent by the end of January following the running of the Facilities Management Model and the print and finish of the documentation. Planning – A 50 50 0 Local Development Framework other hired projects have slipped due to services the Environment Agency directive (endorsed by Go- East) not to proceed with the Core Strategy and Development Policy until the Water Cycle Study has been completed. Many projects may be delayed until after the election so strong possibility that budget may have to be carried forward to 2010/11. Planning – A 27 27 0 Funding for the implementation other hired of a Traffic Regulation Order. services The works and spend will be by the end of the financial year.

Building A 10 10 0 A mircrofiching budget was Control – carried forward to enable files Other Hired to be microfiched after Building Services Control moved to the Town Lodge. There has been a delay in implementing mircrofiching, but this will be done prior to the end of the year.

2009/10 Efficiencies and Investments 4.5 Efficiencies and Investments, approved within the 2009/10 budget, are also given a traffic light code to signify whether there is a problem with achieving the budget. As at the end of September, there are five approved efficiencies at red status and two at amber status. Budgets at amber or red status are detailed in Table 3.

Table 3- Efficiency Budgets at Amber or Red Status Efficiency Option Amber/ Full Projected Explanation Red Year Variance £’000 £’000 IT- Take out 3 year R 21 +21 NHDC is tied into five year warranty contracts warranty agreements on which can not be terminated without penalty. Dell equipment instead The efficiency can be achieved in 2010/11 of the current 5 year once work on the server strategy is agreements implemented. The costs will be met from the IT reserve in 2009/10.

Planning -Cease R 28 +28 The government has issued a consultation CABINET (15.12.09) Efficiency Option Amber/ Full Projected Explanation Red Year Variance £’000 £’000 planning advertisements paper (August 09 ) in respect of changes to in local papers. advertising applications. Any amendments are likely to be introduced in April 2010 but at this stage it is not known what scale of efficiencies would be achieved. Parking Services R 50 +50 The improvement in income during -Reverse part of the December ‘08 has not continued. base budget reduction in the Car Park income and Penalty Charge Notice income targets Planning - Introduction A 2 0 Each application attracts a fee of £2,000 and of charges for non an application is expected later in the year. statutory diversions However the applicant is disputing the fee so under the Planning Acts. there is a possibility that the target will not be achieved. Communications Team A 3 0 Services have so far been sold to two -Provide external external clients, and income of £1.2k has training to other Local been achieved. It is unlikely that the full £3k Authorities on the target will be achieved during this financial consultation software, year. SNAP, and charge a consultancy fee

Vacancy Control R 145 +56 The full year vacancy control target will not be achieved, due to a reduction in staff turnover. Waste Management - R 360 +54 The volume of paper being recycled has New paper recycling declined due to the current economic climate. contract It is unlikely the full efficiency will be achieved in 2009/10. Total +209

4.6 The 2009/10 projected underachievement of efficiency options is £209k or 18% of the total efficiencies identified of £1,172million. Risks highlighted at amber status are not projected to underachieve at this stage.

2009/10 Investments 4.7 Approved investment bids in 2009/10 total £0.225million. At the end of September there are no investments highlighted at red or amber status and there is no indicated problems on their implementation plans.

Key Corporate ‘Health’ Indicators 4.8 There are 10 key corporate ‘health’ indicators reported in table 4 with further comments in paragraphs 4.9 to 4.18.

Table 4 – Key Corporate ‘Health’ Indicators CABINET (15.12.09) Indicator Working Variance Projected Related information provided in Budget to Year End paragraphs 4.9 to 4.18 Profiled Variance Budget £’000 £’000 £’000 Commercial Rents -924 0 +26 Occupancy rate and arrears.

Building Control -414 -17 0 Application numbers by type (Chart 1) Fees Planning Application -466 +69 0 Application numbers by type (Chart 2) Fees Land Charges -332 +1 0 Number of searches by type (Chart 3) Income

Car Parking Fees -1,244 +26 +58 Number of Penalty Charge Notices (PCNs) issued and Car Park tickets purchased (Chart 4A and 4B) Vacancy Control -593 +103 +69 Contributions to target and amounts taken from target. Investment Interest -1,633 -21 -35 Average interest rates and NHDC generated interest trend analysis. (see Appendix A) Benefit -367 -81 0 Aged Analysis of outstanding Overpayments overpayments Benefit Payments 33,525 1,904 +6,159 Caseload

Debt Provisions 37 n/a 0 Prior Year Arrears and Debt Provision Trend Analysis (Ctax & NNDR). (Chart 5A & 5B)

Commercial Rent 4.9 Occupancy is currently at 99% and invoices are being raised for all known commercial investments. Outstanding arrears have risen to £278k of which £252k is one to three months old, £13k of the total outstanding is less than a month old. This will continue to be monitored closely during 2009/10. Rent reviews are in progress and an increase in assessment for various properties has been anticipated within the working budget.

Building Control Fees 4.10 As can be seen in chart 1 the number of building regulation applications have fallen year on year since 2007/08 reflecting the economic climate. However, income received during the first quarter of 2009/10 is above the profiled estimate by £176k. The Building Control Reserve, built up from prior year surpluses, is available to offset any trading losses. The anticipated loss of £32k is budgeted to come from the reserve and this will reduce the reserve from an opening balance of £95k to a closing balance of £63K.

Chart 1

CABINET (15.12.09) Building Reg Application Numbers (for period July to September) by Type of Application

350 300 REGULARISATION

s FULL PLANS f 250 n o

o i r BUILDING NOTICE t

e 200 a b c i l m 150 p u p N 100 A 50 0

Planning Application Fees 4.11 Numbers of fee earning planning applications have remained low in the second quarter of 2009/10 and as a result the income estimate for the year has been revised downwards by £7k. A total of 284 fee earning applications were received in the second quarter of 2009/10 compared to 335 in 2007/08. In contrast the number of non-fee earning applications for the same period has reduced only slightly from 178 in 2007/08 to161 in 2009/10. There is no clear pattern in the number of applications month on month and further adjustments may be needed during the year as more data becomes available.

Chart 2

Number of Planning Applications (July to September)

n 500 o i t Total Number of a

c 400 i Applications l p

p Total Fee Earning

f Applications o

r Non Fee Earning

b Applications m

u 100 N

0 2007/08 2008/09 2009/10

Land Charges Income

CABINET (15.12.09) 4.12 The number of commercial searches in the second quarter is less than the number in the same period in 2008/09 while the number of residential and personal searches is higher. The result is that actual income received to date is slightly below the profiled budget by £1,000. The trend will be monitored over the next period before the estimate for the year may be adjusted as necessary. Chart 3

Number of Land Searches in 2nd quarter of the year

1200 s e

h 1000 0809 Actuals c r

a 800 e

S 09/10 Original Projection

f 600 o

b 09/10 Working

m 200 Projection u

N 0 Residential Commercial Personal Searches Searches Searches Type of Search

Car Parking Income 4.13 The total number of car park tickets purchased from April to September 2009 (657,228) is approximately 34,000 lower than those purchased in the same period in 2008/09 (690,744). The total number of valid PCNs issued to the end of September was 6,679, compared to 5,828 during the same period last year. Overall car parking income to the end of September is approximately £26k behind profiled budget. Chart 4A

Penalty Charge Notices issued by Month from 2006/07 to 2009/10

1,400 1,200

r 1,000 e

b 800 m

u 600 N 400 200 - April May June July August September Month

2006/07 2007/08 2008/09 2009/10

Chart 4B

CABINET (15.12.09) Car Park Ticket Sales by Town

400,000 r

e 300,000 b

m 200,000 u

N 100,000 - Hitchin Letchworth Royston Town

2006/07 2007/08 2008/09 2009/10

Vacancy Control 4.14 As part of the 2009/10 General Fund budget setting, the vacancy control target was increased to £0.593million. A net total of £0.275million has been achieved to date. This is the balance of a total contribution to vacancy control of £0.754million and a total of £0.478million used from vacancy control to fund employee costs that are not built into the budget e.g. temporary agency staff, market forces, post advertisement costs etc.

Investment Interest Income 4.15 The Treasury Statement in Appendix A details the activity of the Treasury function in the current financial year for the 2nd quarter. The total interest generated from investments for 2009/10 is expected to be above the original budget of £1.64million by £0.047million. This is £1,798million less than the amount received in 2008/09 of £3.485million and reflects the fall in interest rates over the last year. Interest rates for short term investment deals have been the worst effected, as is shown in 4.2.2 in the treasury report. The average interest rate achieved for in-house deals has fallen from an average of 4.92% in 2008/09 to an average for the second quarter of 2009/10 of 0.63%. The assumptions for 2010/11 will be revised during the budget estimate process with the latest projections.

Benefit Overpayments 4.16 Overpayments can be made for a variety of reasons and do not always become known for sometime. It is in the Council’s interest to identify overpayments as any monies successfully recouped can be retained by the Council. The budget includes an estimate of £367,000 for overpayments to be identified in 2009/10 while a bad debt provision is calculated to estimate the debts that will not be recouped. The level of overpayments is currently being monitored, and it is possible that the budget may need to be increased before the end of the financial year.

Benefit Payments 4.17 An increase in caseload should be matched by an increase in Housing Subsidy. The number of Housing Benefit claim parts has increased from 6,570 at April 2009 to 7,430 at 30 September 2009, an increase of 860. The number of Council Tax Benefit claim parts has increased from 7,716 at April 2009 to 8,891 at 30 September 2009. Since some claimants will receive both Council Tax and Housing Benefits the total number of claimants is lower, but the number of claimants has also increased by 337 in the same period from 8,869 to 9206. Trends in caseload can help to indicate performance in CABINET (15.12.09) other areas and may also be reflective of the current economic situation. The net effect on the budget of payments and subsidy is being reviewed in detail and it might be necessary to increase the budget requirement in the month 8 budget review.

Debt Provisions 4.18 The total debt provision will normally decrease during the year as prior year arrears are collected. As can be seen in Chart 5A debt provision for Council Tax and NNDR has reduced from £3,077million in April to £2,469million in September. However, this is £0,169million higher than the debt provision at September 2008. Prior year arrears as at September 2009 for Council Tax and NNDR are approximately 7% higher at £4,292million than they were at September 2008 (£4,006million).

Chart 5A

Provision for Bad Debt (Ctax and NNDR) from )

s April to September 0 0 0

' 3500 £ ( 3000 2008/2009 n o

i 2500 TOTAL s i PROVISION

v 2000

o FOR BAD DEBT r 1500 P

f 1000 2009/2010 o

t 500 TOTAL n

u PROVISION

o 0 FOR BAD DEBT m A

Chart 5B

Prior Year Arrears (Ctax and NNDR) over the )

s period April to September 0

0 6000 0 ' £ (

5000 s r

a 4000 e r r 3000 2008/2009 A

f 2000 PRIOR YEAR o

t ARREARS

n 1000 u

o 0 m 2009/2010 A PRIOR YEAR ARREARS

CABINET (15.12.09) Strategic Priorities Fund 4.19 The 2009/10 carry forward budgets includes £0.150million for the strategic priorities fund of which £50k is allocated to projects. All bids to the fund should be of a one off nature and may arise as a result of a service review and ideally be of an invest to save nature. CMT are tasked with scrutinising bids and allocating funds. The fund has been allocated to projects this year and just £5k remains unallocated. The £100k funding for 2009/10 has been allocated as shown in table 6.

Table 7: Strategic Priority Fund Allocations 2009/10. Scheme Allocation Homeworking £32,500 Baldock Town Centre Maintenance £8,500 Strategy for Community Infrastructure Levy and £9,000 Section 106 payments into Community Facilities Report of Lumen Rd Contamination £45,000 Unallocated £5,000 Total awarded £100,000

General Fund Balances Projected for 2009/10 4.20 The revised 2009/10 General Fund projected net expenditure will result in an increase of £0.026million in the year end General Fund balance .

4.21 The General Fund balance is now projected to be £1.683million at 31 March 2010. A summary of the transactions creating this balance are shown in table 7. Table 7: Projected General Fund Balances as at 31 March 2010 (Key: - = reduction in expenditure, + = increase in expenditure)

Projected General Fund Balances as at 31 March 2010 £’000 Balance Brought Forward (1/4/2009) 1,583cr Projected Net Spend (including precepts) 21,297dr Precept Receipts & Government Grants 18,797cr Contribution from IT Reserve 250cr Contribution from Strategic Reserve 2,350cr Balance Carried Forward (31/3/2010) 1,683cr

Earmarked Reserves 4.22 The Council has a number of earmarked reserves which can be used to fund revenue expenditure, these are detailed in Table 8. Table 8 – Earmarked Reserves 2009/10 Projected Balances Payments to Projected at 1 AprilProjected Fund Balance at 31 2009 Contributions expenditure March 2010 £’000 £’000 £’000 £’000 Insurance Reserve 126cr 0 0 126cr Information Technology Reserve 830cr 244cr 820dr 254cr Strategic Reserve 2,419cr 0 2,350dr 69cr Environmental Warranty Reserve 209cr 0 0 209cr Museum Exhibits Reserve 12cr 0 0 12cr Building Control Reserve 95cr 0 32dr 63cr Hitchin Museum Donations 1cr 0 0 1cr Planning Delivery Grant Reserve 511cr 0 0 511cr Cemetery Mausoleum 33cr 0 0 33cr S106 Monitoring 21cr 0 0 21cr Concessionary Fares 51cr 80cr 0 131cr

CABINET (15.12.09) Projected Balances Payments to Projected at 1 AprilProjected Fund Balance at 31 2009 Contributions expenditure March 2010 Property Maintenance 10cr 10cr 10dr 10cr Leisure Management Reserve 10cr 0 10dr 0 Total Revenue Reserves 4,328cr 334cr 3,222dr 1,440cr

4.23 A net total of £3,222million is anticipated to be used from earmarked reserves during 2009/10 leaving a balance at 31 March 2010 of £1,440million. The continued use of reserves is not sustainable for future years and this will need to be addressed as part of the Corporate Business Planning process for 2010/11.

Treasury Report 4.24 The treasury report in Appendix A details the activity of the treasury function in the current financial year until the end of June.

5. LEGAL IMPLICATIONS

5.1. There are no legal implications at this stage although Members are reminded of the duty to set a balanced budget and to maintain a prudent balance.

6. FINANCIAL AND RISK IMPLICATIONS

6.1 Members have been advised of any variations from the budgets in the body of this report and of any action taken by officers.

6.2 The projected balance of £1.683million is approximately £55k higher than the recommended minimum balance of net General Fund reserves. The minimum balance for 2009/10, to allow for a 5% tolerance on net expenditure and identified key budget risks, is £1.628million.

7. HUMAN RESOURCE AND EQUALITIES IMPLICATIONS

7.1 Although there are no direct human resource implications at this stage, care is taken to ensure that where efficiency proposals or service reviews may effect staff, appropriate communication and consultation is provided in line with HR policy.

8. RECOMMENDATIONS

8.1 Cabinet is requested to ask any questions which may arise from the report’s contents and note this report and appendix A, the treasury management activity to September 2009.

8.2 Cabinet is requested to approve the changes to the 2009/10 General Fund budget identified in paragraph 4.1, table 1, a £26k reduction in net expenditure.

8.3 Cabinet is asked to approve the changes to the 2010/11 budget detailed in paragraph 4.1,table 1, a net £23k increase in net expenditure.

9. REASONS FOR RECOMMENDATIONS CABINET (15.12.09) 9.1 Members are able to monitor and request appropriate action of Directorates who do not meet the budget targets set as part of the Corporate Business Planning process.

9.2 Changes to the Council’s balances are monitored and approved.

10. CONTACT OFFICERS

10.1 Report Writer – Tim Neill, Accountancy Manager Tel 474470, [email protected] 10.2 Contributors – Andrew Cavanagh, Head of Finance, Performance and Asset Management, Tel 474243 Kerry Shorrocks, Corporate HR Manager Tel 474224 Katie White, Acting Corporate Legal Manager, Tel 474315

11. BACKGROUND PAPERS

11.1 Estimates 2009/10 Statement of Accounts 2008/09

12. APPENDICES

12.1 Appendix A -Treasury Management Report

CABINET (15.12.09)