`
FINANCE AND ASSET MANAGEMENT SUB-COMMITTEE – 10 DECEMBER 1998
A G E N D A
PART I - MEMBERS PUBLIC (INCLUDING THE PRESS)
(1) Apologies for absence and to report any changes of membership (2) Minutes of the meeting held on 29 September 1998. (2) Disclosure of any other business items in Parts I and 2 to be raised by Members (3) Disclosure of any other business items in Parts 1 and 2 considered urgent by the chairman (4) To confirm that the items of business marked in Part 1 will be considered in public and any items marked Part 2 will be considered in private (5) To note that none of the items fall within the provisions of Section 106 of the Local Government Finance Act 1992 (6) Report of the Officers
1. Asset Management Plan Page 1 2. The Council’s Capital Maintenance Programme Page 11 3. Compulsory Competitive Tendering - Finance Page 21 4. Annual Treasury Management Report Page 41 5. Hillingdon Direct Services Half Year Financial Page 52 Review 6. Finance and Asset Management Sub-Committee Page 55 Revenue Budget 1998/99 7. Devolved Financial Services – Management Page 60 Review 8. Approval of the Audited Statement of Accounts Page 71 9. Performance of Council Tax Collection Page 74 10. Park Lodge Farm Centre, Harvil Road, Harefield – Page 77 Future Management Considerations 11. Nature Reserves in Hillingdon Ownership Page 83 Managed by London Wildlife Trust – Grant of 25 Year Leases 12. Collection Performance – National Non-Domestic Page 96 Rates 13. London Borough Grants Committee 1998/99 Page 102 14. Council Tax and National Non-Domestic Rate – Page 103 Irrecoverable Amounts written off under delegated powers
(8) Any other business and urgent items in Part I
PART 2 - MEMBERS ONLY `
15. Kingsend Phase 2 Page 105
This report is included in Part II agenda as it contains exempt information relating to any terms proposed or to be proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services. (Exempt information under in the Local Government : (Access to Information) Act 1985 Schedule 1 Part 1, para 9 and para 12 in relation to an opinion received from counsel on a matter affecting the Council.
16. HACS Proposal & the Joint Review of Barra Hall, Page 118 Chestnuts and Moorcroft Sites
This report is included in the Part 2 agenda as it contains exempt information relating to any terms proposed or to be proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services. (Exempt information under the Local Government : (Access to Information) Act 1985, Schedule 1- Part 1, para 9
(9) Any items transferred from Part 1 (10) Any other business items in Part 2 (11) Any other items of business in Part 2 considered urgent by the Chairman `
ASSET MANAGEMENT PLAN ITEM 1
CONTACT OFFICER: Martin White TELEPHONE: 01895 250936
SUMMARY
To consider further progress made in developing an Asset Management Database and Asset Management Plan.
RECOMMENDATION
That the Sub-Committee notes the progress made to date.
INFORMATION
1.1 Officers have been fully engaged in undertaking a review of Property and Asset Management issues and a full report is being made on the results of this to the Policy Committee on 17 December 1998.
1.2 In the meantime, and as part of that review, substantial progress has been made in identifying the Council’s most important property assets and obtaining some key data on them. This is provided in Appendix A.
1.3 Further work will now be undertaken by officers to expand the information in the database and on the issues raised in the report to Policy to develop an Asset Management Plan.
LEGAL IMPLICATIONS
No Legal comments
RESOURCE IMPLICATIONS
The efficient management of the Council’s property assets is an important part of the medium term financial strategy
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 1 `
THE COUNCIL’S CAPITAL MAINTENANCE PROGRAMME ITEM 2
CONTACT OFFICER: Tony Butler (Financial Issues) Telephone 01895 250111 ext. 2085 Gerry Edwards (Property Issues) Telephone 01895 250903 Gillian Ralphs (Highways Issues) Telephone 01895 277500
SUMMARY
Policy Committee at its meeting of the 13th October 1998 delegated responsibility for the allocation of General Fund maintenance resources to this Sub-Committee. This report informs the Sub-Committee of the current position in respect of available maintenance resources, the current maintenance requirements of the Council’s assets and other issues relating to the maintenance programme.
RECOMMENDATIONS
It is recommended that the Sub-Committee:
I. Agree that the Capital Maintenance Programme should provide for expenditure to cover maintenance of the Council’s Land, Property and Highways Assets and provide a contingency to cover unexpected items that may arise during any financial year.
II. Agree that the allocation of maintenance resources will be made on a scheme by scheme basis rather than by block allocation to service groups for 1999/2000 and future years.
III. Agree that the distribution of maintenance resources between the items identified above in recommendation 1 will be as set down in paragraph 9 for 1999/2000 and future years.
IV. Agree that the methodology for the prioritisation of maintenance expenditure to be used by officers in reporting to the Sub-Committee on future maintenance demands will be as set down in paragraph 11 in respect of Council Land, Property and Highways
V. Instruct officers to prepare a report for the next meeting of this Sub- Committee which identifies how the 1999/2000 maintenance allocation could be distributed to meet the most urgent maintenance needs of the Council based on recommendations 1 to 4 above.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 11 `
VI. Request that the report to Policy Committee on the 25 February 1998 on the Capital Programme suggests that, subject to consideration of the overall resources position of the programme, the level of capital maintenance resources be increased for 1999/2000 to £1.5m, for 2000/2001 to £2m and for 2001/2002 and future years £2.5m.
VII. Instruct officers to begin the development of a planned three year rolling maintenance programme that would be complementary to the Asset Management Plan and the development of medium term Revenue and Investment Strategies on the basis the Policy Committee approves the resources requested in recommendation VI above.
VIII. Agree that £65,000 of the current years unallocated maintenance provision be allocated to HDS to carry out the resurfacing of the Vehicle Workshop roof for the reasons set down in paragraphs 30 to 35 of the report.
INFORMATION
2.1 As part of its decisions in respect on the report on the Council’s Capital Programme on the 13th October 1998 Policy Committee approved that the allocation of General Fund maintenance resources be delegated to this Sub-Committee. The basis for this delegation was the Sub-Committee’s work on the development of an Asset Management Plan (AMP) which with other advice should be able to help the Sub-Committee make decisions on future maintenance allocations to services.
2.2 There are basically three broad areas of expenditure that the resources made available for maintenance need to meet. These are:
· To maintain the Council’s Land and Property Assets
· To maintain the Council’s Highways (including Footpaths and Street Furniture)
· To provide contingency cover against major unexpected maintenance requirements that may arise in year (including the removal of dangerous material)
The Allocation of Maintenance Resources
2.3 In previous years the maintenance allocations to groups have been made primarily as block allocations with the actual expenditure on individual schemes determined by Service Committees. Service Committees have then allocated these resources towards maintenance priorities within their areas. The actual block allocations have tended to distribute maintenance resources inequitably across all PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 12 ` service areas, with most groups receiving an equal share of the resource with the exception of Education which has normally received double other service areas. Whilst this approach has provided a distribution mechanism it has not necessarily direct resources towards the most urgent maintenance needs of the Council.
2.4 The development of the AMP by the Sub-Committee would provide an opportunity to move away from block allocations and allow it to allocate resources to individual maintenance projects or programmes bid for by Service Committees. Such bids from Service Committees could be amalgamated into a single list based upon agreed prioritisation criteria that draws upon information held within the AMP and elsewhere. Such an approach would ensure that maintenance resources are directed towards the most urgent maintenance priorities across all Service Groups. Such an approach would also have two additional benefits:
· It would enable the Sub-Committee to take a wider view of the use of maintenance resources in such areas as Energy Audit.
· It would ensure that all maintenance resources are spent on maintenance projects. Current practice has allowed Service Committees to use their maintenance allocations to meet the costs of other projects in their areas that have overspent.
2.5 The approach suggested above could be incorporated into a process whereby:
· Service Groups would need to identify and submit bids on their maintenance requirements by the end of October
· These bids would then be amalgamated and reported to the Sub-Committee in December for decisions on allocation
2.6 At that time it would also be possible for the Sub-Committee to decide whether it was appropriate, depending on the circumstances, to release any resources from the maintenance contingency to allow design work on certain schemes to begin prior to the beginning of the new financial year. Officers would recommend that this approach be adopted.
The Distribution of Resources between Different Maintenance Types
2.7 One area that has been given consideration is whether it is possible to produce an amalgamated list that prioritises maintenance combining both Land & Property and Highways. It has been concluded that it would be difficult to make judgements between the prioritisation of Highways schemes and other maintenance issues relating to Land & Property. However it would be possible for the Sub-Committee to determine an agreed split of resources between Highways and Land & Property which would enable officers to forward plan expenditure on a programmed basis (see later section on programmed maintenance) with some certainty of resource allocation. This would be consistent with Central Governments newly introduced 3 year PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 13 ` budgetary cycle and more importantly within the Council’s own proposed development of a medium term revenue and investment strategies.
2.8 To accomplish the above it would be necessary to determine:
· The level of central provision to be held by the Sub-Committee to cover emergency measures.
· The split of available resources between Highways and Land & Property maintenance.
2.9 Having considered the possible distribution of maintenance resources between these areas it is suggested that for 1999/2000 and future years that the Sub- Committee:
· Retains a central contingency of 10% of the total allocation for any year to cover emergency measures such as the removal of dangerous material.
· Adopts a policy whereby 75% of the remaining allocation is used to resource maintenance of Land & Property and 25% used to resources the maintenance of Highways.
2.10 The reasoning behind the allocation split set down in paragraph 2. above would be to recognise that the majority of resources need to be made available to maintain Land & Property so as to ensure the continuation of service provision from current assets but also the importance of providing resources to maintain the Council’s infrastructure.
Criteria for Prioritisation
2.11 To enable the allocation of maintenance resources to be made on the basis of the approach set down in paragraphs 3 to 10 above there needs to be an agreed set of criteria for the identification and prioritisation of maintenance resources. There would need to be two sets of such criteria to cover Land & Property and Highways maintenance. The Council already uses prioritisation criteria in respect of both these areas and these have been revisited as part of preparing this report. A proposed set of criteria for both areas is set down below:
· Land & Property
q Safety - Maintenance work of a health and safety nature which must be undertaken to keep a service open. This would include works required to meet the provisions of the Disability Discrimination Act.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 14 `
q Leaseholds - Maintenance work which must be undertaken to fulfil the Council’s leasehold obligations where it either leases out buildings to other occupiers or where it leases properties for its own use.
q Revenue saving - Building work that could lead to future revenue savings e.g. works that are identified in energy audits.
· Highways
q Safety - Works carried out to ensure that roads are in a safe condition for the traffic, including pedestrians, the disabled and all others who are likely to use them. This priority of work is usually referred to as Day to Day Maintenance.
q Fabric - Protective and repair measures designed to limit the detrimental effects of natural or imposed changes which causes serious failure of roads, footways, street lighting units and bridges. Early intervention can avoid the significant costs associated with delayed maintenance and the adverse affect upon trade and commerce of frequent emergency repairs and delays to business traffic. This priority of work is termed Planned or Programmed Intervention Maintenance.
q Amenity - Maintenance of features within the street scene which enhances its appearance, this includes mowing of grass verges, tree care, tending flower beds and landscaping, upkeep of street furniture, removal of detritus, weeds and fly tipped material.
2.12 In considering the production of an overall prioritisation list for each of these areas it would also be necessary to take account of wider Council policies and strategies in relation to Revenue, Investment and Best Value.
Overall State of the Stock
Property
2.13 The Council’s General Fund building stock is still in considerable need of maintenance both in terms of health and safety works and general property maintenance. The level of resources made available for maintenance over a number of years has been insufficient to meet the demand for expenditure. It is estimated that the outstanding backlog of maintenance is around £20m and this will be confirmed at the next Sub-Committee once the current years condition surveys have been completed.
2.14 In addition to the overall state of the stock there are three specific areas relating to property maintenance that are worth noting as follows:
· Energy Audits - Property Consultancy are currently undertaking a number of
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 15 `
pilot energy audits on General Fund Buildings. It is highly likely that these audits will recommend expenditure. Investment in this area not only produces revenue savings but also improves the condition of the properties concerned.
· Listed Buildings - The Council is the owner of a considerable number of statutorily Listed Buildings some of which are in a poor state of repair e.g. Moorcroft Mansion House, Manor Farm House and Barra Hall. It is possible that English Heritage could serve the Council a Repairs Notice on any of these buildings if they believe the buildings are deteriorating. Such notices could require the Council to carry out very expensive repairs to the detriment of the both the maintenance and general capital programmes. Consideration should therefore be given as to whether resources should be applied to these buildings on a regular basis to prevent such an occurrence.
· Leasehold Properties - The Council leases a number of properties on a fully repairing basis and it is important the appropriate level of maintenance is carried out on these to avoid large scale expenditure bringing these buildings up to the owners required standards towards the end of the lease.
Highways
2.15 During the budget saving exercise that took place in 1991/92, £4 m was removed from the Highways Maintenance budget. During 1994/95 further reductions of approximately £0.5m were made. These savings were made to the planned maintenance portion of the total budget. This means that we no longer carry out any reconstruction’s or major resurfacing of roads or footways and are limited to patching those areas, which become dangerous.
2.16 Prior to 1991/92 the general highway condition was good with the funding shared proportionality between the borough’s principal roads and other residential roads on a priority needs programmed basis. Since then inevitable deterioration has occurred to the point where the overall condition is poor with each winter causing a faster rate of decay. The resultant backlog of major repairs now exceeds £40 m.
Benefits of Planned Maintenance
Property
2.17 In order for the Council to ensure that its buildings are kept in good condition it is essential that the Council is aware of what maintenance works are required in order to allocate resources. These resources will provide for maintenance on both a day to day basis and for the replacement/refurbishment on major elements of property assets e.g. boilers for heating systems. This later type of maintenance is normally funded from capital resources.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 16 `
2.18 The advantage of planned maintenance is that using information that is already available it is possible to identify works that will need to be carried out in the future. Having a planned maintenance programme would mean that property asset were maintained in such away that they were kept in good condition without them falling in disrepair. The benefit of such a programme can be to reduce the overall costs of maintaining assets by effectively investing now to save later. It should be recognised that buildings requiring maintenance can deteriorate if the necessary resources are not applied in the short term.
Highways
2.19 Maintenance needs to be a balance between day to day attention to ensure that the highway network is safe, and planned maintenance to prevent major structural failure occurring.
2.20 Where planned maintenance is halted; pressure is put on the day to day maintenance, as the need to carry out safety repairs increases due to the continuing deterioration of the highway network. The Highway Authority must deal with these safety repairs because of its statutory duty and vulnerability to claims for compensation where accidents occur. This activity causes a fragmented approach to work programming, which is not cost effective.
2.21 Additionally, the absence of planned maintenance causes defects, which may not be an immediate danger to the road user but if not attended to can significantly increase the extent and the cost of the eventual repair.
Specific Issues
2.22 Education – There are two points to note in respect of Education maintenance that need to be noted in the paragraphs below.
2.23 Education Revenue Maintenance 1998/99 - This is currently identified of overspending by in excess of £150k. It would be possible to fund a considerable element of this from the current years-unallocated capital provision. However this may impact on the Sub-Committees ability to:
· Respond to emergency issues during the winter period
· Pump prime design works in respect of next year’s allocation
· Reduce the overall resources available for maintenance up to the end of 2000/2001.
2.24 Given the overall demands for maintenance it would not be recommended that the Sub-Committee agreed to any additional allocation to Education until the detailed report referred to in recommendation V has been prepared.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 17 `
2.25 Future Schools Maintenance - In accordance with the School standards and Framework Act, the revenue budget for repairs and maintenance will be delegated to schools from April 1999.
2.26 Although a final decision has yet to be made, it is unlikely that a contingency fund will be held centrally to deal with emergencies. This is because:
· Setting it up would involve holding funds back from delegation
· Every school would want to make demands on the fund
2.27 The LEA will remain responsible for capital maintenance for all maintained schools and from the 1 April this will include grant-maintained schools.
2.28 Priorities will be determined by the condition surveys carried out as part of the Asset Management Plan.
2.29 The New Deal for Schools (NDS) initiative is due to continue for the lifetime of this Parliament and has three years to go. Bids must meet strict criteria applied by the DfEE. The DfEE has made it clear that LEA’s are expected to continue to have a capital maintenance programme and that NDS must not be seen as a substitute for local funding. The return, which must accompany the 1999/2000 NDS bids, asks for information on the LEA’s capital programme for both 1998/99 and 1999/2000.
2.30 HDS - Re-Surfacing the roof of the Vehicle Workshop - HDS have identified that the condition of the roof of the 10 bay vehicle workshop at Harlington Road Depot has deteriorated to such a degree that it is now considered essential that the roof is completely resurfaced in order to prevent further water penetration and remove health and safety risks.
2.31 The Finance and Property Sub Committee on 26 September 1996 received a report which highlighted the operational problems caused by the poor state of the roof of the vehicle repair workshop. The Sub Committee agreed to allocate £10,000 of capital resources for temporary repairs to the roof and were advised that this remedial action would prolong its life by a further year.
2.32 The Council is contractually obliged to maintain the fabric of the workshop in a sound and weatherproof condition under the terms of the Vehicle and Plant Maintenance Contract with HECO Ltd.
2.33 The condition of the roof has deteriorated further and severe water ingress is causing serious health and safety risks as water is penetrating the roof in many areas and affecting electric lighting circuits and the operation of three phase machinery within the workshop. Emergency measures have been implemented to isolate the
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 18 ` hazards and reduce the risk of injury, however it is now considered essential that the roof is fully re-surfaced.
2.34 Property Consultancy have advised that further temporary ‘patching’ of the roof is not a cost effective option and have recommended that the roof is re-surfaced in order to fully alleviate the problem.
2.35 Initial estimates suggest that the total cost of the work will be in the region of £65,000. However detailed estimates have been sought and the final figure will be reported as part of the Sub Committee’s next Capital Maintenance Programme report.
Resources for Capital Maintenance
2.36 The current unallocated maintenance provision that has been made available to the Sub-Committee is as follows:
Table 1 - Available Maintenance Resources 1998/99 - 2000/2001 Year Amount £ 1998/1999 225,000 1999/2000 836,000 2000/2001 1,000,000 Total 2,061,000
2.37 As can be seen from the table the level of resources currently available for maintenance is small. In 1994/95 the Council introduced an ongoing maintenance programme of £2.5m per annum. This programme has however been reduced as a result of the need to revise the capital programme in the light of resource allocations from Central Government in the last two years. The current level of available resources can do little more address the most urgent maintenance issues facing the Council.
2.38 The Sub-Committee may wish to consider seeking additional resources for maintenance in future years. Suggesting to Policy Committee that, should resources be available, the maintenance programme be increased to £1.5m in 1999/2000, £2m in 2000/2001 and £2.5m from 2001/2002 could start this onwards. However even this increase in resources will not provide sufficient resources to deal with all maintenance issues requiring attention. Therefore it will be necessary to determine how the resources available will be allocated to maximise their use using prioritisation as set down in paragraph 11 above.
2.39 One additional option that maybe available for addressing some maintenance issues is to apply for Lottery Funding. Officers consider that it may be possible to bid for Lottery Funding as a contribution towards the maintenance (particularly external) of some of the Council’s more important Listed Buildings which are in a poor state of repair. This would however require the Council to provide matched funding for such PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 19 ` works. This option is perhaps most useful in relation to planned maintenance where it would be possible to identify when such works might be funded within the Councils own programme in advance. In such a case it maybe possible to prepare the appropriate bids for external funding to match the availability of the Council’s own resources.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 20 `
Conclusions
2.40 There are limited resources currently available to provide for the maintenance of the Council’s land, property and highways. To maximise the effectiveness of these resources there needs to be a clear process for the allocation of such resources. This process should be based on a system, which prioritises need within defined categories of expenditure.
LEGAL IMPLICATIONS
2.41 In making decisions on maintenance the Council must bear in mind the need its legal duties. The Council has a specific statutory duty as Highway Authority to maintain the highways for which it is responsible. It also general legal duty as an occupier of premises to which the public have access to ensure that they are kept in a reasonable state of repair to ensure there is no danger to the those using the premises.
RESOURCE IMPLICATIONS
2.42 This report was prepared in conjunction with the Director of Finance and comments on resource implications are included in the main body of the report.
BACKGROUND DOCUMENTS
Report and Minutes of Policy Committee 13 October 1998.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 21 `
COMPULSORY COMPETITIVE TENDERING - FINANCE ITEM 3
CONTACT OFFICER: Janice Maule TELEPHONE: 01895 250567
SUMMARY
A report on Finance CCT, submitted to the most recent Best Value Sub-Committee, is attached for information.
RECOMMENDATION
That the report and the current position be noted.
INFORMATION
3.1 At the previous meeting of this Sub-Committee, Members expressed a wish to receive copies of reports to the Best Value Sub-Committee covering services within the responsibility of the Finance and Asset Management Sub-Committee.
3.2 The attached report on Finance CCT was submitted to the Best Value Sub- Committee on 17th November. The recommendations were agreed, following discussion. The first resolution, on the services to be put out to tender, has since been requisitioned for further discussion at Council.
3.3 Two other decisions of the same Sub-Committee were also requisitioned. All three issues are subject to strict legal timetables for tendering action. As the next scheduled Council meeting is not until 28th January, the possibility of a Special Council meeting is being considered.
LEGAL IMPLICATIONS
The report includes details in relation to the proposals on Finance CCT. There are none arising from this report.
RESOURCE IMPLICATIONS
The report includes details in relation to the proposals on Finance CCT. There are none arising from this report.
BACKGROUND DOCUMENTS
None
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 22 ` Appendix A
COMPULSORY COMPETITIVE TENDERING - ITEM 8 FINANCE
Contact: Janice Maule Telephone: 01895 250567
Reason for Urgency
Under CCT legislation the Council should have completed a tendering and contracting process by 1st January 1999. An exemption needs to be sought from the Department of the Environment, Transport and the Regions at the earliest possible date.
Appendix A is included in Part 2 of the Agenda as it contains information relating to the amount of any expenditure proposed to be incurred by the Authority under any particular contract, for the acquisition or disposal of property or the supply of goods or services (exempt information under paragraphs 8 and 9 of Part 1 of Schedule 12A of the Local Government (Access to Information) Act 1985.
SUMMARY
This report sets out proposals for complying with the CCT legislation relating to finance work in the authority. It considers the main financial services carried out in the council and their suitability for competitive tendering. It also deals with the various approaches to contracting to be considered.
RECOMMENDATIONS
1. That the core package should be comprised of Council Tax, National Non-Domestic Rates, Benefits (excluding fraud investigation) and the Cashiers function, with the associated IT
2. That the Sub-Committee indicates whether it wishes additional services to be subject to competitive tendering and if so, in what packages
3. That the Sub-Committee determines whether to adopt the Compulsory Competitive Tendering or the Voluntary Contracting Out approach for the core package (and any additional work identified under Recommendation 2)
4. That a contract be tendered for the collection of residual community charge on a commission basis, either as part of the core contract or separately
5. That a further request be made to the DETR for exemption from CCT, based on a timetable which reflects the chosen approach
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 23 `
Background
8.1. At its meetings on 29th June and 16th September 1998, this Sub-committee considered the poor response from contractors to the finance CCT package containing Council Tax and devolved Accountancy work, agreed to change the approach to CCT to generate market interest, and asked for a report with firm proposals to achieve that.
8.2. Members are reminded that the legislation on Compulsory Competitive Tendering (CCT) is still in place and must be complied with. This includes the need to avoid anything that could be considered “anti-competitive behaviour” which can be summarised as anything that would discourage effective competition.
8.3. On 5th November the Council approved a proposal to save up to £175,000 in 1999/2000 and up to £350,000 in a full year through partnership arrangements for finance work.
8.4. Proposals for CCT therefore need both to comply with the law and to deliver substantial savings.
8.5. The report makes reference to discussions held with financial services contractors. The Director of Finance is confident that their views are representative of the market for local authority financial services.
The financial target
8.6. The CCT legislation requires that 40% of the value of finance work carried out in the authority has to be exposed to competition by 1st January 1999. The current estimate of this target is £2.8m.
8.7. The cost of all the various financial services (as defined by legislation) is shown in Appendix A (a Part 2 item). This figure may change as a result of budget decisions taken in relation to next year. If Members select a core package which is very near to the target value, it may therefore be necessary to add small items of similar work to the package to make up the target. Detailed analysis of client side costs may also affect the value of the package.
8.8. There is nothing to prevent the Council from exceeding the CCT target if it wishes. The discussions with contractors did not identify any particular advantage which might be gained from having a larger package, although they would not refuse to tender for large packages. From the Council’s point of view, a small number of large contracts is easier, and therefore cheaper, to manage then many small ones.
8.9. A description of each of the main services and its potential suitability for competition is given below, followed by comments on the scope for packaging.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 24 `
Review of the financial functions of the Council
Council Tax
8.10. Revenues work is the service most commonly selected by authorities for competition. The previous administration selected Revenues as being suitable for competition and a considerable amount of work has been done since to reduce costs substantially and improve quality. Staff have been working towards competition in the expectation that they would be given the opportunity to demonstrate their ability to provide a cost-effective quality Council Tax service, through the tendering process.
8.11. The national performance indicators for 1997/98 are not yet available. Scrutiny of the 1996/97 results suggest that there could be scope for savings of the order agreed by Council. Caution is needed in relying too heavily on these statistics, as it is not certain that all authorities report their costs in the same way. If Hillingdon could become one of the cheapest 25% of London Boroughs for Revenues, in line with the expected Best Value legislative target, a significant saving would be achieved.
8.12. The Cashiers office, which is managed as part of Revenues, should be included because of its close connection with Council Tax. A small client function already exists in Financial Services.
National Non-Domestic Rates
8.13. Members will be aware that the National Non-Domestic Rates contract is currently being operated by an in-house team who have been severely hampered by difficulties with a new computer system. If this team had remained part of a larger team, it would have been easier to bring additional resources to bear on the problem at an earlier stage, from elsewhere in the organisation. The team has failed to meet the collection targets in the contract and although this is due to factors beyond its control, the DETR will expect to see the Council take steps to improve performance. In any event, the current contract expires on 31st March 2000. As an in-house “contract” has no legal force, the Council is free to re-tender this work at any time. The Director of Finance feels that this should be included in the new package.
Benefits
8.14. All Benefits work is now carried out in the Housing Group. It was not selected by Members for inclusion in the CCT package previously for a number of reasons. The merger of staff from Finance into the Housing team was at an early stage and it was recognised that it would take some time for the new organisation to be fully effective. The merger is now complete and the service is meeting high performance standards, largely due to the commitment and skills of the staff involved. Other issues which were taken into consideration and remain pertinent are: the front-line PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 25 ` nature of the service which holds personal and sensitive data about private individuals; and the provision by the Benefits team of information and services for other Housing and Social Services functions including the Housing DSO which is responsible for managing Council tenancies and temporary accommodation for homeless families. Examination of the 1996/97 Performance Indicators indicates that the cost of benefits administration meets the likely Best Value target, although in that year the level of performance was very low, mainly due to the merger and a new computer system. The same caution needs to be applied to reliance on these statistics as is noted above for Council Tax. The performance on fraud recovery has exceeded Government targets and is generating additional subsidy income for the Council.
8.15. Staff in the Benefits team would be anxious to have the time and opportunity to bid against any external competition as has been Council policy on all other previous CCT programmes.
8.16. All financial services involve some degree of confidentiality and interaction with other services and any contract will need to set adequate quality standards as safeguards. The need to satisfy the external auditor and the DSS as to the validity of the grant claim will also require careful monitoring and clear performance standards. A number of authorities have included Benefits with Council Tax in their competition packages and will have adopted this stance.
8.17. An allowance has been made for a small “client” function to be retained for Benefits work. This team would carry out the formal approval of benefit payment (required by DSS under present legislation) and other work in support of policy issues or liaison with other organisations, where this would not be appropriate to specify in a contract. Investigations would also be a “client” role. This would promote the independence of this work from involvement in calculation and approval of benefits and avoid possible legal doubts about participation in anti-fraud initiatives such as data-matching exercises.
8.18. Council Tax and Benefits both use the same software packages, supplied by FirstSoftware. This system is widely used and contractors are familiar with it and used to dealing with the software company.
Accountancy
8.19. In the current market, it is clear that there is little interest in competition for accounting work, whether in the devolved groups or in corporate accountancy. There is no realistic prospect of making savings. The work does not lend itself to significant improvements through the use of IT, which limits the scope for savings. It is difficult to specify and monitor accurately because of the need for regular changes. These factors make this work extremely unsuitable for competition.
8.20. Rent accounting is carried out in Housing Services. While it would be feasible to include this in a package with Revenues and Benefits, because of the similarity of some aspects of the work, it also has important links with Housing Management. It is PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 26 ` unlikely that competition would produce savings. The Acting Director of Housing recommends that it should not be included in the package.
8.21. Some authorities have outsourced all or part of their accountancy work but only as part of comprehensive packages of finance work. It appears that the number of potential tenderers for such packages would be very small. A considerable amount of work has been done by the finance staff in groups to identify areas of improvement and to develop good practice guidelines and standards. The Director of Finance would recommend that this work is given time for implementation and is then reviewed under the Best Value regime as part of the Council’s rolling programme.
Payroll
8.22. Payroll work is likely to be reasonably attractive to potential tenderers. Local authority payroll work is more extensive than the work that payroll processing bureaux carry out and there is consequently only a small number of potential competitors in this field. Payroll costs have been inflated temporarily in recent years because of the implementation of a new system but prior to that, its costs were in the lowest 25% of a District Audit nation-wide survey. This was despite the high cost of processing a large weekly payroll.
Pensions
8.23. Pensions administration is an activity which is often outsourced in the private sector and there are a number of potential external suppliers in this field. Unusually, there is also a public sector competitor for pensions administration - the London Pension Fund Authority. This body was established to run the remains of the Greater London Council pension fund but has legal powers to provide similar services to other bodies in the public sector. The LPFA has won some contracts from a couple of London Boroughs in open competition, possibly because it has the advantage that it is prevented by law from making a profit on such work. The White Paper on London Government raised the possibility of amalgamating all London pension funds under the LPFA. There would be general resistance to amalgamation of investments but the position on administration remains unclear.
8.24. Pensions administration costs can be difficult to compare due to variations in the extent of work carried out by specialist pension staff but the Council’s costs do seem to be slightly high. However, recent changes in the section and the increasing use of the computer system should be addressing this. Pensions costs are a charge to the Pension Fund, through the employer’s contribution and any savings would not impact on the General Fund until the 2001 revaluation is implemented in 2002/3.
8.25. Payroll and Pensions both depend for their efficiency on the work of staff in other Groups who deal with personnel matters. These include both the operational Personnel staff and the administrative staff in Groups. The Head of Personnel has been discussing the scope for competition in personnel matters and has concluded that there is little opportunity for making savings through tendering the operational PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 27 ` personnel function only. His discussions with potential suppliers have raised similar issues to those that apply to finance: contractors are much more interested in partnership or voluntary contracting out (VCO) than in CCT and they would much prefer packages which offer the scope for improving efficiency through IT.
8.26. Members should also note that the workload for Payroll (and Personnel) in the next year will include implementation of the decision of Council on the transfer of staff from weekly to monthly pay and work arising from the introduction of the Government’s new “Fair Funding” regime for schools in April 1999. This will give schools the right to opt for an alternative payroll provider. However, the Inland Revenue will still expect the Council to be responsible for statutory deductions and there is a risk of substantial penalties if schools opt out of using the Council’s payroll system. Payroll staff are currently starting a programme of discussions with schools on their future requirements to encourage them to buy into the Council’s system and will have additional work to do in implementing whatever decision each individual school makes. If Payroll was to be contracted out, schools might be more reluctant to join in the contract than they would be if it remained in-house.
General Income
8.27. General debt collection, like payment processing, is mainly part of the devolved finance function, with a central control and monitoring team in Corporate Accountancy. This is currently the subject of a best value pilot project. Officers consider that full devolution to Groups will produce better results in time, as good practice on debt recovery requires the active involvement of staff who deliver the service.
8.28. Within the central team there is a residual mortgage administration function. This comprises the mortgages that were not transferred to the Portman Building Society. The Council could contract out this work. The value of this work is currently costs about £45,000 pa but new working arrangements are expected to reduce this considerably in 1999/2000. As the cases remaining with the Council are the particularly difficult ones, it is likely that staff would continue to need involvement in them even if the work was transferred.
Payments
8.29. Payments processing is closely integrated with the associated services. There are some concerns about the cost of making payments, although few cheques are now opened for cash and efforts are made to encourage payment by BACS where practical. Some problems arise from the slow speed of operation of the on-line system but this will be addressed by prospective developments to the CFACS system.
8.30. New legislation will make the Council liable for compensation to suppliers if bills are paid late. The current payment performance is good but will need improvement to avoid any claims. As many of the problems are outside the control of payments
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 28 ` processing staff, this work needs to be reviewed as a whole process, including other staff.
Community Charge
8.31. There is still a considerable sum in outstanding Community Charge arrears. The in-house contract to collect these arrears was terminated at the end of 1997/98 as a budget saving, in view of the full provision already made against non-collection of the arrears. There is now no budget provision to meet the cost of further collection, other than in association with Council Tax collection work. However, if a contract based on commission on collection could be let, it might be possible to recover further monies. An in-house bid could not operate on this basis but it may be possible to find an external contractor who would. The ultimate stage in collection involves a court hearing, and all the associated decisions have to be taken by council employees rather than a contractor. Court action is extremely expensive and is unlikely to be cost-effective in all cases so any contract would need to safeguard the Council’s financial position. It is therefore difficult to quantify what the financial impact would be but any net proceeds would benefit the Council’s budget.
Internal Audit
8.32. Generally private sector audit firms are unwilling to compete against an in- house team and prefer the approach of working with the council staff to introduce modern techniques, if required, or to provide specialist skills that it would not be cost- effective for a small internal audit team to provide.
8.33. The option of developing a partnership with a suitable company to bridge skills gaps or provide temporary cover for vacancies may be worth pursuing as a means of ensuring that best value is obtained from the internal audit budget. There may be scope for further improvements in the working arrangements with District Audit, to get the maximum benefit from the cost of the external audit work as well.
8.34. The internal audit team is already as small as can be justified and private sector salaries are generally rather higher, particularly for skilled and experienced staff. District Audit analysis has repeated shown internal audit costs to be low in comparison with similar boroughs. It is therefore unlikely that any savings could be made by contracting out.
Packaging
8.35. At its previous meeting the Sub-Committee agreed that the original package and contract approach (Council Tax and Accountancy, as two separate contracts) should be amended to generate market interest.
8.36. In view of the market information that has been gathered since the original package was advertised, it is now clear that any package that includes accountancy would be potentially anti-competitive. The DETR refused the previous request for PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 29 ` temporary exemption because officials require more evidence of the Council’s commitment to a more competitive approach. Any selection decision that disregards the clear advice from potential contractors is unlikely to provide the DETR with the strong justification they would require before granting an exemption. An exemption is essential, as without it, 40% of the Council’s expenditure on finance work will become ultra vires on 1st April 1999. The District Auditor is taking a close interest in this matter.
8.37. As reported to the September meeting, the contractors whom officers met expressed a keen interest in Revenues work, with a preference for Benefits to be packaged with it. This is consistent with the pattern of competition and contracting seen in other authorities. Written confirmation of the key points for the contractors’ has now been received and is included as Appendix B. This confirms their interest in a package combining Council Tax and Benefits work, together with the necessary IT. These three elements, in one package, offer the greatest scope to produce savings through competition because of the synergy arising from managing and delivering them as one function.
8.38. In order to improve overall efficiency, and to help meet the overall financial target, this core package should also include Cashiers and National Non-Domestic Rates. This package is large enough to meet the target.
8.39. It may be advantageous to include Community Charge in this package to facilitate an overview of local tax debts for each taxpayer and allow for the most effective prioritisation of any debt recovery action, in line with good practice. This option has not been discussed with potential tenderers so the Director of Finance would wish to keep open the option of a separate contract as an alternative.
8.40. Debt recovery work is split between Groups and the central team. This might be considered for inclusion in a revenues-based package. If it was, the Council decision to outsource the legal support for debt recovery might be conveniently included with it.
8.41. It might be possible to create an alternative package to meet the competition target in which Payroll and Pensions were combined with the Revenues services plus some additional small functions. This would be less attractive to potential competitors than Revenues and Benefits and would be more difficult for the Council to manage because of the scope for contract disputes where Revenues and Benefits interact.
8.42. Payroll and Pensions could be considered in conjunction with other relevant staff dealing with personnel matters. This could include personnel advice and if so, it might be appropriate to include legal advice on employment issues. As this would be a completely new approach, Members may wish to see how much can be achieved internally before considering competition. The Council meeting on 5th November has instructed officers to examine the option of outsourcing Personnel further. Such a package would not be large enough to meet the Finance CCT requirement
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 30 `
8.43. Payroll and Pensions have close links but could be dealt with separately. If they were separate, it might be advisable to link the payment of pensions to the pensions administration work.
8.44. Internal audit would need to be a separate contract to preserve audit independence. In practice, few of the possible suppliers are general financial services companies.
8.45. Currently there is clearly no market for accountancy services as a separate contract and little enthusiasm from suppliers for including it with other functions. The Director of Finance has consistently advised against exposing accountancy to competition, in view of the Council’s difficult financial position and the need to fully support the financial management processes. In time it may be possible to reconsider this view, particularly if the market develops sufficiently to justify a change of approach. In that case a contract might sensibly include some of the work carried out in the Corporate Accountancy team.
8.46. If Members wish there to be competition for more than the proposed core package, the advice of the Director of Finance is that there would be a risk in putting everything in one package. Few contractors have the ability to provide the full range of services so this is likely to limit the number of competitors. A multi-service package carries an increased likelihood that any difficulties in one area would have knock-on effects to other services. A mix of suppliers would spread that risk. A very large package would be extremely difficult to manage in the event that it was necessary to take services back in house as a result of contract failure.
8.47. It was evident in discussions that contractors themselves were not over- enthusiastic about large packages and did not indicate that they would offer more competitive prices to secure more business. However, in the context of a specific proposal, it might be possible to negotiate something more than would be achieved through smaller packages.
CCT or VCO ( Voluntary Contracting Out)/Partnership
8.48. The Council can make a choice between CCT or VCO, as long as any VCO package is large enough to meet the CCT target. These two tendering processes have completely different legislative requirements and timescales and are mutually exclusive. CCT applies if there is an in-house bid, VCO applies if there is not. Mixing the two could possibly lead to a challenge from DETR on the grounds of anti- competitive behaviour.
8.49. The report to the previous meeting identified that contractors had some concerns about competing against an in-house bid. This is partly because they recognise that the CCT legislation is restrictive on both parties but also because they would have doubts about the authority’s commitment to a fair process. Obviously officers have emphasised that the council’s wish is to achieve the best outcome from
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 31 `
any tender, with no pre-conceived ideas about the desired result, but however unfounded their concerns might be, they are likely to have an impact on any tendering process. It is apparent that other authorities are similarly experiencing a lack of interest from the private sector in competition under CCT legislation and this is due, at least in part, to the fact that there are increasing opportunities for VCO contracts, as councils move towards the best value regime.
8.50. The CCT legislation is designed to ensure that work is only carried out by in- house teams if they can demonstrate their competitiveness. In order to minimise the scope for the process to be manipulated, the legislation has become increasingly prescriptive. It does not allow the authority the freedom to specify fully what it would like from the service, because certain issues are regarded as “potentially anti- competitive”. Such restrictions cover matters such as the location of the staff, use of IT, the detail of the specification, and contract conditions. It also requires the council to provide potential tenderers with details of all staff who might be transferred (assuming TUPE applies), including details of their current salaries.
8.51. VCO allows the authority freedom to specify exactly what it wants. An in- house bid would not be made, so the requirements of CCT would not apply, other than the need to ensure the financial value of the contract was sufficient. VCT contracts also give contractors more scope to respond flexibly to the needs of the service and to innovate, rather than adhering strictly to a rigid contract that would not have identified all the future changes required.
8.52. In the past the Council has included the in-house team on all short lists automatically. Because of the particular circumstances of this Finance CCT situation, it is appropriate for Members to consider whether or not an in-house bid should be invited in this case.
8.53. A table of advantages and disadvantages is included below. Some of these factors are of more concern to the Council/public than to staff and vice versa.
8.54. The possibility that an in-house bid might not be made has been the main focus of staff concerns. Members of the Sub-Committee were copied into a letter sent by UNISON to the Director of Finance which points out that the union is “fundamentally opposed to privatisation”. Members have been sent copies of the Director’s reply.
8.55. Since most of the benefits of an in-house bid will only be achieved if it wins, the chance of in-house success is an important factor. This is likely to mean making sizeable cost reductions. At this stage neither Financial Services or Housing Services see any obvious way to make large savings by an in-house bid but radical changes in working practices might achieve them. Revenues have already been preparing for CCT since Jan 1995 and it is highly unlikely that further significant savings can be identified within Council Tax without impact on service delivery. Benefits have not been preparing for CCT but have relatively recently been restructured to amalgamate Housing Benefits with Council Tax benefits. There is the likelihood that the
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 32 ` implementation of Workflow in Benefits will lead to future savings but the scale of this is unknown.
8.56. The DETR must be asked for an exemption again, whether there is an in-house bid or not, because no tendering process can be completed by 1st January 1999. If they do grant an exemption, it is unlikely that there will be as much time for preparation as has been available to in-house bids in the past.
8.57. An in-house bid for Revenues and Benefits would need to deal with the two services together and this means starting the preparation of a bid from scratch. Revenues have been working to a draft specification for Council Tax for about two years but there is no equivalent for Benefits, let alone a combined service. The specification would not necessarily replicate current practices and there would be very limited time for staff to test out their delivery of it prior to a bid. This would eliminate the normal in-house advantage which arises from familiarity with the specification i.e. the ability to price accurately, based on experience.
8.58. An additional factor is the need for investment in IT. To date both Groups have been able to fund IT developments as required by taking advantage of falling prices when replacements have been needed, using fortuitous budget savings and by spreading costs over time. This has been necessary because there is no specific funding for IT developments. Given the pace of change in IT, which is mainly determined by software suppliers, it is unclear that sufficient funding will be available in future. For example, Housing and Finance have different versions of the Workflow software. For Revenues to convert to the version in use in Housing, which is Year 2000 compliant, will cost approximately £70,000. As this arises from the need to upgrade the pc operating systems to Windows 95, rather than directly because of Year 2000 incompatibility, this cost would not be eligible for consideration for additional funding on the principles established by Policy Committee. This relatively small sum is likely to cause a budget pressure in Financial Services but would be readily manageable by the private sector. This issue would need to be addressed in an in-house bid.
8.59. In the case of other financial services, the need for IT upgrades is less urgent. However, similar problems are likely to occur in the future.
8.60. On a wider scale, it is possible that in a VCO situation, a private sector firm might inject significant funding - one company cited their provision of a new cashiers hall for an authority as an example. This type of benefit is only possible under VCO arrangements.
8.61. The table below identifies general points which would be applicable to most packages: Advantages of In-House Bid Comments
Might provide the most stringent A review of current costs could be
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 33 `
benchmark for comparison and used as a benchmark without the need encourage keen bids from external for a formal bid. External contractors tenderers. may be deterred from bidding.
May give staff the feeling of more Depends on the extent to which staff control and maintain morale (and feel confident about their ability to win service quality) during the tendering period
If successful, staff would remain in the This may be advantageous to the Local Government Pension scheme Council as well as the staff but it depends on individual decisions and the nature of any alternative pension.
Limited risk of problems at contract Depends on the extent of any changed start working procedures.
More scope for Council to change its No legally binding contract requirements after contract starts if in-house bid successful, to reflect budget implications
Disadvantages of an In-house Bid Comments
Likely to deter some external Possible threat to level of savings. competitors, unless contract Counter-measures needed may give conditions can provide counterweight the contractor more flexibility than the Council would like e.g. location, length of contract etc.
All risks remain with the Council If the in-house bid wins
Contractors may include a greater risk Reduced savings due to adversarial premium in their bids. nature of CCT process
Very limited scope for staff to have Potential conflict of interest otherwise. discussions with possible new Staff will continue to be suspicious of employers contractors.
No scope for staff to be involved in Conflict of interest selection process
Risk of greater problems at contract Due to poor staff morale start if staff bid loses
Will not address long-term IT funding Not just pcs and software upgrades
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 34 `
problems but major developments
Practical problem of developing a Depends on level of management contractor-side bid in a relatively short input available from both Groups. time on a new package Would need DETR agreement to significant deferral of contract start date.
Documentation unable to reflect Best Makes innovation more difficult to Value principles e.g. Risk and Benefit implement sharing, Continuous Improvement
Need to ensure we avoid “anti- Constrains scope of contract and competitive behaviour” under CCT supplier’s response
Council has more control over process More scope to set conditions e.g. on and contract conditions under VCO staff protection, location etc. (but may than under CCT require trade off against price).
8.62. There is no doubt about the ability of the current staff to deliver the existing services. Staff in both Revenues and Benefits have responded to the need for increased productivity and have been flexible in their approach to change. The issues that make VCO worth consideration are factors outside the control of the Council, principally the legislation on CCT and the various controls on local government finance.
Contract Process
8.63. The tendering process will be determined in part by whether there is to be an in-house bid or not. If there is, the process and timetable will need to comply with both CCT and EU legislation. If not, only the EU tendering legislation will apply.
8.64. In discussions with potential tenderers, one raised the issue of using the “negotiated” procedure rather than the “restricted” procedure. The negotiated procedure is really intended for use only in specialised circumstances such as where it is not possible to adequately specify the work or in cases of extreme urgency. It would not appear to be appropriate in this situation as a means of letting the whole contract.
8.65. The restricted procedure does allow for “variant” proposals to be made by tenderers, as long as the specific indicates the minimum requirement. This facility would allow for flexible responses to the tender documentation which should encourage innovation. Contractors want to be able to offer their own ideas on the best way to deliver services, rather than being constrained to compete strictly on the basis of a detailed, pre-determined specification which would be based on existing practices.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 35 `
Terms and Conditions
8.66. As noted above, CCT legislation limits the Council’s scope in certain areas. For example, location can only be specified to the extent that it is justified on service grounds. This means that unless the work has to be carried out face-to-face with the service user, it would not be possible to specify that it be located in the Civic Centre, or even in the Borough.
8.67. It is proposed to offer Civic Centre accommodation to the chosen supplier, at a charge. There would be a minimum requirement to provide a service to personal callers at the Civic Centre. Use of existing IT facilities would also be offered, pending the termination of the contract with ICL/CFM.
8.68. Bidders would be asked to indicate their proposals for delivery of the service and the evaluation process would weigh these up, including all consequent costs and benefits to the Council, in arriving at recommendations to this Sub-Committee for tender acceptance.
8.69. This would include the length of the contract - it has been suggested that 7 or 10 year periods produce lower contract prices. Such lengthy contract periods would require provision for early termination in the event of unsatisfactory performance or for significant changes in the Council’s requirements. As a minimum, a period of 5 years should be provided for.
8.70. Where appropriate, it is suggested that the contract should provide for the sharing of risks and rewards. As an example, if council tax collection was to exceed its target, there would be a financial benefit to the Council from the improved cash flow. If the supplier had a share in this benefit, it would provide a keen incentive to improve collection. As a corollary, it would be necessary to provide for a penalty if the contractor did not achieve the target.
8.71. The contract specification will be in output format, consistent with previous contracts, and will concentrate on the end result of the work, rather than identifying all the processes involved. This allows tenderers scope to suggest new methods of working.
Legal implications
8.72. The Council is legally obliged to expose finance work to competitive tendering. The amount of work exposed must be at least 40% of the value of the defined activity. Under the legislation, if competition has not taken place by 1st January 1999, the Council will no longer have the legal power to carry out all its finance work in- house, unless the DETR grants an exemption.
Personnel implications
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 36 `
8.73. Meetings have been held with Revenues and Benefits staff and the issues have been discussed at Housing and at Finance Joint Negotiating Forums. It is clear that staff feel strongly that an in-house bid should be not only permitted but strongly supported by management. A letter from UNISON to the Director of Finance was copied to all members of the Sub-Committee, as was the Director’s reply.
8.74. Staff in the Finance department in other sections are aware that Members are reviewing the CCT package and some have made similar comments to the Directorate. It was the staff in Payroll & Pensions that suggested that the whole process of administering payroll and pensions should be looked at, not just the final processing stages carried out in Financial Services, in order to get the maximum savings out of any change in working arrangements.
8.75. The other main concern of staff is about their employment rights. It has been made clear to them that the Council would expect the TUPE Regulations to apply. Potential contractors have no problem with this, as reduction in terms and conditions has not been the pattern in white-collar tendering. A number of companies have experience of operating dual conditions of service, allowing those employees who so choose to remain on Local Government Conditions of Service.
8.76. Furthermore, contractors in this market tend to have good pension schemes and it is said that at least one has a scheme that mirrors the Local Government Pension Scheme. Although pensions are not covered by TUPE, the Government has always encouraged local authorities to require comparable pensions to be provided by contractors and this would be a requirement of any finance contract. In one recent transfer that officers are aware of, staff were given individual advice on their pension options to allay their concerns.
Head of Personnel Comments in relation to VCO
8.77. The pressure for local authority’s to consider alternative service provision over the coming years are likely to increase. This is due to specific service issues and the Government ‘s proposals on Best Value. The authority wishes to ensure that in these situations the interests of staff are safeguarded.
8.78. In evaluating any alternative service delivery option that would involve the transfer of staff to a new employer the authority will include in the evaluation of the potential supplier the new employer’s proposals on the future employment of the staff.
8.79. Given the nature of the services covered in this report any transfer of staff is likely to be covered by TUPE. This will mean that the employees would transfer to the new employer on their existing terms and conditions of employment and that the new employer would become responsible for all contractual obligations in respect of those staff transferred. Terms and conditions of employment cannot be unilaterally change by a new employer either at transfer or subsequently. Any changes would need to be made through the normal procedure of negotiation and joint agreement.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 37 `
8.80. As part of the negotiations with prospective suppliers the authority will seek to ensure in all circumstances that the transfer of staff is dealt with in line with the TUPE regulations. The authority will explore with the new employer their plans for staff after transfer including their long term plans for conditions of employment, their policy on trade union recognition, training, equal opportunities and the pension arrangements that would be applicable. The authority will seek to safeguard the future employment position of staff when selecting a new employer.
8.81. TUPE specifically excludes the protection of pension rights. Normally at the point of transfer the employee leaves the current occupational pension scheme and has a choice to join the new employers scheme and to either transfer their existing benefits or set up preserved benefits. In the case of CCT the government advised local authorities that there is or may be a contractual obligation for the authority to ensure that the new employer provide pension benefits that are not detrimental and “broadly comparable” to those provided to the employee by the Council. Failure to do so could lead to claims of constructive dismissal against the authority. In the past the authority has had actuarial evaluations carried out in these circumstances. It is proposed that the Council will, as a matter of policy seek to ensure that the pension arrangements of the new employer are “broadly comparable”.
8.82. TUPE applies in the case of CCT contracts but the Council would not be able to impose conditions in excess of those provided for in the Regulations, as it could under VCO.
Position with DETR
8.83. As reported at the Best Value Sub-Committee on 16th September, the DETR have indicated that they would need substantial evidence of the Council’s commitment to a new approach before they could consider granting an exemption order. Since that meeting, as previously mentioned, officers have correspondence from the private sector indicating their preferences. However, the DETR would not consider this without a firm resolution from Members. Officers will be talking with the DETR following the outcome of this meeting.
Resource Implications
8.84. The main resource difficulties are likely to arise because of the large number of CCT and Best Value projects requiring support from a relatively small pool of staff. This problem will be compounded if senior management in Finance and Housing also have to develop an in-house bid. In any event, there will be a need to carry out client- side work on specification and contract conditions in a short timescale.
8.85. As far as possible all this work will be carried out in-house but it may be advantageous to use consultants in support. This could include: review of draft specifications and contract conditions to ensure they are adequate but not anti- competitive or unduly restrictive; ensuring that an adequate range of potential
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 38 ` suppliers is encouraged to compete; participation in tender evaluation work; and assisting in any contract negotiation work. The extent of consultant involvement will depend on the options selected by the Sub-Committee for tendering.
8.86. The past practice of using external consultants to carry out the financial assessment of companies will continue.
Implications for Support services
8.87. All the main financial activities make extensive use of IT. The Council owns its own hardware but licenses software from a number of companies. The main servers are located at Enfield, where systems are managed by ICL/CFM under the general IT facilities contract. This contract is under notice to terminate on 31st March 2000. Potential Revenues/benefits contractors have made it clear that they would wish to take over responsibility for the provision of IT, as this gives them control over the whole process. This approach is likely to apply with any contract for Payroll and Pensions work as well, as in all the activities that involve processing information, the key to achieving savings lies in the most effective use of IT. The outcome of the tendering process will need to be reflected in the Council’s future IT facilities contract.
8.88. Extensive use is made of the Council’s network facilities, which are supported by in-house staff. Housing has its own IT support staff, Finance relies on the corporate IT team. The impact of competition on these staff will depend on the detailed arrangements made with the successful provider, as continued support may be required.
8.89. Revenues currently use external providers for bailiff services and for the production of the payment books. There are no long-term contracts for these arrangements.
8.90. If work is contracted out as a result of tendering, there will be a slight reduction in the work for in-house support services such as personnel, payroll and accounting as these would be provided by the contractor. However, the impact of one contract would not be sufficient to make any savings in staff costs from this.
8.91. Accommodation could be affected, either through the opportunity to charge a contractor for the use of space in the Civic Centre or, if the contract was provided from elsewhere, through letting space to other organisations.
Financial Implications
8.92. Achievement of the savings proposal agreed by Council will depend on the tendering process generating competitive responses. If the saving is not achieved, it will not be possible to achieve compensating savings from financial service work without impact on service delivery. A full year saving of £350,000 would represent a reduction of 12.5% on a package of £2.8m
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 39 `
8.93. A VCO process should be capable of being completed in a shorter timescale than the CCT process. It might even be possible to negotiate an up-front payment from the contractor, although this would be part of detailed contract negotiations. If an in-house bid could deliver savings of this order, it would involve staff reductions and restructuring and it might not be possible to achieve savings as quickly.
8.94. The cost of tendering and any use of contractors will be contained within existing budgets.
Background documents:
Local Government Acts 1988 and 1992 and Regulations Letter from Unison dated 12th October 1998 Letter from DETR dated 13th July 1998 Performance Indicators 1996/97
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 40 `
APPENDIX A
Financial Target
Service £
Directorate, Client & Support (in Financial Services) 533,640 Corporate accountancy and control 898,900 Internal Audit 328,340 Payroll 640,740 Pensions (charged to Pension Fund) 343,130 Cashiers 194,620 Council Tax 1,403,930 National Non-Domestic Rates 204,060 Group finance staff 1,606,460 Rent Accounting 362,960 Benefits administration 1,176,080 Benefits fraud team 257,430
Total £7,950,290
From this is deducted a “competition free allowance” of 60% 4,770,174 and an allowance for support to LMS 397,200
Giving a competition requirement of £2,782,916
Notes
1. The figures assume that tenderers are not provided with free accommodation.
2. The figures shown for Benefits Administration, Payroll and Pensions would be reduced by the cost of the client team. A basic client team already exists for Revenues, and Corporate Accountancy and the Directorate would provide the client side for Group finance and Internal Audit.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 41 `
ANNUAL TREASURY MANAGEMENT REPORT ITEM 4
CONTACT OFFICER: Jim Burness TELEPHONE: 01895 250111 ext 2441
SUMMARY
This is the annual report to Members on the Treasury Management activities in line with the requirements of s45 of the Local Government and Housing Act 1989, and the Code of Practice issued by CIPFA. The report has three sections;
· review of 1997/98 activities
· the operational policies and guidelines that apply to the treasury management function.
· issues for the future that will be of relevance to the current and next year’s revenue budget, including the attributing of interest to planning agreement balances
RECOMMENDATIONS
It is recommended that the Committee
1. Agree the operational policies set out in paras 8 - 21.
2. Note the information relating to treasury management for the current and next years.
3. Agree to attribute interest to payments made to the Council under planning agreements and to amend financial regulations accordingly.
INFORMATION
The Treasury Management operation 1997/98
4.1 During 1997/98 there were 6 loans raised, 1 long term with the Public Works Loan Board (PWLB), and 5 temporary loans. The summary of the borrowing transactions for 1997/98 is as follows:
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 42 `
Summary of External Borrowing Transactions for 1997/98
Debt O/s at Loans Loans Raised Debt O/s at 1/4/97 Repaid £k 31/3/98 £k £k £k Asset Mortgages 616.6 11.6 - 605.0 PWLB 153,475.4 8,498.6 2,000.0 146,976.8 Temporary 637.0 6,689.0 6,500.0 448.0 Total 154,729.0 15,199.2 8,500.0 148,029.8
4.2 Appendix A illustrates the debt profile for 1997/98, which is very similar to the previous year in terms of the composition of the debt, but does show the overall reduction in debt in contrast to the previous year. This reflects the extent to which funds were available to the Council to act as a buffer against short-term fluctuations in cash flow and to minimise the extent of new borrowing.
4.3 The average interest rate of the external debt for 1997/98 was 9.03% compared to 9.05% for the previous year. The average rate of interest on the Council's total borrowings was 8.58%, compared to 8.44%. The small changes in these rates compared to the previous year reflect the stability of the Council’s debt portfolio and the policy of controlling the amount of that debt which has to be refinanced each year to around 10%. In addition the expectation of a decline in rates from 1998 onwards, new long borrowing was minimised (see table above). The reason for the small increase in the overall rate is due to the increase in the 7 day notice short term rates which applies to internally invested funds, which for Hillingdon averaged £37.7m, compared to the £36.8m for the previous year. During the year medium and longer term rates remained stable of declined slightly, whilst short term rates increased.
4.4 During 1997/98 the Council prematurely repaid £1m, the cost of which was contained within the overall budget for external interest costs. More premature repayments were not made as it was not clear which direction rates were likely to move in the short to medium term. However the premature repayment options are continually kept under review particularly as rates start to increase, and reference will be made later in the report on redemptions made in the current year. The total interest costs borne by the Council were £16.4m, and this was £0.6m more than the comparable costs for 1996/97. The increase was due to the increase in short term rates applying to internal borrowing.
4.5 There are time lags between when the resources are available and when the Council chooses to incur the expenditure that they will fund. In the interim these receipts are invested to earn interest for the Council. These receipts when added to the level of accumulated receipts already available to the Council have continued the situation, which commenced in 1993, of substantial external investment and minimal temporary borrowing. PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 43 `
4.6 During the year 491 external investments of surplus funds were made totalling £691m. Of the total 90% was with banks, 9% with building societies, and 1% with other bodies (mostly local authorities). The average rate of interest earned on these investments ranged between 4.75% to 7.59%, reflecting the market rates for short term investments of up to one year which is the period to which the Council is limited. The total amount of interest earned on these external investments was £2.4m. This was less than the previous year’s figure of £2.65m, due to the overall level of surplus funds being less. Appendix B shows the profile of external investments for the year.
4.7 As will be discussed later in this report the level of surplus funds is expected to remain broadly stable for the coming year, but obviously some variation will arise from year to year.
The Operational Policies
4.8 The primary objective of the Council’s treasury management function is to minimise the financing costs by borrowing at the lowest rates of interest, and by investing, at an acceptable risk, any surplus cash in order to earn interest.
4.9 To achieve this objective the Council pursues a range of policies, which it is the role of the Director of Finance, through the central accountancy function, to formulate, implement and review.
4.10 The policy for borrowing is to minimise costs consistent with ensuring the stability of the Authority’s long-term financial position.
4.11 The policy for lending can be summarised as seeking the best return consistent with minimising risk.
4.12 The Council carries out its treasury management activities with regard to the relevant statutes, regulations and codes of practice. It also receives advice and market information from the leading local authority treasury management advisory company, to help in the determination of borrowing strategies.
Approved Methods and Sources of Capital Finance
4.13 Appendix C sets out the methods (or instruments) that are available to the Council for raising capital finance. In deciding how to arrange the financing of the authority’s borrowing requirement officers will be guided by the need to have flexibility to respond to cash flow fluctuations, but keeping an overall stability of the debt portfolio to minimise the effect of market fluctuation and the risk of having to undertake large scale re-financing programmes at a time of high interest rates.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 44 `
4.14 To balance the two needs referred to above, limits are placed on the amount of short term borrowing, and the amount of borrowing at variable rates. These are currently as follows:
· Money on call - maximum at any time of £3m.
· Money on two day notice - maximum at any time of £5m.
· Limit on total temporary borrowings - maximum at any time of £20m.
· Limit on total borrowings at variable interest rates - maximum at any time of £20m.
4.15 The intention behind these limits is to ensure that at any time no more than 5% of the Council's debt is subject to potentially volatile changes in rates. The limit on variable rate borrowing is set to enable flexibility if appropriate but without leading to excessive exposure to fluctuating market rates. The Council is required by statute to place a ceiling on its temporary and variable rate borrowings, and this is formally determined each year in accordance with the requirements of the 1989 Local Government & Housing Act, as part of fixing the Council Tax.
4.16 On the fallout of debt the Council's policy has been to establish a debt profile where the amount of debt due for refinancing each year is fairly stable and large scale refinancing is avoided. To achieve this the following limit is placed on the amount of debt that has to be refinanced in any one year.
· Maximum percentage of total debt due to fallout in any year - 10% (for Hillingdon this target is currently approximately £15m per annum)
4.17 The current profile of fallout on the Council's long term debt is set out in Appendix D. The overall position is in line with recommended practice, with the main exception of one year, 2004/05. The current strategy for longer term borrowing is to target the years 2006/07 onwards for new borrowings, in order to stretch the borrowing profile and take account of the current historically advantageous long term interest rates.
4.18 With regard to the source of borrowing the Council borrows on a temporary basis from any organisation working in the local authority financial market. Long term borrowing is exclusively from the Public Works Loans Board (PWLB) on account of the favourable rates available and the simplicity and flexibility of this form of long term borrowing.
Investing and Depositing Surplus Funds
4.19 The Council has always placed the emphasis on the importance of minimising risks, as opposed to maximising interest earned. As the Council still has debt outstanding it is only permitted to invest funds externally for periods up to one year.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 45 `
As a further means of risk minimisation the total sum invested with a single organisation at any material period of time is limited to £7m.
4.20 Investments are only made with:
· The main clearing banks or their wholly owned subsidiaries,
· Other public sector bodies
· Building societies where the Council's investment would not represent more than 1% of their liquid assets.
4.21 The continually evolving nature of financial markets means that the Council has to continually monitor the bodies with whom it might invest, to ensure that the Council’s investments have the maximum security whilst at the same time to become aware of new institutions that can meet the required standards.
The Current Year and Beyond
4.22 The current year has seen a general uncertainty within financial markets in the UK as they react to the sometimes conflicting messages from
q The UK economy, its growth rate and inflation rate
q Whether the UK would follow a policy of starting to move towards the conditions for monetary union, one of which is lower interest rates
q The world economy, primarily the Far East and Russia
4.23 For much of the first part of the year there was uncertainty whether UK interest rates had peaked or not. It seems clear now that interest rates have probably flattened out and the future trend is downward.
4.24 In the light of an assessment that rates were more likely to reduce officers have undertaken £4m of premature redemption of debt with rates of 10%+ in the current year. These loans have three to four years to maturity, which allows the premiums on premature redemption to be, with reasonable certainty, less than the interest savings that will arise.
4.25 Funds exist for repayment by applying some of the accumulated provision for repayment of debt (PCL) the Council has built up to the end of 1997/98 (PCL at 31/3/98 was £17.8m). These funds arise from complying with the statutory requirement to make an annual revenue charge, and from setting aside a proportion of capital receipts generated.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 46 `
4.26 In previous years these funds had not been applied as part of a policy of awaiting indications from central government of how it planned to release accumulated set aside capital receipts for housing purposes. These were made clear by the Capital Receipts Initiative (CRI), and in particular there would be no advantage in allowing accumulated set aside receipts to build up. Therefore the strategy for utilising these to reduce debt could now be followed, and it is the effect of this that is starting to be seen in the current year but which will have its main effect in the coming year.
4.27 The PCL also acts to provide internal funds that can be used in lieu of new external borrowings which would incur real external interest costs.
4.28 The likely downward trend in interest rates will have an overall benefit for the Council’ costs. However because of the structuring of the debt, which insulates the Council from the effects of external interest rate movements, the more significant effects will arise from the policy of redeeming higher rate debt and minimising new borrowing.
4.29 The combination of repaying debt and minimising new borrowing in the current year will significantly reduce the interest costs in future years. It is estimated that the interest saving for 1999/00 will be at least £1.5m. This saving will divide between the Housing Revenue Account, and the General Fund, however the General Fund saving will be £1.25m as a minimum. Related to this reduction it is expected that the overall interest rate for the Council’s external borrowings will reduce in 1999/00 to no more than 8.5%.
4.30 Based on the current projections for debt fallout and levels of new borrowings it is anticipated further savings will arise in 2000/01.
4.31 At the same time as minimising interest costs officers have been assessing the likely income level from the investment of cash surpluses. Cash flow has remained as very health through policies of encouraging substantial initial payments from debtors, especially large business ratepayers, and from carefully structuring the payment schedule with Government for the business rate. In addition taking advantage of options to delay certain payments (e.g. levies ,precepts).
4.32 The conclusion at this stage is that the interest earned overall in 1999/00 will not be less than the current year. Within this however, there is the issue of whether the Council will attribute interest to funds received under planning agreements until they are utilised. This could amount to £100k per year depending on the size and number of agreements.
4.33 The Head of Planning Services has indicated that there is increasing pressure from developers for any financial payments made to the Council to attract interest until they are fully expended. It has not been the Council’s financial policy to do this in the past as a matter of course. However if it will assist in the negotiation of benefits then this policy can be changed.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 47 `
4.34 If the policy on interest were to change, the financial regulations covering this area will need to be revised. Specifically there will be a need to ensure the payments due to the Council are made at the appropriate time and their subsequent use is in accordance with the legal agreement. This will need to be achieved between the relevant planning, legal, and finance officers.
LEGAL IMPLICATIONS
There are no legal implications arising directly out of this report.
BACKGROUND DOCUMENTS
Final accounts L.B.Hillingdon 1997/98 Financial Markets and economic briefing papers
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 48 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 49 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 50 `
Appendix C
GLOSSARY OF MAIN TERMS
Call Loans Loans that are repayable at the lender's discretion with no obligation to give any prior notice.
2 or 7 Day Notice Money Loans where the lender is obliged to give either two or seven working days notice of their intention to call in the loan.
Short Fixed Loans Loans fixed to mature in periods usually up to one month.
1 or 3 Month Money These are loans with fixed repayment dates either one or three calendar months from the date the loan is made.
Public Works Loan Board Commonly referred to as the PWLB. It is a Loans (PWLB) Government Agency. This is the most common source of long term lending to local authorities. Loans cover all annual periods up to 25 years. In addition the loans can have different principal repayment characteristics. e.g. repayment at the end of the loan; repayment by equal instalments over the loan period. Loans are available at two levels of interest rate, the higher rate applying to borrowings over an individual authority's basic entitlement for the year.
Bonds In the past these have included small value loans from individuals as well as large loans from companies and institutions. LBH no longer issues small value bonds for reasons of economy.
Negotiable Bonds Loan instruments issued through banks and finance houses that can be traded. The actual loan is for a fixed duration.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 51 `
Local Authority Mortgages These elements mainly relate to the period when authorities used to borrow for specific purposes and sometimes secured loans on fixed assets. Mortgages are issued under Council Seal and are still the required form of loan by building societies when they lend long term to Councils.
This represents funds the authority is legally Provision for Credit Liabilities obliged to set aside from capital receipts and charges made to its revenue account, to be used for the repayment of debt, or as credit cover for non-operating leases.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 52 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 53 `
HILLINGDON DIRECT SERVICES ITEM 5 HALF YEAR FINANCIAL REVIEW
CONTACT OFFICER: Mervyn Oakley TELEPHONE: 01895 250634
SUMMARY
The report updates the Committee on the financial performance of each of the Divisions of Direct Services and summarises the action being taken in Groundcare Services following the decision of the Best Value Sub Committee on 17 November 1998.
RECOMMENDATION
It is recommended that
1. The information within the report be noted. 2. The General Manager’s action in relation to Groundcare Services be endorsed.
INFORMATION
5.1 The 1997/98 year closed with a Group surplus of £801,593 which is returned to the General Fund. In addition a surplus of £151,227 was returned to the Housing Revenue Account in respect of work carried out through sub- contracting and £109,737 to other Clients principally Leisure Services in relation to work carried out for them under Service Level Agreements.
5.2 This year the Group are performing well financially in all areas and even within Groundcare Services the position is being held. The current year end surplus is forecast at £563,000 with in addition returns to Housing Services of £100,000 and to Education Youth and Leisure and other Clients of £105,000. Detailed figures at the half year are included in Part 2 of this report.
5.3 In addition to this surplus contribution to the General Fund work done by our Estates and Valuation Service has resulted in a refund in rates on the Civic Centre of £565,000 the current and previous years, and a continuing saving of £328,950.
5.4 The Committee is aware from previous reports of the problems being experienced by Groundcare Services. The Best Value Sub Committee agreed on 17 November that negotiations be progressed immediately for the possible transfer of the work carried out by Groundcare Services to Primary Management Limited. These discussions are being progressed by the General
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 54 `
Manager who will update the Committee in Part 2 and describe the preliminary feedback from the consultation process
5.5 Whilst forecast returns for the year end are good caution should be taken in projecting these forward. Some operations (for example Passenger Services) are already experiencing reduced income due to the need for Client departments to reduce expenditure. This will inevitably impact on the surplus produced by the Group.
LEGAL IMPLICATIONS
RESOURCE IMPLICATIONS
The Projected additional net surplus will be taken account of in assessing the overall level of revenue balances available at the end of the current year and the potential recurring surplus will be considered as part of the future years budgets.
BACKGROUND DOCUMENTS
Best Value Sub-Committee 17 November 1998 Item 6
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 55 `
FINANCE & ASSET MANAGEMENT SUB-COMMITTEE ITEM 6 REVENUE BUDGET 1998/99
CONTACT OFFICER: Paul Whaymand TELEPHONE: 01895 250816
SUMMARY
This report sets out the latest revenue position for Finance & Asset Management Sub-Committee for 1998/99.
RECOMMENDATIONS
That the latest revenue position for the current year be noted.
INFORMATION
6.1 The monitoring of the revenue budget for the current year has identified a number of areas where significant variances from the original budget are expected to arise.
6.2 The September meeting of this Sub-Committee was informed of 3 likely variances with a total of £402k ;
· Costs arising from July 1998 Policy Committee Decisions - (£252k)
· Unallocated General Fund savings target from March Council decision - (£250k)
· Uxbridge Market service charge refund from Prudential (-£100k)
6.3 The latest monitoring suggests that this projected overspend has reduced to £298k. Full details are contained in Appendix A.
6.4 It now appears unlikely that all the £252k approved by Policy Committee in July will be spent in this financial year. The £200k approved for the establishment of a Best Value Team will not be required in full this year. The full establishment was not in place until October and despite some set up costs in year one it seems likely that only about £150k will be required in 1998/99. The position with regards this budget will be closely monitored and it may be possible to revise this figure again in time for the next meeting of this Sub- Committee.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 56 `
6.5 It is unlikely that any more than £10k of the £40k allocated for the job shop will be spent in this year. Redundancies resulting from the Council meeting of 5 December are only just starting to be processed.
6.6 The part year costs of the Community Safety Officer post agreed at Council in July are now expected to be in the region of £8k. An appointment has been made with a start date of January 1999.
6.7 Other variances that have been picked up in monitoring, all within the Chief Executive’s Office, are as follows:
Public Relations Vacancy Savings (-£50k)
6.8 There have been 3 long-term vacancies in Public Relations including the Head of Communications post. One of the posts has just gone out to advert but the Head of Communications post is unlikely to be filled in this financial year. The structure of the Communications Team is currently under review.
Personnel Harmonisation Work (+£20k)
6.9 The extra cost of undertaking harmonisation work, not provided for in the base budget, is expected to be in the region of £20k.
Hillingdon People Income Budget (+£10k)
6.10 There is a pressure on the Hillingdon People advertising income budget of in the region of £10k.
6.11 The Uxbridge Market and unallocated savings variances are still as they were reported to this Sub-Committee in September. There are no further variances expected at this stage on other services reporting to this Sub- Committee.
6.12 Officers will continue to monitor the budget position regularly and report significant findings to this Sub-Committee.
LEGAL IMPLICATIONS
There are no legal implications arising from this report.
BACKGROUND DOCUMENTS
Report and minutes of Finance and Asset Management Sub-Committee September 1998. Report and minutes of Policy Committee July 1998.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 57 `
App a
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 58 `
App b
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 59 ` appc
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 60 `
DEVOLVED FINANCIAL SERVICES – MANAGEMENT REVIEW ITEM 7
CONTACT OFFICER: Trevor Robinson TELEPHONE: 01895 250559 SUMMARY
This report informs Members of the current position with the management review of the devolved finance function. It also asks Members to endorse proposals for the future shape of the function, including the need to respond to any overall Council reorganisation, and for the establishment of sound financial procedures in respect of schools under the new funding arrangements.
RECOMMENDATION
It is recommended that Members:-
i) Endorse the Director of Finance’s management review of the devolved finance function;
ii) Agree that the review be used as the basis for reshaping the devolved finance function, taking into account any reorganisation of council services that may be agreed by Policy Committee, subject to the council’s consultation procedures iii) Agree that where it is necessary as a result of any Council reorganisation to move budgets between Groups or Committees, changes should be in place from the beginning of the next financial year iv) Note that the Director of Finance will take steps to ensure that the Council’s accounts for 1998/99 are closed properly, irrespective of any decisions which may be taken on reorganisation of Council services v) Agree that the Scheme for Financing Schools should ensure that all schools have sound financial procedures that provide adequate public accountability, as determined by the Director of Finance
INTRODUCTION
7.1 At the previous meeting of the Sub Committee, Members considered a report on the General Fund Revenue Outturn for 1997/98. As part of this,
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 61 `
Members were informed that the Director of Finance was reviewing a number of issues relating to budget management and related matters.
7.2 A management review of the devolved finance function has now been prepared. It offers a view of the current circumstances of the Devolved Finance Teams and a way forward with regard to the following:
Ø Management arrangements Ø Scope Ø Common standards and approaches Ø Resource allocation Ø Roles and skills of senior officers within each team
7.3 The review was prepared before the Chief Executive’s report on the future organisation of the Council was published. However, the approach in this Devolved Finance report can be used to determine the appropriate staffing required to support future organisational structures.
7.4 The review has been agreed by the Director of Finance and a copy has been sent to all Members of this Sub Committee. It has also been made available to staff in the devolved finance teams, and to Group Directors.
7.5 The management review concludes that the existing devolved arrangements should remain in place, although recognising that there have been some difficulties over the period since devolution was originally agreed. This accords with the Director of Finance’s view, endorsed by Members at the previous meeting, that the best way forward is to retain the devolved arrangements but strengthen them. Detailed proposals are made in the management review to achieve this.
7.6 This management review should become the basis for determining the allocation of financial support services. A review of resource allocation was required anyway, because significant changes in service delivery and organisation have taken place since the devolution process started in the early 90s. Recent and forthcoming reorganisations will bring their own requirements for reconfiguration.
7.7 The following arises from the work that has been carried out:
Ø Review of the devolved process, with detailed proposals to improve the way that devolved finance teams operate, including their support for the budget management and monitoring processes
Ø There are detailed proposals for the reallocation of staffing resources arising from previous Council decisions on the distribution of individual services within and between Service Groups
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 62 `
Ø There is a need to extend this process if and when Policy Committee agrees to further Council reorganisation
Ø Reallocation of staffing resources within the devolved finance teams will be a ringfenced process, within the Council’s agreed procedures including consultation with staff and assimilation processes
7.8 Members are now asked to endorse these proposals. For Members’ convenience the detailed recommendations in the management review, which have fully accepted and agreed by the Director of Finance, are set out in Appendix A. Appendix B contains a summary of the main issues identified in the management review.
7.9 It is suggested that changes in the devolved finance function should be in place to take effect no later than 1st April 1999. This will have to include the establishment of new budgets to reflect any further organisational changes agreed by the Council. It will also be necessary to ensure that the accounts are properly closed for the current financial year, irrespective of any reorganisation agreed by Members. The Director of Finance will therefore need to take steps to achieve this, using existing resources in the most effective manner. This may require a more directive approach to the use of financial staffing resources if individual Groups have staffing shortages in early 1999/00. If necessary, the Director of Finance may at his discretion reallocate staff on a temporary basis to ensure that the accounts of the authority are closed in accordance with the required timetable.
Fair Funding
7.10 Members may be aware that the Department for Education and Employment is changing the funding regime for schools as from 1st April 1999. The EYL service is currently drafting a Scheme for financing schools which will govern the financial arrangements of all schools.
7.11 Under the new regime, schools that are currently Grant-Maintained will be funded directly by the Council. Their finances will be part of the Council's accounts, subject to external audit, public inspection and under the oversight of the Director of Finance as the Council's statutory Chief Finance Officer. In order to ensure adequate financial management and accountability, it may be necessary for the DF to set standards for the new Scheme that may give the GM schools less discretion than they have been used to. This is unavoidable given the change in their status but the intention is to preserve a considerable degree of financial freedom.
LEGAL IMPLICATIONS
There are no legal implications arising directly from this report.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 63 `
BACKGROUND DOCUMENTS
Devolved Financial Services – Management Review – November 1998
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 64 `
Appendix A
Management Review of Devolved Financial Services
Recommendations
A. Management Arrangements
A.1 To ensure that the management arrangements are such that Heads of Finance are equally accountable to the Director of Finance and to their Service Group Director.
A.2 To take any opportunities to foster a common view of the finance function. For instance, through the Heads of Finance meetings; networking opportunities for other Finance staff; encouraging short-term and flexible transfers of staff between finance teams, delegated and central etc.
B. Scope
B.1 To adopt the list of core finance activities in Appendix A
B.2 To specifically disallow finance teams to routinely prepare payment vouchers because of the control aspects and to ask Heads of Finance and Service Group Directors to identify how this will be achieved.
B.3 To accept the diversity of services provided by Finance Teams, but to keep them under review and seek changes where non-core activities hinder a Head of Finance in providing appropriate financial advice eg on systems because they are involved in them.
C. Common Standards and Approaches.
C.1 To adopt the Service Standards included in Appendix B
C.2 To ask Heads of Finance to identify how their practices will change as a result.
D. Resource Allocation.
D.1 To note the proposed allocations of staff resources outlined in Section 5 and Appendix H and the supporting documentation in Appendices D, E, F and G.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 65 `
D.2 To revisit the analysis and conclusions once the Chief Executive’s proposals for the organisation of the Council have been considered by Members, following consultation, and final decisions have been taken.
E. Skills of Senior Staff
E.1 To ensure that the Director of Finance actively supports the Investors in People approach within each Finance Team ie Performance and Development Agreements and Personal Development Agreements for all staff, Action Plans, Annual Reviews.
E.2 To consider with Heads of Finance the competencies matrix at Appendix I with a view to adopting this, or a version of it, from April 1999.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 66 `
Appendix B
Summary of the Management Review of Devolved Financial Services
Background
Work prepared initially in response to the decision to include devolved finance teams in the chosen CCT package. This has now been overtaken by events, with the Best Value Sub Committee adopting a different approach to CCT. However, there are still pressing reasons for a review of the way devolved finance teams operate, particularly in view of apparent failures of financial management in one part of the Council.
It would be wrong to give the impression that the experience of devolution has been all negative. Many benefits have accrued from it. For instance, there is now a greater understanding of financial issues within service groups and finance staff have a greater understanding of service issues. Particularly in those areas where government policies with major financial implications have been introduced the organisation has been able to respond more effectively than otherwise would have been the case. It is also the case that by combining the Accountancy Team and the Departmental Finance Team there is a better chance of consistent messages about the Group’s financial position being delivered.
Extent of financial administration
Variations between Finance Teams do raise questions about whether the scope of each team is correct. In three of the teams (Housing, HDS and Social Services) a significant number of payment vouchers are being prepared within the Finance Team. This is not helpful for budgetary control as it is through the authorisation of payment vouchers that budget managers are made aware of the extent of transactions being generated by their team. Without this direct link there is a danger that payments could be made without effective checks being made on the invoice. Moreover, it weakens the link between the budget manager and the expenditure being incurred. Finance Teams are also responsible for overseeing the payments processing function; this is a control weakness.
The issue is the extent to which the Director of Finance is happy to allow individual Group Finance Teams to become involved in work which could be regarded as outside the core of the Finance Function. It would seem sensible for the Director of Finance to want to promote the finance support function as one which is positive, supportive and, from time to time where appropriate, interventionist. This would suggest that Finance PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 67 `
Teams should be developing links with those other service providers within their Groups to improve the quality of the advice and support eg contracts teams, personnel teams, IT teams, teams dealing with external or other funding issues etc. This will differ from Group to Group.
Where the nature of the financial work of the Group is heavily weighted towards transaction based activities there is a danger of finance staff becoming so immersed in the detail that they lose sight of the bigger picture, thus impacting on the quality of the advice and support they may be able to offer. Equally, the more detached finance staff are from the detail, there is a danger that they will lose sight of the real picture emerging. A fair balance needs to be struck.
Proposal
There is a range of activities which individual Finance Teams undertake under the large umbrella of Finance Support. There is a need to clarify what the Director of Finance regards as core to the Devolved Finance function. In so doing the Director of Finance will be identifying what he regards as the responsibility of budget managers. Nevertheless, there is no need for the Director of Finance to be totally prescriptive. With the exception of particular administrative functions which could compromise the Head of Finance’s impartiality in assessing the effectiveness of financial systems and ones where accountabilities should clearly rest with budget managers, the Director of Finance need not get too concerned that different Groups provide a different range of services. It is more important that the minimum standards of support for the core functions is met in each Group.
The core and non-core finance activities are suggested in Appendix A
Common Standards and Approaches.
Service Standards have been prepared for the following functions.
Ø Revenue Budget Setting Ø Capital Budget Setting Ø Revenue and Capital Budget Monitoring Ø Closing the Accounts Ø Financial Administration
Each of the documents is included within Appendices B1-B5 and they are recommended for all Groups.
Resource Allocation
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 68 `
Considerable time was spent by the CCT working group considering resource allocation. The aim was to compare and contrast the factors which affected the number of staff which were required within each Group.
The outcome is a combination of quantification, in the case of transaction based staff, and judgement based on the overall relative picture created by the analysis for other staff.
The principal changes proposed are:
Group Principal Changes
Education, Youth and · An increase of 2fte posts to recognise the Leisure outcome of the transaction based analysis and the increased workload from both the addition of Youth and Leisure and the changing responsibilities and accountabilities of schools. Social Services · Principal Income Officer post translated into a second Principal Accountant · 0.5 fte payments officer extra · Future reduction in payment voucher preparation staff if this can be passed back to budget managers needs to be identified. Housing · Reduction of 0.3 fte at the moment, but the Head of Finance needs to identify the effect of passing payment voucher preparation back to budget managers and the effect of discontinuing duplicate checks, as identified in the audit report. Local Services · No change to accounting staff, in spite of transfer of Youth and Leisure, because current arrangements are probably the minimum necessary for cover etc. · Reduction of 2.3 fte transaction based posts suggested by the analysis. Hillingdon Direct Services · Reduction by 1 fte Principal Accountant · Reduction by 0.5 fte Accountancy Support post · · Slight increase 0.1 fte in transaction based posts. · Future reduction in transaction based staff if payment voucher processing is passed back to budget managers. Policy · Analysis suggest a reduction of 0.3 fte, but no change is proposed because of the cover which this payments post provides for payments staff in other Groups. PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 69 `
The Chief Executive has reported on the possible future organisational structures within the Council. As they currently stand, his proposals will impact on the existing structures and the conclusions from the CCT exercise will need to be reconsidered. The information exists in a format which would allow a reconfiguration of the existing analysis, enabling new conclusions to be drawn.
Roles and Skills of Senior Finance Officers
The Head of Finance role is a difficult one for many reasons:
Ø There are dual accountabilities which are sometimes difficult to reconcile where there are differences between the corporate and the departmental, between financial regulations and managerial expediency; between different personalities Ø Finance by its nature is often high profile and is regularly associated with bad news about service reductions Ø The post-holders are expected to be technically expert in finance, have a full grasp of the service they are supporting and also manage a team of staff Ø The post-holders are expected to have a range of management skills including communication, negotiation, problem-solving, to be able to operate effectively.
Heads of Finance and other senior finance staff should be supported in their role and given the opportunity to develop the skills which are necessary for their jobs. This should involve:
a) A commitment to IIP for all devolved finance teams, linking into both their own Group’s scheme and that of the Financial Services Group.
b) A proposed set of competencies for Heads of Finance, adapted from draft senior manager competencies obtained from Housing. (See Appendix I)
This must be accompanied by a shared management accountability in both the Service Group and the Financial Services Group. This in practice would involve a joint PANDA/PDP for Heads of Finance with an annual review for each and scrutiny of:
Ø Team Action Plans Ø Overall annual risk assessment documentation Ø Budget setting plans Ø Closing programme Ø Budget monitoring risk assessment and monthly statements.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 70 `
The emphasis should be on enabling each postholder to meet their own responsibilities as Head of Finance, rather than give Heads of Finance an opportunity to delegate their responsibilities upwards. The useful DfEE principle that “intervention should be in inverse proportion to success” should be adopted: the aim is goal congruence, rather than control for its own sake.
The role of the Head of Finance is pivotal if financial management is to be effective throughout the organisation. If individual postholders do not have the relevant skills to be effective in the role, there needs to be active management support from both the Financial Services Group and the Service Group to allow the individual to obtain the necessary skills. It makes sense for there to be a permanent and active system of management support from both sides, rather than providing ad hoc support once problems have escalated.
Conclusions
It is implicit within this report that the devolution of financial services has positive benefits for the organisation and that there should continue to be finance teams dedicated to each of the main service groups. Should these groups change significantly finance teams will need to be reconfigured to meet those changes.
Some strengthening of the management control over finance teams by the Director of Finance would be desirable.
The scope of the finance teams is different in each case but, with the exception of a few financial control points, there is no great danger in allowing a diversity of services provided by teams.
Common standards and approaches are outlined and should be adopted in each finance team but, with the exception perhaps of HDS, it is unlikely that any other Group will have difficulties adapting to these.
Risk assessment is a theme common to both the Service Standards and the Resource Allocation and it ought to be adopted as the principle means of assessing priorities and planning for financial support services across the Council.
Finally, the systems and procedures adopted by Groups will only be effective if the people operating them are able to develop their skills, knowledge and experience. The Finance Services Group and other Groups in the Council have gained Investors In People accreditation over the last few years. It is worth underscoring the importance of this approach to ensure that the services delivered by staff in devolved finance teams attain and maintain the highest quality standards.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 71 `
APPROVAL OF THE AUDITED STATEMENT OF ACCOUNTS ITEM 8 1997/98
CONTACT OFFICER: Paul Whaymand TELEPHONE: 01895 250816
SUMMARY
This report outlines the changes to the Statement of Accounts made since the draft un-audited accounts were presented to this Sub-Committee in September.
RECOMMENDATIONS
1. That the qualification of the accounts by our external auditors be noted.
2. That the amended Statement of Accounts for the financial year ended 31 March 1998 be approved.
INFORMATION
8.1 This Sub-Committee approved the draft un-audited statement of accounts in September, this being a requirement of the Accounts and Audit Regulations 1996. A further requirement of these Regulations is that Members should receive a further report on the Statement of Accounts if any material changes are made during the external audit.
8.2 There have been no fundamental changes that affect the financial position of the Council. The General Fund and HRA balances are as they were presented in September.
8.3 However, our external auditors have made one qualification to the accounts in relation to the NNDR accounts (page 3 of the Statement of Accounts). Our auditors are saying that the accounts do present fairly the financial position of the Council except for questions that remain over the NNDR accounts.
8.4 The Council collects non-domestic rates as an agent of the Government. The Council is responsible for establishing the amount due from non-domestic rate-payers and then paying this sum (less a cost of collection allowance) over to the national pool.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 72 `
8.5 The amount collectable is accounted for on a software package supplied by First Software. There have been long-standing problems associated with the operation of this system since it went live in April 1997. As a result of these problems, the final accounts relating to NNDR had to be calculated in part by the use of ‘best estimates’ because certain information being held by the system could not be relied upon. These problems relate to elements of the calculation that feed into the amount collectable from rate- payers. There is no problem in relation to the control and reconciliation of amounts received from rate-payers and the allocation to the correct account.
8.6 There are a number of figures in the accounts that are affected by the use of these ‘best estimates’.
8.7 The first are the Ratepayers arrears and pre-payment figures in notes 6 and 7 on page 15 quoted as £45.7m and £2.9m respectively. Because the arrears figure of £45.7m cannot be supported in detail, then neither can the provision of £14.5m against these arrears (included in provision for doubtful debts figure of £28.4m in debtors note 6 page 15).
8.8 The second is the amount due to be paid over to the national pool included in the creditors note on page 6 of £3.3m (included in the Government departments creditors figure of £19.2m).
8.9 The third is the total non-domestic rates collectable credited to the Collection Fund (£182.1m on page 24).
8.10 There is a separate more detailed report on the agenda outlining the NNDR problems and the recovery plan that has been put in place this year to correct those problems.
8.11 There will be no direct financial implications if any NNDR adjustments need to be made from the estimates used in closing the 1997/98 accounts. Any changes on the estimated figures will have an impact on the Collection Fund balance sheet not on the General Fund. If for example the amount collectable is understated by £2m the ratepayers arrears will go up by £2m to £47.7m and the amount due to be paid over to the National Pool will go up by £2m to £5.3m.
8.12 There are no other material changes to the accounts that have been made since the draft accounts were issued.
8.13 The final version of the Statement of Accounts, including the audit opinion, have been circulated in advance to all Members of this Sub-Committee and will be shortly circulated to all Members of the Council.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 73 `
8.14 An advert will shortly be going into the local paper advertising the conclusion of the audit and stating that copies of the accounts are available to members of the public.
LEGAL IMPLICATIONS
There are no legal implications arising from this report.
BACKGROUND DOCUMENTS
Finance and Asset Management Sub-Committee report September 1998. The Accounts and Audit Regulations 1996.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 74 `
PERFORMANCE OF COUNCIL TAX COLLECTION ITEM 9
CONTACT OFFICER: Keith Clayton TELEPHONE: 01895 250336
SUMMARY
Report on the performance of Council Tax collection.
RECOMMENDATION
That the report be noted.
INFORMATION
9.1 Table 1 shows the percentage collected and balance due of Council tax, as at the end of each quarter, for the last three years.
Table 1 Quarter Amount Amount Percentage Balance due ending due for the paid to paid to date (including year date arrears due (including for previous arrears years) b/fwd ) (£m) (£m) (£m) 1995/96 June 49.9 9.3 18.7% 40.6 Sept. 49.5 21.4 43.3% 28.1 Dec. 49.3 34.5 70.1% 14.8 Mar 49.7 43.4 87.3% 6.3
1996/97 June 53.4 9.9 18.6% 43.5 Sept. 53.2 22.7 42.7% 30.5 Dec. 53.0 36.1 68.1% 16.9 Mar 53.2 46.1 86.6% 7.1
1997/98 June 57.4 10.9 19.0% 46.5 Sept 57.1 24.3 42.6% 32.8 Dec 56.7 39.3 69.4% 17.4 Mar 57.0 49.6 87.0% 7.4
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 75 `
Explanatory notes regarding Table 1.
(i) The ‘balance due’ figures include the balance of arrears due for previous years
(ii) The arrears of £7.4m, as at 31 March 1998, is made up as follows: £m Arrears outstanding from 1993/94 0.871 Arrears outstanding from 1994/95 1.055 Arrears outstanding from 1995/96 1.230 Arrears outstanding from 1996/97 1.615 Arrears outstanding from 1997/98 2.629
£7.4
(iii) Percentage paid to date, is the amount paid compared to the total outstanding debt including arrears
(iv) The changes in the ‘amount due for the year’ figure, from quarter to quarter, is as a result of changes to benefits, reliefs and discounts granted, taxpayers occupying and vacating properties, and changes in property bandings.
9.2 Table 2 gives a comparison of Council Tax arrears year by year for the last three years
Table 2 Tax Year Position as at Position as at 31/3/97 Position as at 31/3/98 31/3/96
1993/94 £1.3m (2.9%) £1.0m (2.4%) £0.9m ( 2.0%) 1994/95 £1.8m (4.2%) £1.3m (3.0%) £1.1m ( 2.4%) 1995/96 £3.2m (6.9%) £1.7m (3.7%) £1.2m ( 2.6%) 1996/97 £3.1m (6.3%) £1.6m ( 3.3%) 1997/98 £2.6m ( 5.0%)
Totals £6.3 £7.1 £7.4
(The figures in parenthesis are the arrears as a percentage of that year’s debt as at year end for that year)
9.3 Although the overall arrears figure is still increasing (£0.3 since last year) the percentage of each years debt collected has improved over the first three years.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 76 `
9.4 The Council made a 4% provision for non-collection of Council Tax for 1993/94 and 1994/95, this was reduced to 3% for the years 1995/96, 1996/97 and 1997/98. In view of the improvement in collection the Council has further reduced this provision to 2.5% for 1998/99. It is likely that this will be the recommended provision for 1999/2000
9.5 With regard to the remaining debts for earlier years, this is made up of either cases against which we are taking recovery action, such as committal, the very nature of which means that progress to clear the amounts due is very slow, or are long term payment arrangements for taxpayers on low incomes. Where a taxpayers owes current years tax, as well as arrears, and obviously has difficulty in paying, due to financial circumstances, our policy is to give priority to clearing the current liability first then affordable payments against arrears. This does mean of course that in these cases arrears can take some time to clear.
9.6 Hillingdon’s performance for Council Tax collection can be gauged against other London Boroughs, using figures published by the Department of the Environment, Transport and the Regions. .
9.7 Table 3 shows Hillingdon’s ranking against other London Boroughs, based on percentage of the Council tax due, for the year, collected in the year. For comparison I show the ranking of neighbouring authorities.
Year Hillingdon Hounslow Ealing Harrow 1994/95 10th 16th 15th n/a 1995/96 11th 20th 16th n/a 1996/97 15th 16th 14th 7th 1997/98 11th 19th 13th 6th Source:- Department of the Environment Transport and Regions’ Quarterly return of Council Tax and Rates Income: Fourth Quarter results for 1994/95, 1995/96, 1996/97 and 1997/98
9.8 Although we have improved our collection rates, over the last few years, we have, other than for 1996/97, remained roughly in the same position when compared against other London Boroughs.
LEGAL IMPLICATIONS
The legal section has been consulted in the preparation of this report and confirms there are no legal implications arising.
BACKGROUND DOCUMENTS
Report to Policy and Resources Committee 30 September 1997
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 77 `
Department of Environment, Transport and Regions, Quarterly return for Council Tax and Rates income: 4th Quarter results for 1994/95, 1995/96, 1996/97 and 1997/98 Various analysis of Council Tax collection and arrears
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 78 `
PARK LODGE FARM CENTRE, HARVIL ROAD, HAREFIELD - ITEM 10 FUTURE MANAGEMENT CONSIDERATIONS
CONTACT OFFICER: M Francis TELEPHONE: 01895 250925
SUMMARY
This report investigates the possible ways in which Park Lodge Farm may be managed in the future, in order to pursue its objectives as a commercial farm providing a community resource in terms of education and leisure and to attract sufficient internal or external funding to ensure that the essential improvement and development programme is progressed at no additional Revenue cost.
RECOMMENDATION
That officers are instructed to investigate further the option of establishing a charitable trust by a company limited by guarantee so that the issues can be fully investigated and reported back to members.
INFORMATION
10.1 Park Lodge Farm Centre is an agricultural enterprise managed in hand by the Council, through the HDS Estates and Valuation Service, and with a ring-fenced budget.
10.2 It comprises of three units, Park Lodge Farm itself, Highway Farm and Langley Farm amounting in total to some 570 acres of which over 200 are a former landfill site.
10.3 The land forms part of the Green Belt Estate which is held by the Council under the provisions of the Green Belt (London and Home Counties) Act 1938.
10.4 The day to day operations of the Farm Centre are overseen by the farm manager with 4 full time staff and a part-time technician.
10.5 Although the Farm has a ring-fenced budget it has struggled to find the necessary finances to carry out repairs and maintenance to the yards and buildings, let alone any development of facilities to make it more available and attractive to visiting school parties and the general public.
10.6 A report to HDS Sub-Committee dated 26 September 1996 resulted in officers being instructed to identify funding arrangements for the developments PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 79 ` described in that report. Because of the research into the potential for funding it has become opportune to review the management options for the Farm Centre and to provide a conclusion as to the most appropriate form of management to both attract funding and meet the objectives established for the Farm under Section 4 of the Greater London Council (General Powers) Act 1974 as amended in 1986 by the Local Government Reorganisation (Misc. Provisions) (No. 7) Order, namely:-
“Use the Farm for the purposes of agriculture and the promotion of matters of agricultural interest, and for the purposes of education, recreation and leisure and may do all such things as they consider necessary or desirable for or in connection with the management and maintenance of the farm and may permit the use of the Farm by members of the public for the purposes of this section and subject to such terms and conditions as the Council think fit”.
10.7 The options for management which have been identified are as follows-
· Continued Council Management · Farm Business Tenancy under the Agricultural Tenancies Act 1995 · Freehold Disposal · Trust · Joint Venture (Partnership/share farming) · Management Agreement/Contract
Continued Council Management
10.8 Has limited potential for attracting internal/external funding for development and is a “no cost” option provided Farm income exceeds Farm expenditure, which is becoming increasingly difficult to achieve. The main advantage is that there is a total control on activities and developments at the Farm, the main disadvantage is the age, condition and status of many of the buildings on the 3 units, some of which are Listed requiring substantial amounts of money to repair and maintain.
Farm Business Tenancy
10.9 A tenancy does not give the direct control enjoyed by the Council and it is unlikely that there is a tenant in the market who would want to take on the liability of the buildings and land and the educational/public access input. The three units could be let separately – the Council would benefit from rental income but would be responsible for payment of compensation at the end of the tenancy. The future of the Council’s staff, live and deadstock would also have to be considered as would the important collection of farming bygones.
Freehold Disposal
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 80 `
10.10 Would provide best return in terms of capital receipt but worst from loss of control of development of either land or objectives of the Farm Centre. It is unlikely that the 200 plus acres of landfill site could be sold on the open market because of the potential contamination problems. Any disposal of Green Belt Act land requires the consent of the DETR which would be a lengthy process leading to a Public Inquiry. Any disposal could be subject to Green Belt or other covenants, but it is still considered likely that ultimately the Council would lose any form of control over the property. There is no doubt that Langley and Highway Farms have considerable freehold market value – would only really be an advantage if the Council continues to be able to reuse 100% of the capital receipt.
Trust
10.11 There is no doubt that the objectives of the Farm meet two of the criteria for establishing charitable status – education and the benefit of the community. Although a Trust would have to operate independent of the Council management, control would be maintained by having representation on the Trust. Although there can be no guarantee a Trust is far more likely to attract external funding, since research has already shown that a number of possible sources of substantial funding will only provide grants to charitable organisations.
10.12 Once a Trust is formed it can bid for external funding on presentation of at least 1 years trading accounts, and in order to meet most funding bodies criteria, it is likely that a Trust would need some form of tenancy (probably 25 years) for which there would no doubt be a return in the way of rental income. The Councils input would be the live and deadstock and the milk quota, transferred under a strict requirement to replace and maintain at existing levels. Under a Charitable Company limited by guarantee arrangement there would be a considerable amount of accountability for the financial management of the Trust, as the rules of the Companies Act 1985 would also apply.
Joint Ventures (Partnership/Share Farming)
10.13 These would avoid the creation of an agricultural tenancy and have flexibility as to the length of agreement. The doubt again arises as to who would wish to enter into such arrangements with the Council.
PARTNERSHIP is a common venture with a view to profit. Partners have a full personal liability for partnership debts and are under a duty to participate actively in the partnership enterprise. Any such arrangement would have to be carefully drafted - can the Council be a business partner?
“SHARE FARMING” means a particular type of contract which involves the parties contributing to input in a given percentage and sharing gross income in that or another percentage. It is a principal/contractor agreement - the
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 81 ` landowner i.e. the Council retaining possession of the land, participating in effective farming without the day-to-day responsibilities on the cost of providing labour or equipment. The farmer can use his own skills to farm and manage without major capital outlay since the landowner will be responsible for the maintenance of buildings.
Management Contract (short term)
10.14 Under Agreement or Contract a farming contractor carries on all or some of the farming functions. The parties liabilities remain entirely separate, their contributions are defined by agreement, and the rewards are an agreed share of the revenue (not profit) of the enterprise. The landowner would probably be required to pay a contract fee to a contractor and a percentage of income as an incentive to the contractor. The contract would have to be closely monitored and its success would depend on the contractors reliability and ability to manage performance of staff. Management decisions would still need to be taken by the Council to ensure maximisation of return. The Council would still be responsible for all repairs, improvements, livestock replacements, materials, insurance and other outgoings. There are possible areas of saving with machinery and labour costs, but it is considered unlikely that the public access side of the farms activities could be successfully contracted out under this arrangement.
Conclusion i). The Council continues to manage Park Lodge Farm Centre under current arrangements, supporting development through additional funding to provide modern and attractive facilities for both farming and public access. ii). If the Council is committed to the idea of the Farm Centre, but does not wish to continue to manage the facility itself, then it should pursue the Trust. iii). If the Council is not committed to the objectives of the Farm Centre as an Education and Leisure resource, then it should seek DETR consent to the disposal of Langley and Highway Farms, and let Park Lodge Farm on a Farm Business Tenancy of up to 15 years. iv). A Trust may not be interested in taking on the liability of either Highway or Langley Farms (or both) and the disposal by way of a long lease or freehold would still be a consideration. v). Any of these above options, apart from continued management by the Council, will have staffing considerations which could possibly lead, in the extreme, to redundancies and rehousing.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 82 `
LEGAL IMPLICATIONS
There are a number of complex legal issues which would require detailed investigation if the option of a charitable trust is to be pursued.
RESOURCE IMPLICATIONS
The report highlights a number of options for the future of these assets. The first key point to note is that doing nothing is probably not sustainable given the inevitable physical deterioration of the assets that will occur without investment in the coming years. In terms of an asset management plan for the authority, something will have to be done with these assets, either as a whole, or as separate parcels. In the financial terms, if capital charges are excluded, these assets broadly break-even on an annual basis. There is therefore not currently any real surplus generated for the investment needed in the asset. If the route of a charitable trust is followed, on the basis of the trust having objectives that address:
q Advancement of education
q Other purposes beneficial to the community in a way recognised as charitable then the benefits that can flow are access to rate relief, tax relief on private donations, access to funds and grants not available to local authorities.
It will be important to very clearly prepare the objectives of a trust, as the body would be legally prevented from operating outside these. If the trust is aiming to secure grants or partnership funding then it will need to develop a clear business plan for its operations.
Consideration will need to be given to whether the trust is incorporated or not, as this has relevance in respect of the regulations applying to local authority companies. The controls of local authority companies and the appropriate tests if influence and control, would have to be applied to determine whether the expenditure etc could be deemed to be separate from the local authority’s. Unincorporated bodies are outside of the control on companies legislation. To be in the position where the trust’s capital expenditure would not count as expenditure of the authority, the Council must not be able to control the trust through the number of nominations it has to the Board of Trustees.
The benefits of incorporation are that the obligations of publishing accounts and other financial statements in accordance with accounting regulations make such bodies more acceptable to funding institutions or private sector partners.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 83 `
There will be set up costs associated with incorporating the trust and developing its business plan, in addition to those associate with any staff transfers of redundancies.
The development of the business plan will highlight whether it is beneficial to retain all the component tenancies or whether some could be disposed of to provide to pump priming capital for the trust that may be required for match funding as per of any future partnership arrangements.
BACKGROUND INFORMATION
Report to HDS Sub Committee dated 26 September 1996.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 84 `
NATURE RESERVES IN HILLINGDON OWNERSHIP ITEM 11 MANAGED BY LONDON WILDLIFE TRUST - GRANT OF 25 YEAR LEASES
CONTACT OFFICER: Martin White TELEPHONE: 01895 250936
SUMMARY
This report seeks approval to a request from the London Wildlife Trust to enter into 25 year leases on 9 London Borough of Hillingdon sites, in order that they may bid for substantial funding from the English Heritage Lottery Fund for enhancement and improvement of the nature reserves under agreed management plans.
RECOMMENDATION
That the Head of Property Services Agency is instructed to approve appropriate terms and conditions for 25 year leases on the identified sites to provide for both conservation management and community benefit.
INFORMATION
11.1 The London Wildlife Trust manages on behalf of the London Borough of Hillingdon 11 nature reserves which are held under a variety of formal or informal agreements. 9 of these reserves have been identified by the LWT as forming the basis of a bid for Heritage Lottery Funding. The sites are shown on the attached plans, while a plan illustrating their location in the Borough will be available at the sub - committee meeting.
11.2 Nationally, the Wildlife Trust organisation has successfully negotiated with the Heritage Lottery Fund a grant of ú25m over 5 years, which is available for local Wildlife Trusts to make bids for. The Heritage Lottery Fund have stipulated that in order for funding to be made available then as a minimum Wildlife Trusts must have leases of 25 years on the sites for which funding is sought.
11.3 Preliminary discussions have been held with senior representatives of the LWT who are extremely confident that, provided LBH are willing to enter into 25 year leases, their bids for up to 75% funding will be successful.
11.4 External funding would, through the provision of valuable resources, improve the overall management of the nature reserves and enable the sites to contribute in a variety of ways to LBH policies on conservation and public access, at no additional cost to the Council. PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 85 `
11.5 The grant of 25 year leases of these sites would place maintenance and management obligations on the Trust, relieving the Council of any future expenditure.
11.6 In discussions with the LWT it has been emphasised that:- i). The grant of the 25 year leases is very much dependent on the success of the lottery bid û if funding is not forthcoming despite having an agreement to a 25 year lease then the leases could not be granted. ii). LWT must establish a management plan for each reserve which includes a degree of public access/education to the benefit of the community in general and is agreed by officers. iii). Any proposals for long leases should not conflict with Property Management or Development Strategies. iv). The granting of a 25 year lease on any particular site would have to include an understanding that the terms and conditions placed no financial obligation for repairs, maintenance or improvement on the Council.
11.7 In some cases the granting of 25 year leases could give LWT a greater interest in the area than other established users (e.g. fishing in lake adjacent to Denham Lock Wood, in River Colne at Uxbridge Moor and River Colne at Frays Island). The intention would be to recognise these users rights and ensure that their current level of enjoyment is in no way diminished.
11.8 The London Wildlife Trust is a well established and well managed organisation, with both full-time and volunteer workers. The success of a bid for funding would greatly enhance the management of these nature reserves in Hillingdon and the sub-committee is therefore asked to resolve that 25 year leases be negotiated on each site to enable LWT to progress matters through the agreement reached between their national organisation and the Heritage Lottery Fund.
11.9 Officers from Property, Leisure and Planning Services have considered these proposals to identify how they relate to council property, leisure and planning policies and strategies. It is not considered that the proposed leases would conflict with any policies or strategies, nor is it likely that there would be any scope for linking these proposals to any other initiatives being pursued by the Council. However, the proposed leases would represent an excellent example of partnership working between the Council, who provide the land, the lottery Heritage Fund who would provide funding and London Wildlife Trust who would provide ongoing management expertise for the benefit of nature conservation and the enjoyment of local residents.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 86 `
LEGAL IMPLICATIONS
There are no legal implications arising directly out of this report.
RESOURCE IMPLICATIONS
The financial implications of these leases will be taken into account in determining next year’s budget for these service
BACKGROUND DOCUMENTS
Nil
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 87 ` Apendix A
Nature Reserves which LWT may include in their bid for Heritage Lottery Funding ______
1. Denham Lock Wood - 25 year lease currently being negotiated (Resolution of Finance & Property Committee 3.6.97.)
2. Frays Farm Meadows - Farm Business Tenancy currently being negotiated (Resolution of P & R Committee 23.1.98.)
3. Dews Farm Sand Pits - informal licence.
4. Ickenham Marsh - no formal agreement.
5. Gutteridge Farm - no formal agreement.
6. Yeading Brook Meadows (part) - no formal agreement.
7. Ten Acre Wood - no formal agreement.
8. Uxbridge Moor - no formal agreement.
9. Frays Island/Maybes Meadow - no formal agreement.
Attached plans refer.
(MF495)
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 88 ` plans
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 89 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 90 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 91 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 92 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 93 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 94 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 95 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 96 `
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 97 `
COLLECTION PERFORMANCE: - NATIONAL NON- ITEM 12 DOMESTIC RATES
CONTACT OFFICER: Keith Clayton TELEPHONE: 01895 250663
SUMMARY
This report up-dates the committee on the poor collection performance by the in-house National Non-Domestic Rates (NNDR) Team, caused by the severe difficulties encountered with the migration of the National Non-Domestic Rates data from the old mainframe to the new ‘open’ system.
RECOMMENDATION
That this report be noted.
INFORMATION
Introduction
12.1 Members will be aware from the report ‘Approval of the Auditors Statement of Accounts 1997/98’ (elsewhere on this agenda) that the District Auditor has qualified the Council’s statement of accounts for the year 1997/98, due to uncertainty over figures in respect of National Non-Domestic Rates (NNDR).
12.2 The District Auditor has also raised this problem in his Management Letter (a report on which will be before the Policy Committee on 17 December 1998), as a key concern for Members, and he has recommended the following action: -
“The Council must monitor progress to address the NNDR system failure and ensure that NNDR transactions are accurately recorded”
12.3 In section 2 of the management Letter the District Auditor shows that there has been a significant rise in recorded NNDR arrears and that Hillingdon has the poorest collection performance in the country. These problems are as a result of the implementation of a new NNDR system at the start of 1997/98 financial year.
12.4 The purpose of this report is to outline for Members the main reasons for the failure to implement the new system successfully, the action being taken to rectify the position, and how the lessons learnt will be used to prevent a repeat of this situation. PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 98 `
Migration of the NNDR data from old to new system
12.5 In January 1995 the Council had decided that the whole of Revenue Services, which is responsible for the collection of Council tax, NNDR, Residual Community Charge (RCC) and cashiers, should be subjected to market testing under the Compulsory Competitive Tendering (CCT) legislation.
12.6 In preparation for this challenge the Revenues group underwent a major reorganisation which resulted in the loss, through voluntary redundancy, of a number of experienced and knowledgeable officers, especially on NNDR. A client function was also established, separate from the contract team.
12.7 In April 1996, in order to reduce the value of services to be subjected to market testing to the minimum required under the regulations, Members decided that only NNDR and RCC should be subjected to CCT. This required the establishment of a separate NNDR/RCC team and the appointment of a manager to lead this group.
12.8 In the summer of that year it was also agreed that the NNDR package should be transferred from the ICL/CFM mainframe to an ‘open’ system. This was in line with the overall strategy for financial systems. Following an evaluation process it was decided to implement the Firstsoftware package which had already been made available as part of the negotiations on the Council Tax package. This meant that Council Tax, RCC, Council Tax Benefits, Housing Benefits and now NNDR would all now be on Firstsoftware solutions. It was believed this would benefit the in-house team in its preparations for CCT.
12.9 During the summer staff undertook a site visit to an existing user of the system, drew up a detailed specification of what the system should achieve and had discussions with both ICL/CFM and Firstsoftware staff on the Council’s requirements. There was no reason to anticipate any problems with the transfer.
12.10 The original target date for the transfer to the new system was January 1997 and it was intended that the two systems would run in parallel until the end of that financial year. Therefore Hillingdon agreed with ICL/CFM to terminate its use of the mainframe package with effect from 1 April 1997. Due to late changes in NNDR legislation it was necessary to delay the transfer until 1 April 1997.
12.11 Between January and the end of March 1997 the NNDR team prepared for the migration from the mainframe to the new ‘open’ system. The project management team consisted of representatives from the NNDR team, the Client side, Firstsoftware, and ICL/CFM with help from the corporate IT section.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 99 `
12.12 Although extensive testing was undertaken by the NNDR team, there were technical limitations which meant that officers had to rely on assurances from Firstsoftware that problems identified would be rectified on the ‘live’ system. Moreover, there was no time for parallel running if the additional cost of extending the ICL/CFM contract was to be avoided. Although there were still some problems these appeared, at the time, to be minor and the decision to go live was taken.
Post Migration
12.13 When the new system was in operation, it became apparent that there were major problems with the data load. Firstsoftware and ICL/CFM were summoned to an emergency meeting. Both Firstsoftware and ICL/CFM were confident that the problems could be sorted out quickly and efficiently. The early work carried out supported this optimism and therefore it was agreed to proceed on this basis.
12.14 In the meantime, the NNDR team could not sensibly carry out updating work, and therefore extensive backlogs of Valuation and other work built up. Also no recovery action was taken, because of uncertainty about the accuracy of accounts.
12.15 By late autumn most of the problems identified at the start of the year appeared to have been resolved and the NNDR section commenced recovery and other work. However problems continued to surface and several further attempts were made by Firstsoftware, ICL/CFM and NNDR staff to find solutions to resolve the difficulties.
12.16 Towards the end of 1997 ICL/CFM felt they had done all they could to resolve the problems. Their argument was that the data previously held on the mainframe was correct and that it was the ‘new system’ rather than the data that was at fault. Erroneous balances were still appearing on the accounts but Firstsoftware argued that the ‘system’ was fine and it was a data load problem. In support of this contention Firstsoftware were able to argue that their product was in use by several NNDR sites throughout the country, including some London Boroughs and it was basically the same system used for Hillingdon’s Council Tax. This is true and no fundamental system error has been located.
12.17 The end of year processes in March 1998 indicated the true nature of the problems with reports indicating massive levels of arrears, which were shown as being over £142,000,000, which was obviously wrong. At this stage Firstsoftware agreed to have another look at the problems and a NNDR specialist for Firstsoftware was allocated to Hillingdon for two, one-week periods. Arising from these investigations and meetings with the District Auditor a comprehensive action plan was developed. This is set out below.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 100 `
Problems and lessons
In the meantime the Head of Revenue Services, together with the Client side officers undertook a review of the problems to identify what went wrong and why.
12.18 There were a number of detailed problems but in summary, the main implementation difficulties were:
· Lack of resources: time; funding (for an adequate test facility and/or an extension of the old system); and sufficient experienced staff and contractor support
· Lack of clarity about roles and responsibilities, particularly in relation to technical IT matters and the interface between the two IT companies
· Technical problems which finance staff had no control over and which were not properly addressed by IT specialists
· An assumption that as this was essentially a transfer of data, it was a simple task.
12.19 From this it is clear that for any future IT project there should be:
· Full project planning, managed by a nominated lead officer, with identified and adequate funding and staffing
· Clarity about roles and responsibilities, particularly in technical areas, with specialist IT support and proper contractual arrangements
· Sufficient lead-in time, preferably without other major changes being introduced at the same time.
Action Plan
12.20 The NNDR team had two main problems: -
· erroneous data that was corrupting individual accounts, thus preventing recovery action because arrears records could be unreliable
· a massive backlog of valuation updates, giving rise to numerous complaints which created further work for the team
12.21 As the data corruption problem was restricting the ability to update the valuation records it was necessary to allocate resources to solving this problem first. All attempts to solve the problem generally by programming had
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 101 ` failed. Therefore the only remaining solution was to examine every account, one by one, identify the errors by comparing what was held on the system with what was held on the mainframe and making corrections where necessary.
12.22 This is an arduous and prolonged task with the NNDR team having to check all 13,000 accounts held on the system. To undertake this, additional resources (agency staff) have been allocated to the NNDR team. This task force, together with assistance from a Firstsoftware employee, is now checking each account. It is anticipated that this task will not be completed until late January 1999.
12.23 It was also decided to ring fence a number of staff to work on the valuation backlog of 2,500 items. Initially a target date of March 1999 was agreed with the District Auditor to bring this backlog up to date. Staff with the necessary experience and ability to undertake the often-complex work of valuation changes were selected to work on this sub-team. This schedule is at risk currently due to lack of staff and the use of fixed term staff is now being considered as a means of bringing this work back on course.
Recovery
12.24 As stated in the introduction to this report the NNDR section has seen a significant increase in the level of rate arrears due to poor performance in collection. The level of arrears, as at the end of year, for the last three years is shown in table 1
Table 1 1996 1997 1998 £m £m £m National Non- 10.7 11.9 45.8 Domestic Rates
12.25 Hillingdon’s performance on NNDR collection can also be gauged against other London Boroughs using figures published by the Department of Environment Transport and the Regions (DETR) Hillingdon’s ranking, in terms of percentage collected for the last four years is shown in table 2
Table 2 1994/95 1995/96 1996/97 1997/98 Rank based on % 18th 16th 10th 33rd collected of that year’s rate
12.26 The major data load problems and the backlog of valuation work has meant that recovery action can only be taken on a few accounts at a time and every notice produced (i.e. Bill, Reminder, Final and Summons) has to be checked and amended, manually before dispatch. PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 102 `
12.27 Once the data load problems are resolved an action plan for recovery work will be implemented.
LEGAL IMPLICATIONS
The Head of Legal Services has advised that there may have been a failure by the software supplier to provide adequate support. However, as the NNDR system was supplied when the Council Tax system was purchased and was not the subject of a separate contract, it is probable that legal action would be difficult to bring to a successful conclusion, given the complications of the case and the general problems of litigation in connection with IT systems.
RESOURCE IMPLICATIONS
12.28 The cost of additional staff resources in the NNDR team will be met from within the overall Financial Services budget. Delays in receiving payments have an adverse impact on the Council’s cash flow, leading to potential loss of interest.
12.29 When the implementation of a valuation reduction is delayed, the taxpayer is entitled to interest on any refund. However, as the Council will have retained payments based on the original valuation in the meantime, this need not have a net cost to the Council.
BACKGROUND DOCUMENTS:
Financial services internal records, DETR statistics
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 103 `
LONDON BOROUGH GRANTS COMMITTEE 1998 / 99 ITEM 13 BUDGET
CONTACT OFFICER: Nigel Cramb TELEPHONE: 01895 250394
SUMMARY To consider the Council’s contribution to the London Boroughs Grants Committee 1999 / 2000 budget.
RECOMMENDATION
That the Council’s contribution of £ 999, 040 be approved.
BACKGROUND
13.1 The Council has received details of the London Boroughs Grants Committee’s proposed budget for the 1999 / 2000 financial year. At its meeting of 4th November the Grants Committee agreed to recommend to its constituent Councils a budget of £ 29, 064,110.
13.2 The total budget represents a 3% reduction over the Grants Committee’s 1998 / 99 budget.
13.3 As a result the individual boroughs contributions are revised, based on their percentage of the total population of London, and Hillingdon’s contribution has dropped by £ 28, 670 to £ 999,040.
13.4 For the London Boroughs Grants Committee budget to be approved, at least two thirds of the 32 London boroughs must approve their individual budget contribution.
13.5 If there is no agreement, the overall level of expenditure for the Grants Committee reverts back to the previous years budget.
LEGAL IMPLICATIONS
RESOURCE IMPLIATIONS
Hillingdon’s contribution is within the provision of the 1999 / 2000 revenue budget. The provision will be adjusted to reflect the proposed figure subject to members agreeing the Grants Committee proposal.
BACKGROUND DOCUMENTS
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 104 `
Letter from London Borough Grants Unit 6th November 1998
COUNCIL TAX AND NATIONAL NON-DOMESTIC RATE - ITEM 14 IRRECOVERABLE AMOUNTS WRITTEN OFF UNDER DELEGATED POWERS
CONTACT OFFICER: Amanda Hailstone TELEPHONE: 01895 250358
SUMMARY
This report contains details of irrecoverable amounts of Council Tax which have been written off by officers under delegated powers in the last quarter.
RECOMMENDATION
That the Committee note the amounts written off by officers under delegated powers.
INFORMATION
14.1 Under the scheme of delegations, officers have delegated powers to write off income due to the Council in respect of sums up to £5,000, subject to quarterly reports to the Finance and Asset Management Sub Committee summarising the action taken.
14.2 This report contains details of irrecoverable amounts of Council Tax which have been written off by officers under delegated powers in the last quarter.
COUNCIL TAX
A total of £3,530.13 has been written off in respect of Council Tax. This is made up as follows:
Range No. of Amount cases £.p Up to £100 204 1,865.29
£100.01 to £500 4 1,137.79
£500.01 to £1,000 1 527.05
Total 209 3,530.13
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 105 `
The reasons that these amounts have been written off are as follows:
Reason No. of Amount cases £.p
Moved away - unable to trace 83 1795.38
Ratepayer deceased - Estate insolvent 4 1,155.61
Uneconomical to Collect 122 579.14
Total 209 3,530.13
LEGAL IMPLICATIONS
This report has no legal implications.
BACKGROUND DOCUMENTS
Case papers and lists of amounts written off.
PART 1 - MEMBERS & PUBLIC (INCLUDING THE PRESS)
Finance & Asset Management Sub-Committee - 10 December 1998 Page 106