Gravesham Borough Council

Report to: Finance & Audit Committee

Date: 14 February 2011

Reporting officer: Service Manager – Financial Services

Subject: Budget Monitoring Report 2010-11

Purpose and summary of report:

To submit a budget monitoring report against the 2010-11 Original Estimates for the General Fund, Housing Revenue Account and Capital Budgets, in light of formulation of the Probable Budget estimates for 2010-11.

Recommendations:

1. Members are asked to note the report and to consider what action they feel necessary.

1. Background

1.1 This budget monitoring report summarises known variances to the Original Estimates for 2010-11 (as reported to Cabinet on 8 February 2010).

1.2 The Original Budget for 2010-11 represents a net revenue budget of £14,444,300 for the General Fund, with this being mainly funded from central government grant (in the form of Revenue Support Grant & redistributed National Non-Domestic Rates) and Council Tax, together with other general grant funding such as Area Based Grant. In addition, the Housing Revenue Account original budget for the year represents a net deficit of £535,840.

1.3 This report includes variances identified up to and including the end of December 2010, and therefore in effect summarises nine months of Budget Monitoring information as collated to date. The figures outlined within this report form the basis of the Probable Budget estimate, which was presented to the Cabinet for approval on 7 February 2011.

1.4 Explanations for any major variances identified against the Original Budget are given in section eight of the report, split by directorate. For comparability, tables seven and eight below summarise the variances by Cabinet Portfolio and also by Directorate.

2. Level of Reserves

2.1 The levels of General Fund and Housing Revenue Account working balances which were brought forward as at 1 April 2010 are as follows;

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General Fund

HRA

£'000 £'000

Working Balances as at 1 April 2009 (3,608) (1,855)

Budget Variances & Slippage B/Fwd (454) (423)Cabinet Decisions taken during the year 1,324 0Transfers to Reserves 1,453 0Compensation Payment (1,011) 0Slippage Items from 2009-10 to 2010-11 (312) (2)

Working Balances as at 31 March 2010 (2,608) (2,280) Table 1: General Fund and Housing Revenue Account Balances brought forward from 2009-10

2.2 Members will be aware that the minimum level of working balances which must be retained with both the General Fund and Housing Revenue Account is £1 million. However, as part of the General Fund Estimates report 2011-12, presented to the Cabinet on 7 February 2011, Cabinet Members were asked to endorse the recommendation of the Assistant Director – Transformation & Finance to increase the minimum level of General Fund working balances from £1 million to £1.25 million.

2.3 As Members will also be aware, the level of General Fund Revenue Account working balances brought forward is supplemented by specific reserves which have been created to assist with future funding obligations or initiatives;

£'000

Specific ReservesInsurance Excess - Vehicles (15)Decriminalised Parking Reserve (9)Repairs & Renewals Reserve (76)Spend to Save Reserve (500)Olympics 2012 Reserve (196)Local Development Framework Reserve (250)Corporate Priorities Reserve (270)Buildings Improvement Reserve (234)Leisure Centre Reserve (30)

(1,580)

General Fund

Table 2: Analysis of the General Fund Specific Reserves

3. Ongoing Potential Variances

3.1 Notwithstanding the known variances to the 2010-11 Original Budget outlined within section eight of this report, there is one other item which potentially could have a beneficial financial effect upon the level of General Fund working balances, namely;

3.1.1 VAT Reclamations. Members will be aware that the authority has successfully reclaimed VAT amounting to £1,392,000 during 2009-10 in relation to leisure events, Woodville Halls admissions and bulky waste collections. In addition, as detailed later within this report, the authority has also recently recovered a further £322,000 in relation to cold food sales and

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outstanding sports related claims (including simple interest on the original amount overpaid). Notwithstanding these successful reclamations received, the authority also submitted several other VAT reclamation claims during 2008-09, together with claims for compound interest to be paid on the amounts already reclaimed. However, these additional reclamations are dependant upon the outcome of the current “Isle of Wight” legal challenge and other current ongoing legal cases. Given that reclamation of additional monies is by no means certain, no allowance has been made within this budget report, and officers will present further information to Members, as it becomes available, in future budget monitoring reports.

4. Current Economic Pressures

4.1 Consumer Prices Index (CPI) annual inflation was 3.2 per cent in October up from 3.1 per cent in July 2010. It is difficult to determine the full implications of inflation on local authorities’ budgets with there being no standard measure of inflation for local authorities. However, the Medium Term Financial Plan is adjusted as necessary to take account of changes in the economic environment as outlined in section five below. That said, the graph below shows the general trend in both the CPI, RPI (Retail Price Index) and RPI-X (Retail Price Index – all items) and shows how all three indicators of inflation have shown significant fluctuation over the past two years.

Figure 1: Percentage changes in CPI, RPI and RPI-X

4.2 The Retail Price Index as at October stood at 4.5% (a decrease of 0.3% since the last reported position in July 2010 and down 0.1% on the figures as at September 2010). An extract from the Office of National Statistics, Statistical Bulletin: Consumer Price Indices, October 2010, can be seen below, which helps to explain the movements in the Retail Price Index experienced recently;

“There was a large downward contribution to the change in the RPI 12-month rate between September and October from house depreciation, which fell this year but rose a year ago reflecting movements in the smoothed house

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price index from the Department of Communities and Local Government. House depreciation is excluded from the CPI.”

4.3 The public sector showed a deficit on current budget of £7.1 billion in October 2010 (up from £3.8bn in July as previously reported), compared with a deficit of £6.9 billion in October 2009. Public Sector Net debt was £845.8 billion at the end of October 2010 compared with £694.7 billion a year earlier. Total public sector net debt, expressed therefore as a percentage of gross domestic product (GDP), was 64.5% at the end of October 2010 compared with 58.8% at end of October 2009.

Figure 2: Net Public Sector Debt as a proportion of GDP

4.4 The Bank of England base rate continues to be held at 0.5%, which has resulted in a reduction in investment income for this authority, however, this has been offset to an extent by higher than expected levels of investment (due to budgetary savings and slippage). In terms of borrowing rates, the current rate for PWLB borrowing as at 13 December 2010 (10 Year rate) was 4.61% (up from 3.20% last reported as at 23 August 2010), largely as a result of the announcement in November’s budget statement that PWLB borrowing was to increase by around 1% with immediate effect..

5. Medium Term Financial Plan & Government Announcements

5.1 The Medium Term Financial Plan is constantly being reviewed in order to take into account longer term assumptions of inflation rates, central government grants and

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energy prices, together with building in all known variances to the council’s budget as a result of Management Team and Cabinet decisions during 2010-11.

5.2 The Medium Term Financial Plan reflects a freeze in Council Tax for 2011-12, together with the anticipated compensatory grant receivable from government in relation to such a freeze.

5.3 Whilst the Budget announcements in November 2010 did not confirm any additional grant reductions during 2010-11 in those grants received by the authority, the following table details the monetary impact of announcements made to date or following clarification from grant awarding bodies:

Revisions to Grant allocations 2010-11

Original Grant

Allocation £’000s

Income in Original Budget £’000s

Revised Grant

Allocation £’000s

Net Savings required

£’000

Confirmed reductions Area Based Grant (GF) – General & Status Survey

114 104 87 17

Housing & Planning Delivery Grant (GF)

73 0 0 0

Reductions to be established Supporting People Administration Grant (HRA)

346 346 TBA TBA

LAA Reward Grant (Performance Reward Grant) (GF)

0 0 TBA 0

Local Area Business Growth Incentives scheme (LABGI). (GF)

48 0 TBA TBA

Table 3: Grant reductions 2010-11

5.4 Further to the announcement by the Chancellor of the Exchequer in June 2010 that funding for non-protected central government departments was to be cut over the forthcoming parliamentary period (and the resulting extension of the authority’s Medium Term Financial Plan to include two additional financial years) the November Budget Speech indicated average formula grant reductions in the order of 7.1% per annum over the four year period.

5.5 Following receipt of the provisional local government finance settlement for England, 2011-12 and 2012-13, announced by the Secretary of State on 13 December 2010, the actual level of reductions in Central Government support for this authority over the next four years are in the order of 34%, with the reductions amounting to around 25% in the first two years of the settlement.

5.6 The CLG wrote to all Chief Executives on 21 October 2011; stating that if an authority freezes council tax for 2011-12, it will be eligible to receive a grant in each of the four parliamentary years equivalent to a 2.5% increase in its 2010-11 basic amount of council tax multiplied by the authority's tax base for 2011-12 (rounded to the nearest pound). This is estimated to be around £143,000 per annum for Gravesham Borough Council. This has been built into the MTFP, albeit no assurances have been provided that this grant will be received beyond 2014-15.

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5.7 The Localism Bill has introduced a referendum on excessive council tax increases, as well as removal of ring fenced grants. Community or ‘place based’ budgets are planned to be introduced everywhere by 2013. The Localism Bill was also announced on 13 December 2010.

5.8 In a commitment to increase transparency and accountability with residents, council spending for invoices over £500 has been published online from December/January 2011.

5.9 Further information in relation to the Medium Term forecasts for 2010-11, government policy announcements, the actual level of Government Grant receivable, and the balancing of the budget for 2011-12 and beyond can be seen within the General Fund Estimates report presented to Cabinet on 7 February 2011.

6. Treasury Management

6.1 The Treasury Management Strategy Statement (TMSS) for 2010-11 was approved by full Council on 2 March 2010. The authority’s Annual Investment Strategy, which is incorporated in the TMSS, outlines the authority’s investment priorities as follows:

6.1.1 Security of Capital

6.1.2 Liquidity

6.2 In line with recommendations made by both the Audit Commission and CIPFA following the recent turmoil in the financial markets, an update on Treasury Management performance is provided to Members on a quarterly basis. With the half yearly Treasury Management performance of the financial year 2010-11 being reported to the Finance & Audit Committee on 28 October 2010, a full list of investments held by the authority as at 13 December 2010, can be seen in the table below;

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Investments Investment Date of £'000 Repayment

Building Societies/Banks

BARCLAYS BANK 1,000 21/12/2010LLOYDS TSB 1,000 21/04/2011LLOYDS TSB 1,000 05/01/2011

Money Market Funds

AIM GLOBAL 1,800 On CallGOLDMAN SACHS 2,000 On CallHENDERSONS LAF 2,000STANDARD LIFE 2,000 On Call

Special Interest Accounts

NATWEST 2,000 On Call

Public Sector Reserve

CO-OPERATIVE BANK 500 On Call

Total Investments 13,300 Table 5: Investments as at 13 December 2010

7. Efficiency Reporting

7.1 On 18 October 2010, the Communities and Local Government (CLG) confirmed that local authorities will not be required to submit efficiency savings data through National Indicator 179 (value for money gains) again. The Finance team will continue to record efficiency savings in the MTFP, as part of the budget monitoring process.

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8. Current Position

8.1 The position for the General Fund revenue budget is shown below, this is in accordance with the Cabinet Portfolios:

Cabinet PortfolioOriginal Budget 2010-11

Probable Out-turn

2010-11 £

Variance between Budget & Probable

Out-turn (Under)/Over Spend

£

Leader, Regeneration & Business 4,416,790 4,369,750 (47,040)Deputy Leader and Community 3,982,020 4,015,520 33,500 Community Safety and Environment 3,458,840 3,431,970 (26,870)Housing 982,030 878,650 (103,380)Transformation 1,689,820 1,811,970 122,150 Youth 10,000 10,000 0 Transfers to/(from) reserves (95,200) (292,560) (197,360)Total 14,444,300 14,225,300 (219,000)

Table 7: General Fund Revenue Projected Out-turn: Cabinet Portfolios

8.2 The position relating to Directorates is shown below.

DirectorateOriginal Budget 2010-11

Probable Out-turn

2010-11 £

Variance between Budget & Probable

Out-turn (Under)/Over Spend

£

Chief Executive 1,048,710 955,550 (93,160)Housing and Environment 3,558,580 3,656,690 98,110 Business 2,200,150 2,324,080 123,930 Community 4,857,100 4,914,700 57,600 Transformation and Finance 2,935,080 2,734,500 (200,580)Interest and Investments (60,120) (67,660) (7,540)Transfers to/(from) reserves (95,200) (292,560) (197,360)Total 14,444,300 14,225,300 (219,000)

Table 8: General Fund Revenue Projected Out-turn: Directorates

Individual variances in excess of £3,000 have been outlined below by Directorate.

8.3 Chief Executive

8.3.1 None (Other than those affecting all Directorates)

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8.4 Housing and Environment

8.4.1 Gurdwara Vehicle Park. On 8 February 2010, The Cabinet delegated authority to the Leader of the Executive to agree terms of rent reviews in relation to the Gurdwara Vehicle Park. Subsequently, the rental charge for the Gurdwara Vehicle Park has been agreed at an increase of £9,250 per annum; to reflect the higher number of spaces now offered at the site.

8.4.2 Burials Income. Income from this area of activity is totally unpredictable and can be influenced by factors beyond anyone’s control. An aspirational income target is set annually, but can never be guaranteed. Although total income in the two preceding years has exceeded target, this year has so far lagged behind. Although the Winter months historically realise an increase in income, there is still a risk that target levels will not be achieved. Based on current projections for the year, this may mean a shortfall of around £10,000.

8.4.3 Non-Domestic Rates (Lord Street Vehicle Park). Following the Cabinet decision to create the temporary vehicle park at the former Lord Street site, it has been necessary to budget for National Non-domestic Rates on this site for 2010-11. This equates to £10,890.

8.4.4 Penalty Charge Notices and Parking Income. Current projections show an anticipated shortfall of around £60,000 against Original Estimate income levels this year. This shortfall is after taking into account the £90,000 contribution that will be made to cover the effects of the Cabinet decision to extend the free Saturday parking scheme. There has been a reduction in expected levels of income from PCNs over recent weeks. Every effort is being made to redress this. It is anticipated that the effect on the General Fund will be a shortfall against target of around £7,500 at year end.

8.4.5 Recycling Credits. Although there has been a reduction in qualifying recycling tonnages in the last year, this has not been reflected in the Original Estimate in 2010-11. It is envisaged that income levels will be broadly in line with those for 2009-10, meaning that there will probably be a shortfall of income of £24,000 this year.

8.4.6 Bulky Waste Collections. There is a continued reduced level of customer requests for collection of household bulky items since the introduction of charges to customers. It is estimated that the income this year will be broadly the same as last year and that there will be approximately £6,000 less income than had been anticipated in the Original Estimate for 2010-11.

8.4.7 Environment Officer. The Probable budget for 2010-11 now makes provision for the recruitment of a temporary Environment Officer within the Operational Services section at a cost of £10,000.

8.5 Business

8.5.1 Land Charges. Following the government’s decision to terminate charging for Land Charges (personal searches) and due to the ongoing adverse economic climate there is a £28,050 reduction in the income forecast together with reductions in associated expenditure.

8.5.2 Planning Application Fees. The original budget for 2010-11 reflected a shortfall in the level of Planning Applications over those received in 2009-10,

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however several issues have since become apparent which have reduced the overall projected level of income for 2010-11;

• Government decision to cancel the intended 10% increase in fees, as recommended by its consultants, Arup, and;

• Delays in the preparation / submission of applications for major developments such as Northfleet Embankment (east), Christian Fields Phase 3, etc.

Consequently, the anticipated level of income from Planning Application fees now stands at £353,000 (a reduction of £146,000) against the original budget.

8.5.3 Sale of Land and Other Rental Income. Following the decision (under delegated authority) by the Leader of the Executive on 11 February 2010, the land adjoining 170 Livingstone Road, Gravesend has been sold for £4,000. Furthermore, an additional £13,000 of rental income has been generated in relation to miscellaneous sites owned by the Council due to ongoing rent reviews.

8.5.4 Town Pier Pontoon. The budgets for the Town Pier Pontoon, originally budgeted for 2010-11 and beyond, have now been replaced with a contribution of £43,500 per annum being placed into Town Pier Pontoon reserve, beginning from 2011-12, as outlined within the Town Pier Pontoon report to Cabinet on 10 January 2011.

8.5.5 NNDR Refund. The authority has recently been successful in securing an NNDR refund in relation to its occupation of Cygnet House between 2000-01 and 2003-04. The net refund (which includes applicable interest owing) amounts to £5,060.

8.5.6 White Post Lane Travellers. Residual costs incurred shortly after the end of the 2009-10 Financial Year in relation to the movement of the White Post Lane travellers to the former allotment site adjacent to Brookvale Depot have been charged to the 2010-11 financial year, and amount to £20,000.

8.5.7 Kent Reliance Building Society. During 2006-07 the authority created a Saving Scheme through the Kent Reliance Building Society for vulnerable residents within the Borough. Following cessation of the scheme, the remaining monies have been reclaimed from the Kent Reliance Building Society, and amount to £18,000.

8.5.8 The Grand Office Space. Following the cessation of the lease of the previous property occupied by The Grand in New Road, the team has been moved into the Civic Centre. On the basis that The Grand is an externally funded entity, rent totalling £13,330 has been levied for the current financial year in relation to their tenancy.

8.5.9 Rents of Land. The authority has been successful in securing additional rent due from farm land owned by Gravesham Borough Council at West Park Cobham. Backdated charges are to be implemented for the lease which commenced back in September 2008. Lease has been signed up until 2018 with rent reviews planned for 2013, and therefore the rental income for 2010-11 (including the back-dated element) amounts to £7,660.

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8.5.10 Industrial Estates Rental Income. Industrial estate rents budgets are all built including voids for vacancies. This is to account for the current rental markets and the predicted UK climate and the possible bleak future predictions for small business. However, the current economic climate and businesses within Gravesham industrial units have remained on the positive side. Gravesham’s Industrial Units have continued to achieve less then the predicted void percentage. Vacant units have been contained to a minimum by the efforts of Property Services and this has resulted in increased rents payable compared to original budgets. This, together with a back-dated rent review at Springhead Industrial Estate has resulted in an additional £202,570 in rental income/reduced spend for 2010-11 compared to the original budget.

8.6 Community

8.6.1 Building Control Partnership. The latest information received from the Partnership suggests that the deficit contribution owing by Gravesham at the end of 2010-11 could be £21,180 due to ongoing difficulties presented by the current economic climate. Targeted management action is being taken to ensure that compensating cost reductions are identified in order to minimise the financial risk to the authority as a result of this reduction in income.

8.6.2 Gateway Income (Manager Funding). Following the creation and opening of the Gateway facility within the Civic Centre foyer, an annual contribution from Kent County Council is receivable towards the costs associated with managing the Gateway. This contribution totals £33,240 per annum, commencing in 2010-11.

8.6.3 Woodville Halls. The probable budget for 2010-11 represents a reduction in the net budget for Woodville Halls amounting to £16,000 due to increases in the level of income generated from a revised programme of events and greater usage of the facilities.

8.7 Transformation and Finance

8.7.1 Area Based Grant. For 2010-11, the authority was initially notified that it had been successful in securing Area Based Grant funding equal to £113,599, an increase of £9,780 above the provisional originally included within the budget. On June 10 however, the Area Based Grant funding by the government was reduced, with the reduction applicable to Gravesham amounting to £18,000. Furthermore, the authority has recently been notified of a further £8,400 reduction in the level of the grant due to the cessation of the Housing Tenant’s Status Survey in 2010-11. The net reduction against budget is therefore £16,620 for 2010-11.

8.7.2 Costs Recovered. Recently, the authority has been very proactive in taking outstanding arrears through to Court action in relation to sundry debtor amounts overdue. Unfortunately, due to the operations of the courts, there is a lagging effect between payment of fees for court action, and the recovery of these fees from the debtors. For 2010-11, this lagging effect is forecast to amount to a shortfall of £3,100 against budgeted income levels.

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8.7.3 Audit Commission Fees. Following improvements in the quality of financial reporting and working papers the audit commission fee for 2010-11 has been reduced to below the levels originally budgeted for. For 2010-11, the total fee now stands at £170,940 (a saving of £27,580). As further details regarding the Audit Commission fees for 2010-11 become available these will be included in future Budget Monitoring Reports.

8.7.4 IT Software Costs. As a result of the ongoing joint working arrangements with neighbouring Local Authorities there is the need to procure an electronic it security module to facilitate joint working arrangements between neighbouring authorities at a cost of £7,500 and a new Internet Content Management System at a cost of £11,000. In addition, necessary upgrades to the CAPS planning IT systems are required, and it is forecast that an additional £7,500 will be required to improve the functionality and future public access to the system.

8.7.5 Bank Charges. Due to a higher volume of transactions through the authority’s bank account compared to 2009-10, the costs charged by the Authority’s bank for handling these transactions has increased by £10,780 above the original estimate for the year.

8.7.6 Concessionary Travel. Journey numbers have seen a slower increase during 2010-11 than originally forecast, partly due to the introduction of free Saturday parking within the town and the ongoing effects of the economic recession. The effect of this is currently forecast to result in a saving of £13,940 against the original budget for 2010-11.

8.7.7 Housing Benefits. The current economic situation has placed increasing pressure upon the Housing Benefits service. Current calculations suggest that the expected variation to the original budget amounts to an additional £126,120 and this has therefore been built into the budget.

8.7.8 Internal Audit & Performance Management. Due to changing requirements at a national and local level, the Audit and Performance team have identified a saving of £9,420 in relation to the existing budgets for the provision of the Corporate Plan and Local Strategic Partnership.

8.7.9 Bad Debts Provision/Costs Recovered. Proactive court action in relation to outstanding Council Tax and NNDR liabilities continues to result in increased levels of income from Court Costs in these areas. This, balanced against the resulting changes in the levels of Bad Debts Provision against these debts and those for Sundry Debt liabilities has resulted in a saving of £10,000 against the original budget during 2010-11.

8.7.10 VAT Reclamations. The authority has recently been successful in recovering £322,000 (including the gross refund and interest) in overpaid VAT monies relating to the sale of cold food supplies by the authority between 1978 and 1994, together with outstanding claims in relation to sports activities.

8.8 Interests and Investments

8.8.1 Investment Income. The initial estimated income from investment returns took into account an anticipated increase in the Bank of England rate (and

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consequential resulting increase in investment returns). Such an increase has not occurred to date during 2010-11, and therefore income from investment of the authority’s cash flow balances is forecast to be £42,680 lower than originally budgeted.

8.9 Transfers to/from Reserves

8.9.1 As outlined within the General Fund Estimates report 2011-12 presented to the Cabinet on 7 February 2011, Cabinet Members were asked to endorse the following recommendations by the Assistant Director – Transformation & Finance;

8.9.1.1 to transfer £128,000 from General Fund working balances into the Buildings Improvements Reserve, and;

8.9.1.2 to transfer £150,000 from General Fund working balances into a new Leisure Centres Maintenance Reserve to assist with forthcoming necessary works to the Leisure Centres.

8.9.2 The Leisure Centres Maintenance Reserve monies will be utilised to deliver further improvements to the fabric and structure of the Leisure Centre buildings, whilst the Building Improvements Reserve contribution represents the second tranche of funds in relation to the cessation of leases related to properties currently rented by the authority, in line with the Asset Management Strategy and Ideal Property Portfolio.

8.9.3 In light of the projected underspend for 2010-11, the transfer of £30,000 of General Fund working balances to finance the purchase of two 4x4 vehicles by the Operational Services section has also been reflected in the budget for 2010-11.

8.9.4 Furthermore, Members are asked to note that the use of General Fund working balances towards the Town Pier Pontoon scheme, originally budgeted for in 2010-11, is now forecast to take place during 2011-12, and the respective level of General Fund working balances has therefore been adjusted accordingly.

8.10 Variances Across All Directorates

8.10.1 Employees Costs. A detailed exercise has been undertaken to evaluate the current position with regard to employee costs for 2010-11. The exercise demonstrates that a saving of £128,420 is forecast for 2010-11, after having taken into account all changes to the establishment since the Original Budget for 2010-11 was set.

8.10.2 Consistent Underspends Exercise. In the 2009-10 Out-turn report presented to the Cabinet on 1 June 2010, the Financial Services Team undertook to “examine consistent underspends (over the last three years) with a view to reducing budgets as necessary where consistent underspends are apparent.” As a consequence of this action, budgets within all Directorates have been reduced by around £297,000 for 2010-11.

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8.10.3 NNDR Budgets. During 2009-10, the Valuation Office carried out a thorough cyclical revaluation of all commercially rateable properties within the Borough of Gravesham. As a number of these properties are either owned or leased by the Council, the NNDR budgets were adjusted accordingly to reflect changes to the rateable values as provided by the Valuation Office. For 2010-11, the government reduced the “NNDR Multiplier” which is applied to the rateable value of commercial properties to establish the NNDR charge for the year. As a result of this reduction in the rateable value, a saving of £118,180 has materialised in relation to NNDR costs incurred by the authority on the properties which it either owns or leases.

8.10.4 VAT Increases. As a result of the Chancellor of the Exchequer’s announcement on 22 June 2010 that VAT would be increasing from 17.5% to 20.0% with effect from 4 January 2011, the effect of this increase has been calculated to amount to £6,000 for 2010-11 upon the authority’s income from Fees and Charges between January and March 2011.

8.10.5 Procurement Savings. The original budget for 2010-11 included the provision of £91,000 in savings arising from pro-active procurement methods to reduce the cost of new and existing supplies by the authority. These savings were not originally allocated to individual budget code lines on the basis that opportunities would be maximised during the year to deliver the procurement savings. On the basis that these savings have now been generated (with the corresponding budget lines, such as energy and utilities as below, adjusted downwards accordingly), the central procurement savings budget line has been deleted from the 2010-11 budget.

8.10.6 Energy & Utilities. Due to general reductions in the unit charges for energy and utilities, together with other reductions generated through improved procurement processes (see above), and reductions in usage driven by the procurement of energy monitoring equipment, a reduction in overall energy and utility budgets amounting to £92,000 has been realised during 2010-11.

8.10.7 Insurance Costs. Following a recent detrimental history in relation to insurance claims made by the council (particularly in relation to Leased Vehicles), the insurance premiums payable for the current financial year have increased by £15,150 above the original estimate for the year.

8.10.8 Leased Vehicles. During 2010-11 there has been a general shift by Leased Vehicle users away from new leasing agreements towards taking the cash alternative amounts in place of a leased vehicle. In total, this has resulted in a saving against the budget of £23,540 for Leased Cars, however, this should be viewed in context against the Salaries variance reported for the year.

8.10.9 Inflation Budget. The original budget for 2010-11 included £53,300 in the form of a centrally held inflation budget in relation to an inflation assumption of 0.5% on supplies and services procured by the authority (reflecting the Medium Term Financial Plan approach taken to budgeting by the authority in recent years). On the basis that all budgets for 2010-11 have now been revised as necessary to include inflation as appropriate, the centrally held inflation budget has been removed for 2010-11.

8.10.10 Retirement Benefits. Following the Value for Money review of the Reprographics/Courier functions within the authority, together with other

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opportunities arising from natural reductions in the authority’s establishment, an increase in retirement benefits costs amounting to £71,700 has been budgeted for within the Probable Budget for 2010-11.

8.10.11 Service Provision Statements. For 2010-11 and beyond, the authority has adopted the principles of Service Provision Statements in the settling and allocation of central recharges between back office functions, and between the General Fund and Housing Revenue Account. Following extensive revision of these Service Provision Statements, and agreement by management, a net reduction in the level of central recharges leaving the General Fund account has materialised. For 2010-11 this amounts to £206,450.

9. General Fund Revenue Items Carried Forward from 2009-10

9.1 In addition to those variances outlined in Section eight of this report, the following carried forward items from 2009-10 to 2010-11 have been identified and approved by the authority’s Section 151 Officer, the Service Manager – Finance;

Directorate Expenditure/Income Heading

Amount

£

Reason

Transformation & Finance

Promotion of Direct Debits

1,050 Now that the AUDDIS System has been implemented – Direct Debits to be promoted

Planning & Regeneration

Local Development Framework

106,810 Not spent in 2009-10

Planning & Regeneration

Planning Delivery Grant Contribution

(36,000) Not drawn down in 2009-10

Planning & Regeneration

Habitat Regulations Assessment

(13,980) Not drawn down in 2009-10

Communities CCTV Equipment new

10,800 Delay of installation of camera at Valley Drive

Communities IT Consumables 440 Still awaiting support arms for dual screens that have been ordered

Communities Feasibility Study 4,970 Awaiting consultation report in May before being able to pay outstanding balance.

Housing & Environment

Public Conveniences at Woodlands Park

12,000 Utilisation of savings accruing in 2009-10 from parks maintenance to fund coverage of the Woodlands Park public conveniences during the summer of 2010.

Business Repairs & Maintenance

13,500 Utilisation of savings generated in 2009-10 to fund contribution to KCC Procurement Exercise and erection of fencing to Travellers site.

Business

Capital Expenditure met from General Fund Working Balances

192,750 Slippage occurring in relation to Capital items (predominately Lord Street conversion costs) to be funded from General Fund working balances as per Cabinet Decisions taken during 2009-10.

Total £292,340 Table 9: Carried Forward Items from 2009-10.

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10. Effect Upon The General Fund Working Balance

10.1 The combined effect of variances against the Original Budget, the reductions in grants and Council Tax constraints outlined in Section five and the carried forward items outlined in Section nine, have the following effect upon the General Fund working balances;

Working Balances General Fund

£

Balance Brought F’wd from 2009-10 (2,608,190)

Use of Balances (Cfwd Items, Capital Transfers and Cabinet Decisions) 62,310

Variances identified (219,000)

Working Balances C/Fwd (as at December 2010) (2,764,880)

Table 10: Effect upon General Fund Balances

10.2 In addition to the Working Balance, the Authority has a number of specific reserves, which are used to either fund specific corporate priorities, or to mitigate against future funding obligations. Accordingly, below is a summary of these specific reserves held as at December 2010, together with budgeted or Cabinet approved expenditure as appropriate during 2010-11;

Balance Exp. Inc. Balance1 April '10 31 Mar '11£'000 £'000 £'000 £'000

Specific ReservesInsurance Excess - Vehicles 15 0 0 15 Decriminalised Parking Reserve 9 0 21 30 Repairs & Renewals Reserve 76 176 100 0 Spend to Save Reserve 500 33 6 473 Olympics 2012 Reserve 196 196 0 0 LDF Reserve 250 65 0 185 Corporate Priorities Reserve 270 122 0 148 Buildings Improvement Reserve 234 220 128 142 Leisure Centre Reserve 30 55 115 90 Leisure Centre Maint. Reserve 0 0 150 150 Pensions Backfunding 0 0 21 21

1,580 867 541 1,254 Table 11: Effect upon General Fund Balances

11. General Fund Capital Monitoring

11.1 Full details of the revised Capital Programme for 2010-11 (together with estimates for future financial years) can be seen as part of the General Fund Estimates report to the Cabinet on 7 February 2011.

11.2 Notwithstanding the above, as included within previous Budget Monitoring reports, the following carried forward items from 2009-10 to 2010-11 have been identified in relation to the General Fund Capital programme. All of these items have been

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considered and approved to be carried forward to 2010-11 by the authority’s Section 151 Officer.

Directorate Expenditure/Income Amount Heading £ Business Civic Buildings - enhancements (570) Civic Buildings – removal of hazardous materials 26,110 Cobham Park Ph 1 (1,300) Cobham Park Ph 2 (30) Conservation Area Appraisals 29,110 Facilities for the Disabled 11,060 Great Expectations Project 228,650 Lord Street / Parrock Street 25,360 Parrock Street Car Park – new toilet block 99,690 Lord Street Site 190,250 Town Pier Pontoon 155,690 Special Projects Heritage Quarter 7,600 Town Centre Traffic/Transport Development Work 60,000 Transport Quarter 29,260 Communities Automated Switchboard 2,380 Children’s Play Strategy 4,010 Leisure Centres - improvements 515,060 Playsites – programme of improvements 43,230 Recreational Activities for Young People 29,700 Sports Pitches 150,000 Youth Initiatives 3,110 Housing & Environment

Allotments – improvement works 3,920

Cemeteries - extension 33,040 Quality Public Space 38,020 Total 1,683,350

Table 12: Carried Forward Items to 2010-11

11.3 A summary of the revised General Fund Capital Programme can be seen below;

GENERAL FUND CAPITAL PROGRAMME 2010-11 2011-12

General Fund Capital Expenditure 5,496,980 2,998,530 TOTAL GENERAL FUND SPEND 5,496,980 2,998,530 FINANCED BY; Useable Capital Receipts 319,270 872,640 Capital Grants-Contributions (General Fund) 4,431,220 707,370

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Unsupported Borrowing 515,060 - Revenue Contributions 231,430 1,418,520 TOTAL RESOURCES USED 5,496,980 2,998,530

12. Housing Revenue Account Budget

12.1 The position of the Housing Revenue account budgets is shown below:

Housing Revenue Account

2010-11 Original

2010-11 Probable

Variance between Original and

Probable Budget for 10-11

Capital Financing 13,180 48,640 35,460 Community Hall 42,340 40,890 (1,450) Depreciation 4,475,620 4,454,550 (21,070) Direct Works 6,756,830 6,599,880 (156,950) General Expenses 3,537,840 3,468,490 (69,350) General Fund Contribution (10,580) (10,220) 360 Interest on internal balances (7,280) (7,280) 0 Interest on Sold Houses (5,680) (5,670) 10 Other rents and income (416,960) (443,840) (26,880) Other Special Expenses 1,079,640 1,010,010 (69,630) Repairs Administration 573,350 580,170 6,820 Rents of Dwellings (20,853,550) (20,778,800) 74,750 Service Charges (807,000) (821,500) (14,500) HRA Shops (104,640) (117,430) (12,790) Subsidy Payments 5,683,870 5,741,290 57,420 Supporting People Fund 117,790 103,340 (14,450) Sheltered Scheme Services 472,970 458,540 (14,430)

Total 547,740 321,060 (226,680) HRA Working Balances

12.2 The HRA working Balance at the end of 2009-10 was £2,279,650. As illustrated below at the end of 2010/11 the working balances will decrease to £1,944,600:

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£ HRA working Balance B Fwd from 09-10 (2,279,650) Budgeted (Surplus)/ Deficit 2010-11 321,060 HRA Working Balance C fwd to 2011-12 (1,958,590)

12.3 The following variances have been identified in relation to the movement in the

forecast deficit on the Housing Revenue Account between the 2010-11 Original Budget and 2010-11 Probable Budget:

• Capital Financing (Item 8)- Following the discontinuation of the Supported Capital Expenditure Grant the position of the Capital Financing Requirement has changed resulting in HRA paying interest to the General Fund. This has resulted in a variance of £20,570.

• Repairs and Maintenance- Proactive management of the repairs and maintenance works has resulted in £77,500 savings.

• GBC Stock works. Due to a decrease in the number of homeless people and proactive management a £28,200 saving in repairs expenditure is therefore expected.

• Direct Works-Operational Services. Proactive Management and reduced number of responsive repairs have resulted in £30,000 savings.

• Tenant Participation. Sponsorship and proactive management have resulted in £20,000 saving.

• Tenant Disturbance Allowance. Due to reduced number of tenants requesting disturbance allowance a £10,000 saving is expected.

• Insurance Costs. Insurance renegotiation has resulted in a £38,000 saving against the original budget for the year.

• Salaries and Wages. Proactive management of vacancies has resulted in £30,000 savings over and above the vacancy allowance.

• Repairs Administration. A decrease of the Operational Service recharges as a result of proactive management of vacancies in the contracts team has resulted in £150,000 savings. In addition to this, the Contracts team recharge to the HRA has decreased by £144,000.

• Rents-Bad Debt provision- An increase in the number of tenant arrears has resulted in the bad debt provision going up by £60,000.

• HRA Shops. An increase in the number of shops being let has resulted in an income increase by £23,0000. However, the bad debt provision has also increased by £10k, the net result being an increase of only £13,000.

• Negative Housing Subsidy. An increase in the interest percentage used to calculate the HRA Subsidy has resulted in a £57,000 variance.

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13. Housing Capital Monitoring

13.1 Full details of the revised Capital Programme for 2010-11 (together with estimates for future financial years) have been included within the Housing Revenue Account Estimates report to the Cabinet on 7 February 2011.

13.2 The following carried forward items from 2009-10 to 2010-11 have been identified in relation to the Housing Capital programme. All of these items have been considered and approved to be carried forward to 2010-11 by the authority’s Section 151 Officer.

Directorate Expenditure/Income Heading

Amount

£

Reason

Housing & Environment (Capital Programme)

Strategic Partnering (Apollo London Ltd)

£153,650 Slippage of £153,650 has occurred on the Improvements and Conversions Budgets and Health and Safety schemes, but with these schemes being a rolling contract, work continues to be carried out in these areas. Members should note that the authority has achieved the minimum Decent Homes Standard as at the end of March 2010.

Housing & Environment (Capital Programme)

Energy Efficiency Investments

£42,870 These schemes are £468,000 underspent due to several properties scheduled for renovation subsequently being sold at auction. About £42,870 of this represents retentions that will be paid at the end of 2010-11 and hence this is classified a slippage.

Housing & Environment (Capital Programme)

Health & Safety Works

£240,770 These schemes have slippage of £240,770 which is already committed to structural repairs at Gravesham Court and Homemead (work has already started).

Housing & Environment (Capital Programme)

Housing Computer System

£289,230 An ongoing project that is straddled over two financial years. The project is expected to go live in November, with no extra funding being required.

Housing & Environment (Capital Programme)

Private Sector Assistance

£320,360 Slippage of £320,360 has occurred due to the fact that some of the grants were received late and there was no time for the works to be finished. All of the budgets are already committed and work had been approved but not finalised by the end of March.

Total £1,046,880 Table 15: Carried Forward Items to 2010-11

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14. Risk

14.1 The purpose of this monitoring report is to mitigate financial risks to the Authority by identifying major variances and recurring variances at an early stage to enable Members and officers to take corrective action if and when required.

15. Section 17 Crime and Disorder Act

15.1 The Crime and Disorder budget is within the General Fund and Housing Revenue Account Budgets and any significant variance has been included within the report.

The background papers to this report are held within files in the Accountancy Section