Aug 28, 2014 - review, with bi-monthly reports considered by the Corporate Policy and Strategy. Committee ... Risk, poli
Appendix 1
Finance and Resources Committee 10.00am, Thursday, 28 August 2014
Revenue Monitoring 2014/15 – month three position
Item number
6.2
Report number Executive/routine Wards
Executive summary The report sets out the projected current-year revenue monitoring position for the Council at month three, based on analysis of period two data. While a balanced overall outturn position is forecast, attainment of this is subject to on-going management of a number of service-specific and Council-wide risks and pressures.
Report Revenue Monitoring 2014/15 – month three position Recommendations 1.1.
Members of the Finance and Resources Committee are asked to note: 1.1.1 the projected balanced overall revenue monitoring position at month three; 1.1.2 the balanced position projected on the Housing Revenue Account (HRA); and 1.1.3 the risks and challenges in delivering the balanced position which will require active management and scrutiny throughout the year.
Background 2.1
On 13 February 2014, Council approved a budget for 2014/15. This budget was set against a backdrop of increasing service demand; additional budget provision of some £9.5m has been made in respect of demographic factors alone. When the further impacts of inflationary uplifts, legislative change and demand-led pressures within services are compared to an essentially-static overall level of funding, the approved budget assumed delivery of £36m of savings spanning all areas of Council activity. Tracking of these savings and, in a number of cases, the associated investment necessary to deliver them, will therefore form a key part of maintaining financial stability going forward.
2.2
This report sets out the projected overall position for the Council’s revenue expenditure budget for 2014/15 as at period three, based on analysis of period two data.
Main report 3.1
This report represents the first of the quarterly revenue monitoring reports for 2014/15. Ongoing analysis of the revenue position will be undertaken in line with agreed risk-based principles and any material changes reported in the intervening periods as required.
3.2
The Council is projecting a balanced outturn for the year. All service areas have, however, highlighted a number of pressures and/or risks to attainment of this position, including additional calls upon a number of demand-led services relative to the level of provision included within the approved budget. Directors have implemented a range of management measures to control expenditure,
Finance and Resources Committee – 28 August 2014
Page 2
including reductions in overtime, recruitment controls and reviews of discretionary spend. Service-specific issues and mitigating actions are highlighted in Appendix 1. 3.3
The approved budget for 2014/15 is underpinned by the delivery of some £11.8m of General Fund procurement-related savings relative to the April 2013 baseline. Considerable work has been undertaken in recent months to gain additional assurance over the financial projections associated with projects within the procurement pipeline. Of equal importance, however, is maintaining a steady flow of projects from idea to delivery stage and revised arrangements have therefore been put in place to capture these ideas more effectively and develop them more closely with the service areas affected. The position with respect to in-year savings delivery is subject to weekly review and a further update will be provided as part of the half-year report.
3.4
Following completion of the construction phase, Edinburgh Trams commenced passenger operations at the end of May 2014. While initial passenger numbers have been encouraging, it is too early to assess how overall expenditure and income projections compare to budgeted assumptions. A more detailed update will therefore be provided as part of the half-year report.
3.5
Welfare reform remains an evolving area as the cumulative impacts of recent changes take effect. There are particular budgetary risks in such areas as the Council Tax Reduction Scheme, where the level of expenditure is entirely demand-led. The overall position will therefore continue to be kept under regular review, with bi-monthly reports considered by the Corporate Policy and Strategy Committee.
3.6
Members will also be aware of a number of recent reports concerning residual costs associated with the former Property Conservation service, as well as ongoing funding requirements of the successor services. Work is continuing to establish the combined financial impact, and potential sources of funding, for these factors and further details will be included in the half-year report.
3.7
The report to Council on 26 June 2014 regarding Liberton High School detailed the actions to be taken in light of the recent tragedy. Corresponding provision to meet extraordinary revenue costs arising from the incident has been made within the Council Priorities Fund.
3.8
In line with the increased emphasis on balance sheet monitoring, Appendix 2 sets out some of the key elements at period three, including reserves and provisions. This analysis will be built upon for subsequent periods’ reports. Housing Revenue Account
3.9
The Housing Revenue Account is forecasting a break-even position, however welfare reform and changes in the funding of temporary accommodation continue to present significant challenges.
Finance and Resources Committee – 28 August 2014
Page 3
Measures of success 4.1
Achieving a balanced overall budget outturn position for 2014/15 and successful delivery of approved savings.
Financial impact 5.1
The report’s contents point to a projected balanced outturn for the year as a whole, although attainment of this position is subject to active monitoring of a number of risks and, where appropriate, the taking of timely remedial action.
Risk, policy, compliance and governance impact 6.1
The delivery of a balanced budget outturn for the year is the key target. The risks associated with costs pressures, increased demand and procurement savings targets are regularly monitored and reviewed and management action is taken as appropriate.
Equalities impact 7.1
While there is no direct additional impact of the report’s contents, all budget proposals are now subject to an initial Equalities and Rights Impact Assessment. The equalities and rights impacts of any substitute measures identified to address savings shortfalls are similarly assessed.
Sustainability impact 8.1
While there is no direct additional impact of the report’s contents, the Council’s revenue budget includes expenditure impacting upon carbon, adaptation to climate change and contributing to sustainable development.
Consultation and engagement 9.1
There is no external consultation and engagement arising directly from this report.
Finance and Resources Committee – 28 August 2014
Page 4
Background reading/external references Period two – service monitoring statements Liberton High School, City of Edinburgh Council, 26 June 2014
Alastair D Maclean Director of Corporate Governance Contact: Hugh Dunn, Head of Finance E-mail:
[email protected] | Tel: 0131 469 3150
Links Coalition pledges Council outcomes Single Outcome Agreement
Appendices
P30 – Continue to maintain a sound financial position including long term financial planning CO25 – The Council has efficient and effective services that deliver on objectives SO1 – Edinburgh’s economy delivers increased investment, jobs and opportunities for all SO2 – Edinburgh’s citizens experience improved health and wellbeing, with reduced inequalities in health SO3 – Edinburgh’s children and young people enjoy their childhood and fulfil their potential SO4 – Edinburgh’s communities are safer and have improved physical and social fabric Appendix 1 – Significant pressures, key risks and further actions Appendix 2 – Balance sheet monitoring
Finance and Resources Committee – 28 August 2014
Page 5
Significant pressures, key risks and mitigating actions Service Area Children and Families
Corporate Governance
Health and Social Care
Significant Pressures
Appendix 1 Mitigating Actions/ Key Risks
Fostering, adoption and kinship placements
Employee cost pressures within Schools and Community Services
Additional Support Needs home-to-school transport
Re-procurement of IT services - £0.4m pressure
Procurement pipeline savings
Under-recovery of income, such as intervention income attributable to the service
Mitigating actions are being taken to manage the other risks, including developing business cases for procurement savings or identifying alternative savings options.
Domiciliary care services, with 7.6% increase in demand for service in last 12 months. Currently 186 people are waiting for 2,860 hours of service per week. In order to stimulate the market and increase capacity of contracted providers, consideration is being given to increasing the Care at Home floor price from £14 to £15.50 per hour, with the aim of reducing waiting lists.
Actions are being taken to offset a number of pressures, along with slippage in project timescales, including:
Staffing pressure in Older People’s Care Homes with increased costs relating to dependency levels and the fullyear effect of management structure changes implemented in 2013-14
Management action has already been put in place to address a number of the projected pressures, including the application of service reserves. The service is committed to identifying further action to ensure a balanced budget position is delivered. Pressures are being contained within available resources, including reduced Customer Service Improvement Plan investment.
One-off funding of £1m from the NHS towards Care at Home pressures;
Seeking a source of funding for relocation of local authority residents (but as yet unidentified).
Service Area
Services for Communities
Net Cost of Benefits
Significant Pressures
Mitigating Actions/ Key Risks
The closure of Pentland Hills Nursing Home, resulting in the relocation of the 46 local authority residents, half of whom to another private provider at significantly higher rates.
Property Conservation, Shared Repairs Service and development of an Enforcement Service
Winter weather
Achievement of improve it and iPFM savings
Property rationalisation, procurement and fleet savings
Tram support operations
Currently projecting a balanced position, but risks in delivering this.
Mitigating actions have been put in place to control expenditure, including:
Reducing overtime by a third Reducing training budgets Vacancy control and savings delivered through staffing efficiencies
There are significant risks in the assumptions underpinning the forecasts, including material reductions in amounts of waste going to landfill. While landfill targets were achieved in the first two periods, it is too early to assess performance for the remainder of the year.
Risk of loss of subsidy recoverable from DWP relating to local authority error rates
Finance and Resources Committee – 28 August 2014
Page 7
Appendix 2 BALANCE SHEET MONITORING Planned use of reserves Within the approved budget and the mitigating actions set out by Directors to manage expenditure pressures, there are a number of planned uses of reserves. The most significant of these are set out in the table below: Planned Earmarked Balance Balance (Use) / as at Contribution 31.03.14 in 2014/15 Balances set aside for £5.359m (£5.359m) At this stage, it is anticipated that all funding carried forward will be committed specific investment during 2014/15. Dilapidations fund
£7.554m
(£5.000m) In addition to the planned contribution to the fund, payments expected in 2014/15 include Chesser House, Westwood House and Baileyfield depot.
Unspent grants
£4.610m
(£4.610m) Planned to draw down all unspent grants carried forward from 2013-14.
BT Efficiency fund
£1.183m
Older People’s Change Fund
£2.670m
£1.998m Number of continuing projects and fund repayments, including repayments for e-HR and SEEMIS and contributions from the ICT refresh and Workstyle. (£2.670m)
The Change Fund comes to an end in 2014/15, with all remaining money requiring to be spent by 31 March 2015 or else returned to the Scottish Government.
Provisions The 2013/14 unaudited financial statements include £16.476m set aside for various provisions. These include £4.418m relating to the tram project and £5.302m in respect of equal pay claims and it is anticipated that full drawdown of these provisions will be required, although not necessarily all in 2014/15.
