Item: 5 Page: 10 ` Business Services REPORT TO ABERDEENSHIRE COUNCIL 8 MARCH 2017 REVENUE BUDGET MONITORING AS AT 31 DECEMBER Recommendations

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1 Page: 10 ` Business Services REPORT TO ABERDEENSHIRE COUNCIL 8 MARCH 2017 REVENUE BUDGET MONITORING AS AT 31 DECEMBER Recommendations 1.1 The Council is recommended to: 1. Note the revenue budget monitoring to 31 December 2017; 2. Note the forecast position and the actions taken to address the current situation; 3. Approve the budget virements as set out in Appendix 3; 4. Approve the payment to Highland Council for the costs of ordinary residency as set out in paragraphs 2.10 and Discussion 2.1 The Council s budget for monitoring purposes in 2017/18 is 553 million. As at 31 December 2017, the forecast to the end of the financial year is expected to be in excess of budget by 2,715,000 (0.49%). The previously reported position as at the end of September was a forecast in excess of budget by 2,951,000. The financial position is shown in more detail in Appendix Services continue to practice a more risk based approach to budget management which recognises that budget variances are likely to occur. These variances, when identified are discussed, any implications are considered and appropriate action taken to reduce, limit or otherwise avoid the financial consequences. 2.3 Forecast pressures have been identified within all service budgets, details of which have been reported to the relevant Policy Committees. Details of variances on items reserved for Full Council are contained in Appendix 2. These are: Capital Financing Charges: forecast to be within budget by 280,000; Level of Council Tax income currently forecast is 904,000 below budgeted assumptions mainly due to a reduction in the number of new properties being added to the Council Tax Register. 2.4 Services are aware that there are a number of risks facing the Council and that these risks are subject to ongoing review. These risks were reported to the Council in February 2017 as part of the budget setting process for 2017/18. The areas of overspend identified in the current financial year are broadly similar to those experienced last year and contained in the list of risks during the budget setting process. 2.5 Strategic Leadership Team (SLT) discuss the Council s budget on a weekly basis and have reviewed the latest financial information to arrive at the currently reported forecast position. This is a slight improvement on the September forecast position. It is SLT s intention to continue to review the current year s position with the aim of improving this during the remainder of the year. It is recognised that any reduction or change in expenditure can potentially have an adverse impact on service delivery and, that balance needs to be acknowledged and mitigated.

2 Page: In terms of actions being taken by SLT and building on discussions at Policy Committees, the following are examples of areas which are expected to mitigate the forecast overspend. A review of all vacant posts Review the costs of supplies and utilisation of contracts Review of expenditure on supplies and services Ability to drive more efficient use of procurement opportunities Consideration of the delay in expenditure on specific items A review of capital expenditure and balance sheet entries 2.7 As mentioned above, the potential impact on service delivery and on staff delivering these services will continue to be a key consideration for SLT during their discussions. 2.8 There are a number of virements to be approved, and these are shown in Appendix 3. The virements have been included in the Revised Budget figures used in this report, hence it is important to note that the Revised Budget is subject to the approval of the virements. 2.9 The Council has in place a Reserves strategy. The majority of the financial balances in the Reserves are earmarked for specific purposes. The Usable Reserves are detailed in Appendix 4 along with the movements on those Reserves, the forecast movement for the remaining months of the year, and the forecast closing balance for each of the Reserves Council was advised at its September 2017 meeting that a determination had been made by Scottish Ministers on a dispute between Aberdeenshire Council and Highland Council on the ordinary residency of a social work client. At the time the estimated cost of the determination was 593, but Council was advised that this cost may increase. Highland Council have since reviewed their information and identified an error which has resulted in a revised figure of 1,071,810, of which the majority, 955,665 is due by the Council with the balance of 116,145 due by the IJB. Officers have met with colleagues in Highland and have concluded that the revised figures are correct and in accordance with the determination made by Scottish Ministers As previously agreed, the amount due will be met from the Working Balance. The instruction to the Head of Finance was to identify funds from Earmarked Reserves to reinstate the Working Balance. Following the decision by Council on 8 February to undertake a review of Reserves, the identification of funds from Earmarked Reserves will form part of this review and will be reported back to Council The Monitoring Officer within Business Services has been consulted in the preparation of this report and is satisfied that the report complies with the Scheme of Governance and relevant legislation.

3 Page: Scheme of Governance 3.1 The Council is able to consider and take a decision on this item in terms of the general powers conferred by Section A of the List of Committee Powers in Part 2A of the Scheme of Governance. In particular, Section A.8.2 applies in relation to the virements as they relate to the incurring of revenue expenditure not provided for in the Revenue Budget. 4. Implications and Risk 4.1 An Equalities Impact Assessment and a Town Centre Impact Assessment are not required for this report as the report deals with the monitoring of expenditure against budgets which have been approved previously, and the re-profiling of some expenditure. 4.2 The monitoring position is 2,715,000 in excess of budget and it is forecast that the working balance will be 6,285,000 at the year-end if this position is maintained. 4.3 There are no staffing implications arising from this report. 4.4 The following Risk has been identified as relevant to this matter on a Corporate Level: Budget Pressures (Corporate Risk Register). The following Risk has been identified as relevant to this matter on a Strategic Level: Balancing the Books (Directorate Risk Registers). Actions being taken to mitigate these risks are set out in paragraph 2.6 of the report. Ritchie Johnson Director of Business Services Report prepared by Susan Donald, Accountancy Finance Manager 5 February 2018

4 Page: 13 SUMMARY OF REVENUE MONITORING 2017/18 TO 31/12/2017 BY SERVICE Appendix 1 Base Forecast Budget Forecast Higher than Lower than Net 2017/ /18 Budget Budget Variance NOTES BUSINESS SERVICES COMMITTEE 40,928 42,441 1, ,513 COMMUNITIES COMMITTEE 114, , EDUCATION & CHILDREN'S SERVICES COMMITTEE 301, ,857 0 (227) (227) INFRASTRUCTURE SERVICES COMMITTEE 70,773 70,246 0 (527) (527) BUDGETS TO BE REALLOCATED TO POLICY COMMITTEES (4,737) (4,827) 0 (90) (90) TOTAL POLICY COMMITTEES 522, ,207 1,935 (844) 1,091 CAPITAL FINANCING CHARGES AND IORB 31,091 30,811 0 (280) (280) A TOTAL EXPENDITURE 553, ,018 1,935 (1,124) 811 REVENUE SUPPORT GRANT (308,643) (307,643) 1, ,000 B ADDITIONAL SCOTTISH GOVERNMENT FUNDING TO BE CONFIRMED (5,256) (5,256) BUSINESS RATES (95,828) (95,828) RING FENCED GRANTS (2,606) (2,606) COUNCIL TAX (134,007) (133,103) C TOTAL INCOME (546,340) (544,436) 1, ,904 NET (SURPLUS)/DEFICIT BEFORE USE OF RESERVES 6,867 9,582 3,839 (1,124) 2,715 FUNDING FROM RESERVES TRANSFERS TO/(FROM) EARMARKED RESERVES (4,680) (4,680) TRANSFERS TO/(FROM) STATUTORY FUNDS (60) (60) REPLENISHMENT/(USE) OF WORKING BALANCE (2,127) (2,127) TOTAL FUNDING FROM RESERVES (6,867) (6,867) (SURPLUS)/DEFICIT 0 2,715 3,839 (1,124) 2,715

5 A due to increased interest receivable on temporary investments due to higher than the Transfer of grant to Education and Children's Services to support the Teacher Induction Scheme and Probationer Teachers. reported during the budget process in February 2017 was in relation to the level of Council Tax collected being less than budgeted for. The budget assumed an additional 1,000 properties for 2017/18 and although there are additional homes being added, the rate of discounts and reliefs being claimed has also risen, therefore income levels are not currently at the level anticipated during the budget process. There has also been an increase in the level of exemptions and Capital Financing Charges and IORB (280) Capital Financing Charges and IORB - Is forecast to be within budget by 280,000 anticipated cash balances. B Revenue Support Grant 1,000 Revenue Support Grant - Is forecast to be below budget by 1,000,000 as a result of C Council Tax 904 Council Tax Income - Is forecast to be 904,000 below budget. A specific risk discounts awarded. Page: 14 Appendix 2 - Variance Analysis - Full Council Note Budget Forecast Over (within) budget 2017/18 Narrative '000

6 Page: 15 REVENUE MONITORING VIREMENTS Virements Planned as Part of the Budget Process: Appendix 3 '000's 1 Year End Flex Reserve Transfer funding to match expenditure incurred on projects funded through the Year End Flex Reserve. This virement applies to 2017/18 only. Integration Joint Board 15 Replenishment of Working Balance (15) 2 Business Transformation Fund Transfer funding from the Earmarked Reserves to match expenditure incurred on projects funded through the Business Transformation Fund. This virement applies to 2017/18 only. Integration Joint Board 15 Business Services Corporate Projects 28 Special Education (85) Property Corporate Projects 15 Transfers to/(from) Earmarked Reserves 27 3 Revenue Grants Transfers from Reserves to support Community projects. This virement applies to 2017/18 only. Community Learning & Development 3 Active Communities 2 Integration Joint Board 9 Transfers to/(from) Earmarked Reserves (14) 4 Regeneration Transfers from Reserves to support Regeneration projects. This virement applies to 2017/18 only. Environment 40 Economic Development 105 Transfers to/(from) Earmarked Reserves (145) 5 Community, Culture and Tourism Expenditure to be met from Reserves. This virement applies to 2017/18 only. Secondary Education 34 Integration Joint Board 6 Transfers to/(from) Earmarked Reserves (40) 6 Central Energy Efficiency Fund

7 Page: 16 Transfer of budget from the Property Service - Central Energy Efficiency Fund to match income received from services. This virement applies to 2017/18 only. Property Corporate Projects 2 Transfers to/(from) Earmarked Reserves (2) 7 Property Estates Renewal Fund Expenditure to be met from Reserves. This virement applies to 2017/18 only. Estates (2) Transfers to/(from) Earmarked Reserves 2 8 Insurance Fund Transfer from the Insurance Fund to offset expenditure. This virement applies to 2017/18 only. Insurance 47 Transfers to/(from) Statutory Funds (47)

8 Page: 17 9 Renewable Energy Reserve Expenditure to be met from Reserves. This virement applies to 2017/18 only. Economic Development 17 Transfers to/(from) Earmarked Reserves (17) 10 Joint Board Surpluses Expenditure to be met from Reserves. This virement applies to 2017/18 only. Joint Boards 41 Transfers to/(from) Earmarked Reserves (41) 11 Revenue Support Grant Viirement from Revenue Support Grant to Nursery Education in respect of the Early Learning and Childcare 1140 hours expansion Revenue Support Grant (1,242) Nursery Education 1,242 Virements Made in Year in Response to Unplanned Situations: 12 Revenue Support Grant Virement from the Revenue Support Grant to Primary Education to reflect the funding received for the Teacher Induction Scheme and Probationer Teachers. This virement applies to 2017/18 only Revenue Support Grant 158 Primary Education (158) 13 Revenue Support Grant Virement from the Revenue Support Grant to Primary, Secondary and Special Education to fund the Teacher Pay Award from January This virement applies to 2017/18 only Revenue Support Grant 314 Primary Education (147) Secondary Education (131) Special Education (36)

9 Page: 18 SUMMARY OF EARMARKED RESERVES AND STATUTORY FUND 2017/18 Appendix 4 Approved Forecast Forecast Balance at in 2017/18 Virements to January 2017 to Balance at 1 April 2017 Budget December 2017 March March 2018 Reserve/Fund '000 '000 '000 '000 '000 General Fund Balance (8,535) (2,577) 2,112 2,715 (6,285) Earmarked Reserves Business Transformation Fund (1,302) (307) Devolved Education Management (DEM) (3,657) 0 3,657 (3,500) (3,500) Aberdeenshire Farming Museum Purchase Fund (60) (1) 0 0 (61) Aberdeenshire Heritage Artefact Acquisition Fund (9) (2) 0 0 (11) Estate of the late William Paterson Beedie Bequest (20) (20) Property Service - Central Energy Efficiency Fund (149) 0 (36) 0 (185) Tolbooth Restoration Fund (55) (55) Property Estates Renewals Fund (208) (106) Sinking Funds for the replacement of All Weather Pitches (1) (59) 0 0 (60) Gerrie Trust (51) (36) Community Councils Legal Fund (10) Investment in Technologies Community Culture & Tourism (1,316) (877) Planning (107) (101) Welfare Reform (899) Joint Board Surpluses (41) Innovation (77) Education Learning Estate Reserve (2,000) 2, Affordable Housing (3,827) (3,507) Transitional Reserve for Severance Costs (499) (216) Regeneration Reserve (5,499) (400) (4,645) Renewable Energy Reserve (1,959) (1,744) City Region Deal (5,000) ,177 (3,007) Capital Reserve (466) (161) Energy from Waste (104) (104) Support to Community Groups 0 (200) 0 20 (180) Credit Unions 0 0 (234) 43 (191) Revenue Grants Unconditional and Expenditure not Incurred (1,061) (418) Earmarked Reserves (28,377) 2,114 6, (19,492) Housing Revenue Account (2,000) (2,000) Capital Receipts Reserve (667) (667) Usable Capital Receipts Reserve (453) (453) Statutory Funds Building Repairs & Maintenance (97) (97) Coastal Protection Roads Maintenance (887) 0 0 (90) (977) Winter Maintenance (2,566) 0 0 2,139 (427) Amenity Areas Vehicle Replacement Capital (298) (47) 0 0 (345) Insurance (2,022) (108) (1,143) Statutory Funds (5,870) (155) 215 2,821 (2,989) Capital Grants Unapplied Account (2,925) (2,925) Total Usable Reserves (48,827) (618) 8,489 6,145 (34,811)