Report to Cabinet. 8 February Quarter 3 Council Wide Budget (Key Decision Ref. No.SMBC1661) Leader of the Council

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1 Agenda Item 5 Report to Cabinet 8 February 2017 Subject: Presenting Cabinet Member: Quarter 3 Council Wide Budget (Key Decision Ref. No.SMBC1661) Leader of the Council 1. Summary Statement This report presents the financial position for Sandwell MBC for the first 9 months for the financial year. Services are on track to deliver the 24m of savings agreed by the council on 8 March 2016 and are projected to deliver further surpluses by the end of the year. This demonstrates the continued success of our multi-year budget planning process. 1.1 This report provides information with regard to the following: Revenue Monitoring To Date and Forecast Outturn Revenue Virements Central Items and other Corporate Budgets Use of Reserves & Contingency Specific Grants & Contributions Budget Savings Capital Monitoring Capital Virements Financial Health Indicators (Inc Revenue Collection Statistics) Section 106 Monies Housing Revenue Account 1.2 At a service level, excluding Public Health, the Council is reporting a forecast year end surplus of 3.982m, which is within the following service areas: Assistant Chief Executive surplus of 0.849m Adults Social Care Services surplus of 1.500m Children s Services surplus of 0.073m Regeneration and Economy surplus of 0.713m Neighbourhoods surplus of 0.735m Corporate Management surplus of 0.092m Public Health Regulatory Services surplus of 0.020m

2 1.3 In addition, there is a projected year end surplus of 0.733m within Public Health that relates to funds carried forward from previous years. It is requested that this carry forward be re-profiled to 2019/ Children s Services is projecting a small surplus, but the ongoing uncertainty following the recent trust announcement represents a significant risk that is being monitored closely. 1.5 Explanations for these variances are summarised in this report and detailed within the individual service s statements provided as Appendices F to M. 1.6 The 2016/17 service budgets have been adjusted to reflect the carry forwards that were approved as part of the Period 6 Council Wide Budget Monitoring 16 th November A technical adjustment has also been made to service budgets to reflect the latest capital charge calculations. 1.7 When taking into account the projected surplus on central items of 3.204m, the utilisation of centrally earmarked balances of 1.93m and the ring-fencing of unutilised Public Health Grant of 0.733m; the Council is showing an overall forecast surplus for the year against general balances of 5.247m. Revenue Monitoring To Date and Forecast Outturn (Period 9) 1.8 The Council s quarterly budget statement for 2016/17 analysed by service shows the actual position for net expenditure at the end of December 2016 and compares this with the relevant budget as detailed in Appendix A. The statement also shows a forecast outturn position for the year which is detailed in Appendix A. Details of how these variances are made up are shown in Appendices F to M, however, the main areas of variance are as follows: Assistant Chief Executive 1.9 The projected outturn is a surplus of 0.849m. This surplus is mainly due to staff savings across the directorate and future planning of budget reductions. Additional grant funding received in year to assist with the implementation of the Fraud and Error Reduction Scheme and welfare reform has also impacted on the projected outturn. It is being requested that 0.317m of the surplus be carried forward to 2017/18 to assist with the technical refresh of the Revenues and Benefits Northgate contract.

3 It is also requested that 0.085m of the remaining surplus be carried forward to 2017/18 to fund one off salary costs for part year planned leavers. Adult Social Care 1.10 The projected outturn is a surplus of 1.500m. In main the projected surplus is due to vacancies held pending service redesign within the Extra Care Services and Community Alarms and one off backdated contributions from the CCG towards integrated mental health placements within the Commissioning Service. Following the Supreme Court Clarification in March 2014 (Cheshire West ruling) the service has experienced a significant increase in demand for Deprivation of Liberty (DoLS) assessments. It is being requested that the surplus of 1.500m be re-profiled from 2016/17 and carried forward into 2017/18, 2018/19 and 2019/20 at 0.500m respectively. Children s 1.11 The projected outturn is a surplus of 0.073m. The projected surplus comprises of vacancy savings and the maximisation of the Community Learning Grant. It is being requested that the surplus of 0.073m be treated as a revenue contribution to capital outlay (RCCO) and used towards refurbishment of The Hollies, the base for New Arrivals Centre. Regeneration and Economy 1.12 The projected outturn is a surplus of 0.713m. In main, the surplus is due to reduced professional and consultancy costs within the service areas of planning policy, transportation and core strategy. There has been savings made within premises expenditure within Commercial Property Service. In addition savings have been made within Highways Services mainly due to reduced energy and depot expenditure as well as additional income on engineering consultancy. It is being requested that the projected surplus of 0.713m be carried forward into 2017/18 to fund street lighting and infrastructure costs. On 16th November 2016 Cabinet resolved to re-prolife 1.098m of the Regeneration & Economy target budget into 2017/18. Permission is sought to re-profile 0.448m of this into 2018/19 which in particular reflects the expected spending profile in street lighting and feasibility studies.

4 Neighbourhoods 1.13 The projected outturn is a surplus of 0.735m. The surplus is due to vacancy savings across the directorate and the ending of a historic contract which resulted in a one-off payment being received by the Council within Leisure and Culture Service. It is being requested that 0.599m of the projected surplus be carried forward into 2017/18 and the balance of 0.136m be used towards capital improvements Corporate Management The projected outturn for Corporate Management is a surplus of 0.092m. This is as a result of underspends within staff training, and supplies and services. It is being requested that the projected surplus of 0.092m is carried forward into 2017/18 to fund further Combined Authority expenditure. Public Health & Regulatory Services 1.15 The projected outturn for Public Health is a surplus of 0.733m which it is proposed is carried forward into future years to assist in the management of further reductions in grant funding. In addition to this Regulatory Services show a projected surplus of 0.020m which it is proposed is carried forward into 2017/18 to fund further roll out of IT to facilitate agile working across the service. Revenue Virements 1.15 There have been a number of approved virements between Directorates and within Service Divisions since the previously reported monitoring. These have been detailed in the relevant service narratives included as Appendices F to M to this report. Revenue Virements (Below 0.200m) Between Directorates 1.17 The following virement between Directorates below 0.200m or representing 1% of Gross Service Expenditure have been included within the period 9 monitoring and approval is being sought as part of this report: Assistant Chief Executive & Corporate Management 1.18 A transfer of 0.040m has been actioned from the Assistant Chief Executive Directorate to Adult Social Care in relation to a transfer of a Grade F post.

5 Revenue Virements (Above 0.200m) Between Directorates 1.19 There are no reported virements above 0.200m between directorates. Revenue Virements Within Directorates 1.20 The following virement within Directorates have been included within the period 9 monitoring and approval is being sought as part of this report: Children s Services 1.21 A transfer of 0.236m has been actioned between Infrastructure Review Budget and Children s Social Care in relation to the budget for Directorates Office. Central Items and Other Corporate Budgets 1.22 The Council has a number of budgets that are held centrally. The nature of these budgets means that they are not within any specific directorate s control and, as a result, they are excluded from target budgets. These budgets are summarised in Appendix B and detailed within individual directorate statements. As at period 9 the forecast outturn is a surplus of 3.204m. This relates to the following areas: Neighbourhoods 1.23 The current projected outturn for the Waste Partnership central item budget shows a 2.900m surplus. This reflects the lower than expected indexation rates and the lower level of tonnages in the first eight months compared to the phased budget. The tonnages will be closely monitored throughout the financial year to see if further revision to the forecast is required. In addition there have been negotiated changes to service charges within the cleansing and collection service which has also contributed to the forecast surplus. The surplus will be returned to corporate resources at year end. Assistant Chief Executive 1.24 The current projected outturn across the central item budget shows a 0.304m surplus. The surplus will be returned to corporate resources at year end.

6 Capital Financing 1.25 The service is currently forecasting a deficit of 0.073m against available resource which relates to the Hollies refurbishment scheme. This 0.073m is to be resourced by a Revenue Contribution to Capital Outlay (RCCO) from Children s Services which is being requested as part of this monitoring report. Sources of Finance 1.26 As at period 9 there have been no adjustments to the Councils Revenue Support Grant, Retained Business Rates or Business Rates Top Up allocations. Therefore, the forecast position for the year is to breakeven. Use of Reserves 1.27 The Council holds a number of reserves that are held for either specific purposes (Earmarked Reserves) or as general balances As at the 31 st March 2016 the Council held total revenue balances of m which included items earmarked for capital expenditure or other purposes, and free resources. Total Available Reserves are detailed below:- Actual March Revenue Balances 70,998 Less: revenue contribution to capital expenditure 12,800 Less: earmarked central items 46,057 Total Available Reserves 12,141

7 1.29 Balances earmarked moving into 2016/17 and future years, included carry forwards specific to individual directorates of 9.412m, central items of 1.412m, and ring fenced public health grant of 2.017m. In addition, there are balances carried forward from previous years of 8.803m which includes 3.385m for Public Health and 1.322m for central items. There is also m set aside for revenue contributions to capital, which includes funding of the Council s ICT strategy together with funding to support other capital projects As part of the 2015/16 Outturn Report that was presented to Cabinet on the 1st June 2016 approval was given to set aside 4m of spare revenue resources to fund capital projects as and when required. To date, this resource has not yet been utilised and, therefore, it is requested that it be re-allocated to a General Project Fund that would be used to progress both revenue and capital schemes such as: Urgent Ongoing Maintenance Projects Spend to Save Projects Urgent Health & Safety Schemes Small Capital Projects There will still be a requirement to submit formal bids to access the fund that would require an appraisal to be assessed by Strategic Finance and which would need to be reported to the relevant Cabinet for approval In addition to the balances detailed above, the Council also holds specific reserves totalling m inclusive of those held in relation to the Housing Revenue Account of 2.694m. Period 9 estimates indicate that reserves of 0.661m will be utilised during 2016/17. These reserves are summarised in Appendix C and details provided within individual directorate reports. Use Of Contingency 1.32 The contingency balance for 2016/17 is currently 0.835m. As at period m of this balance remains unallocated, however, it is projected that this will be fully utilised by year end. Specific Grants & Contributions 1.33 These are additional resources that have been received to fund specific areas of expenditure that did not form part of the original directorate budgets agreed in February They are for specific initiatives or changes in working practices and the expenditure will increase in proportion to the grant received.

8 There have been no additional specific grants reported within the service targets since period 6 monitoring was completed. Budget Savings 1.34 The original target budget savings set in February 2016 totalled m. As at period 9 all directorates are on target to meet these savings. However, some directorates have found these savings through different budgets, as the original saving was not going to be achieved. Capital Monitoring 1.35 The Capital Programme has been amended to include changes to the total estimated resources available due to the notification of Supported Capital Expenditure (Revenue), SCE(R), and increases in the level of grant funding as identified in Appendix D The total estimated expenditure for 2016/17 is m compared to an approved budget of m, forecasting a deficit of 0.073m against available resource. This relates to the Hollies refurbishment scheme. This 0.073m is to be resourced by a Revenue Contribution to Capital Outlay (RCCO) from Children s Services which is being requested as part of this monitoring report. Capital Virements No capital virements have been actioned between period 6 and period 9. Financial Health Indicators 1.37 This includes indicators that have been designed to measure value for money performance across the Councils Corporate Services. It also includes Revenue Collection Statistics such as Council Tax and Business Rates, General Debtors and Housing Rents. Current Key Financial Indicator details are listed and explained within Appendix E.

9 Section 106 Monies 1.38 This relates to contributions from private sector organisations to be used for specific purposes. Progress on how this funding is being used is detailed within individual directorate reports. Housing Revenue Account 1.39 Appendix M shows monitoring for the Council s Housing Revenue Account as at the end of December The service is forecasting a surplus of 3.427m at outturn 2016/17. It is requested that a revenue contribution to capital outlay (RCCO) of 2.850m be made to reduce the financing costs of the capital programme. The remaining 0.577m will be requested to be used for the repayment of internal debt and associated interest costs. Further details are attached for information. 2. Recommendations 2.1 That the Medium Term Financial Strategy is on track and there are no budget pressures that require action outside of normal budget management processes be noted. 2.2 That the financial monitoring position of individual directorates be received and referred to Budget and Corporate Services Scrutiny Board for consideration and comment. 2.3 That the financial monitoring position of the Housing Revenue Account for the period ending December 2016 be received. 2.4 That the following virements be approved: a) 0.236m has been actioned between Infrastructure Review Budget and Children s Social Care in relation to the budget for Directorates Office. b) A transfer of 0.040m has been actioned from the Assistant Chief Executive Directorate to Adult Social Care in relation to a transfer of a Grade F post. 2.5 That the following carry forwards be re-profiled to future years: a) 0.402m for Assistant Chief Executive into 2017/18 b) 1.50m for Adult Social Care into 2017/18, 2018/19 and 2019/20 at 0.500m respectively

10 c) 0.713m for Regeneration and Economy into 2017/18 o On 16th November 2016 Cabinet resolved to re-prolife 1.098m of the Regeneration & Economy target budget into 2017/18. Permission is sought to re-profile 0.448m of this into 2018/19 which in particular reflects the expected spending profile in street lighting and feasibility studies d) for Neighbourhoods into 2017/18 and the balance of 0.136m be used towards capital improvements e) 0.092m for Corporate Management into 2017/18 f) 0.733m Public Health into 2017/18 g) 0.020m Regulatory Services into 2017/ That the following Revenue Contribution to Capital Outlay (RCCO) be approved: a) 0.073m (Children s Services) for use towards the refurbishment of The Hollies, the base for New Arrivals. 2.7 That the following Revenue Resources Earmarked To Fund Capital Projects be approved: a) That the 4m of earmarked revenue balances originally set aside to fund capital projects be re-allocated to a General Projects Fund John Smith Interim Head of Finance Contact Officer Rebecca Maher Strategic Finance Manager Strategic Resource Implications 3.1 The report and appendices provide details of the Council s revenue and capital expenditure at the end of December 2016 together with a forecast outturn for the financial year 2016/17. Resource implications of the current financial forecast are contained within the body of the report.

11 4. Legal and Statutory Implications 4.1 The Local Government Act 2003 places a requirement on local authorities to provide Members with regular financial monitoring. 4.2 The Council s Financial Regulations state that: Regulation 1.24 Any overspending on service estimates in total on target budgets under the control of a Chief Officer must be carried forward to be recovered in future years. The medium term financial strategy framework requires that Chief Officers put in place arrangements to recover overspends over a maximum of three years. The Chief Financial Officer will report the extent of overspendings carried forward to the Cabinet Member for Strategic Resources and to the full Council. The requirement to meet overspends from future year target budget allocations can be waived by the Cabinet Member for Strategic Resources if the circumstances of the overspend warrant this course of action. All internal business unit deficits shall be retained by the appropriate service and form part of the net overspending reported to the Cabinet Member for Strategic Resources under this financial regulation. Regulation 1.25 Net underspendings on target budgets under the control of the Chief Officer may be carried forward, subject to the approval by Cabinet of a report presented jointly by the Chief Officer and the Chief Financial Officer regarding the source of underspending or additional income and the proposed application of those resources. 5. Implications for the Council s Scorecard Priorities 5.1 The report details monitoring for revenue and capital expenditure for 2016/17 for all Council services and, therefore, outlines general implications to the achievement of the Council s Scorecard Priorities. 6. Background Details 6.1 All background details have been provided as part of the Summary Statement and within the accompanying Appendices. Source Documents Councils Finances Report Financial Regulations & Procedures Individual revenue / capital monitoring returns from Directors