Council meeting 9 February 2012

Transcription

1 Council meeting 9 February 2012 Public business Budget 2012/13 Purpose To approve the budget for 2012/13. Action required The Council is asked to approve the budget for 2012/ Introduction 1.1. At its meeting in November 2011 Council discussed an outline approach to creating a rolling corporate plan for The comments made by Council formed the basis of the corporate plan 02.12/C/01. This paper seeks to use the strategic objectives detailed in the corporate plan to inform the budget for 2012/2013 by allocating resources accordingly The attached budget sets out the financial implications of the corporate plan for 2012/ Equality and diversity implications 2.1. There are not considered to be any equality and diversity implications arising from the provision of this paper as such. However it is understood that as our strategic objectives are developed the equality and diversity implications of each will need to be closely considered. Page 1 of 14

2 3.0 Communications implications 3.1 Delivering effective regulation is of interest to both patients and registrants. It is a fundamental assumption of our planning and budgeting that we must engage and communicate with all our stakeholders. 4.0 Resource implications 4.1. The resource implications for 2012/13 and the level of fees proposed for the immediate following period are fully laid out in the attached paper. Consultation on future fee levels can be found at 02.12/C/03 of the Council agenda. One of our overriding objectives is of course to ensure we continue to discharge our regulatory objectives and to ensure that the Council continues to be financially sustainable to enable us to do so, in both 2012/13 and the years ahead. 5.0 Risk implications 5.1. Failure to budget appropriately for the immediate year ahead could compromise the GPhC s ability to deal with the immediate pressures on its resources in discharging its regulatory responsibilities and moving forward to achieving its longer term strategic objectives and thus its ability to continue to regulate effectively for the benefit of patients, the public and registrants. Action required The Council is asked to approve the budget for 2012/13. Bernard Kelly Director of Resources and Corporate Development bernard.kelly@pharmacyregulation.org Duncan Rudkin Chief Executive & Registrar duncan.rudkin@pharmacyregulation.org 25 January 2012 Page 2 of 14

3 1. Background Budgets 2012/ The budget for 2012/2013 has been compiled as the first year of the current three year corporate plan which is also on today s agenda and which reflects the work Council has previously undertaken in developing its strategic plan and the corporate planning workshop in November. 1.2 In line with the objectives developed through that work the budget reflects the investments made to date in improving our customer services and fitness to practise activities and the continuing development of our organisation structure. For the first year since our inception we have a budget which we believe reflects a steady state and fully staffed organisation. 1.3 The attached appendices 1 and 2 show our consolidated result with expenditure broken down by directorate and then by cost type. Appendix 3 analyses revenue in detail while Appendix 4 shows our projected balance sheet at the end of the budget year. 1.4 Included below are graphical representations of the composition of our registrants, from where our income is derived and the breakdown of expenditure by directorate. 2. Income 2.1 Our income assumptions reflect our best estimates for numbers of registered pharmacists, pharmacy technicians and pharmacies as informed by the current numbers on the register. 2.2 In anticipation of the Council discussions on fees, the income budgeted assumes a 10% reduction in renewal fees for pharmacists and pharmacy technicians. However as these revised fee assumptions would only be implemented from October 2012 the impact in the budget year 2012/13 would be limited. The full effect would not be felt until 2013/ Expenditure 3.1 Our expenditure budgets as referred to above, reflect a fully staffed organisation structure based on current or expected salary levels for existing or to be appointed staff. With effect from June 2012 an allowance of 4% of salary costs has been made. This does not presume upon any decisions still to be made about salary levels, but gives the organisation some scope for development, bearing in mind that the Remuneration Committee will be considering the results of a grading and pay policy review in the next few months. 3.2 To meet our office accommodation needs, we have agreed to enter into a new two year lease with the RPS from September In the meantime to accommodate our immediate needs, we have also taken a short lease on some space within 3 Albert Embankment. The additional occupancy costs are reflected in the budget numbers. The budgeted numbers also reflect a significant increase Page 3 of 14

4 in the rates payable on our current building as a result of the most recent rate revaluation exercise carried out by Lambeth Council. 3.3 We are currently negotiating an outsourcing contract with a specialist infrastructure service provider who will host and support our IT infrastructure and disaster recovery services. This arrangement will require us to unwind our arrangements with the RPS in the early part of the budget year. Unwinding these arrangements will have a knock on effect on our headcount but will not be any more expensive than the current arrangements. The move away from RPS as our IT service provider is an essential step towards our eventual move away from co-location. 4. Budget Outcomes 4.1 Based on the above assumptions the proposed budget for the twelve months to 31st March 2013 predicts a surplus of 3,313,463. This compares to the current year s forecast of 6.4m, however as that forecast was put together some months ago there is every possibility that it could be exceeded. 4.2 The income budgeted is 20,638,223 and expenditure is 17,466,920. An allowance has been made for interest income of 180,000 on which tax of 37,800 would be payable. 4.3 The surplus budgeted is lower than the current year forecast of 6.4m by some 3.0m. Income is 200k higher than the current forecast. Income from pharmacists is higher but that from pharmacy technicians is lower because of lower numbers of applications and we are recognising grant income, from the DH working capital grants. 4.4 Of the 3.2m variation in expenditure, 2.0m comes from employee related costs which reflects both the first year we are working with a fully established headcount and the expected TUPE transfer of staff from the RPS as we take in house finance and certain IT database development staff as we unwind some of our current arrangements with the RPS. Although we will still outsource our IT infrastructure support and HR activities, taking in house finance and IT database development, will provide a more effective and cheaper service than the current arrangements with the RPS. The balance of the variance predominantly arises from the costs of our new space arrangements ( 394k), higher levels of depreciation on our fixed assets ( 307k) and project specific costs ( 517k) which reflect the ambitions of the Corporate Plan although there are presentation differences between the years. 4.5 The variation in budgeted expenditure from the current year s forecast arises from increases in the budgets of each directorate as follows:- 4.6 The Chief Executive budget is to increase by 188k which reflects the inclusion of full contingency budget of 300k which has only partially been used in 2011/12. Page 4 of 14

5 4.7 Policy and Communications increases by 709k over the current year and reflects a full year of staffing, a full year of publishing Regula+e and Upda+e and the further work on the registered pharmacies project. 4.8 The Regulatory Services budget increases by 839k over the current year and is reflective of a full year of staffing under the new organisation structure, 2011/12 having been marked by a significant number of vacancies in key senior management positions. It is also reflective of the full year impact of the CPD call and review programme that was suspended for part of the current year. The budget for our FTP Committee, Investigating Committee and legal costs are driven by the model which has been developed to track and report on the progression of cases through fitness to practise. The budget continues therefore to reflect the significant efficiency improvements that have been made in 2011/12.The recently appointed Head of Investigations and Case Management will work closely with the Head of Finance to further improve the accuracy and reliability of this model. 4.9 The Resources and Corporate Development budget is showing an increase of 1,948K over the current year. Much of this is a presentation issue as IT (including the costs of the outsourced service provider) and Finance (a combined increase of 1.0m) are budgeted within the directorate. Previously these were shown in the service level charges made by the RPS. The Resources Directorate budgets, also contains a provision of 517k in respect of additional project budgets which will support the ambitions of the Corporate Plan. A further 307k of additional depreciation on investments in buildings and IT projects contributes to the balance of the increase in the budgets Council and Governance expenditure is budgeted to increase by 137k which reflects additional costs for the recruitment of new Council members, training and professional fees to support the drafting of new rules Occupancy and Service costs are overall 594K lower. Service Level costs are lower by 1.0m as a result of IT and Finance costs now being budgeted for in Resources and Corporate Development while higher rent and related occupancy costs of 394k reflect the additional space which will be occupied during the year An allowance of 62,500 has been made for the imposition of a levy to fund the activities of the Professional Standards Authority (currently CHRE). It is assumed this will be based on an estimated cost of 150,000 for a full year but which will only be payable for the last five months of the year. 5. Capital Expenditure 5.1 We plan to invest in excess of 1.7m in capital next year. Almost all of the investment will be made in new IT equipment, the office move and systems development. Of this 1.6m will be applied against the working capital grants provided by the DH. For accounting reasons the grants will be recognised by offsetting them against the depreciation charge made against the investment in accordance with our standard depreciation policy, total monies spent against the working capital grants are expected to be 2.2m. Page 5 of 14

6 6. Balance Sheet and Reserves 6.1 The predicted balance sheet based on this budget indicates that the GPhC will have reserves of 12.2m by the end of March Fixed assets will have reached 1.5m and current assets will be 24.9m of which cash is the largest component at 24.1m. Current liabilities are expected to be 14.2m, the largest component of which is the prepaid fee income of 11.6m. 6.2 The GPhC is a new organisation launched in a highly volatile and challenging environment, with effectively no founding reserves. We have an ambitious and necessary programme of work, including both long-needed upgrading of critical business systems and processes as well as a number of essential major regulatory policy projects. And we will continue to operate, for the foreseeable future, within an unpredictable wider policy context (Law Commission review and potentially further major legislative upheaval to come). Against that background, relative to the scale of the challenge facing the organisation, the costs of regulation, and the known and currently unknowable risks, working towards a target reserve of 12.5m by the end of March 2013 represents a prudent and responsible position, without being excessively and disproportionately cautious. Page 6 of 14

7 Income Pharmacist Income 12,707,261 Premises Income 3,290,299 Pharmacy technician Income 2,889,708 Pre-Registration Income 993,140 Other Fee Income 102,675 DH Grant Income 444,009 Other Income 211,132 The table and chart above show how many registrants and premises we are budgeting to register in 2011 and 2012 and how the total income of is made up. Pharmacists and pharmacy technicians have had a 10% reduction in renewal fees budgeted, however this would not come into effect until October 2013 so the full year impact of this would not be felt until 2013/2014. Page 7 of 14

8 - Chief Executive 616,165 - Policy & Communication 3,347,329 - Regulatory Services 7,629,210 - Resources & Corporate Development* 5,811,756 *Includes the cost of Occupancy and Service Costs Employee Costs 10,475,988 Property Costs 244,694 Office Costs 727,589 Professional Costs 1,044,928 Event Costs 467,916 Marketing Costs 503,039 Financial Costs 497,358 Grant Costs 50,000 IT Costs 810,004 Other Costs 870,102 Occupancy & Outsourced Services Costs 1,712,843 CHRE Costs 62,500 Page 8 of 14

9 Appendix 1 Consolidation 2011/ /2013 Reforecast Budget Income Total Total Pharmacist Income 12,318,262 12,707,261 Fee income from the RPSGB 89,865 0 Premises Income 3,364,615 3,290,299 Technician Income 3,326,604 2,889,708 Pre-Registration Income 980, ,140 Other Fee Income 101, ,675 DH Grant Income 0 444,009 Other Income 260, ,132 Total Income 20,441,860 20,638,223 Expenditure - Chief Executive (428,334) (616,165) - Policy & Communication (2,638,396) (3,347,329) - Regulatory Services (6,790,489) (7,629,210) - Resources & Corporate Development (1,462,827) (3,410,710) - Council & Governance (556,689) (693,703) Total Directorate Costs (11,876,736) (15,697,118) - Service Level Cost (1,624,299) (637,051) - Rent (334,467) (524,994) - Service Charge (173,737) (261,281) - Rates (107,943) (210,327) - Utilities (42,915) (50,400) - Insurance (18,314) (23,290) Total Occupancy and Service Costs (2,301,675) (1,707,342) CHRE Costs 0 (62,500) Total Expenditure (14,178,410) (17,466,960) Net Operating Surplus/(Deficit) before interst & tax 6,263,450 3,171,263 - Interest Receivable 157, ,000 Net Operating Surplus/(Deficit) before tax 6,420,458 3,351,263 - Corporation Tax Payable (32,972) (37,800) Net Operating Surplus/(Deficit) after tax 6,387,486 3,313,463 Page 9 of 14

10 Appendix 2 Consolidation by Income and Expenditure type 2011/ /2013 Reforecast Budget Income Total Total Pharmacists 12,318,262 12,707,261 Fee Income from the RPSGB 89,865 0 Premises 3,364,615 3,290,299 Technicians 3,326,604 2,889,708 Pre-Registration 980, ,140 Other 361, ,816 Total Income 20,441,860 20,638,223 Costs - Employee Costs (8,520,319) (10,475,988) - Property Costs (171,050) (244,694) - Office Costs (251,848) (727,589) - Professional Costs (1,034,288) (1,044,928) - Event Costs (321,456) (467,916) - Marketing Costs (777,076) (503,039) - Financial Costs (234,210) (497,358) - Grant Costs (22,400) (50,000) - MIS Costs (365,271) (810,004) - Other Costs (178,787) (932,602) - SLA Charges & Building Costs (2,301,705) (1,712,843) Total Costs (14,178,410) (17,466,960) Net Operating Surplus/(Deficit) before interst & tax 6,263,450 3,171,263 - Interest Receivable 157, ,000 Net Operating Surplus/(Deficit) before tax 6,420,458 3,351,263 - Corporation Tax Payable (32,972) (37,800) Net Operating Surplus/(Deficit) after tax 6,387,486 3,313,463 Page 10 of 14

11 Appendix 2 continued Expenditure breakdown 2011/ /2013 Reforecast Budget Total Total Chief Executive & Registrar - Chief Executive & Registrar (428,334) (616,165) Total Chief Executive & Registrar (428,334) (616,165) Policy & Communication Director - Director (165,624) (218,489) Total Director (165,624) (218,489) Standards & Fitness to Practice Policy - Standards & Fitness to Practise Policy (227,789) (283,278) Total Standards & Fitness to Practice Policy (227,789) (283,278) Education & Registration Policy - Operations (140,838) (171,881) - Accreditation (459,070) (478,776) - CPD (65,180) (97,784) - Exam (118,898) (167,613) Total Education & Registration Policy (783,985) (916,054) Regulatory Development & Policy Planning - Regulatory Development & Policy Planning (145,928) (389,236) Total Regulatory Development & Policy Planning (145,928) (389,236) Communications - Communications (1,250,130) (1,359,510) Total Communications (1,250,130) (1,359,510) Devolution - Scotland (40,143) (80,031) - Wales (24,797) (100,731) Total Devolution (64,940) (180,762) Total Policy & Communication (2,638,396) (3,347,329) Regulatory Services Director - Director (328,419) (401,458) Total Director (328,419) (401,458) Page 11 of 14

12 Appendix 2 continued Customer Services - Operations (416,879) (289,847) - Call Centre (183,479) (245,265) - Applications Team 1 (662,075) (673,783) - Technical Support (Admin) (212,497) (413,380) - CPD (468,645) (465,818) - Exam (188,172) (196,250) Total Customer Services (2,131,747) (2,284,343) Investigations & Case Management - Operations (87,332) (211,669) - Case Progression (664,752) (632,674) - Investigations (519,681) (533,552) - Monitoring (12,565) (40,032) Total Investigations & Case Management (1,284,329) (1,417,927) Inspection - Operations (83,602) (200,675) - Inspectorate (1,808,557) (2,019,691) Total Inspection (1,892,158) (2,220,366) Legal Advice & Hearings Management - Operations (449,988) (608,705) - Appointments Committee (15,033) (67,534) - Fitness to Practise Committee (640,377) (569,191) - Investigating Committee (48,438) (59,687) Total Legal Advice & Hearings Management (1,153,836) (1,305,117) Total Regulatory Services (6,790,489) (7,629,210) Resources & Corporate Development - Director (436,181) (940,031) - Finance (270,844) (496,449) - HR (191,217) (320,195) - Business Development (393,702) (363,933) - IT (75,180) (876,956) - Facilities Management (95,703) (413,146) Total Resources & Corporate Development (1,462,827) (3,410,710) Council & Governance - Governance (273,272) (313,583) - Council (283,417) (380,120) Total Council & Governance (556,689) (693,703) Total Team Expenditure (11,876,736) (15,697,118) Page 12 of 14

13 Appendix 3 Income breakdown 2011/ /2013 Reforecast Budget Total Total Pharmacist Income Practising Registrant Fees 11,874,943 12,285,308 Application & Upgrade Fees 339, ,400 Independent Prescriber Fees 20,742 21,120 Registrant Administration Fee 36,284 36,738 Scrutiny Fee - Pharmacist 37,033 37,695 Pharmacist Restoration Fee 9,686 0 Total Pharmacist Income 12,318,262 12,707,261 Premises Income Premises Retention Fee 3,026,378 3,059,319 Premises Registration Fee 293, ,480 Premises Administration Fee 22,506 22,800 Premises Internet Pharmacy Logo 22,286 3,700 Total Premises Income 3,364,615 3,290,299 Technician Income Practising Technician 2,274,311 2,545,052 Application Fees 931, ,000 Scrutiny Fee Technician 1,743 92,058 Adjudicating Committee Fee 83,797 99,598 Technician Overseas 28,596 0 Technician Restoration Fee 6,376 0 Total Technician Income 3,326,604 2,889,708 Pre-Registration Income Pre-Registration Training Fee 359, ,690 Pre-Registration Exam Fee 609, ,450 Pre-Registration Admin Fee 11,560 0 Total Pre-Registration Income 980, ,140 Fee Income from RPSGB 89,865 0 Other Fee Income 101, ,675 Total Fee Income 20,180,993 19,983,082 Accreditation Income 225, ,532 Inspection Income 32,986 30,000 Subscription Income 2,200 3,600 DH Grant Income 0 444,009 Total Income 20,441,860 20,638,223 Page 13 of 14

14 Appendix 4 Budgeted Balance Sheet 31st March / /2013 Reforecast Budget Fixed Assets Total Total - Tangible Assets 123,280 1,489,382 - Intangible Assets ,280 1,489,382 Current Assets - Trade Debtors 49,744 43,555 - Other Debtors 483, ,443 - Prepayments 88, ,149 - Accrued Income 33,668 28,083 - Bank & Cash 23,719,551 24,104,908 24,375,650 24,865,136 Current Liabilities - Trade Creditors 248, ,422 - Deferred Income :- Working Capital 2,168,629 1,800,728 Ring Fenced Grant 76,108 0 DH Grants 109, ,882 Fee Income 12,617,121 11,604,037 Other Income 2,300 2,300 - Accruals 423, ,592 15,645,834 14,187,960 Net Current Assets / (Liabilities) 8,729,816 10,677,177 Total Assets less Current Liabilities 8,853,096 12,166,559 Long-Term Liabilities 0 0 Net Assets 8,853,096 12,166,559 Funds Employed - Accumulated Fund b/fwd. 2,465,610 8,853,096 - Surplus/(Deficit) in Year 6,387,486 3,313,463 Total Funds 8,853,096 12,166,559 Page 14 of 14