Agenda item

To receive a report of the Deputy Leader & Cabinet Member for Finance and Procurement providing for consideration the monitoring position for both the revenue and capital budget, for Quarter 1 of 2014-15 and seeking agreement to various amendments to the Capital Programme.

FinancialMonitoring Report- Quarter1

(Item5 –Report oftheCabinetMemberfor FinanceandProcurement,Mr John

SimmondsOBE and CorporateDirector forFinanceand Procurement,AndyWood)

Cabinetreceiveda reportsetting outthe budgetmonitoringposition forJune2014 and seeking agreementto necessaryre-alignmentsandamendments to the Revenue and CapitalBudgets respectively.

MissCarey,Deputy CabinetMemberfor Financeand Procurementintroducedthe itemforCabinet.In particularshe referred to the following:

Revenue Budget

      i.        Thatalthoughit wasnot unusualtoreportan overspendat thispoint inthe financialyear, thecurrentforecastwas causefor someconcern.  Evenafter deductionspredictedformanagementactionwork wouldstill beneededifa balancedbudget wereto be reportedat the end of thefinancial year.

    ii.        Thatin 2013-14the Councilhadbeenableto recordanunderspendwhich was allocatedto the2014-15budgetand thatthis wasunlikely tobe possible in2014-15as thecumulativeeffectofsavings imposedby budgetcuts was beingrealised.

   iii.        Thecurrent forecastoverspend,beforemanagementaction,was £12.4milion.  It was expected,butnotassured,that followingscheduledmanagement action the overspendwould bereducedto £5.3million.  Thiswas unacceptableand further management actionwould beneededin ordertoreducethatfigure further.

   iv.        Themain areasofoverspend reportedwere currentlywithin Adult SocialCare and Children’sSocial Care.   Theoverspendshadbeenlargely attributedto savings originally includedinthebudgetnow beingconsideredto be unachievable.  Thesetargets would be carefullyassessed toidentifyareas of improvement.  In particularthoseareasofwork which had oncereceived ring fencedfundingandwhere theservice hadcontinuedtobe providedeven though thefundinghadceased wouldbe investigated.

    v.        ThattheAsylum positionreportedreflectedthe mostrecentofferfromthe HomeOfficeand took intoaccount the cessationofthe Gateway Grant.

   vi.        Other  areas  highlighted  within  the  report  included  SEN  Home  to  School transportwhich hada predictedoverspendof£2million.

  vii.        Thatthe reportdid includesomepositive news,despite theoverall overspend, the Growth EnvironmentandTransportDirectorate currentlyreported a predictedunderspend of £1.5millionbut thatas thiswas also ademandlead budgetcaremust betaken;recentmonthshad seenan increase inwaste tonnagethoughtto bea resultoftheweather conditionsandimproved economicactivityof familiesin Kent.  Inadditiontheacademicyearhad only juststarted andtakeup oftheYoung Persons TravelPass couldnot yetbe assessed.  Onlywhen thesefigures wereunderstoodcouldit beascertained whetherthe savingsin thatbudgetareacouldbe met.

viii.        PublicHealth hada predictedunderspendof £0.9millionbutinorder to protectthosemoniesreceivedfor theirintendedpurposeit wouldnot beused toplug budgetholes elsewhere butwould insteadbeallocatedtoa public healthreserve foruse in futureyears.

   ix.        Thata Quarter1 shortfallin thedividend expected fromCommercial Services wasreported butit washopedthatperformancewould improveto apoint wherecontributionscouldbe made aspredicted.

    x.        Thatbettersavings thanexpected hadbeenreportedfromthepart lightstreet light project.   Althoughthis hadbeena controversialproject, ithad been shown  that  not  only  would  it  help  to  reduce  carbon  emissions  and  light pollutionbut alsomakethe predictedsavings andmore.Thesesavingshad to bemadein areasthathelpedto protectotherhighly valuedservicesofthe Council.

MissCarey continued;she explainedthe key factorsin the CapitalBudget

      i.        Thatcapitalborrowing mustnot beallowed toexceed acertain proportionof therevenue budgetandthereforeas theRevenue budgethadbeenrestricted sothe Capitalspending mustalso bereduced.This would putpressureon resources to achievethose capital projectsforwhich the councilhadplanned.

    ii.        Thatthe currentfigure reportedas requiredto deliverthe council’scapital projectswas approximately £406m,thisincludeda predicted£33million overspend.  Thispredictedoverspend waslargelyattributabletothedemand for schoolplacesin theCounty.  The BasicNeed budget forbuildingand expandingschoolswas currently£12millionbelowthe required totaland althoughnearly£4millionwas expected to berealisedfromdeveloper contributions£8millionwould needto beresourcedelsewhere.  Furthermore althoughthe immediatework relatedto thecreationofPrimary Schoolplaces, inthe longtermsecondaryschool placeswould alsoneed to be addressed.

   iii.        ThattheWestwoodReliefRoad wascurrentlyreporting anoverspend.  This wasdisappointingas KCCwas theaccountablebodyfor theprojectandhad, inaccepting the funding,agreed tocover anyoverspend.  Theoverspend had occurred asa resultoffinding expensivefibreoptics andutility equipment underthesite followingthe commencementofworks.  Theadditionalcostto theproject wasestimatedat £2.5million.

Miss  Carey  was  pleased  to  report  that  KCC  had  been  successful  in  obtaining

£98millionofLocalGrowthFunds andbusinesscases werecurrently being written to securethematch fundingrequired foridentifiedprojects.

In conclusionMiss Careyreminded membersof the challengingfinancial position that theauthorityfacedandthe exceptionallyhard workthat wouldbe requiredto make thesavingsthat hadbeencommittedto inthis financialyear andbeyondwhen further savingswould be needed.

AndyWood,CorporateDirector ofFinanceand Procurementspoketo theitemhe remindedmembersofthe followingimportant points:

      i.        Thatthefigures ofapproximately £12millionpredicted overspend,reducedto approximately£5million aftermanagementactionshouldnot beconsideredas a foregone conclusion.    The management actions to save approximately£7millionwere setout inappendix3 ofthe reportand itwas clearthat they wouldtake much workto deliver.

    ii.        Thatanassessmentoftheamountofcashgoing outofthesystem wasa usefulindicatorin planninga successfulbudget.In thequarter1 monitoring figuresfor2014-15cashwas going outat asimilar rateto 2013-14buton a smaller total budget.    However, the trend for July looked to be slightly improved.

   iii.        That  another  positive  development  that  would  contribute  to  the  savings needed wasthe wellnegotiated wastecontractsrecently enteredby KCC.

   iv.        Thatfurtherwork wouldbeneededfollowing thechallengingmanagement actionstobe undertakenin orderto alsomitigate the£5million predicted overspend.Last year a stop on spendinghad managedto save approximately £1.5-2millionand similaraction wouldbe lookedat carefullyin the nearfuture.

MrSimmondscommented on workundertaken in Essexwhere thenumbers of lookedafterchildren hadbeenreducedfromsimilar numberstothosecurrently reportedat KCCto under1000by preventative measures.  MrOakford,Cabinet Memberfor Specialist Children’sServicescommentedto explainthat thework had beeninvestigated, andhad savedEssex CC£54 millionover 3years.  Preventative serviceswere alsobeing improvedat KCCin orderto achievea similarend and, whilethe councilwas seeingsmallimprovementsin numbersofchildren enteringthe system,it wouldtake timeto materialiseintosavings.

Following further commentsfrom theChairmantheCabinetMemberfor Education andHealthReform,MrRoger Goughspoke totheitem.  He explainedtoMembers thatpressureshadmaterialisedas aresultofvarious factors,including increased constructioncosts andadditionalprojects being required.  Thisyear the councilhad deliveredthe numberofplacesthatit had setout to but withincreasedmigration into thecountyhigher thanpredictedpressures onschoolplaces remained.  Thisyear to September2015furtherlarge scaleprojects wouldbe undertaken,including several newschools andtheexpansion ofmanyotherexisting schools.  He alsoreminded membersthat thesepressureswould soonbeseen within thesecondarysector and thatover timethe pressuresremainedsignificant.

It wasRESOLVEDthat: