Purpose: Decision

Date	25TH JULY 2017

Title	OUTTURN REPORT 2016/17

Report of: Chief Financial Officer

EXECUTIVE SUMMARY

The Hampshire Fire and Rescue Authority (the Authority) continues to plan ahead for future savings requirements, which has again resulted in savings being made ahead of schedule during 2016/17.

The year end position is an underspend of £2.142m against budget, mainly on employee costs as employees are not replaced in preparation for savings requirements and on a lower than expected take-up level for Firefighter pensions.

As agreed within the 2017/18 Budget Report, this underspend has been transferred to the Transformation Reserve to enable the programmes of work currently being undertaken to improve performance and efficiency across the service.

The opportunity is also taken in this report to provide a brief update to the Authority on the monitoring position for the first 2 months of 2017/18.

This report will request members of the Authority review the figures as laid out in the Appendices and will recommend that the outturn report, including reserves and capital financing are approved, along with the annual treasury outturn for 2016/17.

BACKGROUND

This is an annual report which sets out the financial position as per the draft Statement of Accounts. Budget monitoring for the first two months of the current financial year is also included for information.

REVENUE EXPENDITURE 2016/17

The revenue outturn position is shown in functional and subjective summary at Appendix A.

Early savings have been made in Professional Services, reducing the spend on staff.

There are currently around 150 vacant retained firefighter posts, 100 of which will remain in the structure after SDR and are actively being recruited to.

Firefighter pension costs are significantly lower than expected due to lack of take-up of the schemes and lower employer contributions since the introduction of the 2015 scheme. This is in addition to the reduced numbers of Firefighters in preparation for the SDR changes.

Some savings have also been made on non-pay costs, such as business rates, staff car allowances partly offset by increased staff travel expenses (public transport), and group community budgets Other non pay underspends relate to slippage in projects and budgets will be carried forward to be spent in 2017/18.

Income has been higher than budgeted in a number of areas, with the highest increases coming from interest on balances, sales of vehicles and the use of our estate.

This spend also includes the £1.981m contribution to the capital payments reserve included within the original budget.

This level of underspend is not permanent and will reduce as the annual grant from Government reduces. However, the opportunity is being taken to review all significant budget underspends to identify if permanent budget reductions can be made.

CAPITAL EXPENDITURE 2016/17

Capital payments during the year totalled £11.1m compared with the £15.5m forecast. A breakdown of the variances is given in Appendix B.

Capital payments can be financed from the following sources:

£’000
Capital grants	1,772
Partner contributions	277
Capital receipts	2,914
Revenue contributions	4,324
Capital payments reserve	1,808
Total	11,095

The Authority received £3,855,958 in the form of a capital grant in 2015/16 from the Department for Communities and Local Government (DCLG) for Transformation projects. This was not all spent in 2015/16, so the balance was transferred to the Capital Grants Unapplied Reserve (CGUR) and has been used in 2016/17.

By using the capital grant, capital receipts, capital reserve and revenue contributions this year the Authority has not had to use any unsupported borrowing.

TREASURY MANAGEMENT

The treasury management strategy approved by the Authority in February 2016 was followed throughout the year. All the limits and boundaries set were fully complied with.

The year end report is set out as Appendix E for Members’ approval.

PROVISIONS

The following provisions have been adjusted in the 2016/17 financial year. The increase is met from the revenue budget:

Provision for Uninsurable and other claims (+£90,000)

This covers costs which may arise as a result of the Authority being uninsured for a period (the Authority’s insurers went into liquidation some years ago), possible employment tribunals (together with their associated costs) and other claims made against the Authority. These cases may take a number of years to settle.

Provision for tax liabilities (no change)

The provision for potential tax liabilities remains unchanged at £141,000. This relates to possible payments due to HMRC in respect of pensions of staff who have retired from the Service and have subsequently been re-employed. The final charge has now been agreed with HMRC and has been settled at a lower figure.

Provision for pensionable allowances (-£51,173)

The provision was set up following the ruling in Norman V Cheshire case, to cover pension contributions which will now need to be paid on certain allowances which were not treated as pensionable when they were originally paid. All payments due have now been settled and the provision removed.

RESERVES AND GENERAL BALANCE

In recent years it has been normal practice to add any underspends to the capital payments reserve. However, as the cost of restructuring, along with other improvements and efficiencies within the service continues, it was agreed within the 2017/18 budget report that any underspend for 2016/17 would be added to the Transformation Reserve.

Capital and Revenue grants unapplied reserve
This year £13,726 of capital grants were received from the Home Office for New Risks (marauding terrorists). This, together with the balance of capital grants received in previous years, has been used to fund 2016/17 capital expenditure.
Revenue grants totalling £2,031,000 have been received in 2016/17 and £1,910,000 of grants have been spent requiring a net contribution to the revenue grants unapplied reserve of £121,000. This is mainly due to the Home Office paying the FireLink grant for 2017/18 early.

Transformation Reserve
The balance of the Transformation Reserve is £4.018m as at 31st March 2017, which takes into account the £2.142m underspend during 2016/17.

The movements in these reserves and the general balance, including the proposed adjustments to reserves, can be summarised as follows;

Balance as at 1 April 2016	Used during the year	Additions in year	End of year addition	Balance as at 31 March 2017
£’000s	£’000s	£’000s	£’000s	£’000s
-40,067	13,404	-2,263	-2,142	-31,068

A breakdown by reserve is shown at Appendix D of this report.

ADDITIONAL FUNDING REQUEST

At the Finance & General Purposes Committee meeting on 23rd March 2016, commitment was made to fund the cost of the Service Delivery Redesign (SDR) programme up to £3.5m. Work is on-going, however there has been the need to increase the level of consultation and pilot testing to ensure successful implementation of the programme. The pilot testing will involve trials at a number of stations with reduced numbers of firefighters, which will produce a saving in year. It is hoped that this saving could be used to fund the additional costs of the programme.

A request is expected to be brought to the Authority later in this financial year to approve this transfer of funding.

BUDGET MONITORING 2017/18 – MONTH 2

Due to the early point in the year of this report, to date nothing has become apparent which will affect the original budget estimates and there are not any significant variations to be reported. However, the following items are mentioned for information and a summary of the budgetary position is included in the table below.

Pay costs are expected to be under budget at the end of the financial year. A large part of the underspend is due to the number of vacancies in across Whole Time and Retained Firefighters and Staff posts.

Supplies and Services shows a variance of £210,000. This is due to a delay (for good operational and risk management reasons) in the ICT transformation project , however the changes have now been implemented and the full savings will be made for the remainder of the year and into the future.

2017/18 Current Budget	2017/18 Forecast as at end Period 2	Variance Underspend / (Overspend)
Employee Costs	49,123	48,374	749
Premises	4,292	4,292	0
Transport	1,720	1,720	0
Supplies & Services	8,303	8,513	-210
Support Services	12	12	0
Capital Charges	0	0	0
63,450	62,911	539
Income	-2,301	-2,301	0
Specific Grant	-1,257	-1,257	0
59,892	59,353	539
Revenue contributions to capital	2,547	2,547	0
Contingency	999	999	0
Net Cost of Service	63,438	62,899	539

SUPPORTING OUR SERVICE PLAN AND PRIORITIES

Ensuring that funding is appropriately accounted for is vital for all public sector organisations. Good budget management during 2016/17 has allowed an underspend to be achieved at year end which will help to fund the Service priorities and enable the key changes required to make budget reductions at the same time as service improvements.

CONSULTATION

No consultation is required for this report as it is based on historic information and is a purely factual document. The information contained within this report will be verified by our external auditors.

RESOURCE IMPLICATIONS

This report reflects the financial position for the previous financial year and does not contain any requests which would effect the future financial position.

LEGAL IMPLICATIONS

It is a legal requirement that the Statement of Accounts be approved and signed by external audit. This is expected to take place in September once the full review of the accounts as taken place.

PEOPLE IMPACT ASSESSMENT

The proposals in this report are considered compatible with the provisions of the equality and human rights legislation.

OPTIONS

There are no options for consideration in this report.

RISK ANALYSIS

This report sets of the draft outturn position, prior to the full audit of the accounts being completed. If any significant errors are uncovered by the auditors, these will be referred back to the Authority.

CONCLUSION

It is requested that the Authority review and approve the financial position for the year ended 31st March 2017 is detailed in this report.

RECOMMENDATION That the accounts for 2016/17, including the use of reserves set out in paragraph 22, and Appendix D of this report be approved by Hampshire Fire and Rescue Authority That the changes to the capital payments in 2016/17 and the impact on the capital spend profile going forward as set out in Appendices B & C be approved by Hampshire Fire and Rescue Authority That the financing for capital payments as set out in paragraph 16 be approved by Hampshire Fire and Rescue Authority That the annual treasury outturn report set out in Appendix E of this report be approved by Hampshire Fire and Rescue Authority

APPENDICES ATTACHED

Appendix A – Revenue Outturn 2016/17

Appendix B – Capital Outturn 2016/17

Appendix C – Capital Forecast to 2020/21

Appendix D – Reserves

Appendix E – Treasury Management Outturn 2016/17

Contact:

Rob Carr, Chief Finance Officer

Rob.Carr@hants.gov.uk

01962 847508