NOT PROTECTIVELY MARKED SFRSBoard/Report/ Page 1 of 3 Version 1.0: 11/10/2017 ResourceBudgetOutturnReport2016-17 Report No: B/FCS/19-17 Agenda Item: 11 Report to: THE BOARD OF SCOTTISH FIRE AND RESCUE SERVICE Meeting Date: 26 OCTOBER 2017 Report Title: RESOURCE BUDGET – OUTTURN REPORT 2016/2017 Report Classification: FOR NOTING Prepared by: Marcus Jenks, Decision Support Manager Sponsored by: Sarah O’Donnell, Director of Finance and Contractual Services Presented by: Sarah O’Donnell, Director of Finance and Contractual Services Links to Strategy Our Money & Our Performance – SFRS Strategic Plan 2016 - 2019 Governance Route for Report Meeting Date Comment Strategic Leadership Team 23 October For Noting SFRS Board 26 October For Noting 1 Purpose 1.1 To advise the Board of the Resource Budget outturn position for the financial year 2016/2017. 2 Background 2.1 2.2 2.3 The Scottish Government allocated funding to SFRS for 2016/17 of £294.7million. This funding comprised Resource and Capital Departmental Expenditure Limits (DEL) of £259.221million and £10.8million respectively, and £24.679million in respect of depreciation (Ring-fenced or “non-cash” DEL). Following the budget revisions issued by Scottish Government in September 2016, funds in respect of the Scottish Public Pension Authority Charges (£0.314m) were transferred back to the Scottish Government, from where the charges will be paid. Following further budget revisions notified by Scottish Government in January 2016; funds in respect of Firelink charges (£4.0m) were transferred back to the Scottish Government, from where the charges will be paid and additional funding (£0.5m) in respect of Pay Recognition has been confirmed. These changes resulted in a revised Resource DEL budget of £255.407million. SCOTTISH FIRE AND RESCUE SERVICE The Board of Scottish Fire and Rescue Service
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SFRSBoard/Report/ Page 1 of 3 Version 1.0: 11/10/2017 ResourceBudgetOutturnReport2016-17
Report No: B/FCS/19-17
Agenda Item: 11
Report to: THE BOARD OF SCOTTISH FIRE AND RESCUE SERVICE
To advise the Board of the Resource Budget outturn position for the financial year
2016/2017.
2 Background
2.1 2.2 2.3
The Scottish Government allocated funding to SFRS for 2016/17 of £294.7million. This funding comprised Resource and Capital Departmental Expenditure Limits (DEL) of £259.221million and £10.8million respectively, and £24.679million in respect of depreciation (Ring-fenced or “non-cash” DEL). Following the budget revisions issued by Scottish Government in September 2016, funds in respect of the Scottish Public Pension Authority Charges (£0.314m) were transferred back to the Scottish Government, from where the charges will be paid. Following further budget revisions notified by Scottish Government in January 2016; funds in respect of Firelink charges (£4.0m) were transferred back to the Scottish Government, from where the charges will be paid and additional funding (£0.5m) in respect of Pay Recognition has been confirmed. These changes resulted in a revised Resource DEL budget of £255.407million.
SCOTTISH FIRE AND RESCUE SERVICE
The Board of Scottish Fire and Rescue Service
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3 Main Report and Discussion
3.1 3.2
A summary of the consolidated financial position for the 2016/2017 financial year is attached at Appendices A and B. These reports detail the underspend against budget of £0.126million.
4 Key Strategic Implications
4.1 4.1.1
Financial The financial implications are detailed within the report.
4.2 4.2.1
Legal Not applicable
4.3 4.3.1
Performance Not applicable
4.4 4.4.1
Environmental & Sustainability Not applicable
4.5 4.5.1
Workforce Not applicable
4.6 4.6.1
Health & Safety Not applicable
4.7 4.7.1
Timing Not applicable
4.8 4.8.1
Equalities Not applicable
4.9 4.9.1
Risk Not applicable
4.10 4.10.1
Communications & Engagement Not applicable
4.11 4.11.1
Training Not applicable
5 Recommendation
5.1
The Board is asked to approve the following recommendation:
That the resource budget position for the financial year 2016/2017 be noted.
6 Core Brief
6.1
The Director of Finance and Contractual Services advised the Board of the resource budget position for the financial year 2016 / 2017 which shows a final underspend against budget of £0.126million.
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7 Appendices/Further Reading
7.1 7.2
Appendix A provides a summary of the consolidated financial position for the 2016/2017 financial year. Appendix B provides an explanation of the significant variances relative to budget and the previous forecast.
INTRODUCTION The attached report covers the period 1st April 2016 – 31st March 2017, the complete financial year. It highlights a full year underspend of £0.126 million (0.04% of budget) and compares this against the February 2017 forecast overspend of £0.227 million representing a favourable swing of £0.353 million (0.1% of budget).
£000
1 WHOLETIME FIREFIGHTERS
1.1 Full Year Position Wholetime costs overspent by £326,000, representing 0.2% of budget. A significant proportion of this overspend relates to a year end accrual for overtime holiday pay of £112,000. Overtime holiday pay was previously reported as a contingent liability but following guidance from the Scottish Government and the POD Directorate a detailed calculation exercise has been completed and it is now reported as an accrual within the accounts. The remaining overspend relates to a number of factors which include; an increase in the level of Flexi Duty Managers required to cover sickness and project work, and expected savings for retirals being lower than budgeted. Overtime spend for the year showed a £826,000 reduction (16%) when compared to the previous financial year, with Wholetime firefighter numbers at stations ending the year 262 (8%) below the 2016/17 operating model. This position has now improved following the deployment of newly trained firefighter recruits to stations and completion of the off station staffing restructure.
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1.2 Change from Forecast Wholetime costs in February were forecast to overspend by £282,000. The year-end position has therefore resulted in an adverse swing between the forecast position and the final outturn of £44,000, representing 0.03% of budget. The year-end accrual for holiday pay, as identified in section 1.1 accounted for an adverse swing of £112,000 which was partially offset by other favourable movements of £68,000.
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2 CONTROL FIREFIGHTERS
2.1 Full Year Position Control costs underspent by £15,000, representing 0.2% of budget. This underspend is a combination of; savings in staff costs, mainly the result of staff that left the Service under VSER arrangements and lower average rates of pay for temporary staff providing cover for permanent staff seconded to the Command and Control Futures (CCF) project. These underspends are partially offset by an overspend in overtime, mainly the result of supporting the transition to three control rooms.
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2.2 Change from Forecast Control costs in February were forecast to be £49,000 overspent. The year-end position has therefore resulted in a favourable swing between the forecast position and the final outturn of £64,000. The majority of the swing, £48,000, relates to overtime, with the spend in March combined with the year-end payroll accrual both being less than the spend seen in the preceding months, and the basis used for the February forecast. The balance of £16,000 relates to the release from the balance sheet of a legacy accrual for TOIL.
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3 RETAINED AND VOLUNTEER FIREFIGHTERS
3.1 Full Year Position Retained and Volunteer costs underspent by £577,000, representing 2.5% of budget. This underspend was the result of lower than anticipated activity levels and vacancies across the Service.
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3.2 Change from Forecast Retained and Volunteer costs in February were forecast to be £476,000 underspent. The year-end position has therefore resulted in a favourable swing of £101,000 between the forecast position and the final outturn. Retained costs are inherently difficult to forecast due to their demand led nature. The swing in the forecast position represents 0.4% of the annual budget.
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4 SUPPORT STAFF
4.1 Full Year Position Support staff costs underspent by £706,000 representing 2.5% of budget. Within this figure the challenge of filling vacant posts accounted for an underspend of £1,678,000 and the release of the final Pay and Reward accrual accounted for a further £75,000. This underspend was partially offset by overspends in agency staff of £751,000 and private contractors of £291,000. Both of these overspends were the result of budget holders employing temporary resource to maintain business continuity and enable development projects to be driven forward until vacancies are filled. In addition, an accrual for overtime holiday pay of £5,000, previously reported as a contingent liability (see section 1.1), is now also included within the final year figures.
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4.2 Change from Forecast Support Staff costs in February were forecast to be £529,000 underspent. The year-end position has therefore resulted in a favourable swing between the forecast position and the final outturn of £177,000. The majority of the swing £102,000 relates to vacant posts. The forecast for the 2016/17 pay award, settled in March 2017, included an element for all posts in the structure. This however was not fully required as some posts remained vacant at year-end and others were only occupied for a proportion of the year. In addition, there were further favourable swings of; £75,000 following the release, from the balance sheet, of the final Pay and Award accrual and £5,000 in agency staff costs. These favourable swings were partially offset by the impact of the £5,000 accrual for holiday pay overtime, as identified in section 4.1.
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5 ILL HEALTH EARLY RETIREMENT CHARGES
5.1 Full Year Position Ill health early retirement charges overspent by £449,000, representing 11.5% of the budget. Charges for ill health retirals are accounted for through the pension fund with the Service charged a “Capital Equivalent Charge” (CEC) when awards are made. CEC charges fall into two categories; Upper Tier, awarded when individuals are assessed as being unable to ever work again and
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Lower Tier when individuals are assessed as being unable to work in their current role. The Upper Tier CEC is calculated as (4 x annual pensionable pay) and Lower Tier as (2 x annual pensionable pay). The categories awarded to individuals are made through a process chaired by an Independent Qualified Medical Practitioner (IQMP). The year saw six Upper Tier awards being made, with a further seven accrued, 59% of all ill health retirals compared to 21% last year. This combined with nine Lower Tier awards, which include a senior officer, resulted in an overspend of £360,000 in CEC. There are also overspends in; injury benefit charges due to an additional one-off charge advised by the SPPA of £64,000 and unfunded LGPS costs of £36,000. Pension scheme sanction charges underspent partially offsetting the above overspends by £11,000.
5.2 Change from Forecast Ill health early retirement charges in February were forecast to be £280,000 overspent. The year-end position has therefore resulted in an adverse swing of £169,000 between the forecast position and the final outturn. The majority of the swing, £125,000 relates to the final year end accrual for an additional four ill health retiral cases. There was an adverse swing in; LGPS unfunded charges of £19,000 due to a correction in the charges levied by Highland Council. Injury benefit charges in February were forecast to overspend by £28,000 but finished the year £64,000 overspent resulting in an adverse swing of £36,000, mainly due to the additional one-off charge advised by the SPPA. These adverse swings were partially offset by a favourable swing of £11,000 in pension scheme sanction charges.
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6 TRAINING
6.1 Full Year Position Training costs overspent by £98,000, representing 19.3% of budget. The majority of this, £63,000, related to an unbudgeted diploma course in Fire Engineering run at Glasgow University for 17 Enforcement and Auditing Officers. A further £22,000 was the result of Support staff within development grades and reduced salaries requiring additional training and qualifications to increase their competence. This variance should be considered in conjunction with the underspend in Support staff salary costs. The remaining £13,000 was the result of unbudgeted training activity undertaken in; project management, for staff within the CCF project; gas testing, for staff within stores and equipment and performance management training within SPPC.
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6.2 Change from Forecast Training costs in February were forecast to be £37,000 overspent. The year-end position has therefore resulted in an adverse swing between the forecast position and the final outturn of £61,000. Almost all of the swing relates to the unbudgeted Fire Engineering course highlighted in section 6.1. This is partially offset by a £2,000 favourable swing in training courses provided to Asset Management and Response & Resilience.
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7 SUBSISTENCE
7.1 Full Year Position Subsistence costs overspent by £466,000, representing 41.5% of the budget. The majority of the overspend, £299,000 relates to subsistence costs for training courses. This includes the accommodation costs for the 101 new recruits during their basic training activity that took place at central training facilities before they were deployed to stations. Part of the overspend was due to the re-categorisation of costs following the appointment of a new service provider. This re-categorisation is offset by a corresponding underspend in travel costs (see section 11.1). There were also additional costs due to:
An increase in operational requirements for instructors’
overnight accommodation whilst delivering training away
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from their duty training locations.
An introduction of peripatetic operational intelligence visits.
Familiarisation visits to local areas, including Orkney and
Shetland, for staff in relation to the establishment of the
new Control rooms.
7.2 Change from Forecast Subsistence costs in February were forecast to be £304,000 overspent. The year-end position has therefore resulted in an adverse swing between the forecast position and the final outturn of £162,000. The majority of the swing, £132,000 relates to training subsistence costs with spend in the final month being more than 300% higher than the average for the preceding 11 months. This increase was mainly due to delays in the processing of invoices by the service provider which resulted in the basis for the February forecast being under estimated. These delays will be factored into future forecasts for subsistence costs.
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8 OTHER EMPLOYEE COSTS
8.1 Full Year Position Other Staff costs underspent by £142,000. The majority of the underspend, £143,000, relates to Control staff that were budgeted to leave under VSER arrangements. Some of these staff elected not to leave and the costs for others was less than budgeted. This resulted in the accrual, held on the Balance Sheet, being released as a credit to the Resource Account. In addition, there was an underspend of £40,000 following the year-end technical accounting entry for used holiday entitlement. Both of these underspends were partially offset by overspends of £8,000 relating to staff relocation costs; £28,000 to medical/optical costs; £4,000 to interview costs and £1,000 to other staff costs.
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8.2 Change from Forecast Other Staff costs in February were forecast to be £42,000 overspent. The year-end position has therefore resulted in a favourable swing of £184,000 between the forecast position and the final outturn. The majority of the swing, £143,000, relates to the final projection of VSER costs which were not available earlier in the year and are explained in section 8.1 above. The technical year-end entry for holiday pay accounts for a further
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£40,000 of the swing. This figure could not be quantified until after the 31st March when holiday balances for staff are confirmed. Allowing for the two final year-end adjustments set out above other employee costs accounted for a swing of only £1,000.
9 PROPERTY COSTS
9.1 Full Year Position Property costs overspent by £326,000, representing 1.6% of budget. Delays in concluding sales of property at Gullane, Lauriston and Maddiston resulted in budgeted savings of £142,000, in respect of rates, not being achieved. In addition, a delay in an initiative that was scheduled to deliver savings in contract cleaning during the year accounted for a further £113,000 overspend. Facilities management professional fees overspent by £86,000 following the Scottish Government’s instruction to carry out obtrusive building surveys. Non-centralised property adaptations overspent by £75,000 mainly within the East and West SDA areas. Refuse collection costs overspent by £15,000 and utility costs by £19,000. Property insurance excess charges underspent by £82,000, with the costs associated with Ballater Fire Station being capitalised. Statutory inspection costs underspent by £25,000 and all other property costs together were £17,000 underspent.
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9.2 Change from Forecast Property costs in February were forecast to be £391,000 overspent. The year-end position has therefore resulted in a favourable swing of £65,000 between the forecast position and the final outturn. Refuse collection costs were forecast in February to overspend by £38,000 but finished the year £15,000 overspent resulting in a favourable swing of £23,000. Utility costs ended the year overspent by £19,000, an improved position from the February forecast of £40,000 and representing a favourable swing of £21,000. All other property costs combined contributed to the remaining
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favourable swing of £21,000, 0.1% of the overall property cost budget.
10 SUPPLIES AND SERVICES
10.1 Full Year Position Supplies and Services underspent by £68,000, 0.4% of budget. The majority of the underspend £339,000 relates to unallocated contingency budget which the Service holds to allow it to manage any unforeseen expenditure. Hydrant maintenance costs underspent by £66,000 due to delays, by the utility provider, in carrying out work instructed by the Service. Spend in respect of scrap cars and timber was lower than budgeted and resulted in underspends of £30,000 and £24,000 respectively. There were underspends in respect of events and smoke detectors of £106,000 and £24,000 respectively. Printing and office equipment also underspent by £57,000. The above underspends were offset by a number of areas of overspend elsewhere within the Supplies and Services budget. Pressure on the equipment maintenance and purchase budget, including non-centralised equipment, resulted in a £160,000 overspend. Delays in delivering budgeted savings in seven ICT projects and the dual running of telephone lines resulted in information technology costs being £377,000 overspent. This overspend was partially offset by saving in respect of communication platforms of £222,000. Non-contract catering costs continued to rise and finished the year £129,000 overspent with the West SDA accounting for £59,000 and training £41,000, mainly due to the costs of the new recruits. Contract catering costs, mainly in the North, were £48,000 overspent. Subscriptions were £48,000 overspent relating mainly to salary benchmarking information for HR&OD, consultation services for Strategic Planning, Performance & Communications and contributions towards CFOA research and development. PPE and uniforms were £67,000 overspent as a result of the increased costs of replacing worn-out garments. Other supplies and service costs were £29,000 underspent.
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10.2 Change from Forecast Supplies and Services in February were forecast to be £287,000 overspent. The year-end position has therefore resulted in a favourable swing of £355,000 between the forecast position and the final outturn. Almost all of the swing can be attributed to the budget held to cover contingency costs, allowing the Service to manage any unforeseen expenditure. Typically a significant proportion of this budget will be realised during the year end process. This year £339,000 remained unallocated. Hydrant maintenance costs ended the year underspent by £78,000. This was an improved position from the February forecast where it was anticipated the entire year’s budget would be spent and resulted in a favourable swing of £78,000. ICT costs were forecast, in February, to overspend by £268,000 but finished the year £377,000 overspent resulting in a £109,000 adverse swing. This swing was the result of the dual running of telephone lines which will be offset by savings in 2017/18. This swing was partially offset by a favourable swing in respect of communication platforms of £32,000. The balancing favourable swing was distributed across the remaining account lines and nets to £15,000.
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11 TRANSPORT COSTS
11.1 Full Year Position Transport costs underspent by £268,000, 3.1% of budget. Fuel costs accounted for £221,000 of the underspend. This was due primarily to lower fuel prices during the year. Travel costs across the Service, following the appointment of the new service provider and the re-categorisation of costs, were £143,000 underspent. This underspend should be seen in conjunction with the overspend in subsistence costs as detailed in section 7.1. These overspends were partially offset by an overspend in vehicle maintenance and running costs of £68,000. This overspend included the need to replace brake testing equipment, purchase of jacks and rams for workshops and the refurbishment of an incident command unit. Other transport costs were £28,000 overspent, the majority of which related to lease cars and reflected the appointment into substantive posts of officers that had previously been acting-up.
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11.2 Change from Forecast Transport costs in February were forecast to be £320,000 underspent. The year-end position has therefore resulted in an adverse swing of £52,000 between the forecast position and the final outturn. Vehicle maintenance and running costs accounted for £96,000 adverse swing with un-forecast costs in respect of; the replacement of brake testing equipment; purchase of workshop machinery and refurbishment of the incident command unit being the major contributors. Travel costs ended the year underspent by £143,000. This compared against the February forecast of £230,000 and resulted in an adverse swing of £87,000. The increase in costs was mainly due to delays in the processing of invoices by the service provider and accumulated expense claims prior to the year-end deadline. Both of these resulted in the basis for the February forecast being under estimated. These delays will be factored into future forecasts for travel costs. The above adverse swings were partially offset by a favourable swing in fuel costs of £131,000, the result of fuel prices remaining significantly lower than the predictions of the Road Haulage Association which were used as the basis for the February forecast.
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12 THIRD PARTY PAYMENTS / COUNCIL CHARGES
12.1 Full Year Position Third party payments overspent by £58,000, 4.6% of budget. The majority of the overspend related to Service Level Agreement costs which were £65,000 overspent. Budgeted savings, in an SLA with Police Scotland, not being realised in the financial year accounted for a £77,000 overspend, offset by savings of £12,000 relating to agreements with legacy payroll providers for accessing historical payroll records. Professional fees overspent by £34,000. The majority of this was due to an overspend within Health Safety and Organisational Wellbeing of £90,000 relating to physiotherapy, medical and counselling fees. In additional there were also overspends in respect of; employment tribunal costs of £24,000; legal fees of £10,000 and cost sharing agreement charges with the Improvement and Development Agency for Local Government of £21,000. These overspends were offset by savings in R&R arising from the suspension of the national resilience contract of £89,000 and in SPPA costs of £22,000. These overspends were partially offset by an underspend in Fire Board costs of £42,000.
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Other third party payments were £1,000 overspent.
12.2 Change from Forecast Third party payments in February were forecast to be £11,000 overspent. The year-end position has therefore resulted in an adverse swing of £47,000 between the forecast position and the final outturn. Professional fees accounted for the majority of this swing with the costs of physiotherapy, medical and counselling fees being £53,000 higher than forecast in February. Process controls have now been introduced to improve the accuracy of future forecasts. Other third party costs combined showed a favourable swing of £6,000.
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13 Financing Costs
13.1 Full Year Position Financing costs underspent by £230,000, representing 6.2% of budget, the result of interest charges from local authorities being lower than budgeted.
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13.2 Change from Forecast Financing costs in February were forecast to be £226,000 underspent. The year-end position has therefore resulted in a favourable swing of £4,000 between the forecast position and the final outturn.
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14 INCOME
14.1 Full Year Position Income was under recovered by £157,000, representing 24.7% of budget. Lower than anticipated level of support required at the aircraft carrier build in Rosyth accounted for £75,000 of the under recovery. There were also under recoveries of income in the West SDA of £53,000 and East SDA of £26,000. Other areas combined accounted for the remaining £3,000 under recovery.
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14.2 Change from Forecast Income was forecast to be under recovered by £95,000 in February. The year-end position has therefore resulted in an adverse swing of £62,000.
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The majority of the swing, £63,000, relates to Argyll and Bute within the West SDA and was due to changes in the administrative processes impacting on the recovery of income for services provided to rural airports. All other areas combined accounted for the remaining £1,000 favourable swing.
