APPENDIX 1

Purpose: for Decision

REPORT TO THE CABINET

Date : 5 DECEMBER 2006

Title : QUARTERLY FINANCIAL AND PERFORMANCE MANAGEMENT REPORT

REPORT OF THE DEPUTY LEADER OF THE COUNCIL

INPLEMENTATION DATE: 15 December 2006

PURPOSE

For members to receive a statement on how the Council was performing at the end of the second quarter of 2006.

OVERVIEW OF QUARTERLY PERFORMANCE

REVENUE BUDGET

A significant focus of attention in the second quarter has been to ensure that the revenue budget is in control. This involved the identification of budget pressures and confirmation that the planned efficiency savings were being delivered. Recovery plans were prepared and delivered against, for both elements.

Much work was also done around identifying and centralising the control of individual service contingency budgets and reserves. By so doing the Council is able to reduce the total budget allocated to these areas and release funding to improve the overall delivery of services.

At the start of the second quarter there was a projected overspend of £6.2 million on the budget if no remedial actions were taken. This was largely due to in year budget pressures and some still to be delivered service efficiencies. Recovery plans initiated in July had reduced the projected overspend to £1.6m and by the end of August to £199,000. At the end of the quarter the projected overspend was £401,000 and action is already underway in the second half of the year, to reduce this.

A breakdown by Cabinet Member of the Council’s revenue position at the end of Quarter 2 is attached in Annexe 1 to this report.

CAPITAL BUDGET

Attention in the second quarter focused on the management and delivery of the capital programme as a whole rather than as a set of discrete directorate based projects.

Details of the programme are shown in Annexe 1. The current level of slippage in the capital budget is £9.4 millions, which is in the main associated with projects in schools and housing association schemes. Recovery plans are being prepared to correct this.

KEY PERFORMANCE INDICATORS

The initial focus at the start of the quarter was to review the many indicators for which the Council collects information in a number of forms and for a number of bodies. The purpose of the review was to identify those few critical indicators that provide a clear description of the ‘health’ of each of the services for which the Council is responsible. This is to inform a clear and focused approach in using these indicators as a means of ensuring that the Council’s expectations are being delivered through the services. Performance measurement is becoming performance management.

A significant amount of work was therefore undertaken to identify the key operational indicators (KPIs) for each service area. Care was taken to ensure that, when taken together, the identified indicators can describe a sufficiently complete picture of the effectiveness of the delivery of a service to allow management interventions to be initiated where appropriate. The main criteria for each KPI are that it relates to the overall corporate objectives, is capable of being easily measured on a regular (normally monthly) basis and, most importantly, represents areas in which the Council can/is making a significant impact in the community.

Further work will be undertaken during the next quarter to identify other indicators that need to be included in the process. It is also the intention that, as priorities change or if there are short term matters which the Council must manage, then additional indicators will be added to those already chosen, for as long as they are required.

Performance against these indicators to the end of September 2006 is shown by Cabinet member in Annexe 2 of this report. At the end of the quarter, 20 of the 150 indicators still require an end of year forecast to be produced and therefore the indicator to be managed as opposed to measured. For those where such a forecast has been produced, 66% are forecast to achieve or exceed the level of expected performance at the year end. This demonstrates clear and measurable progress in performance management across the organisation. Recovery plans are being prepared for the 34% of indicators currently not expected to achieve the required performance levels.

RISK MANAGEMENT

Towards the end of the quarter, detailed attention was given to ensuring that the Council’s corporate risks were correctly identified and being managed effectively. A risk seminar involving Directors and Heads of Service was held in October to refresh the corporate risks. Having done this, the focus for the next quarter will be on ensuring their effective management.

PROJECT MANAGEMENT

Attention has been given to the identification of the most significant projects which the Council has plans to deliver. This is to ensure that these projects are delivered on and that the opportunities for joint working are maximised.

Directors will be allocated responsibility for specific high impact projects and these projects will be managed corporately rather than being delivered and managed within directorates. In this way the organisation as a whole will be able to focus and take responsibility for achieving the delivery of the outcomes that are the most important to the Council and the community. In this way, the Council will ensure it always does what it has promised the community it will do – and will be able to demonstrate this.

BACKGROUND

The Council’s Comprehensive Performance Assessment (CPA) published in August identified that its approach to performance management was below minimum expectations. The Council had itself come to the same conclusion in producing its Self Assessment in readiness for the CPA process. A key objective for the Chief Executive was to improve this aspect of the Council’s operation.

A new performance management system was accordingly mapped out in June 2006 and implementation began in July 2006.

There are four monthly components to the system:-

· Service Boards	A monthly meeting in which the Chief Executive and Director of Finance hold to account each director for the in year performance of their directorate.
· Projects Programme Board	To ensure the delivery of future corporate high impact projects.
· Corporate Management Board	To review the output from the service and projects programme boards and find collective approaches to opportunities and concerns identified in the process.
· Leader’s Performance Management Meetings	In which the Leader holds to account each individual cabinet member for the delivery of their portfolios of responsibility.

Having worked through these internal management processes, a quarterly report to Cabinet, of which this is the first, allows the opportunity for a focused debate about the Council’s in year performance. It also affords the opportunity for the Cabinet to collectively consider the reallocation of resources, or the refresh of some targets in the light of the performance information.

The Audit and Performance Committee also plays a key role in the process. It will be asked to review the Cabinet report, focussing on any particular areas of concern or success in order to make recommendations to Cabinet as to how performance can be improved. This will ensure that problems are being effectively resolved and good practice is shared across the Council.

The information used by each element of the performance management system is generated by the CORVU performance information system. This has greatly enhanced the Council’s ability to produce and collate the necessary reports for each element and

allow significantly more time for interpreting the information and determining appropriate responses to it.

STRATEGIC CONTEXT

The Council’s objective of being high performing and cost effective will be better delivered through the introduction of an effective performance management system.

Performance management is highlighted as one of the Council’s main areas for improvement in the Comprehensive Performance Assessment. It is also an essential component of the Direction of Travel judgement made by the District Auditor in his annual management letter.

CONSULTATION

The performance management structure ensures that service managers, Heads of Service, Directors and Cabinet Members are fully engaged in managing the performance of their own areas of responsibility and also the Council as a whole.

FINANCIAL/BUDGET MPLICATIONS

There are no financial implications arising from this report.

LEGAL IMPLICATIONS

The Council has a statutory requirement under the terms of the Local Government Act 1999 to achieve the best value in the delivering of its services. The performance of a service against expectations forms a key component of the best value test.

OPTIONS

1. Note the performance of the Council as at the end of Quarter 2.

2. Endorse the performance management process that has been implemented during the second quarter of 2006.

3. Endorse the key performance indicators shown in Annexe 2 as the basis of the performance management process.

4. Identify specific areas of performance which require further detailed explanation by the responsible Cabinet Member.

5. Amend the performance management process that has been implemented.

6. Add to the key performance indicators shown in Annexe 2.

EVALUATION/RISK MANAGEMENT

Effective performance management will provide the bedrock on which the Council is able to assure itself that it is delivering services to planned levels and standards and within set budgets. By exposing service performance that is not in accordance with expectations it allows the Council to take appropriate and timely decisions in response.

An effective performance management system needs to engage with all of the stakeholders that are associated with the delivery of a service (or target), to ensure that they share a collective view of what is to be done, what is being done and how any gap between the two can be closed.

The performance management process that has been initiated ensures that all of the key service stakeholders are actively involved in reviewing the performance of each service area. The process allows for performance information to be provided and challenged within a very short space of time of it becoming available. This allows for the development of early interventions for exceptional performance and the regular monitor, review and management of those interventions. The system also ensures that whilst performance is managed at a directorate or Cabinet Member level the whole organisation is aware of all the areas of exceptional performance in it and can adjust its planning processes accordingly.

The new performance management system is going through a rapid development phase as evidenced by the work that has gone on in Quarter 2. From an initial focus on finance to the identification and assessment of key performance indicators by the end of the period. The speed of development will be maintained in the next quarter to ensure the management of corporate and service risk and also of the Council’s high impact projects will be taken into the system by the end of the first month (October) in quarter 3.

There may be some key performance indicators which are not absolutely representative of the overall service outcomes they are being used to monitor, but this may not become apparent until the year end. This will result in a regular but responsive performance management process. This will allow the messages given by groups of indicators to be checked. It will also allow for the addition of new indicators where the existing groups are found not to be sufficient for the planned purpose.

The quality of the data being used to produce an indicator can have a major influence on any management decisions that are taken based on that data. Ensuring the quality and consistency of data has been a normal part of process control in some areas of the Council, but this process will see this high standard of performance management rolled out across the Council.

RECOMMENDATIONS

That the Cabinet:

1.  Note the performance of the Council as at the end of Quarter 2.

2. Endorse the performance management process that has been implemented during the second quarter of 2006.

3. Endorse the key performance indicators shown in Annexe 2 as the basis of the performance management process.

BACKGROUND PAPERS

Audit Commission, (August 2006), Corporate Assessment, Isle of Wight Council

ANNEXES ATTACHED

Annexe 1 - Financial Management Report for Quarter 2 (to 30 September 2006)

Annexe 2 - Performance Management of Key Indicators for Quarter 2 (to 30 September 2006)

Contact Point: John Metcalfe, Assistant Chief Executive, tel: 01983 821000 ext. 5661, email [email protected]

JOE DUCKWORTH Chief Executive

CLLR PATRICK JOYCE Deputy Leader of the Council

Annexe 1

Financial Management Report for Quarter 2 (to 30^th September 2006)

Revenue Budget

The Council’s budget for 2006-07 was based on an ambitious redirection of resources, to be funded by £7.5 millions of savings, largely from efficiencies.

By the start of the second quarter of the financial year, a number of additional pressures had arisen, and some savings targets had yet to be delivered. In the absence of remedial action, the budget for the year was projected to overspend by £6.2 millions.

Three rounds of service boards have taken place since then, and corrective action has been identified which has reduced the projected overspend to £401,000. Further work on reducing this continues, with the intention to deliver a fully balanced position by the year end.

Key features of the current projection by Cabinet Member areas of responsibility are:

Cllr Wood	A net overspend of £153k, due in particular to core ICT project costs, offset by an improvement in Land Charges turnover and unfilled Finance posts.
Cllrs Joyce and Cousins	Net overspend of £1.346m, due in particular to increased agency placements and other client pressures. Spend to save projects and other means of controlling these budgets are under development.
Cllr Cousins	Demographic growth budget has been applied in part to learning disability pressures and the savings target, leaving £1.043m which has been returned to the centre.
Cllr Ward	Parking income is higher than expected, but the concessionary fares budget is expected to be £615k overspend due to high levels of take-up. After applying part of the contingency set aside for the cost of the residents’ permit, the remaining £233k has been returned to the centre.
Cllr Hunter-Henderson	A net overspend of £499k results largely from the Business Transformation Unit and the Planning overspend brought forward from last year.
Cllr Abraham	Savings of £321k more than the target have been identified, relating particularly to crematorium income and Fire and Rescue Service efficiencies.

The table shows spending projections against budget by service area for each cabinet member, showing for each service the budget, forecast for the year as at September 30^th, agreed remedial actions, and the forecast outturn and under/overspend after those actions have been implemented.

	Budget	Projected outturn	Agreed actions	Fore-cast	Over/ under (-)
	£000	£000	£000	£000	£000
Cllrs Joyce and Mrs Cousins
- Schools	0	-70	0	-70	-70
- Children's Services	16,560	18,402	-496	17,906	1,346
Cllr Cousins	0	0	0
- Housing	2,703	2,653	0	2,653	-50
- Adult Services	33,266	34,361	-2,088	32,273	-993
Cllr Hunter-Henderson	0	0	0
- Cultural Services	3,410	3,369	-20	3,349	-61
- Leisure Services	1,665	1,706	0	1,706	41
- Tourism	908	908	-40	868	-40
- Regeneration	1,062	1,062	0	1,062	0
- Communications	246	336	-90	246	0
- Public Access	471	559	0	559	88
- Business Transformation	-22	449	0	449	471
Cllr Abraham	0	0	0
- Fire Service	6,500	6,392	0	6,392	-108
- Safer Communities	1,100	1,100	0	1,100	0
- Consumer Protection	1,970	1,757	0	1,757	-213
Cllr Wood	0	0	0
- Policy, Performance & Partnerships	5,907	6,594	-459	6,135	228
- Finance	1,498	1,395	0	1,395	-103
- Property Management	136	164	0	164	28
- Building Maintenance	1,060	1,060	0	1,060	0
- Administrative Buildings	679	679	0	679	0
Cllr Ward	0	0	0
- Engineering Services	13,567	14,193	-900	13,293	-274
- Parks & Gardens/Countryside	1,678	1,678	0	1,678	0
- Planning	949	1,000	-25	975	26
- Coastal Management	325	340	0	340	15
Capital Financing	13,097	13,097	0	13,097	0
Contingencies etc.	1,132	1,202	0	1,202	70
	109,867	114,386	-4,118	110,268	401

Capital

The following table shows the total budget by cabinet member for capital schemes, forecast spend by year end and the total overspends and total underspends on schemes by the end of the current year. Also shown are the totals for schemes projected to be over or underspent over their whole life. These two sets of measures taken together provide an indication of how much expenditure variances are an issue of timing, and how much they represent a change in the total financing requirement of the programme.

	Budget	Proj-ected	Variance	Over in year	Under in year	Schemes over/ under (-)
	£000	£000	£000	£000	£000	£000
Cllrs Joyce and Mrs Cousins	21,841	14,943	-6,898	1,049	7,947	810
Cllr Cousins	3,248	2,566	-682	1	683	1
Cllr Hunter-Henderson	1,223	1,097	-126	20	146	20
Cllr Abraham	356	360	4	4		4
Cllr Wood	1,037	896	-141	201	343	201
Cllr Ward	6,619	6,434	-185	98	284	478
	34,324	26,296	-8,028	1,373	9,403	1,514

As at the date of the report, the projected net underspend for the financial year is £8 millions, but within that figure there are projected overspends on individual schemes of £1.4 millions, so the true level of projected slippage into 2007-08 is £9.4 millions.

The most significant areas of expected slippage are in schools and, to a lesser extent, housing association schemes.

Work is currently underway to re-phase the programme on a more realistic basis in these areas. At the same time the over-commitment will be reduced by reprioritising the programme and identifying additional financing streams.

The disposals programme is being monitored closely, as any shortfall or delay will have implications for both prudential borrowing and for revenue savings in 2007-08.