Simply Complicated - The 2010/11 draft budgets.

I went down to the Town Council offices to collect the draft budget. Only to find there are two draft budgets! I've scanned in the summaries for Option1 and Option 2.

There has been a bit of rearranging the deckchairs on the Titanic. The first thing to point out is neither option has regard to any provision for public toilets or the Eaton Socon Car Park. The second point is some of the under budgeting in the 2009/10 budget have come back to bite this council. I blame Giles and Thorpe for this.

Option 1
This draft budget increased from £803,576 to £892,997. An increase of £89,421.  This is equal to £87.59 band D or  + 4 pence increase over 2009/10. The main cost increase is a massive £67,996 on Central Administration. The vast majority of this is a hike in salaries of £67,991. About half of this of this increase is due to the under budgeting for the Town Clerk in 2009/10. The other part I don't know. Other increases are: Priory Centre + £13,542; Capital Projects + £14,751.

Option 2
This draft budget increased from £803,576 to £858,727. An increase of £55,151. This is equal to £84.23 band D or -£3.32 decrease on 2009/10.

The main changes to Option 1 are:

Capital Projects are now zero. -£26,500
Priory Centre -£2,000
Eatons Community Centre -£4,650

The changes at the ECC are strange. (ECC Option 1 + ECC Option 2)

Staff salary: Option 1 = ££ / Option 2 = £9,000
Hall Hire: Option 1 = £25,000 / Option 2 = £40,000
Pre School Lease: Option 1 = £12,000 / Option 2 = £6,000

In my opinion there are three problems with these budgets.

The first problem is central staffing. We seem to be in the savage circle. An increase in the central bureaucracy without a massive increase in services delivered to the residents. The Town Council is over staffed and needs to be cut back rather than keep increasing.

The second problem is the budget for the Eaton Community Centre. Option 1 has an entry is just ££ for staffing. So the Town Council has made no budget for this section in Option 1. This is wrong. An estimate should be made and a figure entered. There are major differences in the estimates on income and on the lease for the pre-school. The assumptions behind these figures should be the same. The lease cannot be £12,000 in one option and £6,000 in another. Nor can you have hall hire income at £25,000 in Option 1 and £40,000 in Option 2. There should be only one view on these income items, not two.

The third is there is not much money for capital projects. This Council needs to keep setting aside large amounts of money in a capital programme to renew the Town Council facilities. Otherwise these facilities will continue to deteriorate and will cost more money in the future.

What we should remind ourselves is this budget would have been much worse if it wasn't for the extra £89,000 from the annexed areas. If we took the new council tax base and applied it to the old budget we would be paying £78.82.
Option 1 we would be paying £87.59. An extra £8.77 or 11%.
Under Option 2 we would be paying £84.23. An extra £5.41 or 6.4%.

Whilst this is not a cost increase for 2010/11 it should be remembered that Grounds Maintenance is still costing SNTC £83,000 more than in 2007/08. This is a major underlying cause of the budget problems.

In conclusion, this budget is partly a carry over from the 2008/09 casino budget which left SNTC in a right mess. What is troubling is the lack of funding for a capital programme or indeed a capital programme. But what is most troubling is the salaries increase of £67,991. We should be reducing the central bureaucracy instead of increasing it!

These draft budgets are due for discussion at a Special Town Council Meeting on 15th December 2009.

Documents
Option 1 Summary
Option 2 Summary
ECC Option 1
ECC Option 2
Salary Increase

2008/09 SNTC Outturn

The outturn figures against the budget figures were a surprise. One of the aims of Cllr Derek Giles, when he was SNTC leader, was to change The Priory Centre into a cinema. This was mainly because The Priory Centre was, according to Cllr Giles, costing so much money to run. In actual fact much of the additional cost was the expansion of staff numbers because of the faulty 2005/06 Best Value Report.

Because of turnaround at The Priory Centre which came in £85,839 under budget, the cost increases were hidden. The increases were:
Recreation: £44,525
Town Management: £18,023
Community Services: £22,696

Other savings were made:
Grants: £18,893 (underspend)
Corporate: £28,926 (Town Clerk left?)

Looking forward to the 2009/10 budget outturn. This should be a very good outturn.

 

The 2009/10 budget was a better reflection of the actual cost of the Town Council. Though there is some under budgeting with the Capital Budget and the Central Administration. This is a problem for next budget 2010/11.

The main area where savings in the 2009/10 budget should be is The Priory Centre. Also interest received should be higher this year because of the delays in the building of the ECC. With much of the reserves gone to pay for towards the ECC the interest received will be down for next year. As a new Town Clerk has yet to be employed their should be a saving here.

This outtrun to 2008/09 was lucky. The drop in costs at The Priory Centre was the good bit of news which saved SNTC from an embarrassing result. The underlying cost increases are the one that need attention if SNTC is going to get its budget under control.

2008/09 Auditors Report

Having read both reports there are a few significant changes to the accounts (which the accountants say are non-trivial) but these are paper adjustments and in the scheme of thing aren't critical nor should they headline. And the other good news is the Town Council is certainly moving in the right direction.

Now for the damning bits.

The 4 Key Lines of Enquiry (KLOE) of the Use of Resources (UoR) Judgements are damning of how this Council was run. These 4 KLOE's replaced the 11 criteria in the previous report.
Much of what is wrong is down to those in charge at the time or part of the time. Some of this is down to the former RFO and the former Town Clerk. But much of what went wrong is under the auspices of the Policy and Resources Committee chaired by Cllr Derek Giles with Cllr Gordon Thorpe as Deputy Chairman. Also from July 2008 they were also Leader and Deputy Leader respectively. Time for them both to resign as Town Councillors!

The 4 KLOEs are:
1. Does the organisation plan its finances effectively to deliver its strategic priorities and secure sound financial health? Answer = NO
2. Does the organisation have a sound understanding of its costs and performance and achieve efficiencies in its activities? Answer = NO
3. Is the organisation's financial reporting timely, reliable and does it meet the needs of internal users, stakeholders and local people? Answer = NO
4. Does the organisation manage its risks and maintain a sound system of internal control? Answer = NO

So the Town Council has another adverse finding against it. This time for the 2008/09 accounts.

With 2 adverse reports against it how many local politicians have resigned? Answer = 0


Links to the reports are below.
Auditors report
Annual report second edition
Annual report first edition

SNTC 2008/09 Budget Explained

From the outset this looked a good budget to our Liberal Democrat Councillors. But it wasn't. In the report on the 2008/09 the Auditor found that there was little detail on how this budget was formulated. This meant this was a budget whose figures could not be relied on.

Whose fault is this? Well, the Deputy Town Clerk, at the time, has much to answer for. The former Town Clerk had the responsibility of supervision of the Deputy Town Clerk. The Chairman and Deputy Chairman (Cllrs Giles and Thorpe) of the Policy and Resources Committee were in charge of the budget process. [7] [9]

What was missing from this budget?

The Council decided to cancel most of the Grounds Maintenance contracts and start its own department. This is known as bringing the service in-house. Despite a detailed study that should have identified the costs involved these weren't included into the accounts. This totalled £95,000 in costs over a full year. As this was started during the year then roughly £55,000 that should have been added to this budget.

The Capital Receipt of £60,000 is a large problem. The reason why it is a problem is the amount against reserves. The inclusion of a £60,000 against a reserves of say £16 million is minimal risk to the budget if things go wrong. In the case of the Town Council the inclusion of a £60,000 Capital Receipt against balances of  virtually zero is a gamble and a gamble that didn't pay off.

This casino budget caused many problems for the Town Council. The inclusion of the extra £55,000 Ground Maintenance costs and the exclusion of £60,000 Capital Receipt would have given a budget of £874,873. This is up from £695,794. That would have been a £179,079 increase. That would have been a 25% increase in the precept or a 24% increase in the Towns portion of the Council Tax. This would have been politically unacceptable for the Liberal Democrats and would have outraged the Town.

So instead of a proper budget of £874,873 the Town Council passed a budget of £695,794. This caused many problems. During the financial year this underfunding led to the cancellation of many projects which should have gone ahead. From the cutting of the essential Town Plan to the Play Area Upgrades. This Town Council lost its way on a big gamble and lost. The gamblers were those in charge and time and again the former Liberal Democrat leadership of Cllrs Giles and Thorpe are those who gambled and lost. This is bad  government.

2007/08 Auditors Report

The External Auditors Annual Report 2007/08 is a damning report by Grant Thornton on the financial problems of this Town Council going back to the 1980's. The original SNTC Annual Report should have been presented to Town Council for approval by 30th June 2008 (legal deadline). It wasn't until October 2008 the Annual Report was finally presented.

So what did the Auditors have to say?

Under Value for Money section the Town Council failed to meet adequate 10 of the 11 criteria. The only one it achieved was "Communication with service users and other stakeholders and partners". What this Town Council failed at was:

Setting, reviewing and implementing strategic and operational objectives.
Management of performance against strategic objectives.
Monitoring the quality of published performance information.
Maintaining a sound system of internal control.
Managing significant business risks objectives.
Managing and improving value for money.
Ensuring spending matches available resources
Managing Performance against budgets.
Managing the asset base.
Promoting and ensuring probity and propriety in the conduct of business.  

Some other quotes:

"There were no written procedures in place for the accounting system,..."
"There is no evidence that the Council has effective procurement policies in place."
"Because of the absence of comprehensive financial and non-financial reporting during the year it is not possible to confirm that areas of high spending were identified and subject to review and scrutiny."
"There was inadequate monitoring of spend against the budget during the year."
"The Council does not have a written policy on the level of reserves and balances,....."

Other concerning parts.

The Auditors were concerned that the position of Town Clerk has yet to be replaced. This was a decision by the Liberal Democrat leadership (Cllrs Giles and Thorpe) to save a bit of money to get them through the budget process as they, obviously, didn't know what the financial position was!

There is evidence of non-compliance with the Council's Standing Financial Instructions, which require the Town Clerk to authorise all debt write-offs. However, the Town Clerk was never requested to authorise debt write-offs in practice.

The cost of the Audit rose from £10,000 to £20,000. (This extra £10k was taken in the 2008/09 accounts.)

Members were not able to establish whether Council objectives were being delivered or that Value for Money was being achieved in the use of resources.

Managers budgets weren't devolved to them.

I can only assume that instead of being open and honest our political leaders hid the problem and went on with the massive undertaking (in SNTC terms) that is the Eatons Community Centre. I quote from Page 14 section 4.6. of the report. "The outturn position for 2007/08 was not known until the accounts were fundamentally complete for approval by members in October 2008. This had implications for managing the 2008/09 budget and a freeze was placed on spending for part of the year which could have had a significant impact on the Council's activities and achievement of its priorities. "

In effect the ECC was held up during the summer of 2008 because they didn't know what the financial situation of the Council was!

In conclusion, I would state this audit report basically says the Councillors who were in charge were not doing their jobs. The Senior Officers were not doing theirs either. Information was kept back and this had implications for the 2008/09 budget and the 2009/10 budget.

Political resignations because of this report = 0

So what about the "missing loan" that headlined in the local papers. Well, the Town Council was paying the loan back and in each budget this was accounted for. It was just the amount was left off the balance sheet. Inclusion of this loan didn't effect the Council Tax. Whilst highly embarrassing it didn't warrant the attention it received. Indeed, Cllr Derek Giles was able to use the "missing loan" to smother all the faults the report exposed under his leadership of the Town Council.

Setting the SNTC Budget and Precept

I'm publishing a little series on previous budgets and auditors reports that I have information on. This is in the lead up to the setting of the budget and precept for 2010/11. This 5 article series is about trying to explain how we have arrived at the position SNTC is in. Anyway I hope they make sense.

1. 2007/08 Auditors Report
2. 2008/09 Budget Explained
3. 2009/10 Budget Explained
4. 2008/09 Auditors Report
5. 2008/09 Budget Outturn Report