CLACKMANNANSHIRE COUNCIL

Report to Resources and Audit Committee

Date of Meeting: 25 September 2014

Subject: Revenues Performance to June 2014

Report by: Revenues and Payments Manager

1.0 Purpose

1.1. The purpose of the report is to provide the Committee with an update on the performance of the Revenues service to June 2014, together with an update on the progress of the Action Plan presented to members as part of the Director of Finance Report in May 2014.

1.2. The report will also set out the main actions currently being progressed by the service to continue to improve on performance.

2.0 Recommendations

2.1. The Committee notes the review of operational performance for 2013-14 and 2014-15, comments on and challenges the outcomes, where appropriate.

3.0 Introduction

3.1. In May 2014, the results of the annual Director of Finance benchmarking exercise for 2012-13 was presented to Committee. Of the 27 indicators 15 indicators (56%) had improved, however 12 (44%) had reduced. This was in comparison to the national average of 11 declining indicators.

3.2. An Action Plan to address the declining performance in the specified areas was presented to members.

3.3. At the meeting, a commitment was made to Committee to bring a mid year report back to members to provide an update on both performance during the year and progress on the Action Plan.

4.0 Revenues Collection Performance to June 2014

4.1. During 2014-15, the Revenues service is budgeted to charge over £70.2 million of gross income This is an increase of £1.1 million from last year £69.1 million, which recognises additional rental and council tax income. The income billed comprises council tax, non domestic rates, sundry debtors and rents and can be broken down as follows :

THIS PAPER RELATES TO ITEM 12

ON THE AGENDA

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Income Projected 2014-15

Council Tax £29.8mRental Income £16.1mNDR £15.6mSundry Debtors £7.8m

Figure 1

4.2. Collection levels across the range of income streams improved during 2011-12 and 2012-13, however they plateaued or declined by the end of 2013-14. Collection for Sundry debtors reduced 10.47% to 73.15% at the end of the financial year, with Council tax and NDR both declining less than 1% to 94.73% and 97.66%, respectively. A detailed analysis of the collection levels for the financial year 2013-14 was reported to Council, as part of the Annual Debtors Review in June 2014.

4.3. Collections levels to the first quarter of 2014-15 have been variable, with council tax, sundry debtors > 90 days improving against the same quarter in 2013-14 while non domestic rates and rents have declined. Performance in the first quarter is summarised below, with the comparator the same period in 2013-14.

4.4. Benefits processing performance has also continued to improve to the end of quarter 1 and into quarter 2 of 2014-15. While at the end of quarter 1 performance was still above the national average of 26 days for new claims and 10 days for charges to an existing claim, performance continued to improve reaching the national average for both new claims and changes at the end of July 2014.

4.5. A more detailed analysis of the first quarter performance in 2014-15 is provided in Appendix A.

Income Qtr 1 2014-15 Qtr 1 2013-14 Movement

Council Tax 34.31% 33.86% ⇑

Non Domestic Rates 17.35% 30.57% ⇓

Sundry Debtors 44.38% 56.45% ⇓

Sundry Debtors >90 days

50.15% 62.88% ⇑

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Current Tenant Rents

7.69% 7.48% ⇓

Time Taken to Process New Benefit Claims

29 days 39 days ⇑

Time Taken to Process Changes to Benefit Claims

22 days 23 days ⇑

Table 1

4.6. A number of factors have affected performance in the previous year and into the current year. These include.

• Considerable time being invested in the new teams in undertaking skills assessments and developing individual and team training plans. During the second half of 2013-14, staff commenced cross skilling to move to more generic ways of working and this is still ongoing.

• rigorous performance management arrangements continue to be introduced to the different teams for the first time.

• the continuing impact of the welfare reform changes and the current economic climate

4.7. A Performance Plan is in place within the Revenues service to address the performance issues and this is incrementally demonstrating a sustained improvement in benefits processing times and sundry debtor over 90 days..

4.8. The decline in collection levels leading to increase in debt levels is likely to continue to be a risk in future years. This risk is reflected in the increasing level of provision made for bad debts over the past three years.

4.9. Both collection performance and trends together with the resulting impact on debts continues to be kept under review. This is particularly important given the ongoing impact of the continuing economic downturn and from Welfare Reform changes.

Action Taken in 2014-15

4.10. To ensure that these risks are managed, the Revenues service continues to, review its processes, move towards greater automation of transactions and embed continuous improvement

4.11. As part of the Services Business Planning process, the following activities have taken place since the last update to members:

• the Council is participating in the joint tender for automated collection facilities,

• an options appraisal is being completed for the local of a "one stop shop" approach to advice and guidance for customers

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• the Revenues Service contacted the DWP's Performance and Development Team and invited them in to review the existing processes and make recommendations for improvement. The PDT team formally reported on both the strengths and areas for improvement within the current arrangements. From the feedback received, the Benefits Action Plan was prepared. The PD Team have offered to return in Autumn 2014 and the Revenues service are in the process of arranging a second visi,.

• online forms for the SWF have been introduced,

• the tender for the Sheriff Officer contract is in the final stages of assessment,

• four new temporary Revenues officers have been appointed across the three teams,

4.12. The following activities are scheduled to take place during the rest of the financial year:

• proactive engagement and collection arrangements will be introduced for NDR to ensure customers not adhering to monthly payments are contacted and payment options discussed,

• the Revenues service are in the process of contacting all services issuing invoices and working with them to review what information is included on invoices,

• failure by the Revenues service to issues reminders to sundry debtors customers on a timely basis is being addressed as a matter of urgency,

• commence the first stages of the rollout the automated collection facility to customers,

• review of rent arrears and recovery procedures

• investigate the potential systems capability for undertaking a pilot for trialling direct payments of housing benefit,

• undertake a cost-benefit analysis and prepare business case for the introduction an online application for the new customers and changes to Council tax claims,

• on completion of the Sherriff officer tender, investigate all opportunities to maximise the cost effective recovery of income both through the Sheriff Officer and inhouse,

• after the completion of the tender process for the Sheriff Officer contract, the internal recovery procedures for all incomes will be reviewed.

5.0 Progress on the Director of Finance Improvement Plan

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5.1. All Scottish Local Authorities have representatives on the Directors of Finance Group and all members participate in formal annual performance benchmarking. The financial key performance indicators are also recognised by the Scottish Government as Statutory Performance Indicators.

5.2. The Director of Finance Key Performance Indicators (DofF KPI's) are collected and collated by the Chartered Institute of Public Finance and Accountancy (CIPFA) during the summer with benchmarked results available for all members at the end of each calendar year

5.3. The results for 2012-13 were presented to Resources and Audit Committee in May 2014. Of the 27 indicators 15 indicators (56%) had improved, however 12 (44%) had reduced. This was in comparison to the national average of 11 declining indicators.

5.4. As part of the report, the key areas for improvement were highlighted and an Action Plan was presented which made recommendation specifically to address the following areas :

payment of suppliers within 30 days

accuracy of payroll payments

benefits processing times for new claims and change of circumstances

5.5. Progress on the Action Plan has been recorded in Appendix B of the report.

5.6. Performance for all the areas has improved between 2012-13 and 2013-14 as follows:

• Payment of supplier days within 30 days, this has increased 1.2% during the year to 80.4% at 2013-14 from 79.2% in 2012-13. In addition, payments made by BACS has increased 11% from 87.2% in 2012-13 to 98.2% in 2013-14.

• Payroll accuracy has improved with 99.7% of payments being made accurately by volume and 99.9% by value, compared with 99.6% and 99.8% respectively for 2012-13.

• As covered in paragraph 4.3, benefits processing has improved between 2012-13 and 2014-15, with processing days improving for both new claims and changes to circumstances. As covered in Appendix A, this trend continues into 2014-15.

6.0 Conclusion

6.1. The monthly collection and processing levels continue to be closely managed and monitored. In the previous three years to 2012/13, collection and net debt levels had been improving with increasing collection levels, however this trend has started to reverse in 2013-14.

6.2. In previous years, the Council's performance had run contrary to national trends which had demonstrated overall reductions in collected income and increases in debtors, however in from 2013 this trend is now being

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experienced by the Council. The reducing collection and therefore increasing debtor levels continue to be a risk to the Council. In addition to the actions covered in paragraph 4.9 and 4.10, the three team will continue to closely monitor and regularly reported on performance.

7.0 Sustainability Implications

7.1. None

8.0 Resource Implications

8.1. Financial Details

8.2. The full financial implications of the recommendations are set out in the report. This includes a reference to full life cycle costs where appropriate. Yes

8.3. Finance have been consulted and have agreed the financial implications as set out in the report. Yes

8.4. Staffing

8.5. None

9.0 Exempt Reports

9.1. Is this report exempt? Yes (please detail the reasons for exemption below) No

10.0 Declarations The recommendations contained within this report support or implement our Corporate Priorities and Council Policies.

(1) Our Priorities (Please double click on the check box )

The area has a positive image and attracts people and businesses Our communities are more cohesive and inclusive People are better skilled, trained and ready for learning and employment Our communities are safer Vulnerable people and families are supported Substance misuse and its effects are reduced Health is improving and health inequalities are reducing The environment is protected and enhanced for all The Council is effective, efficient and recognised for excellence

(2) Council Policies (Please detail)

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N/A

11.0 Equalities Impact

11.1 Have you undertaken the required equalities impact assessment to ensure that no groups are adversely affected by the recommendations? Yes No

12.0 Legality

12.1 It has been confirmed that in adopting the recommendations contained in this report, the Council is acting within its legal powers. Yes

13.0 Appendices

13.1 Please list any appendices attached to this report. If there are no appendices, please state "none".

Appendix A - Detailed Analysis on Revenues Performance

Appendix B - Director of Finance Improvement Plan

14.0 Background Papers

14.1 Have you used other documents to compile your report? (All documents must be kept available by the author for public inspection for four years from the date of meeting at which the report is considered)

Yes (please list the documents below) No

Author(s)

NAME DESIGNATION TEL NO / EXTENSION

Susan Mackay Revenues and Payments Manager

01259 452047

Approved by

NAME DESIGNATION SIGNATURE

Ahsan Khan Head of Housing and Community Safety

Signed: A Khan

Nikki Bridle Depute Chief Executive Signed: N Bridle

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Detailed Analysis of Revenues Performance Appendix A

First Quarter to June 2014

1.0 Introduction

1.1. During 2014/15, gross income of over £70.2 million is outturned to be billed or charged by the Revenues service. This is an increase of £1.1 million from last years £69.1 million, which recognises the annual rent increase of £700,000 being 4.2% and additional council tax income of £300,000 from the change in long term empty discounts.

1.2. The income collected by the service includes council tax, non domestic rates, sundry debtors and rents and is collected through various mechanisms, including direct debt, standing order and via the CAPS offices. The performance of the Revenues team in collecting each income stream during to the first quarter of 2014-15, together with trend comparisons for earlier years is covered in more detail below.

2.0 Council Tax Collection

2.1. Council Tax and Water Service charges are levied on each domestic dwelling within Clackmannanshire. There are 23,891 such dwellings and this number has remained constant for the past two years. The annual charge levied against these residential properties amounts to approximately £29 million pa.

2.2. Council tax is billed for the 1 April each year and payees are permitted to pay up to 12 monthly instalments. Accordingly council tax collection levels increase throughout the year.

2.3. For 2013-14, the annual Council tax collection was 94.73%, down from 2012-13 of 95.31%. The target for 2014-15 is 95%. The national average collection for 2012-13 was 95.42%.

2.4. Council tax collection to 30 June 2014 was 34.31% which is an increase of 0.45% on the 2013-14 quarter 1 collection level of 33.86%. The collection trend over the past three years remains broadly consistent as follows:

Council Tax Collection Monthly

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Figure 2

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2.5. It should be noted, that while the annual collect trend is broadly consistent, there can be significant monthly variances particularly around the summer months and the Christmas period. If all customers were to pay their Council tax over 12 equal instalments, this would equate to individual monthly payments of 8.3% pm over the course of the financial year. The graph below illustrates the actual individual monthly payment trend over the past three years. It can be seen from this that individual monthly collections can vary from 4.7% pm to 11.6% pm around the 8.3% median.

2.6.

CT Collection Per Month

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Figure 3

3.0 Non Domestic Rates Collection

3.1. NDR income is billed and collected by Clackmannanshire Council on behalf of the Scottish Government under the rates pooling system. In 2014-15, the Council is projected to bill £15.7million to over 1500 business premises in the Council area. This is an increase of from £15.6m in 2013/14.

3.2. Non domestic rates is billed on 1 April each year and payees are permitted to pay up to 12 monthly instalments. Legal recovery procedures cannot commence until 1 October, so customers have greater flexibility to legally end load their payments. Accordingly non domestic rates collection levels increase throughout the year, however there can be a considerable degree more volatility in the first 2 quarters collection levels.

3.3. In 2013-14 NDR collection levels dropped for the first time in five years by 0.34% to 97.66% down from 98% in 2012/13. Non domestic rates, collection levels have been above the Scottish Average since 2010/11. The target for 2014-15 is 98%.

3.4. NDR collection to 30 June 2014 was 17.35% which is an decrease of 13.22% on the 2013-14 quarter 1 collection level of 30.57%. The collection trend over the past three years is as follows:

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NDR Collection

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2014-15

Figure 4

3.5. As outlined above, there is a greater degree of flexibility for NDR customers with the payment of their NDR debt, allowing them to end load their payments to the second half of the financial year. This explains the reduction in the quarter 1 collection levels.

3.6. In addition, non domestic rates are revalued every five years and customers are permitted a right of appeal following the issue of the new rates valuation. The last revaluation was completed in 2011 and appeals are still being considered. Where an appeal is successful, this has the effect of reducing the amount billable by the Council in the current year and previous years. Where an appeal is unsuccessful, this has the effect of increasing the amount billable. During November 2013, one large appeal of approximately £3 million was successful and payments to date repaid to the customer. In January 2014, several smaller appeals of approximately £2 million were unsuccessful. The movement in the amount billed is illustrated in table 5 below.

3.7. The monthly variation in the NDR billed also has an impact on the monthly collection figures. The following table illustrates the changes in 2013-14 during the year of the levels of NDR billed and collected.

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NDR Collected vs Billed

£0

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Billed 2013-14Average CollectionActual Collected 2013-14

Figure 5

3.8. If all customers were to pay their NDR debt over 12 equal instalments, this would equate to individual monthly payments of 8.3% pm over the course of the financial year. The graph below illustrates the actual individual monthly payment trend over the past three years. It can be seen from this that individual monthly collections can vary from -14.6% pm to 23.5% pm around the 8.3% median.

NDR Collection Per Month

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Figure 6

4.0 Sundry Debtors Collection

4.1. Sundry debtors reflects invoices raised by the Council in relation to the charging of goods or services provided to the community, residents or businesses. It is billed by an invoice raised by the respective team for the provision of goods and services, including music tuition, commercial refuse, home help and meals on wheels. The administration of income collected and debt outstanding being undertaken by the Revenues service.

4.2. In the first quarter of 2014-15, invoices of £4.434 million have been raised against £3.056million for the same period in 2013-14. In 2013-14, invoices of £7.765 were raised by March 2014, compared to £9.97 million to March 2013. Income of £7.086 million was collected in 2013-14 compared to £9.7 million in

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2012-13. The annual sundry debtor collection for 2013-14 was 73.15%, down from 2012-13 of 83.62%. The target for 2014-15 is 80%.

4.3. Invoices are raised at any time during the year and can relate to the provision of a "one off" service, or ongoing service provision. Accordingly sundry debtors collection levels can fluctuate monthly during the year .

4.4. For the first quarter of 2014-15, the collection level was 44.38% which is a 12.07% reduction on the same period in 2013-14 of 56.45%. The collection trend over the past three years in as follows:

Sundry Debtors Collection %

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Figure 7

4.5. It can be noted, that while the annual collect trend is broadly consistent, there can be monthly variances. Variances can occur due to a material change in the number of invoices raised in a month or where customers exceed the 30day payment terms.

4.6. When considering sundry debtor collection levels, it is also important to consider the proportion of invoices that are paid within 90 days. This illustrates how long it is taking for debt accounts to be cleared. When the reducing collection performance is contrasted with reducing long outstanding debt, this indicates that while customer are taking longer than 30 days to clear their debtor accounts, they are still doing so within 90 days. While the movement during the year for debtors over 90 days can be variable during the year, over the past three years the proportion outstanding at the year end continues to decrease.

4.7. For 2013/14, this reduced 8.87% to 37.01% at the end of the year, indicating that just over one third of debt remains outstanding after 3 months. At the end if June 2014, this is 50.15% which is 12.73% less than the same period in 2013-14 of 62.88%, as follows

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Sundry Debtors Over 90 days %

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Figure 8

4.8. In reviewing the reduced collection levels for quarter 1 of 2014-15, the following has been identified:

• on reviewing the reasons why customers contact the Revenues service to query an invoice, it has come to light that there is often insufficient information included on the invoice explaining in sufficient detail the nature of the charge. This results in delays to payment of the invoice by the customer, while the appropriate information is being recovered from the respective service and passed to the customer. The Revenues service are in the process of contacting all services issuing invoices and working with them to review what information is included on invoices,

• it has also been identified that in the current financial year, reminders to customers were not being issued on a timely basis by the revenues service. This is being addressed immediately.

5.0 Current Tenant Rent Collection

5.1. Housing and lock up rent is charged to almost 5,000 Council tenants and is projected for 2014-15 to be £16.753 million compared to £16.067 million in 2013-14.

5.2. Rent is charged at the start of each week and tenants can pay weekly, fortnightly, 28 days or monthly. The collection indicator for rents is reflects the outstanding arrears and accordingly is relatively consistent during the year. increase throughout the year.

5.3. For 2013-14, the annual current tenant arrear was 6.58%, an increase from 2012-13 of 5.45%. The target for 2014-15 is 6 %. Performance to June 2014 is higher than target. The Recovery team were operating with 3 vacancies during this first quarter. Two of the vacancies have now been filled.

5.4. Current tenant arrears to 30 June 2014 was 7.69% which is an increase of 0.21% on the 2013-14 quarter 1 collection level of 7.48%. The collection trend over the past three years is as follows:

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Rent Arrears as % of Rent Charged

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Figure 9

6.0 Benefits Processing

6.1. Over the past three year, performance on the processing of new claims and changes to claims, has been declining, and this was highlighted as part of the Director of Finance Report presented to members.

6.2. Timely processing of Council tax and housing benefit claims is essential to ensure customers income is maximised and private landlord, RSLs and Council debts are minimised.

6.3. At the end of 2013-14, new claims and changes to claims were processed in 47 days and 15 days respectively. This is considerably higher than the Scottish National average of 28 days and 11 days.

6.4. At the end of June 2014, performance on new claims was 29 days. This is a reduction of 10 days for the same period in 2013-14, being 39 days. The three year trend is as follows:

Time Taken to Process New Benefits Claims

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Figure 10

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6.5. At the end of June 2014, performance on changes to claims was 22 days. This is a reduction of 1 days for the same period in 2013-14, being 23 days. The three year trend is as follows

Time Taken to Process Benefit Changes

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Figure 11

7.0 Conclusion

7.1. The monthly collection and processing levels continue to be closely managed and monitored. In the previous three years to 2012/13, collection and net debt levels had been improving with increasing collection levels, however this trend has started to reverse in 2013-14.

16.2 In previous years, the Council's performance had run contrary to national trends which had demonstrated overall reductions in collected income and increases in debtors, however in from 2013 this trend is now being experienced by the Council. The reducing collection and therefore increasing debtor levels continue to be a risk to the Council due to the current economic situation and the welfare reform changes and will continue to be closely monitored and regularly reported on.

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Appendix B Director of Finance Improvement Action Plan Updated Progress on Actions

Ref Action Service Responsible Officer Date for Completion Progress to date

1 Review collection methods for customers to improve the ease of making payments to the Council and investigate options for the introduction of cost effective automated facilities

Revenues Revenues and Payments Manager March 2015 Joint tender for automation of collection currently out. Closing date for tenders end Sept 2014.

2 Introduce Corporate Arrears System to facilitate the move to a Corporate Recovery Team.

Revenues Revenues and Payments Manager March 2015 Options Appraisal commenced

3. Address benefits processing backlog and ensure processing of current claims are maintained

Revenues Revenues and Payments Manager June 2014 This has been completed with processing days at the national average of 28 and 11 days respectively.

4. Investigate reasons behind invoices paid outwith 30 days Payments Revenues and Payments Manager September 2014 Reasons for invoices > 30 days for the first quarter 2014 are being analysed.

5. Complete automation of Payroll processes, including travel and subsistence and overtime claims.

Payments/HR Revenues and Payments Manager September 2014 ESS/MSS are in the process of being rolled out.

6. Complete the payroll service restructures Payments Revenues and Payments Manager June 2014 Profiles are being drafted and will be passed to HR by end September 2014 for grading.

7. Complete Phase two of the integrated HR and payroll Itrent system, including the roll out of Employee and Manager Self Service modules

HR Governance Manager September 2014 This is on track to be completed by end December 2014

8. Review methods for purchasing goods and services within the Council, as part of the corporate procurement approach

Payments

Procurement

Revenues and Payments Manager

Procurement Manager

September 2014 Ongoing

9. Undertake review of central support recharge methodology Accountancy Chief Accountant December 2014 On target

10. Explore options for the procurement of a new finance system for implementation in 2015/16

Accountancy

R and P

Chief Accountant

Revenues and Payments Manager

June 2014 Options Appraisal is being finalised. Prior Information Notice (PIN) issued in July 2014.

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Appendix B Director of Finance Improvement Action Plan Updated Progress on Actions

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