Agenda item

(Joint Report of the Interim Director and Consortium Treasurer)

The Management Committee considered a joint report of the Interim Director and Consortium Treasurer, the purpose of which was to provide the Management Committee with detailed Forecast Outturn for 2011-12 and proposed budget for 2012-13.  A copy of the report, marked ‘D’, is filed with these minutes.

Arising from discussion the following points were noted:

(i)                       Development of a 4 year financial plan and 4 year strategy was continuing which would complement the annual budget reports which were presented to the Management Committee, to give a longer term view of ESPO’s position;

(ii)                     In the longer term it was intended for ESPO to develop its strategy of low margin and high volume; this was reflected in the fact that cost increase was linked to income increase.  The strategy was designed to ensure, and was consistent with, the organisation’s objectives of providing value for money for customers rather than seeking to maximise profits;

(iii)                   It was noted that ESPO was a Department for Education preferred supplier on the basis that it was a not for profit organisation.  Were ESPO to review this strategy it was likely that this relationship would be damaged;   

(iv)                    Reserves were unusually high partly to ensure security against the legal claim against ESPO (minute 107 refers) and partly because other significant activities, such as pay harmonisation, had been delayed and so had not yet incurred spend; 

(v)                      The Management Committee was advised that, subject to the outcome of the legal claim against ESPO, it was intended to release outstanding dividends to Member Authorities.  Following a resolution to the claim a report would be presented to the Management Committee which would include recommendations on a way to move forward;

(vi)                    A concern was expressed about the costs for HR services.  The Committee was advised that ESPO was purchasing HR support from Leicestershire County Council, as the servicing authority, because HR requirements had increased to the extent that ESPO’s traditional capacity was insufficient to deal with the necessary workload.  Two members of staff who had previously worked within ESPO had been absorbed into Leicestershire County Council’s HR function in order that a more effective service was provided to ESPO; 

(vii)                  Inflationary pressures had reduced the volume of products stored in the warehouse.  As a result ESPO required fewer warehouse operatives.  ESPO responded by working on the basis of employing agency staff to ensure that the planned reduction in staff levels was managed so as to avoid redundancies;

(viii)                With regard to catalogue advertising (as detailed in Appendix 1A of the report) ESPO was making efforts to advertise both branded and unbranded goods together to encourage customers to choose the cheaper of the two; usually the unbranded product.  This practice would ultimately help to reduce costs.  A difficulty with this approach was that frequent customers were often reluctant to try a new but cheaper alternative product and instead preferred to purchase tried and tested, but more expensive products;

(ix)                    The Vehicle and Equipment Reserve comprised the cyclical replacement of ESPO equipment;

(x)                      Replacement of the current GEMS integrated management system software was likely to require approval by the Management Committee at a future meeting;

(xi)                    Members would benefit from budget reports in future being presented in more detail including greater information with regard to the assumptions underpinning the headline figures presented. 

RESOLVED:

(a)         That the report and appendices be noted;

(b)         That the Forecast Outturn for 2011/12 be noted;

(c)         That the budget for 2012/13 be approved; and

(d)         That a Subcommittee be established to work with the Director and Consortium Treasurer prior to consideration of the 2013/14 budget to consider how future budgets should be developed and presented.