Revenue and Capital Budget Monitoring Report 2009/10 – Period 4

Report: 5
Date: 17 September 2009
By: Director of Resources

Summary

This report provides an update on the revenue and capital budget monitoring position for 2009/10 at Period 4 (to the end of July). The revenue budget is forecast to overspend by £22.3m (approximately 0.7% of budget).

The Capital Programme as at Period 4 (to the end of July) shows year to date total expenditure of £35.1m. This total represents 15% of the revised annual budget of £234.2m. The forecast for the year of £218.5m is £15.7m below the revised annual budget.

A. Recommendation

That

1. members note the year to date and forecast position for revenue and capital budgets; and
2. approve a request for a budget virement in excess of £5m (Para 47 refers).

B. Supporting information

Background

1. This report provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2009/10 based on the position at the end of July 2009.

Revenue Forecast by Business Group

2. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 4 and Period 2 by Business Group and Table 3 compares the forecast outturn variances for Period 4 and Period 2 by Business Group (Period 2 being the last forecast presented to Finance and Resources Committee). The report focuses on the material movement in variances between Periods 3 and 4.

Table 1 – Summary of revenue forecast against budget at Period 4

Table 2 - Comparison of Period 4 forecast outturn variance with Period 3 forecast outturn variance.

Table 3 - Comparison of Period 4 forecast outturn variance with Period 2 forecast outturn variance.

3. The forecast outturn variance at Period 4 is an overspend of £22.3m.

4. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

5. Territorial Policing – An overspend of £17.8m – 1.3% of Budget.
The forecast overspend relates principally to: Police Staff Pay caused by delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation; PCSO Pay where the movement of PCSOs into other roles has not taken place as anticipated; Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations; a number of different areas within Supplies and Services; and within Income were there are reduced Immigration Service receipts and lower than budgeted income from Operation Reclaim.

6. There has been an adverse movement of £5.2m in the forecast position from that reported at Period 3. This is principally within Police Staff Pay and PCSO Pay following a review of workforce expectations and Police Officer overtime following the availability of more up to date information on Operation Mirandy (Tamil ceasefire demonstrations).

7. Specialist Crime – An underspend of £2.1m – 0.5% of Budget.
As previously advised, the forecast underspend is principally within Police Officer Pay where strength is below target. This is partially offset by an overspend forecast on Police Staff Pay principally relating to costs of Financial Investigators and other specialist temporary staff in unfunded units (Operations Gestalt and Tappert relating to an investigation of HM Customs & Excise prosecution and Operation Maxim relating to human trafficking investigations which were due to wind down this year).

8. There has been a favourable movement of £1.2m in the forecast position from that reported at Period 3. This is principally due to increased income from external agencies such as FACT (Federation Against Copyright Theft); Customs & Excise and UKBA (UK Borders Agency).

9. Specialist Operations – An overspend of £1m – 0.4% of Net Expenditure Budget.
The overspend is principally within Police Officer Overtime due to covering vacancies (where there is a corresponding underspend within Police Officer pay) and additional Royalty Protection requirements. An under recovery of income of £3.3m relates principally to the provision of policing at Heathrow Airport and the Palace of Westminster, where officer numbers are lower than budgeted and these are offset by corresponding expenditure underspends. An under-recovery of Specific Grant relates principally to ACPO TAM funding which matches forecast expenditure in this area.

10. There has been a favourable movement of £0.5m in the forecast position from that reported at Period 3. This is principally due to a review of the forecasts for police officer overtime and Transport costs.

11. Central Operations – An overspend of £7.0m – 3.5% of budget.
The forecast overspend relates principally to Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations and for the planned Climate Camp demonstration in August. Additionally, Employee Related Expenditure shows an overspend as seconded officers are expected to be used to help with policing the Climate Camp demonstration. There is also an overspend forecast within transport costs relating to additional public order vehicle hire resulting from the G20 and Tamil demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit. Additionally, there is an overspend within Supplies and Services relating to increased firearms and Taser training as well as additional equine costs relating to the 2012 Olympics. There is also an under-recovery of income from Transport for London (TfL) relating to the London Safety Camera Partnership (LSCP). This has arisen as TfL have reduced the level of funding they are prepared to commit to the LSCP. Discussions are underway to try and resolve this funding issue otherwise activity in this area will need to be reduced in order to stay within budget. There is also an under-recovery of income forecast for Wembley events.

12. There has been a minor favourable movement in the forecast position from that reported at Period 3.

13. Olympics Security – No overall variance to budget.

14. Deputy Commissioner’s Portfolio – An underspend of £1.2m – 2.2% of budget.
The forecast underspend relates principally to Police Officer Pay due to officer numbers being below target strength. Additional income is also forecast relating to work carried out by MPS staff on behalf of the Cayman Islands.

15. There has been an adverse favourable movement of £0.3m in the forecast position from that reported at Period 3 which relates principally to a review of the Police Officer pay forecast.

16. Directorate of Public Affairs – A minor underspend.

17. Directorate of Information – An overspend of £1m – 0.4% of budget.
The main subjective variances are principally within Police Staff Pay relating to Temporary Staff costs filling specialist vacancies and within Running Expenses for increased advertising costs to address staff recruitment issues. There has been a minor favourable movement in the forecast position from that reported at Period 3.

18. RResources Directorate – An underspend of £0.4m – 0.2% of budget.
As previously advised the forecast underspend relates principally to a reduced tax liability on free rail travel. This is partially offset by an under-recovery of Interest Receipts following a reduction in the level of interest rates achievable on investments reflecting changes to the Authority’s Treasury Management policy. /p>

19. There has been an adverse movement of £0.5m in the forecast position from that reported at Period 3 following a number of minor movements within Running Expenses such as facilities management, electricity, fuel, service charges, premature retirement costs and staff advertising.

20. Human Resources – An overspend of £0.6m – 0.3% of budget.
The forecast overspend is principally due to increased expenditure on dangerous dogs and for providing free rail travel for police officers, the latter being offset by the reduced tax liability (see Resources Directorate above).

21. There has been a favourable movement of £1.1m in the forecast position from that reported at Period 3. This is principally due to a review of the expected income within Catering Services. There have been significant changes in the variances for Supplies and Services and Other Income following the setting of budgets for Operation Reclaim as advised in the Period 3 report to Investment Board.

22. Metropolitan Police Authority – An overspend of £0.4m – 3.3% of budget.
The overspend is principally within Supplies & Services relating to additional legal expenses and external consultant costs. There has been a minor movement in the forecast position from that reported at Period 3.

23. Centrally Held Budgets – An underspend of £1.9m.
There has been a minor movement in the forecast position from that reported at Period 3.

24. Discretionary Pension Costs – Nil variation.

Revenue Forecast variance by expenditure/income type

25. Table 4 compares the forecast outturn variances for Period 4 and Period 3 by expenditure/income type.

Table 4 – Comparison of forecast outturn variance by expenditure/income type

26. Police Officer Pay – An underspend of £15.7m – 0.8% of budget.
The forecast underspend relates generally to anticipated vacancies across a number of Business Groups. Whilst the strength as at 31 July is above target, average strengths throughout the year have been below target. This has been principally caused by the ongoing impact of the deferment of recruits planned for March 2009 into April. However, as indicated in Table 5, the current forecast anticipates that the original target strength at 31 March 2010 of 33,353 will be achieved by year-end. It should also be noted that some officers included within the strength figures are off-pay or on reduced pay for a number of reasons such as maternity leave, special leave and suspension from duty and these contribute to the underspend position.

27. There has been a favourable movement in the forecast of £1.2m from the position reported at Period 3, principally within Territorial Policing following a review of their forecast strength position.

Table 5 – Police Officer Actual Strength v Target Strength

28. Police Staff Pay - An overspend of £7.1m – 1.5% of budget.
The forecast overspend is principally within Territorial Policing following delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation. The forecast has changed adversely by £1.2m from the position reported at period 3 following a review of expected staff levels, particularly in respect of delays to the implementation of Integrated Prosecution Teams.

29. PCSO Pay - An overspend of £3.1m – 2.1% of budget.
The forecast overspend is within Territorial Policing who are currently around 100 PCSOs over strength following less than expected wastage and transfers to police officer roles being slower than new PCSO recruitment to ensure there are no PCSO vacancies.

30. Traffic Warden Pay - An overspend of £1.2m – 11.5% of budget.
The forecast overspend is within Territorial Policing who are currently around 45 Traffic Wardens over strength following delays in anticipated transfers to PCSO roles. This is principally within the Transport OCU and whilst the overspend is being managed within the “bottom-line” TOCU budget, the position is under review as part of the Safer Transport initiative.

31. Police Officer Overtime – An overspend of £12.4m – 10.1% of budget.
The forecast overspend relates principally to the policing of the G20 and Tamil demonstrations and for the planned Climate Camp demonstration in August. Appendix 4 shows that £9.7m of the forecast overtime cost relates to major operations for which no budget provision exists. If the costs for these major operations are excluded then the forecast would show an overspend of £2.7m (1.4% of budget). This overspend results from covering vacancies (and should be viewed alongside the forecast underspend for police officer pay) and additional Royalty and Diplomatic protection. Discussions regarding potential funding of the additional costs incurred as a result of the G20 demonstrations are still being held with the Home Office and the MPA has agreed that reserves may be used to offset the cost of the Tamil demonstrations once the year-end financial position has been established.

32. There has been an adverse movement in the forecast of £1.7m from the position reported at Period 3, principally within Territorial Policing following the availability of more up to date information on Operation Mirandy (Tamil ceasefire demonstrations).

33. Police Staff Overtime – An overspend of £1.1m – 3.4% of budget.
As previously advised, the forecast overspend is principally within Specialist Crime in the areas of Forensic Services and Operational Information Services. Some of the additional costs incurred are offset by additional income.

34. PCSO and Traffic Warden Overtime – An overspend of £0.2m.
There has been an adverse movement in the forecast of £0.2m from the position reported at Period 3 mainly within Territorial Policing as a result of utilising PCSOs on the G20 and Tamil demonstrations.

35. Employee Related Expenditure – An underspend of £0.2m – 0.5% of budget.
There has been a favourable movement in the forecast of £0.2m from the position reported at Period 3 mainly within Specialist Operations relating to a forecast reduction in external training costs.

36. Premises Costs – An overspend of £1.1m – 0.5% of budget.
As previously advised, the forecast overspend is principally within the Specialist Crime Directorate relating to the refurbishment of the fingerprint bureau at New Scotland Yard, and within Central Operations due to additional costs at Marlow House and Bishopsgate Firearms training centre.

37. There has been a minor favourable movement in the forecast of £0.2m from the position reported at Period 3.

38. Transport Costs - An overspend of £0.3m – 0.4% of budget.
The forecast overspend is principally within Central Operations and relates to additional public order vehicle hire resulting from the G20 and Tamil demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit (the budget was set when exchange rates were approximately £1 to €1.50 - rates are now around €1.13 resulting in an exposure of approximately £0.5m).

39. There has been a favourable movement in the forecast of £0.9m from the position reported at Period 3, principally within Specialist Operations following a review of forecast expenditure in this area.

40. Supplies and Services - An overspend of £0.3m – 0.6% of budget.
There has been a favourable movement in the forecast of £1.2m from the position reported at Period 3, principally within Human Resources following the allocation of budget (matched by a corresponding income budget) relating to Operation Reclaim. The material variances within this category are:

• Forensics - An underspend of £2.6m - 7% of budget. This reflects a continuing reduction in forecast activity in this area following the introduction of strict criteria for forensic submissions.
• DNA Testing - An underspend of £2.6m – 35% of budget. This reflects changes to working practices resulting in a forecast for fewer tests being requested.
• Payments to Association of Train Operating Companies - An overspend of £0.6m - 3.7% of budget. This results from an increase to the contract price for the provision of free rail travel to police officers. This cost is offset by an overall underspend in total Running Expenses within the Resources Directorate in respect of the tax liability on the ATOC agreement.
• Dangerous Dogs Act – An overspend of £1.2m - 88.2% of budget. This relates to the costs of kennelling, veterinary care, and associated expenses for dogs seized by police officers under the Dangerous Dogs Act 1991. The number of dogs seized is expected to increase by 66% compared to last year due to increased ownership and use in criminal activity, both as a weapon and as a status symbol.
• External Consultants - An overspend of £0.9m - 20.1% of budget. This is principally due to employing consultants in TP to support the MPS Youth Strategy and in DoI to support the Improvement and Rationalisation programmes.
• Scene of Crime Equipment - An overspend of £0.4m - 20.2% of budget. The level of expenditure forecast is consistent with spend during 2008/09. Specialist Crime is examining the budget allocation in this area.
• Clothing and Accessories - An overspend £0.3m - 4% of budget. This relates to forecast spend on Multi-Agency Initial Assessment Team hazardous substance clothing.

41. Capital Financing Costs – An underspend of £0.3m – 1.1% of budget.
As previously advised, the forecast underspend is principally due to a lower than budgeted forecast for the Minimum Revenue Provision (MRP). This is due to a lower than anticipated 2008/09 capital outturn and hence a lower than expected capital financing requirement. This is partly offset by additional interest payable on new external loans arranged by the Authority in 2008/09.

42. Interest Receipts – An under-achievement of £1.3m – 64.2% of budget.
As previously advised, the forecast under-achievement relates to a reduction in the level of interest rates achievable on investments. There has been no change from the position reported at Period 3.

43. Other Income - An under-achievement of £9.4m – 2.6% of budget.
The forecast under-achievement is within a number of business groups and much of it relates to areas where expenditure has also reduced such as for the provision of policing at Heathrow Airport and the Palace of Westminster and within the vehicle removal service. There has also been a reduction in funding from TfL for the London Safety Camera Partnership, lower than budgeted income from Immigration receipts and from Wembley stadium events as well as historical income targets set for operational receipts within Specialist Crime Directorate which are not forecast to be achieved.

44. There has been an adverse movement in the forecast of £2.9m from the position reported at Period 3, principally within Human Resources following the setting of an income budget for Operation Reclaim (matched by a corresponding expenditure budget within Supplies and Services).

45. Specific Grant – An under-achievement of £0.9m – 0.2% of budget.
The under-achievement relates to ACPO TAM grant where a reduction in forecast expenditure is matched by a reduction in grant income.

46. Budget movements
As previously advised, the MPA/MPS Business Plan was approved by MPA Full Authority on 26th March 2009. Since that time budget amendments have been made relating to changes in the funding stream for Counter Terrorism (at the time of the budget submission, funding levels had not been finalised with the Home Office). Funding streams relating to PCSOs have also required changes to the subjective allocation of budgets. Allowing for these issues and other in-year budget movements, funding budgets (income, specific grant and transfers from Reserves) have increased by £26.8m since the budget submission and corresponding expenditure budgets have been set accordingly. Appendix 2 shows the subjective budget movements that have been required in the time between the original budget submission and the presentation of this report. The major budget movements undertaken in Period 4 are shown below in Table 6.

Table 6 – Major budget movements actioned in Period 4

47. In addition members are asked to approve the following budget virement (a permanent budget move between different categories of expenditure): This budget virement is already reflected in the figures reported in this paper and relates to two issues:

• Project Herald - the rephasing of implementation reflects a delay in moving from officer to staff support was not fully reflected in the budget as finally approved (Staff salaries -£14.3m, Officer salaries +£14.3m)
• Budget allocation - within the agreed TP budget control total, in setting the detailed budget, there was a miscalculation of budget which is being corrected by this vrirement (Staff salaries -£2m, Supplies and services -£3m, Income +£5m)

Movements in Reserves

48. The reserve movements carried out in Period 4 are shown in Table 7.

Table 7 – Reserve movements carried out in Period 4

Capital Monitoring

49. Despite the downturn in the economy adversely affecting the expected level of capital receipts available in 2009/10 to support the capital programme, an ambitious level of investment is still proposed. This has proved possible thanks to the judicious use of (a) unsupported borrowing; (b) capital reserves; (c) revenue underspend from 2008/09; and (d) Service Improvement Programme funds. This financing situation will be closely monitored to ensure all funding sources remain available and the capital programme continues to be affordable and sustainable in accordance with the requirements of the Prudential Code. This is critical when considering the projects that have been rephased from 2008/09 and the capacity issues that arise from this.

50. In Period 2, approval was given by SMT for rephasing of capital budgets into 2009/10 and future years. This request was formally granted by the MPA at the Finance Committee meeting which took place on 30th July 2009. This report provides forecast variations against the revised annual budget.

51. Appendix 3 sets out the expenditure for the 2009/10 Capital Programme as at Period 4 (July) by programme. Year to date expenditure is £35.1m, representing 15% of the revised annual budget of £234.2m. The forecast for the year of £218.5m is £15.6m below the revised annual budget.

52. Property Programme – A minor variation against the revised budget.

53. Information Programme – Excluding C3i – An overspend of £1.9m - 1.9% of revised annual budget.
The main reason for the forecast overspend is the inclusion of expenditure on Automatic Number Plate Recognition related projects, the funding for which is currently within Capital Reserves. When the level of funding is confirmed, this will then be incorporated within the Information Programme budget.

54. Transport Projects – An overspend of 0.8m - 5.2% of revised annual budget.
The overspend being reported by Transport Services represents non-core Transport Services forecast expenditure which will be funded entirely through revenue contributions to capital outlay by the commissioning departments.

55. Other Plant & Equipment Expenditure – A Nil variation against the revised budget.

56. Directorate of Information – C3i Programme – A Nil variation against the revised budget.

57. Safer Neighbourhoods Programme – A Nil variation against the revised budget.

58. Olympics/Paralympics – An underspend of £19.1m – 70.5% of revised annual budget.
The Olympics/Paralympics Programme is funded by specific grant and each project is subject to Home Office approval following the submission of individual business cases. The current forecast is based on the latest expectations of the number of projects that will be approved for funding this year. It is likely that the planned building works (and associated IT fit-out costs) to accommodate additional intelligence staff, will be delayed until 2010/11. Options around enhancing existing estates are being reviewed as part of this process.

59. Counter Terrorism – A Nil variation against the revised budget.

C. Race and equality impact

There are none specific to this report.

D. Financial implications

The financial implications are those set out in this report.

E. Background papers

• Policing London 2009-12 Business Plan.

F. Contact details

Report author: Paul James, Director of Finance Services

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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