Revenue and Capital Budget Monitoring Report 2009/10 – Period 7

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

Summary

This report provides an update on the revenue and capital budget monitoring position for 2009/10 at Period 7 (to the end of October). The revenue budget is forecast to overspend by £17.1m (approximately 0.5% of budget).

The Capital Programme as at Period 7 (to the end of October) shows year to date total expenditure of £71.6m. This total represents 33.5% of the revised annual budget of £214m. The forecast for the year of £211.1m is £2.9m below the revised annual budget.

A. Recommendation

Members are invited to: Note the year to date and forecast position for revenue and capital budgets.

B. Supporting information

Background

1. This paper 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 October 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 7 and Period 6 by Business Group.

Table 1 – Summary of revenue forecast against budget at Period 7

* of net expenditure budget

Table 2 - Comparison of Period 7 forecast outturn variance with Period 6 forecast outturn variance.

3. The forecast outturn variance at Period 7 is an overspend of £17.1m.

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 £24.8m – 1.8% of Budget.
The forecast overspend relates principally to: Police Officer Pay as a result of the current strength being higher than anticipated due to Police Officers not moving to other Business Groups as originally planned (despite them holding vacancies and reporting underspends in this area) and shortages in some units, ranks and roles in Territorial Policing which also limit movement; Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations; PCSO Pay where the movement of PCSOs into other roles is being managed to avoid vacancies; Police Staff Pay caused by delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation; Traffic Warden Pay where strength is above target in the Transport OCU (matched by income); and a number of different areas within Supplies and Services such as Forensic Medical Examiners, external consultants and office equipment.

6. There has been an adverse movement of £5m in the forecast position from that reported at Period 6. This principally relates to Police Officer Pay following a reassessment of future strengths and the likelihood that opportunities for officers to move to other Business Groups will remain limited. This has been partially offset by a reduction within Premises costs (£1.1m) following delays to planned property works related to Operation Tyrol (accommodation of Safer Transport teams).

7. Specialist Crime – An underspend of £2.9m – 0.7% of Budget.
As previously advised, the forecast underspend is principally within Police Officer Pay where strength is below target. This is partially offset by a forecast overspend on Police Staff Pay primarily caused by forensic services recruiting ahead of their original plans coupled with additional staff being employed due to increased demand from the Criminal Records Bureau. This element is recoverable through additional income.

8. There has been an adverse movement of £0.5m in the forecast position from that reported at Period 6. This is principally within Supplies and Services following a review of the scene of crime equipment and forensics forecasts.

9. Specialist Operations – An overspend of £0.6m – 0.2% of Net Expenditure Budget.
The overspend is principally within Police Officer Overtime due to covering vacancies and additional Protection requirements. There are underspends within Police Staff Pay and PCSO Pay relating principally to the provision of policing at Heathrow Airport and the Palace of Westminster, where strength is lower than budgeted. The resulting underspends are matched by lower receipts reported within Other Income. There is also an underspend within Transport costs which relates to reduced spending on overseas travel.

10. There has been a favourable movement of £0.8m from that reported at Period 6 principally within a number of Supplies and Services account lines.

11. Central Operations – An overspend of £5.9m – 2.9% of budget.
As previously advised, the forecast overspend relates principally to Police Officer Overtime caused by the policing of the G20, Tamil and Climate Camp demonstrations. Employee Related Expenditure shows an overspend relating to seconded officers used for Public Order Aid. There is also an overspend forecast within Transport Costs relating to additional Public Order vehicle hire resulting from the demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit (helicopter maintenance). There is an overspend within Supplies and Services relating to increased firearms and Taser training as well as additional equine costs. There is 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. There is also an under-recovery of income forecast for Wembley events. These overspends are partially offset by an underspend on Police Officer Pay as officer numbers are below target strength.

12. There has been a minor adverse movement of £0.2m in the forecast position from that reported at Period 6.

13. Olympics Security – Nil variance.

14. Deputy Commissioner’s Portfolio – An underspend of £1.4m – 2.7% of budget.
The forecast underspend relates principally to Police Officer Pay due to officer numbers being below target strength. An over recovery of income is also forecast relating to work carried out by MPS staff on behalf of the Cayman Islands.

15. There has been a minor adverse movement of £0.2m in the forecast position from that reported at Period 6.

16. Directorate of Public Affairs – A minor underspend

17. Directorate of Information – An underspend of £1.3m – 0.6% of budget.
The forecast underspend relates principally to Police Officer Pay and Police Staff Pay reflecting current recruitment expectations.

18. There has been a favourable movement of £1.3m in the forecast position from that reported at Period 6, principally within Supplies and Services following a reassessment of the timing of Eagle data centre costs resulting from earlier delays in contract approval.

19. Resources Directorate – An underspend of £1.4m – 0.5% of budget.
Whilst the overall position forecasts a small underspend, there are a number of subjective variances. Police Staff Pay forecasts an underspend of £0.8m principally within Property Services reflecting a reduction in the use of agency staff and preparations for restructuring which will yield permanent savings; Employee Related Expenditure forecasts an underspend of £2.4m principally resulting from a reduced tax liability on free rail travel (offset by the additional cost of free rail travel - see Human Resources below); Premises costs forecasts an overspend of £3.0m relating to additional utilities and facilities management costs; Capital Financing forecasts an underspend of £1.2m linked to a lower than budgeted Capital Financing requirement; Interest Receipts forecasts an under-recovery of £1.3m following a reduction in the level of interest rates achievable on investments reflecting changes to the Authority’s Treasury Management policy; Specific Grant forecasts an over-achievement of £1.7m relating to additional Loan Charges grant resulting from a lower balance of useable capital receipts (due to the need to use significant levels of usable capital receipts to finance the Capital Programme in 2008/09).

20. There has been a favourable movement in the forecast position of £1m from that reported at Period 6 following an assessment of funding requirements for SAP development works.

21. Human Resources – An underspend of £2.5m – 1.6% of budget.
The forecast underspend is principally within Police Officer Pay as officer numbers are below target strength. An overspend is forecast within Police Staff Pay due to delays in the THR Programme. At the MPA Finance & Resources Committee on 17 September, it was agreed that HR would identify £3m savings within core budgets to fund the additional costs associated with THR. The savings are reflected within Supplies and Services and Employee Related Expenditure.

22. There has been a favourable movement of £1.1m in the forecast position from that reported at Period 6. This principally relates to increased income in core Vehicle Recovery Examination Services (excluding Operation Reclaim) relating to rising scrap metal prices achieved upon disposal of seized vehicles and a reduction in anticipated costs relating to virology issues (i.e. swine flu posters).

23. Metropolitan Police Authority – An overspend of £0.4m – 3.2% of budget.
The overspend is principally within Running expenses relating to additional legal expenses, secondment costs and recruitment drives to fill vacancies. There has been a minor adverse movement in the forecast position from that reported at Period 6.

24. Centrally Held Budgets – An underspend of £5.1m
The underspend principally relates to accounting adjustments to write off unmatched goods receipts relating to previous financial years as well as an accounting adjustment in regard to the Landsbanki investments. In 2008/09 the unimpaired portion (83%) of the total debt (£30m) was discounted to net present value (NPV) terms. This year the MPA is due to receive the first part-repayment of the debt (£6.9m in March 2010). On receipt of this repayment the MPA is able to reverse part of the NPV adjustment made in the previous year which means that investment interest is increased by £1.5m. The forecast reflects the current CIPFA guidance which anticipates a payment in March 2010. If the guidance changes (further guidance is expected at the end of November), the forecast will be adjusted in future reports.

25. There has been a favourable movement of £1.5m in the forecast position from that reported at Period 6, principally relating to accounting adjustments to write off unmatched goods receipts relating to previous financial years.

26. Discretionary Pension Costs – An overspend of £0.1m – 0.4% of budget. There has been an adverse movement of £0.1m in the forecast position from that reported at Period 6.

Revenue Forecast variance by expenditure/income type

27. Table 3 compares the forecast outturn variances for Period 7 and Period 6 by expenditure/income type.

Table 3 – Comparison of forecast outturn variance by expenditure/income type

28. Police Officer Pay – An underspend of £11.5m – 0.6% of budget.
The forecast underspend relates generally to actual and anticipated vacancies across a number of Business Groups, except for Territorial Policing where the current and forecast strength are higher than anticipated due to reduced opportunities for officers to move to other Business Groups. Elsewhere, 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. Table 4 provides details of the target and actual Police Officer strengths. 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.

29. There has been an adverse movement of £8.1m in the forecast from the position reported at Period 6. This partly results from a reduction of budget of £2.6m within Human Resources in respect of 40 officers that were included within the Deployment Plan in error matched by a corresponding reduction in the seconded officers income budget. The remaining increase is within Territorial Policing and relates to a re-assessment of the likely strength figures within the Business Group for the remainder of the year.

Table 4 – Police Officer Actual Strength v Target Strength

30. Police Staff Pay - An overspend of £3.8m – 0.6% of budget
The forecast overspend is principally within Specialist Crime Directorate primarily caused by forensic services recruiting ahead of their original plans coupled with additional staff being employed due to increased demand from the Criminal Records Bureau. This element is recoverable through additional income. There is also an overspend within Territorial Policing following delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation.

31. There has been an adverse movement of £1.9m in the forecast from the position reported at Period 6 principally within Human Resources due to delays in the THR Programme. At the MPA Finance & Resources Committee on 17 September, it was agreed that HR would identify £3m savings within core budgets to fund the additional costs associated with THR. The savings are reflected within Supplies and Services and Employee Related Expenditure

32. PCSO Pay - An overspend of £2.9m – 1.9% of budget.
The forecast overspend is within Territorial Policing where an average of 60 PCSOs over strength is being forecast following lower than expected wastage and where the movement of PCSOs into other roles is being managed to avoid vacancies. There has been a minor favourable movement from that reported at Period 6.

33. Traffic Warden Pay - An overspend of £1m – 11.8% of budget.
The forecast overspend is within Territorial Policing where an average of 40 Traffic Wardens over strength is being forecast following delays in anticipated transfers to PCSO roles. This is principally within the Transport OCU and whilst the overspend is being managed within the overall “bottom-line” TOCU budget, the position is under review as part of the Safer Transport initiative. There has been a minor favourable movement from that reported at Period 6.

34. Police Officer Overtime – An overspend of £16.3m – 13% of budget.
The forecast overspend relates principally to the policing of the G20, Tamil and Climate Camp demonstrations. Appendix 4 shows that £9.6m of the forecast overtime cost relates to major operations for which no specific budget provision exists. If the costs for these major operations are excluded then the forecast would show an overspend of £6.5m (5.2% of budget). The remaining 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.

35. There has been an adverse movement of £0.8m from that reported at Period 6, principally within Central Operations relating to revised forecasts reflecting increased activity within the Firearms Command and within Territorial Policing following further operational challenges, especially linked to burglary initiatives.

36. Police Staff Overtime – An overspend of £0.9m – 2.8% of budget.
The forecast overspend relates principally to Specialist Crime Directorate for increased activity within forensic services department and covering vacancies within the Intelligence Bureau. There has been an adverse movement of £0.7m from that reported at Period 6 with a number of Business Groups reporting minor increases to cover continuing vacancies and increased activity.

37. PCSO and Traffic Warden Overtime – An overspend of £0.3m - 16% of budget.
The forecast overspend is within Territorial Policing and relates principally to Transport OCU activity which is matched by income as well as an increase in operational requirements where police officer activities have needed the support of PCSOs.

38. Employee Related Expenditure – An underspend of £1.6m – 4.3% of budget.
The underspend forecast is principally within the Resources Directorate in respect of reduced tax liability for free rail travel and is offset by overspends forecast within: Specialist Crime principally relating to external training costs; Central Operations relating to seconded officers used for Public Order aid; Directorate of Information for increased advertising costs to address staff recruitment issues.

39. There has been a favourable movement in the forecast of £1.7m from the position reported at Period 6. This is principally within Human Resources and relates to savings within core budgets to fund the short-term additional costs associated with THR.

40. Premises Costs – An overspend of £3.2m – 1.4% of budget.
The forecast overspend is principally within Resources relating to Facilities Management costs with additional overspends forecast in Specialist Crime 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.

41. There has been a favourable movement in the forecast of £1m from the position reported at Period 6, principally within Territorial Policing delays to planned property works related to Operation Tyrol (accommodation of Safer Transport teams).

42. Transport Costs - An overspend of £1.9m – 2.8% 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 helicopter maintenance within the Air Support Unit.

43. There has been an adverse movement of £0.6m in the forecast from the position reported at Period 6 in a number of Business Groups, principally resulting from increased fuel and vehicle maintenance forecasts.

44. Supplies and Services - An underspend of £1.6m – 0.1% of budget.
There has been a favourable movement of £6.1m in the forecast from the position reported at Period 6, principally within Human Resources relating to savings within core budgets to fund the short-term additional costs associated with THR. There has also been a favourable movement within DoI following an assessment of the timing of Eagle data centre costs resulting from earlier delays in contract approval. Additionally, there has been a favourable movement within Resources in respect of SAP development funding. The material variances within this category are:

• DNA Testing - An underspend of £3.1m – 42.7% of budget. This reflects changes to working practices resulting in a forecast for fewer tests being requested.
• Forensics - An underspend of £2.4m - 6.7% of budget. This reflects a continuing reduction in forecast activity in this area following the introduction of strict criteria for forensic submissions.
• Development Charges - An overspend of £1.8m - 17.1% of budget. This relates to additional cost pressures due to the reduction in NPIA grant funding. Also, there has been a revision in forecast for ICT costs reflecting cost savings previously declared in 2009-12 business planning but now no longer achievable in this cost category. These savings are substituted by underspends in pay costs.
• Dangerous Dogs Act – An overspend of £1.2m - 89% 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. A budget increase of £1.5m per annum has been included as part of the 2010-13 Planning process.
• Revenue Contribution to Capital Outlay – An overspend of £0.8m. This relates to vehicle purchases in support of frontline proactive intelligence teams within the Specialist Crime Directorate.
• External Consultants - An overspend of £0.7m - 13.6% of budget. This is principally due to employing consultants in HR as a result of delays caused by the THR Programme; TP to support the MPS Youth Strategy and in DoI to support the Improvement and Rationalisation programmes.
• 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.

45. Capital Financing Costs – An underspend of £1.2m – 5.2% 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 budgeted 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.

46. Interest Receipts – An over-achievement of £0.2m – 10% of budget.
There has been a minor favourable movement in the forecast from the position reported at Period 6. As previously advised, following Cipfa guidance the forecast includes an accounting adjustment in regard to the Landsbanki investments. If the guidance changes (further guidance is expected at the end of November), the forecast will be adjusted in future reports.

47. Other Income - An under-achievement of £1.9m – 0.9% of budget.
The forecast under-achievement is within Specialist Operations, Central Operations and Resources 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 rent relating to the assignment of the Bessborough Street lease (reduced rent payable offset by reduced rental income). There has also been a reduction in funding from TfL for the London Safety Camera Partnership, lower than budgeted income from Immigration receipts and Wembley stadium events.

48. There has been a favourable movement of £4.7m from the position reported at Period 6. This is principally within the Human Resources Directorate and relates to reduction of income budget for seconded officers that were included within the Deployment Plan in error matched by a corresponding reduction in the Police Pay budget. There has also been a favourable movement within Centrally Held relating to accounting adjustments to write off unmatched goods receipts relating to previous financial years

49. Specific Grant – An under-achievement of £0.9m.
There is an under-achievement within the Olympics Directorate where a reduction in forecast expenditure is matched by a reduction in grant income.

50. 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 £21.4m 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 7 are shown below in Table 5.

Table 5 – Major budget movements actioned in Period 7

Movements in Reserves

51. The reserve movements carried out in Period 7 are shown in Table 6.

Table 6 – Reserve movements carried out in Period 7

Capital Monitoring

52. 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.

53. On 19th November 2009, the MPA Finance and Resources Committee agreed a revised capital programme reflecting a rephasing of project expenditure into 2010/11 and beyond. This report provides forecast variations against the revised annual budget.

54. Appendix 3 sets out the expenditure for the 2009/10 Capital Programme as at Period 7 (October) by programme. Year to date expenditure is £71.6m, representing 33.5% of the revised annual budget of £214m. The forecast for the year of £211.1m is £2.9m below the revised annual budget.

55. Property Programme – An underspend of £1.0m - 1.9% of revised annual budget.
The main reason for the forecast underspend is slippages in the implementation of the sustainable development projects associated with the Climate Change Action Plan and prolonged negotiations in obtaining licence agreement from the landlord to alter the Polar Park site at Heathrow.

56. Information Programme – Excluding C3i – A Nil variation against the revised annual budget.
In Period 6, MPA Members approved a budget increase of £2.8m which represented forecast expenditure on Automatic Number Plate Recognition related projects and expenditure on SAP upgrades. These projects are now reflected within the revised Capital Programme.

57. Transport Projects – A Nil variation against the revised annual budget.
In Period 6, MPA Members approved a budget increase of £0.5m which represented non-core Transport Services expenditure, funded entirely through the utilisation of revenue contributions to capital outlay by the commissioning departments.

58. Other Plant & Equipment Expenditure – An underspend of £0.1m - 10.9% of revised annual budget.
A minor variation against the revised budget.

59. Language Programme − An underspend of £1.7m - 46% of revised annual budget.
Minor delays in the procurement of language services for this Programme mean that contracts will not be awarded until approximately January 2010. Other procurement activities planned for the 2009/10 financial year will not be undertaken until the 2010/11 financial year.

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

61. Safer Neighbourhoods Programme – A Nil variation against revised annual budget.
In Period 6, MPA Members approved a budget rephasing of £5.2m into the 2010/11 financial year, £3.0m for the Property Services element and £2.2m for the Directorate of Information element. This was to take account of delays in sourcing suitable properties and the ultimate fit-out of these.

62. Olympics/Paralympics – An underspend of £0.2m – 14% 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. In Period 6, MPA Members approved a budget reduction of £25.9m to this Programme. The initial Olympics/Paralympics Programme budget assumed a high level of Intelligence staff personnel, which will not materialise this year. The effect of this is a significant reduction in proposed building works (and the associated IT fit-out costs) to house these personnel. Instead, options around enhancing existing estates are currently being reviewed. The current forecast is based on the latest expectations of the number of projects that will be approved for funding this year.

63. Counter Terrorism – A Nil variation against the revised budget.
In Period 6, MPA Members approved a budget increase of £7.8m which represented the Association of Chief Police Officers Terrorism Allied Matters (ACPO TAM) projects not included in the original 2009/10 programme. This increase now forms part of the revised Capital Programme.

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, MPS

For information contact:

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

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