Capital Programme 2010/11: quarterly monitoring report

Report: 5
Date: 13 September 2010
By: Director of Resources on behalf of the Treasurer

Summary

This report provides members with information on the capital programme 2010/11 as at the end of the first quarter of the financial year.

A. Recommendations

Members are requested to:

1. note the present position with regard to capital expenditure incurred during 2010/11 as at the end of the first quarter. (paragraphs 8 to 11 and Appendix 1 refers).

B. Supporting information

Background

1. The capital programme for 2010/11 was agreed as part of the capital spending and borrowing plan 2010/11 to 2016/17. The latter is an integral element of the Policing London Business Plan 2010-13. The Plan was approved by the MPA Strategic and Operational Policing Committee on 1 April 2010.

2. The approved level of capital expenditure for 2010/11 was £305.8m against an available funding level of £263.5m. The overprogramming sum of £42.3m was regarded as manageable and would be subject to close monitoring by the Capital Programme Steering Committee to ensure that actual expenditure was kept within the available funding total.

3. A first review of the capital programme for 2010/11 has been undertaken. This was to ensure that adjustments to expected expenditure could be made in respect of:

• projects that experienced slippage in delivery during 2009/10 and require unspent funds to be made available in 2010/11 and future years;
• projects that needed to have expenditure profiles amended to reflect changes in planned delivery; and
• any essential new schemes which needed to be added to the 2010/11 capital programme.

Provisioning departments were asked to identify if dedicated funding sources were available to finance any of these requested adjustments. This was especially important in respect of any new scheme(s) noted for inclusion within the capital programme.

4. The amendments required to the capital programme for 2010/11 were approved by the MPA Finance & Resources Committee on 15 July 2010. A revised programme of £309.6m was approved. This represented an increase of £3.8m in expenditure. A summary of the adjustments is provided in Table 1 below.

Table1: First Review Adjustments to Capital Programme 2010/11

5. For those projects with dedicated funding sources it was verified whether these funds remained available. For other projects every attempt was made to limit the level of borrowing required. The reason for this is that borrowing for capital purposes attracts capital financing charges and therefore creates pressure on the revenue budget. Given present economic pressures this is regarded as a prudent way forward.

6. At the time of approving the revised capital programme the Home Office advised that police capital grant for 2010/11 would be reduced to £36m. This represented a decrease of £2.4m, or 6.3%, on the previously advised sum of £38.4m. It was agreed that the reduction would be covered by use of the capital receipts reserve. This would allow the capital programme to be maintained at its forecast level until such time that a clearer picture emerged regarding any slippage in projects that was occurring. The position will be kept under constant scrutiny and will be assessed as part of the six month review of the capital programme for 2010/11.

7. Recognising that specific funds are available for a number of schemes, it has been necessary to rework the total funding available for financing capital projects in 2010/11. Table 2 below shows how the adjustments to funding are distributed across specific and general funding sources. Savings in general funds have been made available to the overall capital programme to reduce the level of overprogramming.

Table 2: Adjustments to Funding of Revised Capital Programme 2010/11

Note: The figures shown in Table 2 are derived by examining the noted funding sources for projects as shown within the approved capital programme 2010/11 and taking account of specified funding as notified for additions/reductions to planned expenditure.

Therefore whilst the capital programme for 2010/11 has increased by £3.8m- see Table 1, there has been a £12.8m rise in the level of funding available. This means that the level of overprogramming has reduced from £42.3m to £33.2m.

Position as at 30 June 2010

8. As at the end of June 2010 capital expenditure of £30.2m had been incurred. This represents 10.9% of the revised programme figure of £276.3m. Actual expenditure incurred is slightly lower than would be expected after the first quarter. This results from minor delays in key technology schemes. The provisioning departments have advised that circa 59% of the programme figure of £276.3m has been committed as at 30 June 2010. Details of the initial budgets, revised budgets, expenditure incurred and forecast outturns for the major areas of expenditure are provided at Appendix 1.

Property based programme

9. Forecast expenditure matches revised budgets with in excess of 70% of projected spend now committed. Major areas of expenditure - custody clusters/patrol bases & Heathrow operational facilities - are progressing in accordance with set timetables.

Technology based programme

In overall terms forecast expenditure is in line with revised budgets however, a number of schemes are being examined regarding their revenue implications. It is acknowledged within DoI that insufficient revenue funds exist to deliver all projects noted within the technology based programme. The postponing of technology schemes will assist in reducing the present overprogramming sum.

Transport based expenditure

Forecast expenditure matches revised budgets. Actual expenditure tallies with expectations at this stage of the financial year.

10. Given the little time that has elapsed since the first review of the 2010/11 capital programme, it is not surprising that very few differences are noted between forecast expenditure and revised budget figures. Areas where discrepancies exist are:

• a reduction of £0.6m in respect of DoI staff costs which can be capitalised; and
• a reduction of £0.1m for CT expenditure.

An increase of £1.5m in transport costs has been reported. This relates in large part to the equipping for service costs of vehicles purchased during 2009/10 by business groups utilising monies saved from in year revenue budgets. Transport fleet requirements are presently being examined as part of the savings initiatives required as part of the Government funding reductions. It is expected that the additional cost relating to the Business Group purchases can be absorbed within the overall Transport Services budget.

11. The £0.6m reduction in DoI staff costs was not being financed from a specific funding source. Therefore, this decrease in forecast expenditure can be utilised to reduce the overprogramming sum from £33.2m to £32.6m.

12. Some concerns exist regarding the capacity of the provisioning departments to deliver the level of counter-terrorism initiatives currently proposed. Discussions are ongoing regarding the way in which projects will be delivered. The position will be reported within the next quarterly monitoring report.

13. The format for the quarterly capital monitoring reports is due to be discussed with the MPA. It is expected that these discussions will confirm the criteria for determining key data that needs to be brought to members’ attention.

Present economic climate

14. The present economic climate has directed that all costs are critically examined. A number of measures for reducing revenue expenditure are presently under consideration. Capital expenditure necessarily carries with it revenue expenditure implications. The 2010/11 capital programme will need to be kept under close review to ensure that if cost saving measures are required this can be achieved in a prudent and sensible manner. The operational needs of the Service will remain a major consideration when considering any ‘scaling back’ of the investment programme.

C. Other organisational and community implications

Equality and diversity impact

There are no specific equality or diversity implications arising from this report. Equality impact assessments are undertaken where appropriate on individual projects.

Consideration of MET Forward

The capital programme supports all policing objectives and delivery of projects is fundamental in meeting Service aims and assisting operational effectiveness

Financial implications

1. The financial implications for 2010/11 are discussed in the main body of the report. It has been verified that the provisioning departments have sufficient capacity to deliver the revised capital programme for 2010/11.

2. The implications of the scale of the capital programme in 2010/11 on future years’ investment proposals will be handled as part of the preparation of the Borrowing and Capital Spending Plan 2011/12 to 2017/18. The Plan is presently being collated. The available funding for investment purposes will need to take account of revised expectations regarding the level of police capital grant that will be made available. Decisions on further capital investment will also need to be taken following full evaluation of the affordability of the revenue impact.

Legal implications

There are no legal implications arising directly from the content of this report. In implementing the capital programme due heed will need to be given to all standing legislation relating to capital finance and accounting.

Environmental implications

There are no environmental implications arising directly from this report. However, in undertaking the various projects noted within the capital programme environmental issues will be fully considered and good practice observed.

Risk implications

There are no immediate risk implications arising from the content of this report.

D. Background papers

• Policing London Business Plan 2010-13
• MPA F&R Committee Report - First Review of Capital Programme 2010/11

E. Contact details

Report authors: Nick Rogers, Director of Finance Services, MPS

For more information contact:

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

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