Capital programme monitoring 2001/02 - second quarter

Report: 9
Date: 8 November 2001
By: Commissioner and the Treasurer

Summary

This report provides forecasts of capital expenditure and receipts for 2001/02 as at the end of the second quarter. Also provided are (a) expenditure on all capital projects as at 30 September 2001; and (b) details of projects added to the capital programme since initial approval by the MPA.

A. Recommendations

The Committee is invited to:

1. note that based on results to the end of the second quarter, capital expenditure in 2001/02 is forecast to underspend by £4.1m (4.6%) against the revised capital budget of £88.5m (paragraph 1).
2. note the revised capital budget 2001/02 of £88.5m (paragraph 1).
3. note the intention to finance additions to the capital programme in 2001/02 from the capital receipts pool, with a commensurate reduction in the capital allocation for property services for 2002/03 of £1.3m. This proposal will be accommodated when final approval is sought for the capital programme for 2002/03 to 2005/06 in January 2002 (Paragraph 3).
4. note that £10m allocated to the C3i Project as a contingency sum will only be partially utilised during the financial year. It is intended that £4.0m will be sought to be carried forward to 2002/03 as part of the overall funding of the C3i Project (paragraph 6).
5. approve the inclusion within the capital programme of the implementation and development of the National Intelligence Model. This project to be funded by way of a specific grant of £1m already received from the Home Office (paragraph 7).
6. note that the corrective actions to be taken to redress the forecast overspend on the revenue budget 2001/02 may impact upon forecast capital expenditure (paragraph 12).
7. note that expenditure to the end of the second quarter amounts to £23.9m against a profiled budget of £36.5m (Appendix 1).

B. Supporting information

2001-02 Capital Budget, Expenditure and Forecast

1. The 2001/02 revised capital budget of £88.5m presently shows a forecast outturn of £84.4m resulting in an estimated underspend of £4.1m (4.6%). The summary position is set out in Table 1 below.

Notes:

1. Financed from the capital receipts pool with a commensurate reduction in the capital allocation for property services in 2002/03 from £24.5m to £23.2m – see paragraph 3.
2. Financed by application of capital receipts in advance of the sale of Trenchard House – see paragraph 7.
3. Financed by specific grant received from the Home Office – see paragraph 7.

2. Appendix 1 provides a detailed statement of forecast outturn based on expenditure to the end of the second quarter.

Directorate of Property Services

3. The Directorate of Property Services presently forecasts expenditure of £30m. This includes three projects, to the value of £1.3m, which have been incorporated into the capital programme since the initial budget was approved. These projects - as agreed by the MPA – will be financed from the capital receipts pool with a compensating reduction in the capital allocation for property services for 2002/03 from £24.5m to £23.2m. This reduction will be reviewed later in the financial year when the forecast outturn figures have been further refined.

4. A number of projects are being delivered ahead of schedule or incurring additional costs due to unforeseen requirements. These include the East and West London Serious Crime Group Headquarters, custody suite alterations at Havering Police Station and alterations to Hammersmith Police Station. In order to contain expenditure within the capital property allocation for 2001/02 the following measures have been adopted. The principal areas of virement include:

• Minor building works in support of operational policing being re-phased.
• Belvedere Police Station cell conversions and Plumstead Police Station cell extensions are to be re-phased to commence in 2002/03.
• Refurbishment of Finchley Police Station for SO8 Branch being re-phased to 2002/03.
• Cancellation of the scheme for provision of accommodation for the Forensic Support Unit at Larkhall Lane.

5. For the purposes of this report, consultants' fees and 'slippage', as recorded within the forecast outturn and expenditure columns of Appendix 1, are included within individual project figures and not shown as separate items.

Directorate of Information

6. The revised capital budget managed by the Directorate of Information is £46.8m. This includes a contingency sum of £10m for the C3i Project. The C3i Project Team presently forecasts expenditure of £6.0m in 2001/02 against this figure. The balance of £4.0m will be required in 2002/03 and Committee agreement will be sought for this proposal in January 2002 when the capital programme for 2002/03 to 2005/06 is submitted for final approval.

7. Two additional IT projects have been added to the capital programme.

• Resolve 2 deals with the upgrade and transfer of a back-up facility for the Information Room at New Scotland Yard. Relevant equipment is presently sited within Trenchard House but is obsolete. Also, in view of the intention to sell this property, new equipment is required to be installed at an alternative location. The project is expected to cost £1.2m and was approved by the Finance Planning and Best Value Committee on 14 September. It is intended to fund this scheme from receipts to be realised from the planned disposal of Trenchard House scheduled to take place in 2002/03. In the interim the project will be financed from additional capital receipts arising from the resumption of the sale of residential properties. Upon the successful disposal of Trenchard House reserves will be fully reimbursed.
• The second additional project deals with the implementation and development of the National Intelligence Model. Four interrelated strands of work associated with strategic intelligence management are to be funded from a successful bid to the Home Office for a specific grant of £1m. This grant has been received and is expected to be the sole source of finance for the project.

8. Forecast expenditure for the Directorate of Information has increased in line with the cost of Resolve 2 and National Intelligence Model Projects. Noting the proposed carry forward of £4.0m in respect of the C3i Project, a projected outturn of £42.8m is calculated. Members will recall that the agreed budget for IT projects incorporated a required reduction of £5.4m. This sum was to be found from savings in implementation costs or slippage in project delivery. The Directorate of Information will be asked to set out proposals for achieving the remaining £2.8m reduction in January 2002 as part of the third quarter monitoring exercise.

Directorate of Managed Transport Services

9. The Directorate of Managed Transport Services reports a forecast outturn of £11.2m. This represents a small underspend of £0.1m (1%) on the budget of £11.3m. Balancing reductions in forecast expenditure on vans (£0.6m) and motorcycles (£0.1m) allow for an additional £0.7m to be applied for the replacement of cars. The revised mix of replacement vehicles reflects changes in demand by operational units.

10. A thorough mid-year review of transport requirements is presently being undertaken. The soon to be published Transport Fleet Strategy is also likely to impact upon transport needs.

Capital Receipts

11. Forecast capital receipts from the sale of land and buildings in 2001/02 remain at £35m. This is £10m in excess of the original target of £25m. The sales market will continue to be closely monitored to verify that the forecast receipts are attainable. At the end of the second quarter actual receipts of £16.4m had been achieved.

Overall financial position

12. The MPA has been advised of the forecast overspend on the revenue budget for 2001/02 and of the corrective actions that are to be taken with immediate effect to redress the situation. This initiative may have implications for the capital programme through:

• Slowing down the IT development programme and freezing all uncommitted related revenue expenditure.
• Restricting any further expenditure on buildings and estate matters to those of a health and safety requirement or those contractually committed.

The situation will be kept under review and any matters arising reported to the Finance Best Value and Planning Committee in January 2002.

C. Financial implications

1. The capital programme, after taking account of amendments to the initially approved programme – see Table 1 at paragraph 1 - is currently forecast to underspend by £4.1m (4.6%). However, of this figure, £4.0m relates to the C3i project and Committee approval will be sought in January 2002 for carry forward of this sum to 2002/03.

D. Background papers

Supporting Information: Corporate Finance – 2001/02 Capital Budget Files

E. Contact details

Report author: Bob Alexander, Head of Finance, MPS.

For information contact:

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

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