Revenue budget monitoring 2001/02 (inc budget implementation update)

Report: 14
Date: 17 January 2002
By: Treasurer and Commissioner

Summary

This report provides a summary of the revenue budget position as at the end of November together with a commentary on the main budgetary issues including in particular the counter terrorism measures. It also provides an update on the budget priorities.

A. Recommendations

The Committee is asked to:

1. Note the financial position to November 2001 as set out in Appendix 1 (see Supporting material).
2. Agree that if the MPA contingency is not required to fund any overspending at the end of the financial year it should be added to the Authority's general reserve.
3. Note the update on the budget priorities as set out in paragraphs 17 to 20.

B. Supporting information

Introduction

1. Reports have been submitted regularly to this Committee to advise on the progress of expenditure against budget and the forecast outturn position at the year-end. This report updates the position based on the current information available, including assessments of the impact of work done to investigate the forecast overspend of £13m that was reported to the meeting of the 8 November.

Review of financial performance

2. The summary position is shown in the attached Appendix 1 (see Supporting material) with a business group summary in Appendix 2 (see Supporting material). The statement once again reflects a position of a forecast expenditure outturn broadly in line with the budget. The year to date position (i.e. to the end of November) shows an overspend of £4.2 million.

3. The budget monitoring report for October highlighted the issue of expenditure on counter terrorism measures following 11 September and confirmed that grant of £22 million had been announced by the Home Office to cover costs 2001/02. It was the intention that this monitoring report for November would fully reflect the financial impact of these events in the forecast for the remainder of the year. However, the allocation of the additional resources does require consideration to be given to a number of operational issues arising from the impact of the September 11 terrorist activity. These issues have not yet been fully resolved and it has not proved possible to incorporate the expenditure nor grant into the forecast. Further costs are therefore expected to be reflected in due course but these will be contained within the grant income available.

4. As Members will appreciate, there has already been a significant level of resource applied to counter terrorism measures and some of this is included in the actual to date figures presented. This activity has clearly involved diversion of resources from other operational activities and a review of how this can be alleviated in the light of the resources available is being undertaken.

5. The report on 8 November identified actions being taken under the aegis of the Budget Star Chamber. The key areas for reducing spend were:

• the slowing down of civil staff recruitment
• tighter control and focus on police overtime
• IT investment slippage
• reducing forensic service submissions
• significant reductions in the use of hire vehicles.

These measures remain in place and tight control over expenditure continues to be exercised.

Further comments on the major variances are given below.

6. Police pay
As previously reported there are a number of factors which are leading to an overspend in this area, these include:

• the MPS’s success in attracting new recruits has meant that the vacancy factor built into this budget will not be achieved
• the pay award for police officers was budgeted to be 3% - the actual award was 3.5%
• there has been a settlement of certain pay anomalies in respect of married couples housing allowances
• allowance has also been made for the tax liability in respect of free travel. This was not funded in the budget.

7. Civil staff pay
Civil staff pay continues to show an underspend against budget and this has increased from the October report. No account has been taken of the provision for implementation of the Hay review so that the budget for this of £13.4m remains in the Centrally held funds, to cover implementation of the revised pay scales will be backdated to August 2001.

8. Police overtime
The overspend in Police overtime remains broadly in line with the level indicated in the October report. An increase in this item can be expected as a result of the counter terrorism measures but this will be contained within the grant funds available.

9. Pensions
The trend of underspending against budget has continued in this period and pensions for police and civil staff are estimated to underspend by a total of £10.9m.

10. Business group running expenses
The forecast position is showing an overspend of £8.9m but as previously reported this includes a number budget heads which are under and overspending. The most significant areas of potential overspend are partnership expenditure £4.9m (NB this is offset by unbudgeted income), travel and subsistence £1.6m and consultants £2.7m. It appears that the travel and subsistence variance is associated with counter-terrorism. The consultancy spend is offset by some of the underspend on civil staff pay.

11. Service wide running expenses
The forecast position is showing an overspend of £1.5m; this includes a number budget heads which are under and overspending. The most significant areas of potential overspend are vehicle repair contractor payments £1.1m, forensic charges £10.4m and communication costs £2.5m. This areas of potential overspend are likely to be offset to by significant potential underspend in compensation £7.1m and information systems £9.3m.

12. Business group income
This area is showing a considerable level of receipts above those budgeted for. The position to date shows excess receipts of £4.67m and the year-end forecast shows excess receipts of £9.3m. This is predominantly due to unbudgeted partnership income that is offsetting unbudgeted partnership expenditure (see para. 11)

13. Service wide income
Again service wide receipts are running ahead of budgeted income by £2.9m year to date and £8.1m at the year-end forecast. This is due to three areas of higher than anticipated income:

• Rents receivable (see para. 6.7)
• Pension contributions from additional officers
• Reimbursement of Criminal Record Bureau set up costs in the creation of the character enquiries centre.

Overview of budget position

14. This monitoring report shows net expenditure forecast to be in line with budget at the year-end. This year-end position has been achieved following a systematic internal review of the budget position and after identifying a number of corrective actions. It is recognised that this year-end position can only be achieved if these actions are followed through robustly and to this extent the scrutiny and reporting process will need to remain rigorous for the remainder of the year.

15. As a result of the unfinished work to conclusively disentangle the full actual and projected expenditure in respect of post 11 September activity, the timescales for producing forecast information and analysis based on December results have been brought forward significantly. This will enable a more accurate picture of counter terrorism spend and demonstrate the extent to which Budget Star Chamber output has constrained expenditure over and above that required to breakeven this year.

16. As agreed by the Committee at its last meeting the MPA contingency of £4.1 million remains frozen as a safeguard against non-delivery of the corrective action or any further overspending. It is proposed that this should continue and in the event that the contingency is not required to fund any overspending at the end of the year it should be added to the Authority's general reserve. This would still leave the reserve short of its approved minimum level of 1% of expenditure.

Budget priorities update

17. Police officer recruitment and retention
Detailed reports on recruitment and retention issues are regularly submitted to the Human Resource Committee. Table 1 below sets out current performance on police recruitment and wastage:

Table 1 - Performance on police officer recruitment and retention

NB: 

1. There is no recruit intake in September.
2. The minor discrepancies between the calculated strength and actual strength in the first few months can be accounted for by officers recorded on strength at 31 March, who actually left in the last financial year and are not therefore shown in wastage for this year.

18. The downward trend in the number of police officers occupying designated civil staff posts with Borough Command Units has reversed in November as demonstrated in Table 2. It is probable that the dramatic slowdown in civil staff recruitment to ease the financial position is the major cause of this reversal.

Table 2 - Police officers filling designated civil staff posts

19. Civil staff pay measures
The improved Location Allowances were put into payment in May backdated to April 2001. The costs of £8.9 m are now reflected in the budget reports. The remaining provision for civil staff pay improvement of £13.338m is still held in the Central provision. Work is progressing on the Hay review with a view to implementing this in January 2002.

20. Information technology programme
Attached as Appendix 3 (see Supporting material) is a schedule of the projects in the IT programme with comments as to where they are in the development and implementation cycle at present.

C. Financial implications

There are no financial implications arising directly from this paper.

D. Background papers

• Existing Committee reports referred to above

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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