Revenue budget monitoring 2001/02 - (Including budget implementation update)

Report: 11
Date: 18 April 2002
By: the Treasurer and Commissioner

Summary

This report sets out actual income and expenditure for the MPA/MPS to the end of February 2002 (Month 11) and provides an update to the projected financial outturn for the year. It comments on major financial issues pertinent to the final position for the year 2001/02.

A. Recommendations

Members are asked to note the contents of this report.

B. Supporting information

Introduction

1. The purpose of this report is to update Members as to the revenue budget position of the MPA/MPS for the financial year 2001/02. It reflects the actual position for income and expenditure to February 2002 (Month 11) and provides a projected outturn position based on these actual results and current information available regarding identified year end accounting adjustments.

2. The last formal report to Finance, Planning and Best Value (FPBV) Committee on 21 February was based on figures to the end of December. Between that meeting and this, the MPA Budget Group (chaired by Lord Tope) has received revenue monitoring updates as at January (Month 10) and February (Month 11).

Overall position

3. The summary position is shown at Appendix 1 (see Supporting material), with a Business Group summary at Appendix 2 (see Supporting material). These statements reflect a forecast underspend of £7.3m (0.35% of the net revenue budget). Excluding the indicative overspend on Counter Terrorism measures, the underlying position is a £8.8m forecast underspend. The year to date position shows an underspend of £9.7m.

4. Members will notice that the underspend has increased by £1.3m from the position that was reported to the Committee in February. Whilst this represents a relatively small movement in the projected underspend in the context of the overall budget quantum, there continues to be volatility on certain budget lines, specifically those relating to income.

Headline issues

5. The forecasts of income receivable have significantly improved between Month 9 and Month 11 reporting (approx £7m). This forecast movement, whilst 'late in the day' does seem to be validated by the large favourable actual variance at Month 11 compared with the Month 9 position. The income increase mostly relates to partnership funding/income generation activities that were both unbudgeted for and unaccounted for in earlier forecasts and in part is due to an emphasis of Income Generation and Cost Recovery .

6. However, this increase in projected income has been offset to some extent by a review of the appropriate level of bad debt provision held by the Authority that has sensibly been increased to £6.8m for the purposes of management reporting in advance of a formal dialogue with the District Auditor.

7. Concurrently, as part of the preparation for the accounts closure process and with due consideration to the District Auditor's comments on the precarious nature of the MPA's finances, other necessary accounting provisions are being reviewed to ensure they are at an appropriate level. The most significant expenditure provision movement that is reflected in the attached statements is an increase in the provision for commuted pension lump-sum payments for police Officers eligible for retirement in 2002/03 (30 years service and aged 55) to £12m. Members will recall that the District Auditor specifically qualified the MPA 2001/02 accounts on the inadequate level of financial provision to meet these known pension liabilities.

8. Work is also continuing to ensure that all necessary year end accounting adjustments are identified in time to allow a robust year end position to be reported to Members during May. Members will further recall that whilst the Budget Star Chamber has been formally stood down, many of the constraints it imposed were kept in place through to the year end. Accordingly, it is still probable for changes in the components of the final underspend position.

9. Members should also be made aware that the reported Month 12 position will be unaudited and that during the course of the audit of 2001/02 financial statements, the treatment of particular accounting transactions may be amended through discussion with the District Auditor. This may be of particular relevance when considering the appropriateness of provisions or 'ear marked' reserves.

Budget priorities update

Police officer recruitment and retention

10. 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 & Retention

NB There is no recruit intake in September.

NNB 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.

Table 2 – Police Officers Filling Designated Civil Staff Posts

Civil Staff pay measures

11. 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. Payments reflecting the move to the Hay Pay Bandings occurred in the February and March payrolls. A review exercise is currently underway to establish the quantum of this central provision that needs to be taken through reserves into next years budget to allow for the impact of appeals and adjustments.

Information technology programme:

12. 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

The financial implications are those set out in this paper.

D. Background papers

Existing Committee reports referred to above

E. Contact details

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

For information contact:

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

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