Capital programme monitoring 2002/03 - first quarter

Report: 06
Date: 27 September 2002
By: Commissioner and Treasurer

Summary

This report provides forecasts of capital expenditure for 2002/03 as at the end of the first quarter. Also provided are (a) actual expenditure on capital projects from 1 April to 30 June 2002; and (b) details of projects added to the capital programme since initial approval by the Finance, Planning and Best Value Committee on 30 April 2002.

A. Recommendations

The Committee is invited to:

1. validate the revised capital budget for 2002/03 of £126.716m (see paragraphs 1 to 6)
2. approve an adjustment to the capital programme 2002/03 in respect of the recasting of the scope and timing of six land and buildings projects. Expenditure to remain within the overall property services allocation of £28.756m. (see paragraphs 12 & 13)
3. approve the inclusion within the property services programme of the refurbishment of Tintagel House, Maurice Drummond Section House, and Norman Kendall Section House. Expenditure to be funded from capital reserves pending the sale of Trenchard House (see paragraph 15)
4. approve an increase to the capital programme 2002/03 in respect of the forecast overspend of £0.064m on IT, communications, and telephony work at the new MPA headquarters at 10 Dean Farrar Street. The overspend is to be funded from capital reserves (see paragraph 22)
5. note that capital expenditure forecast by budget holders as at the end of June indicates an underspend of £12.5m (9.87%) against the revised budget of £126.716m (see paragraph 8)
6. note that recorded expenditure at the end of the first quarter was £13.561m. This represents 10.7% of the revised budget sum (see paragraph 9)
7. note that Property Services is in the process of reviewing its building programme with a view to eliminating the present slippage factor (see paragraph 16)
8. note formal approval will be sought for an increase in the Transport Services allocation in respect of vehicles purchased for the new Transport Operational Command Unit (OCU) and to support counter terrorism initiatives (see paragraph 19)
9. note forecast capital receipts have risen from £15m to £25m (see paragraphs 23 to 25).

B. Supporting information

There is one appendix to this report:

Appendix 1: Actual and Forecast Capital expenditure 2002/03. A fuller version showing the expenditure by project is available for members in the Members Room.

2002/03 budgets

1. The capital budget for 2002/03 was given final approval as part of the medium term capital programme 2002/03 to 2005/06 by the Metropolitan Police Authority (MPA), Finance Planning and Best Value Committee at its meeting on 18 April 2002. The approved level of expenditure was £123.936m and was allocated across business groups/projects as noted in Table 1 below.

Table 1 – Budget allocation for capital programme 2002/03

Note: Schemes from the C3i Project downwards in the above table were listed independently of the parent provisioning department as they were to be funded from dedicated sources e.g. Home Office Capital Grant. They were classed as outside of the main capital programme.

2001/02 schemes brought forward 

2. Details of the capital programme outturn for 2001/02 were reported to the MPA, Finance Committee on 11 July 2002. Approval was given for the carry forward of funds to 2002/03 to support named projects. These projects are listed at Table 2 below. 

Table 2 – Sums to be c/fwd to support capital projects in 2002/03

Directorate of Information: 2001/02 schemes brought forward

3. As part of the Directorate of Information’s response in 2001/02 to the Star Chamber’s request to find substantial revenue savings, a deliberate slow down in the capital work programme was necessarily effected. This was particularly so for the Infrastructure Renewal Programme and the Information Strategy Implementation. This resulted in monies in respect of these two major areas of work being identified to be carried forward from 2001/02 to 2002/03. However, £5.75m of the Directorate’s overall allocation for 2002/03 of £29.5m remained to be prioritised across named projects. It became apparent that the capacity of the Directorate of Information to utilise this £5.75m, without a corresponding increase in supporting revenue funding, was limited. Consequently, the decision was taken by the Capital Prioritisation Committee on 10 May 2002 to release this sum back to capital reserves.

C3i and Airwave Projects

4. In recognition of the development of the C3i and Airwave Projects and the considerable capital investment they represent over coming years, the MPA, Finance Committee approved on 11 July 2002 the creation of an earmarked capital reserve specifically to account for funding of these projects. This was to ensure transparency of reporting of specific grants awarded by the Home Office and their application to fund project expenditure. The reserve was established by credit of the sum noted to be carried forward to 2002/03 in respect of the C3i Project.

5. In keeping with good business practice the business cases for the C3i and Airwave Projects have been subject to review. This has resulted in a reassessment of the profile of expenditure over the lifetime of the projects. Accommodation requirements have also been reappraised in the light of security considerations arising from the events of 11 September 2001. The revised forecast expenditure levels were approved by the MPA Treasurer and have been adopted as the revised budget requirement for C3i and Airwave as part of the capital expenditure programme for 2002/03.

Revised capital budget 2002/03

6. Based on approved adjustments to the capital programme a revised budget of £126.716m is determined. This position is summarised in Table 3 below.

Table 3 – Revised capital budget 2002/03

7. Full details of projects within the capital programme 2002/03, their initial and revised budgets, and forecast outturn based on expenditure as at the end of the first quarter, are provided at Appendix 1. 

Forecast and expenditure

Summary position as at 30 June 2002

8. The capital programme is presently forecast to underspend by £12.5m, or 9.87%, against a revised budget of £126.716m. The underspend is largely accounted for by

1. reassessment of the refurbishment schemes at Tintagel House, Maurice Drummond Section House, and Norman Kendall Section House (£7.69m); and
2. slippage in the C3i Project (£2.46m). 

9. At the end of the first quarter capital expenditure of £13.561m was recorded on the corporate accounting system (MetFIN). This represents 10.7% of the revised budget sum. 

10. These variations, and other significant matters reported at the end of June 2002 are described in more detail below by Business Group

Property Services

11. Property Services presently forecasts expenditure of £26.966m. This represents an estimated underspend of £1.79m, or 6.2%, on a revised budget of £28.756m.

12. Immediately following the commencement of the financial year, recasting of the scope and timing of four projects was conducted by Property Services. This resulted in a cost saving for 2002/03 of £0.634m. These projects are listed below. 

Table 4 – Adjustments to Property Services budget

13. In reviewing the land and buildings capital programme it was thought prudent to (a) bring forward from 2003/04 relocation of the Directorate of Information’s Technical Support Unit (£0.2m); and (b) recognise that some building works may be required at the Hendon Estate in respect of storage of registry files (£0.57m). The first of these projects was recognised as being of high importance due to its interaction with support to operational policing; the latter represented a fallback position from full participation in the Ministry of Defence PFI Project for replacement of the Hayes Repository. It can be seen that these two additions are largely balanced by the savings identified at Table 4 above and it is proposed that the Property Services budget be revised accordingly. This adjustment should have no funding implications as it would be expected that costs be managed through the slippage factor that operates for land and buildings expenditure. The minor increase would therefore be contained within the overall budget allocation of £28.756m 

14. As part of the forecasting exercise undertaken at the end of the first quarter a number of adjustments to expected outturn figures have been recorded. This reflects projects being delayed/delivered ahead of schedule, or additional/reduced costs due to unforeseen requirements. Those projects where variations in excess of £0.5m between budget and forecast outturn are now predicted are shown in the Table 5 below. 

Table 5 – Revisions to Property Services forecast expenditure

Notes
a Adjustment results from increase in DoI works and fees c/fwd from 2001/02.
b Delay in formulating Glidewell Programme and finding suitable sites.
c Delay due to revised user requirements. Increase in overall project costs.
d Scope of works being reconsidered. Decrease in overall project costs.
e Delay resulting from prolonged lease negotiations. No change to overall costs.

15. As recorded in the note to Table 1 above, a number of capital projects were listed independently of the main programme as they were being funded from dedicated sources. Receipts from the disposal of Trenchard House were earmarked to fund major refurbishment of Tintagel House, as well as conversion works at two section houses (Maurice Drummond & Norman Kendall). It was reported to the MPA, Finance Planning and Best Value Committee on 18 April 2002 that consideration was being given to the possible sale of the section houses to a developer under a public private partnership. This option is no longer being pursued. Work requirements in respect of Tintagel House and the section houses are presently being reassessed. A revised estimate for the three projects in 2002/03 of £1.5m has been prepared. This represents a reduction of £6.69m on the initial budget for 2002/03 of £8.19m. Forecast expenditure at the present time is only £0.5m. As the disposal of Trenchard House has in turn been deferred, it is thought appropriate to adjust the Property Services allocation by the revised estimate sum and recognise this expenditure as being funded from capital reserves pending disposal of the section house. 

16. It should be noted that Property Services is in the process of reviewing its building programme with a view to eliminate the slippage factor required to ensure that planned building projects are delivered within the overall allocation. This will ensure a balanced programme, with identified savings available for virement to other schemes. 

Directorate of Information

17. The forecast expenditure for the Directorate of Information at the end of June is £31.24m. This represents an underspend of £0.329m, or 1.04%, on the revised capital budget of £31.569. 

18. When setting the budget for the Directorate of Information block allocations were made in respect of the Infrastructure Renewal Programme and the Information Strategy Implementation. These sums have now been assigned amongst the various workstreams that make up these major initiatives and are set out at Appendix 1. 

Transport Services 

19. Transport Services reports a forecast outturn in line with its revised budget of £13.392m. However, it is noted that expenditure of £0.044m has been incurred in respect of the new Transport OCU and £0.628m spent in purchasing vehicles to support counter terrorism initiatives. Both areas of expenditure reflect new demands not catered for within the initial programme. Dedicated funding sources support counter terrorism and Transport OCU expenditure. The full extent of transport requirements for these two operations will be ascertained. Formal approval for an increase in the capital programme for 2002/03 will then be sought; this increase to be funded by contributions from the dedicated funding sources. This is likely to require revenue contributions to capital outlay (RCCO).

C3i and Airwave projects

20. As noted at paragraphs 4 & 5, revised business cases in respect of the C3i and Airwave Projects have been prepared and budgets for 2002/03 adjusted accordingly.

21. Forecast expenditure in respect of the C3i Project at the end of the first quarter indicates an underspend of £2.46m. This primarily results from delays to building works resulting from the redesign of accommodation at Hendon in respect of security considerations. 

MPA: Dean Farrar Street

22. A budget of £0.5m for IT, communications and telephony work at the new MPA headquarters at 10, Dean Farrar Street was approved as part of the 2002/03 capital programme. At the Co-ordination and Urgency Committee of the 11 June 2002 MPA members were advised that additional costs of £0.064m were forecast. It was agreed that this expected overspend be funded from capital reserves. Formal approval will therefore be sought for the capital programme to be increased by £0.064m with a balancing draw down from reserves. 

Capital receipts

23. Forecast capital receipts from the sale of land and buildings have increased from £15m to £25m. This results from increased land values and receipts from the sale of Rochester Row falling into the present financial year rather than 2001/02.

24. The sale figure of £25m includes £1.5m in respect of estimated proceeds from right to buy applications.

25. The capital programme for 2002/03 requires £15m of capital receipts to support funding of total expenditure. Any increase in receipts beyond this figure will bolster capital reserves and provide much needed flexibility.

26. The estimated profile of C3i Project expenditure and dedicated grant receipts from the Home Office are not in tandem and cash flow problems may result. This situation is presently being discussed between the MPA Treasurer and the Home Office with a view to negotiating a more amenable grant payment timetable.

C. Equality and diversity implications

There are no equality and diversity implications arising from this report.

D. Financial implications

Financial implications are discussed in the main body of the report.

E. Background papers

• Corporate Finance – 2002/03 Capital Budget Files

F. Contact details

Report author: Mike Jennings, Director of Finance.

For more information contact:

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

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