Capital programme monitoring 2002/03 – second quarter

Report: 05
Date: 12 December 2002
By: Commissioner and Treasurer

Summary

This report provides forecasts of capital expenditure for 2002/03 as at the end of the second quarter. Also provided are (a) actual expenditure on capital projects from 1 April to 30 September 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. Recommendation

The Committee is invited to:

1. approve an increase to the capital programme of £2.994m in respect of vehicles purchased to support the safer streets, counter terrorism and Transport OCU initiatives. Funding to come from specific grants (see paragraph 12).
2. approve an increase to the capital programme of £2.0m for enhancement of the new Command and Control Centre at Hendon. Funding to come from specific grant (£0.5m) and capital receipts (£1.5m) (see paragraph 14).
3. note that recorded expenditure at the end of the second quarter was £37.417m. This represents 31.16% of the revised budget sum (see paragraph 3).
4. note the capital expenditure forecast by budget holders as at the end of September indicates an underspend of £14.924m against the revised budget of £120.090m (see paragraph 4).
5. note forecast capital receipts have risen from £15m to £32.96m (see paragraph 16).
6. note the revised business group allocations and financing position for the capital programme 2002/03 assuming approval of recommendations 1 & 2 by Committee members at today’s meeting (see paragraph 19).

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 Budget

1. At the Finance Committee meeting on 27 September 2002 a revised capital budget for 2002/03 of £120.090m was approved.

Forecast and expenditure

Summary position as at 30 September 2002

2. Details of the capital programme 2002/03, initial and revised budgets, and forecast outturn based on expenditure as at the end of the second quarter, are provided at Appendix 1.

3. At the end of the second quarter 2002/03 actual capital expenditure totalled £37.417m. This represents 31.16% of the revised capital budget for 2002/03.

4. The capital programme is presently forecast to underspend by £14.924m, or 12.43%, against the revised budget of £120.090m. The underspend is largely accounted for by

• Adjustments to the land and buildings capital programme (£3.970m). Much of this relates to delays to a number of major refurbishments schemes and the ongoing review of the Estate Strategy.
• slippage in the C3i Project (£7.4m).

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

Property services

6. Property Services presently forecasts expenditure of £26.286m on building related schemes. This represents an estimated underspend of £3.970m, or 13.12%, on a revised budget of £30.256m. This is largely attributable to delays in major projects. The requirement for slippage to occur to ensure that expenditure on building projects comes within the overall allocation has now been eliminated. This requirement also cushions the overall impact of the revised expenditure forecast.

7. Those projects where variations in excess of £0.5m between budget and forecast outturn for expenditure in 2002/03 are now predicted are shown in the Table 1 below.

Table 1– Revisions to property services forecast expenditure in 2002/03 £m £m

Notes

• A Delay resulting from prolonged lease negotiations.
• B Delay following redefinition of user requirement
• C Delay resulting from reassessment of refurbishment programme
• D Delay in formulating Glidewell Programme and finding suitable sites.
• E Reduction in programme assoc with Estate Strategy review.
• F Delay in project start date
• G Ongoing deliberations regarding final costs

8. It should be noted that a major review of the Estate Strategy is underway. Full details of the impact of this review on the 2002/03 building programme will be provided to the Finance Committee when available.

Directorate of Information

9. The forecast expenditure for the Directorate of Information at the end of September is £31.255m. This represents an underspend of £0.314m, or 0.99%, on the revised capital budget of £31.569m. This is minor variation on the position as reported at the end of the first quarter and signifies small adjustments to expected expenditure on named projects.

10. 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. Further steps have been taken in assigning these sums amongst the various workstreams that make up these major initiatives.

Transport Services

11. Transport Services reports a forecast outturn at the end of September 2002 of £10.790m for vehicle related schemes. This is £2.602m below the revised budget figure of £13.392m. This reflects delays in the delivery of specialised vehicles such as armoured landrovers. Due to significant lead times between order and delivery many of these vehicles are not now expected to be received until 2003/04.

12. As reported to the Committee on 27 September 2002, certain of the expenditure incurred to date relates to vehicles ordered for the new Transport OCU or to support the counter terrorism and the safer streets initiatives. These areas of expenditure reflect new demands not catered for within the initial programme. Dedicated funding sources are available to support these vehicle acquisitions. Accordingly, formal approval is sought for an increase in the capital programme for 2002/03 of £2.994m. The following table identifies how this money is distributed between expenditure heads and the relevant funding sources.

Table 2 – Revised budgets for transport expenditure

Funded by

C3i and airwave projects

13. Forecast expenditure in respect of the C3i Project at the end of the second quarter indicates an underspend of £7.4m. This variation results from:

• accommodation slippage of £3.1m due to delays in building works at Hendon. This results from delays in contract signing resulting from security considerations;
• technology slippage of £2.8m due to rephasing of equipment purchase; and
• consultancy slippage of £1.5m due to location of project management at Cobalt Square and rephasing of project expenditure.

14. Following the events of 11 September 2001 detailed consideration has been given to the need for high-risk buildings to be enhanced to provide protection against attack - ‘Target Hardening’. Approval has been given for the new Command and Control Centre at Hendon to be improved in this manner. The present estimate for this work to be undertaken is £2m. Approval is sought for the 2002/03 capital programme to be increased by this amount. The sum will be funded by a £0.5m contribution from the grant provided by the Home Office for counter terrorism and public order events. The remaining £1.5m is initially to be met from the increased in-year capital receipts with the expectation that savings will be achieved within the capital programme during the course of the financial year to meet this commitment.

Capital receipts

15. The capital programme for 2002/03 now requires £16.5m of capital receipts to support funding of total expenditure. This comprises the £15m shown in the initial 2002/03 capital expenditure programme together with £1.5m as identified in the preceding paragraph.

16. Forecast capital receipts for 2002/03 from the sale of land and buildings have increased from £15m to £32.96m. This results from increased land values and receipts from the sale of Rochester Row occurring in the present financial year rather than 2001/02.

17. The sale figure of £32.96m includes £1.5m in respect of estimated proceeds from right to buy applications.

18. Capital receipts in excess of the required figure of £16.5m will bolster capital reserves and provide much needed flexibility.

Summary

19. Taking heed of the recommendations made within this report for adjustments to the capital programme 2002/03, revised allocations for business groups would be as shown in Table 3 below. Also, provided is information on how this level of expenditure is intended to be funded.

Table 3 – Revised capital allocations & financing

Financed by

*Included here are dedicated grants received from the Home Office in respect of The C3i Programme, Safer Streets, & Counter Terrorism, and from Transport for London for Transport OCU needs.

20. The impact on reserves of the proposed funding of the capital programme 2002/03 is shown in the table below.

Table 4 – Movement in reserves 2002/03

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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