Capital programme monitoring 2002/03 – third quarter

Report: 06
Date: 13 February 2003
By: Commissioner and the Treasurer

Summary

This report provides forecasts of capital expenditure for 2002/03 as at the end of the third quarter. Also provided are

1. actual expenditure on capital projects from 1 April to 31 December 2002; and
2. details of projects added to the capital programme since initial approval by the Finance, Planning and Best Value Committee on 30 April 2002. A paper setting out the MPA five-year capital programme for 2003/04 to 2007/08 was to be viewed by Committee Members in tandem with this report. The paper has necessarily been delayed as information on the capital settlement for 2003/04 is still awaited from the Home Office.

A. Recommendations

The Committee is invited to:

1. note that recorded expenditure at the end of the third quarter was £61.949m. This represents 49.53% of the revised budget sum (see paragraph 3).
2. note that recorded capital expenditure forecast by budget holders as at the end of December indicates an underspend of £19.07m against the revised budget of £125.084m (see paragraph 4).
3. note that forecast capital receipts now stand at £16.3m (see paragraph 12).
4. note the revised business group allocations and financing position for the capital programme 2002/03 (see paragraph 14).
5. note that information in respect of the five-year capital programme for 2003/04 to 2007/08 has been delaying pending announcement by the Home Office of the capital settlement for 2003/04 (see paragraph 16).

B. Supporting information

There is one appendix to this report:

Appendix 1: Actual and Forecast Capital expenditure 2002/03 2002/03 budget

1. At the Finance Committee meeting on 12 December 2002 a revised capital budget for 2002/03 of £125.084m was set. Increased allocations were approved of £2.994m in respect of vehicles to support safer streets and counter-terrorism initiatives and £2.0m for target hardening at the new Command and Control Centre at Hendon.

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 third quarter, are provided at Appendix 1.

3. At the end of the third quarter 2002/03 actual capital expenditure totalled £61.949m. This represents 49.53% of the revised capital budget for 2002/03.

4. The capital programme is presently forecast to underspend by £19.07m, or 15.25%, against the revised budget of £125.084m. The underspend is largely accounted for by

• delays to a number of major refurbishment schemes and the ongoing review of the Estate Strategy (£3.970m);
• delays in vehicle purchase, especially specialist vehicles (£2.852m); and
• slippage in the C3i Programme (£12.447m).

5. These forecast variations, and other significant matters reported at the end of December 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.

7. For those projects where variations in excess of £0.5m between budget and forecast outturn in 2002/03 are predicted, Property Services has advised that funds will be requested to be carried forward through reserves to be reallocated in 2003/04. Full details of these projects will be provided to Finance Committee members as part of the 2002/03 capital expenditure final outturn report. This is in line with present capital funding policy whereby sums allocated to a project are deemed to be available over the lifespan of that project.

Directorate of information

8. The forecast expenditure for the Directorate of Information at the end of December is £32.392m. This represents a slight overspend of £0.823m, or 2.61%, on the revised capital budget of £31.569m. This is a minor variation on the position as reported at the end of the second quarter and arises because of additional expenditure in respect of the Infrastructure Renewal Programme. This reflects the pressure to complete the renewal project as quickly as possible and the early introduction of new generation servers.

9. Analysis of revenue expenditure on the Infrastructure Renewal Programme during 2002/03 shows that much of the outlay falls within the technical accounting definition of capital expenditure and will need to be treated as such within our accounts. Circa £8.6m of revenue expenditure will be subject to capitalisation. However, this will not have a detrimental financial impact upon either the capital or revenue budget as upon capitalising revenue expenditure, a revenue contribution to capital outlay (RCCO) of equivalent amount would be undertaken.

Transport services

10. Transport Services reports a forecast outturn of £13.534m for vehicle related schemes. This is £2.852m below the revised budget figure of £16.386m. This reflects delays in the delivery of specialised vehicles such as armoured landrovers. Notification has been received that this underspend will be required to be carried forward through reserves to financial year 2003/04 to meet contractual commitments.

C3i and Airwave projects

11. Forecast expenditure in respect of the C3i Programme at the end of the third quarter indicates an underspend of £12.45m. This variation results from:

• accommodation slippage of £8.02m due to delays in building works, primarily at Hendon. This results from delays in contract signing resulting from security considerations;
• technology slippage of £2.79m due to rephasing of equipment purchase to meet project milestones; and
• consultancy slippage of £1.64m due to delays in appointment of system integrator.

The forecast underspend will be required to be carried forward through reserves to be reallocated to the C3i Programme in 2003/04 to meet the identified delayed expenditure.

Capital receipts

12. The initial estimate for capital receipts from the sale of land and buildings in 2002/03 was £15m. A figure of £16.3m is now forecast. However, this represents a significant reduction from the position reported at the end of the second quarter when a sales figure of £32.96 was predicted. The reduction reflects delays/cancellation in the disposal of Rochester Row, Old Street, and Arbour Square Police Stations. A report dealing with the sale of Rochester Row is timetabled to be discussed at this Finance Committee meeting (agenda item 15) and its content highlights the present volatile property market.

13. The forecast receipts total of £16.3m includes £5m in respect of estimated proceeds from right to buy applications.

Summary

14. Shown below are business group allocations for the capital programme 2002/03 as the end of the third quarter together with information on how this level of expenditure would be funded.

Table 1 – Capital allocations & financing

* 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.

15. Given the overall level of slippage in capital expenditure noted within this report, it would not be expected that the level of financing required from specific grant and reserves will be as high as that identified in the preceding table. This will result in reserves being bolstered and carried forward until such time that projected expenditure does take place.

Five-year capital programme 2003/04 to 2007/08

16. It had been expected that a report setting out the five-year capital programme for 2003/04 to 2007/08 for approval would be presented to this meeting of the Finance Committee. The paper would have complemented this monitoring report and identified the ramifications of slippage in respect of this year’s expenditure programme on future spending plans. Unfortunately, this has not proved possible as at the time of drafting this report notification was still awaited from the Home Office of the 2003/04 capital settlement. Once details are available, a draft five-year capital programme will be submitted for approval.

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, MPS.

For more information contact:

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

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