Capital budget 2002/03 – provisional outturn

Report: 05
Date: 9 June 2003
By: Commissioner and Treasurer

Summary

This report provides details of the provisional outturn position for capital expenditure during 2002/03 as recorded at 19 May 2003. An early indication is also given of sums arising through project slippage that are required to be carried forward through reserves to be re-allocated during 2003/04. Approval for the eventual level of carry forward will be sought as part of the report on the final outturn to be submitted to this Committee in July.

A. Recommendations

That

1. the Committee approve an increase to the capital programme of £10.559m in respect of the capitalisation of revenue expenditure on IT equipment. Funding is to come from a revenue contribution to capital outlay (RCCO) (see paragraph 2);
2. approve increases to the capital programme of (a) £0.669m in respect of vehicles; and (b) £0.359m for photographic and catering equipment, purchased from savings achieved in revenue expenditure. Funding is to come from a revenue contribution to capital outlay (RCCO) (see paragraph 3);
3. note the provisional and adjusted provisional outturn information by business group (see Appendix 1);
4. note that outturn figures are provisional and may change as part of the process for finalising the 2002/03 accounts (see paragraph 5); and
5. note that confirmation of the final outturn position, and details of sums required to be carried forward to 2003/04 in respect of named capital projects, will be provided within a report to the July meeting of the Finance Committee (see paragraphs 6 – 8).

B. Supporting information

2002-03 Budget, Expenditure and Forecast

1. A provisional outturn of £110.475m is recorded against the 2002/03 revised capital budget of £125.084m. However, no allowance has been made within the revised budget total for certain areas of expenditure that are now reflected in the provisional outturn figure.

2. In analysing revenue expenditure undertaken during 2002/03 on the Infrastructure Renewal Programme it was noted that £10.559m fell within the technical definition of capital expenditure as set out within the Local Government and Housing Act 1989. Accordingly, steps have been taken to reclassify this expenditure. Notification of this requirement was provided to Committee members on 13 February 2003 as part of the 2002/03 third quarter monitoring report. In order to allow direct comparison of the outturn with the revised budget, approval is consequently sought for the capital programme to be increased by £10.559m for this IT expenditure. The increase will have a neutral financial impact upon either the capital or revenue budget as to balance the capitalisation of expenditure a revenue contribution to capital outlay (RCCO) of equivalent amount will be undertaken.

3. Items of capital expenditure have also been purchased (a) from monies included within the 2002/03 revenue budget for officer growth; and (b) utilisation of monies released for pressing demands as part of the management of the emerging revenue underspend during 2002/03. This is reflected by:

• £0.669m being spent on vehicles for PCSOs and to meet increasing training needs; and
• £0.359m being used for photographic and catering equipment.

These items have not previously been notified to the Committee. As at paragraph 2 above, the expenditure will not have an adverse impact on capital or revenue budgets and will be financed by a revenue contribution to capital outlay (RCCO). Accordingly, approval is sought for the capital budget for 2002/03 to be increased by £0.669m for transport purchases and £0.359m for photographic and catering equipment.

4. Appendix 1 (summary of capital expenditure by business group 2002/03) provides a statement by business group of the provisional outturn for 2002/03 as recorded as at 19 May 2003.

5. The final accounts process for 2002/03 is still ongoing, with work continuing to be carried out to ensure that expenditure is (a) matched to the accounting period to which it relates and (b) appropriately classified according to the nature of the service/goods purchased. In view of this, outturn information can only be regarded as provisional at the present time. Whilst figures would not be expected to vary considerably from those shown in this report, they should be noted as indicative rather than actual figures.

6. Confirmation of the final expenditure position, together with a detailed summary of performance in respect of named capital projects, will be provided as part of an outturn review report. This will be submitted to the Committee for its July meeting.

7. To clarify comparison of the provisional outturn with the capital budget it is necessary to exclude those items for which no provision has hitherto been made within the latter figure. This adjustment is shown in Table 1 below.

Table 1: Derivation of Adjusted Provisional Capital Outturn 2002/03

8. The adjusted outturn figure of £92.903m when compared with the revised budget of £125.084m gives an underspend of £32.181, or 25.73%. Committee members were advised when approving the five-year capital programme 2003/04 to 2007/08 on 10 April 2003, that project managers would be asking for sums noted as ’slippage’ during 2002/03 to be carried forward through reserves to 2003/04, and subsequent years. This is in line with present capital funding policy whereby sums allocated to a project are deemed available over the lifespan of that project. It is understood that circa £26m of the sum noted as underspend against the revised budget relates to project slippage. Full details of the schemes affected in this way will be provided to the Finance Committee in July 2003. This will be as part of the 2002/03 capital expenditure final outturn report when approval to individual project carry forward sums will be sought.

Property Services

9. Property Services has provisionally recorded a spend of £23.889m against its revised capital budget of £30.256m. This represents an underspend of £6.367m. This situation has previously been notified to Committee members as part of in year monitoring reports and when reporting the period 11 spend when seeking approval of the capital programme 2003/04 to 2007/08. The underspend arises from the decision to undertake a full review of the Estate Strategy, and the move to a policing priority theme based approach for future capital works, concentrating on the statutory and contractual obligations placed on the MPA. It is understood that the full underspend sum will be required to be carried forward to support ongoing projects.

Directorate of Information

10. The adjusted outturn for the Directorate of Information records expenditure of £27.616m. In addition to the adjustment of £10.559m referred to in Paragraph 2, a further adjustment of £5.985m has been made which relates to expenditure incurred against a technical refresh prepayment made in 2001/02. The Directorate has indicated that a carry forward of budget will be requested for a number of projects; this will be reported in the final outturn paper.

Transport Services

11. Transport Services has an adjusted provisional outturn of £14.401m. This represents an underspend of £1.985m (12.11%) on the revised budget of £16.386m. The outturn reflects (a) delays in the delivery of specialised vehicles such as armoured landrovers and (b) part utilisation of the sum provided as a special capital grant in support of the safer streets initiative. Finance Services has been advised that the total amount noted as an underspend will be required to be carried forward through reserves to support ongoing projects in 2003/04.

Other plant and equipment

12. Other capital budgets, held by a variety of business groups, recorded an adjusted outturn of £0.298m against a revised budget of £0.299m. This reflects well on the various project managers. The position is in line with that advised to Committee members as part of the series of monitoring reports seen over the past year.

C3i Programme

13. The provisional capital outturn for the C3i Programme, which covers the C3i and Airwave Projects, is £26.087m. When compared with the revised budget of £46.010m an underspend of £19.923m, or 43.3% is achieved. The forecast underspend has steadily grown during the course of the past year and reflects the problems experienced in accurately predicting expenditure profiles for the C3i Programme given the scale of the project involved and the security considerations that have arisen. The underspend arises from

• delays in the construction of the three call centres. This is as a result of security considerations and site problems;
• rephasing of equipment purchases to meet revised project milestones; and
• consultancy slippage due to delay in the appointment of a system integrator.

The C3i Programme Management Team has already indicated that the full overspend sum is deemed to arise from project slippage and will be required to be carried forward to support forecast expenditure in 2003/04.

Capital receipts

14. The outturn for capital receipts in respect of the sale of land and buildings is recorded as £12.301m. This is £2.699m below the initial estimate of £15m. This reflects delays/cancellation in the sale of major properties such as Rochester Row, Old Street and Arbour Square Police Stations, as well as delays in processing the sale to officers of residential accommodation under ‘right to buy’ legislation.

15. Capital receipts from the sale of surplus vehicles and boats are noted as £0.192m.

C. Equality and diversity implications

These 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: Sharon Burd, Director of Finance, MPS.

For more information contact:

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

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