Capital programme 2002/03 – outturn

Report: 07
Date: 10 July 2003
By: the Commissioner and Treasurer

Summary

This report provides details of the outturn position for the capital expenditure programme 2002/03. Capital payments of £111.436m fell short of the adjusted capital budget by £34.477m. Approval is also sought for the carry forward of funds to 2003/04 in respect of named capital projects where timing differences (i.e."slippage”) in expenditure profiles have occurred.

A. Recommendations

The Committee is recommended to:

1. approve increases to the budget of £9.242m as part of the accounts closure programme (see paragraph 3 and Table 1).
2. note the outturn position for capital expenditure in 2002/03 (see paragraph 4 and Appendix 1).
3. approve the carry forward to 2003/04 of £32.987m to support capital projects during 2003/04 (see paragraphs 11-12 and Appendix 2).

B. Supporting information

2002/03 Budget

1. On 9 June 2003 Committee members noted the provisional outturn position for the capital programme 2002/03 and approved a revised budget of £136.671m.

2. Further increases to the budget totalling £9.242m are required, subject to members’ approval, following a review of the accounts as part of the accounts closure programme. These reflect projects previously classified as revenue expenditure which should more correctly be capitalised. The expenditure associated with this budget increase carries its own revenue contribution to capital outlay (RCCO) or grant financing.

3. The detailed schemes added to the capital programme 2002/03 are set out in Table 1 below.

Table 1 – Capital Expenditure Programme 2002/03

Notes:

1. Infrastructure development funded from prepayments to SSEMA as part of the outsource contract. As these prepayments were made in prior financial years this expenditure has already been funded.
2. Utilisation of monies released for pressing demands as part of the management of the emerging 2002/03 revenue underspend.
3. The setting up of a vehicle recovery and storage infrastructure to support core functions of the MPS. Revenue funds to cover fitting-out costs of leased premises. Approved by Finance Committee 14 November 2002.
4. Vehicles required to support counter-terrorism and Transport OCU initiatives. Funding provided by specific grant.
5. Vehicles purchased from partnership grants.

Capital Spend and Outturn Position

4. Capital expenditure during 2002/03 totalled £111.436m. This resulted in an underspend of £34.477m against the adjusted budget of £145.913m. The underspend was largely attributable to timing difficulties experienced in the delivery of schemes. In almost all cases the unused capital budget is required for addition to the 2003/04 programme which is to be reviewed by this Committee in September. Appendix 1 provides a summary of the capital outturn position by expenditure category for 2002/03. Full details for individual capital projects are contained in the accompanying exempt report.

Property Services

5. Property Services has recorded a spend of £23.889m against an adjusted budget total of £31.082m. This represents an underspend of £7.193m. As previously advised the underspend arises from the review of the Estate Strategy. The land and buildings capital programme will henceforth be structured on a policing priority theme based approach concentrating on statutory and contractual obligations placed on the MPA. This will allow greater flexibility in the timing and completion of projects and it will provide the ability to respond quickly to underspends in one area by diverting funds to other projects. Property Services will also be better placed to respond to front line policing needs.

Directorate of Information

6. The Directorate of Information has recorded expenditure of £44.412m against an adjusted budget of £48.533m. The underspend of £4.121m arises from delays in implementation of the Information Strategy Programme particularly in respect of supplier difficulties. However, the opportunity has been used to develop an increasing number of projects required to upgrade legacy systems.

7. In recognition of comments raised by Committee members when discussing the provisional outturn report on 9 June 2003, it is important to note that two large sums of expenditure have been managed by the Directorate that were not initially contained within the approved capital expenditure programme 2002/03. The first relates to £6.136m in respect of technology infrastructure work. This investment has been funded by way of payments previously made to the outsourced service provider in earlier years of the contract. Works to a matching value have now been delivered as planned. The second sum of £10.559m relates to infrastructure development work. This was to a large extent made possible by the emerging capital underspend during 2002/03 and provides much needed support to operational officers. The effort made by the Directorate in accommodating these extra areas of expenditure is to be commended.

Transport Services

8. Transport Services has recorded expenditure of £15.719m against an adjusted budget of £19.044m. This represents an underspend of £3.325m and relates to (a) the extended lead time needed in contracting for the specialised build of armoured vehicles; and (b) fewer vehicles than forecast reaching their replacement parameters.

Other Plant and Equipment

9. Miscellaneous equipment incorporating photographic, catering and office equipment has recorded expenditure of £0.695m against an adjusted budget of £0.658m. This represents a small overspend of £0.037m.

C3i Programme

10. The capital outturn for the C3i Programme, which covers the C3i and Airwave Projects is, as noted in the provisional outturn report, £26.087m. When compared with the adjusted budget of £46.010m, this represents “slippage” of £19.923m or 43.3%. This “slippage”, or underspend has grown steadily during the course of the financial year. It reflects heightened security considerations which have required amendments to building design, as well as the inherent problems that would arise in accurately predicting expenditure for such a large and diverse works programme. The underspend is accounted for by

1. Delays in the construction of the three call centres. This results from security considerations and site problems – £12.301m.
2. Rephasing of equipment purchases once scope and management of the programme became more clearly defined - £5.991m.
3. Consultancy slippage due to delay in the appointment of a system integrator - £1.631m.

The full underspend arises from project slippage and will therefore be required by the C3i programme to support expenditure in future years.

Carry forward to 2003/04

11. Sums allocated to a capital project are deemed available over the lifespan of that scheme. As mentioned at paragraph 4, funds are required to be carried forward through reserves to support named projects to which the MPA is contractually committed or which have been identified as delivering significant efficiency gains. Not all projects will be fully recompensed in respect of timing difficulties experienced during 2002/03. This is because some projects have recorded overspends against budget and it is a requirement for each business group to operate within its overall capital allocation.

12. Details of the projects where the carry forward of funds is requested are shown at Appendix 2. Committee approval is sought for £32.987m to be carried forward to 2003/04. As the recorded underspend for 2002/03 surpasses the sum required for carry forward purposes sufficient funds are available to support this request.

Approach To Financing Of The Capital Programme 2002/03

13. Table 2 shows the intended funding position for the capital expenditure programme 2002/03. For comparison purposes the funding positions for the initially agreed capital programme of £123.936 and the adjusted capital budget of £145.913m are also shown.

Table 2: Financing of Capital Expenditure 2002/03

* This is not new financing of capital expenditure. It reflects payments made in prior financial years to SSEMA, the outsourced IT provider, for which capital works/assets associated with the technology infrastructure have now been delivered.

14. In financing the capital programme external funding sources are to be utilised first before calling on internal sources. Therefore, police grant and supplementary credit approvals (SCAs) are used in preference to in year capital receipts or capital reserves. It is expected that all capital grants received during 2002/03 will be utilised except where the grant has been awarded for a specific purpose and related expenditure has not yet occurred. Such grant would be carried forward through earmarked reserves to be used in future years e.g. specific grant for the C3i programme.

15. In year capital receipts are £12.493m. This is £2.507m below the initial estimate of £15m and arises from delays in the property disposal programme. The sale of major properties such as Rochester Row police station experienced marketing difficulties and the sale of residential properties to officers exercising options under ‘right to buy’ legislation did not proceed as swiftly as expected. The repercussions are that increased use of reserves is required to cover the receipts shortfall. However, this position will be remedied during 2003/04 when the delayed sales take place.

Implications for 2003/04

16. The value of overall capital underspend (£34.477m) exceeds the sum proposed for carry forward against specific schemes (£32.987m) indicating that £1.490m of capital funding is available for redistribution in subsequent years. These monies will remain unapplied in the Authority’s capital reserves.

17. Members will be aware of recent examples where the resilience of the MPA Estate and certain critical sites has been found wanting. Mitigating such defects is a priority for the organisation as reported to the Co-ordination and Policing Committee on 20 June 2003. Some capital expenditure has already been incurred under the Commissioner’s current emergency powers. Other expenditure will be needed but this will be brought forward for approval in the usual way. It is proposed that this expenditure be considered a first draw on the unapplied capital sums carried forward. Meanwhile, deliberations will take place on other key schemes to respond to specific operational policing needs and the requirement to accommodate and equip the increased number of police and support staff.

18. In September 2003 the first quarter report on capital monitoring 2003/04 is scheduled to be presented. The opportunity will be taken to consolidate 2003/04 budgets to reflect carry forward sums from 2002/03, as well as any adjustments to capital projects resulting from re-prioritisation since the initial 2003/04 programme was approved by the Committee on 10 April 2003. Details of any new schemes requiring early capital investment will also 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/03/68 Capital Programme 2002/03: Provisional Outturn

F. Contact details

Report author: Sharon Burd, Director of Finance Services, MPS.

For more information contact:

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

Appendix 2

Sums to be carried forward to 2003/04

Support required to named projects

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