Revenue and capital monitoring report 2006/07 – period 4

Report: 4
Date: 21 September 2006
By: Commissioner

Summary

The report provides the revenue and capital budget forecast position for 2006/07 at period 4 (to the end of July). The revenue budget is forecast to overspend by £24.9m (0.9% of budget). These figures exclude any additional costs that will arise from Operation Overt (relating to the arrests and on-going investigations into the plot to manufacture and smuggle explosive devices onto aircraft).

The Capital Programme as at Period 4 (to the end of July) shows year to date total expenditure of £43.9m. This total represents 18.0% of the revised budget. The forecast for the year of £223.2m is £20.5m below the revised budget.

A. Recommendations

Members are invited to:

1. Note the year to date and forecast position for revenue and capital budgets.
2. Approve the virement of savings of £1.5m relating to Airwave call charges to fund the implementation of the Management of Police Information system (MOPI) – paragraph 11 refers.
3. Approve the transfer to reserves of £3.6m in 2006/07 with regard to the suspension of the MetTime project – paragraph 29 refers.
4. Approve the virement of £1.5m from Police Staff pay to PCSO pay relating to PCSO pension costs that are now identified separately – paragraphs 20 and 21 refers.

B. Supporting information

Background

1. This report provides information on the forecast against revenue and capital budgets for the MPA/MPS in 2006/07 based on the position at the end of July. It excludes any additional costs that will arise from Operation Overt (relating to the arrests and on-going investigations into the plot to manufacture and smuggle explosive devices onto aircraft) and Overamp (relation to the anti-terror raids at an Islamic School in Sussex and a Chinese Restaurant in South London). These costs will be reflected in the Period 5 forecast position but a verbal update will be provided at the meeting.

2. Following the overspend position reported at Period 2, meetings have taken place with the senior management teams of all Business Groups to formulate action plans aimed at controlling and reducing the overspend position. The plans are to be implemented following the express direction of Management Board in July that the overspend will be reduced. The results will be closely monitored with the expectation that the forecast overspend will be reduced in future reports to this committee.

Operational performance

3. A short summary of key operational performance targets is reproduced below to provide a holistic view for members. Comparing Operational performance in April to July 2006 with the same period last year:

• Total notifiable offences have fallen: down 6.8%.
• Homicide has fallen: down 14.9%.
• Rape has fallen: down 2.2%.
• Gun enabled crime has fallen: down 23.1%.
• Violence against the person has fallen: down 5.8%.
• Residential burglary has fallen: down 2.5%.
• Knife enabled crime has risen: up 0.2%.
• Robbery has risen: up 2.0%.
• Motor vehicle crime has risen: up 0.4%.

Members will be aware that more detailed information regarding operational performance is available from the Strategy Unit within Central Services

4. Table 1 compares the forecast outturn variances for Period 2 and Period 4 by Business Group. In overall terms there has been an adverse movement in the forecast position of £2.7m from Period 2.

Table 1 – Comparison of Period 2 forecast outturn variation with Period 4 forecast outturn variation

Revenue forecast by business group

5. The forecast outturn position for the MPS is an overspend of £24.9m (0.9% of budget). The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

Territorial Policing – An overspend of £2.9m – 0.2% of budget

6. The principal reason for the forecast overspend is within police staff pay, mainly due to the extension of the workforce modernisation pilot at Bexley Borough and early implementation of the Integrated Borough Operations programme at Sutton Borough. The forecast overspend has reduced by £1.8m since Period 2 mainly due to the forecast utilisation of additional funding from the National Policing Fund.

Specialist Crime – An overspend of £10.1m – 2.8% of budget

7. The principal reason for this forecast overspend results from projected expenditure on forensics where demand continues to exceed budget provision. An action plan has been devised to address this. The forecast overspend has reduced by £2.6m since Period 2 mainly within the areas of police pay and police staff pay following a review of recruitment plans.

Specialist Operations – An overspend of £12.1m – 5.7% of budget

8. The principal reason for the forecast overspend relates to Police Overtime which is a consequence of work related to the under resourced position of Dedicated Security Posts. An action plan has been devised to address this. Measures are being taken to control overtime expenditure with OCUs being required to keep within budget and overspends being robustly challenged by OCU Commanders. This has already had an effect with the forecast overspend for Police Overtime reducing by £1.2m since Period 2. Other pressures relate to seconded officer costs that are a legacy issue from Operation Theseus and slippages in savings that had been expected from the Counter Terrorism Command restructuring. The Senior Management Team are aware of these issues and remedial action is planned. Overall, the forecast overspend for Specialist Operations has reduced by £3.0m since Period 2 due to a reduction in the forecast for Police Officer overtime and downward revisions to the travel and subsistence forecasts following a review of these costs.

Central Services – An underspend of £0.5m – 1.5% of budget

9. The principal area of the underspend forecast is within Police Staff pay and relates to vacancies within most parts of the Business Group. Recruitment efforts are underway to address the situation. The forecast underspend has reduced by £0.9m since Period 2 primarily due to revised Police Staff forecasts based on anticipated recruitment levels.

Standards and Intelligence – An underspend of £1.0m – 1.5% of budget

10. The principal area of the underspend forecast is within Police Officer pay and relates to vacancies within the Directorate of Professional Standards due to the difficulty of recruiting Police Officers with the relevant specific skill sets and experience. However, the forecast underspend has reduced by £1.5m since Period 2 due to revised forecasts for Police Officer and Police Staff pay, reflecting greater confidence around staff numbers.

Directorate of Information – An overspend of £1.8m – 0.8% of budget

11. The principal reason for the overspend is unbudgeted expenditure (£4.5m) on Management of Police Information (MoPI) following recommendations of the Bichard Enquiry and additional Crime Reporting Information System (CRIS) support costs of £2.0m resulting from the delay in transition to the new outsource supplier. These are partially offset by an underspend within Police Staff Pay (£1.9m) resulting from recruitment difficulties and other reductions caused by project slippage (£1.0m). Approval is sought to vire budget of £1.5m from savings relating to Airwave call charges to fund the unbudgeted costs of implementing MoPI. Further reports to this Committee will identify the budgets which can be used to finance the remaining unbudgeted spend. The forecast has increased by £3.3m since Period 2 primarily as a result of the review of forecast expenditure on MoPI.

Central Operations – An underspend of £1.1m – 0.4% of budget

12. The forecast underspend relates principally to the reduced cost of corporate vehicle hire with the new Lex contract and additional income within the Central Traffic Criminal Justice Unit for prosecution fees and provision of statements. The forecast underspend has reduced by £1.6m since Period 2 following an increase in the Territorial Support Group forecast for Police Officer pay, a detailed review of forecast staffing levels within Metcall and more robust forecasting for aircraft maintenance and fuel costs.

Resources – An overspend of £0.1m – 0.0% of budget

13. The main budget pressures relate to Gas and Electricity costs (£5.1m) for which additional budget will be requested from the Centrally Held budget allocation. Additionally, there are other premises related pressures associated with an increase in training at Gravesend (£1.0m). An overspend is also anticipated in relation to legal and professional fees incurred on capital property projects that have been aborted (£1.5m). The overspends are offset by additional income from investments and other sources as well as underspends resulting from Police Staff vacancies within the Directorate. The forecast overspend has reduced overall by £1.4m since Period 2 primarily due to additional income from investments.

Human Resources – An overspend of £1.3m – 1.1% of budget

14. The principal reason for the overspend is the costs associated with Police Staff premature retirements (£1.6m). This has been partly offset by a number of Police Officer vacancies within Training and Development. However, the forecast overspend has reduced by £2.3m since Period 2 following allocation of budget for the cost of the Transformation Project and the Leadership Academy (see paragraph 16).

Metropolitan Police Authority – Nil variance

15. The forecast overspend has reduced by £0.2m since Period 2 primarily due to a revision of the Police Staff pay forecast.

Centrally held budgets – A favourable variance of £4.0m

16. The forecast underspend results from budgets that have yet to be allocated to Business Groups for non-pay inflation costs. These costs have been reflected in Business Group forecasts. The favourable variance has reduced by £3.9m since Period 2 following allocation of budgets, mainly to Human Resources for the cost of the Transformation Project and the Leadership Academy (see paragraph 14).

Funded units – An adverse variance of £3.2m

17. The budget for funded units assumes a surplus of income over expenditure of £2.7m. The forecast suggests that there will be a deficit of £0.5m, an adverse variance of £3.2m. This is principally due to a reduction in the forecast income from Transport for London (TfL) relating to the Transport OCU and the Disclosure Service where, due to vacancies, the overhead recovery element of the income target cannot be achieved. In previous years this issue has been partly addressed through implementing the TOCU+ scheme. However, TfL are not currently planning to run TOCU+ this financial year. The adverse variance has increased by £2.8m since Period 2 following a detailed review of the forecast income levels in this area.

Provisional revenue outturn by expenditure/income type

18. The main forecast variances from budget are set out below.

Police Officer pay – Underspend of £6.8m – 0.4% of budget

19. The forecast underspend reflects the under-strength position of most Business Groups. The forecast has improved by £7.7m from that reported at Period 2 reflecting the utilisation of additional funding from the National Policing Fund to offset the additional costs of the accelerated introduction of Safer Neighbourhood teams.

Police staff pay - Overspend of £2.4m – 0.5% of budget

20. The forecast overspend is mainly within Territorial Policing due to the workforce modernisation pilot at Bexley Borough and early implementation of the Integrated Borough Operations programme at Sutton Borough. There has been an adverse movement in the forecast position of £7.3m since Period 2 due to the transfer of pensions budgets to PCSO pay and increased forecasts within Business Groups reflecting latest recruitment expectations. The transfer of budget ensures that budgeted and forecast expenditure are in the appropriate place. The MPA Finance Committee are asked to approve the virement of £1.5m from Police Staff pay to PCSO pay.

PCSO pay - Underspend of £3.7m – 4.2% of budget

21. The forecast underspend is principally due to a slower than anticipated recruitment at the start of the year within Territorial Policing and an under-strength position within the Transport OCU. The forecast underspend has increased by £1.5m since period 2 primarily due to the transfer of budgets from Police Staff Pay as mentioned above.

Police Officer overtime - Overspend of £10.0m – 8.6% of budget

22. The forecast overspend is a consequence of work related to the under-resourced position of Dedicated Security posts within Specialist Operations. The forecast overspend has reduced by £4.4m since Period 2, mostly within Territorial Policing and Specialist Operations following implementation of tight management controls on overtime expenditure.

Police staff overtime - Overspend of £1.7m – 5.7% of budget

23. The forecast overspend is principally due to overtime within the forensics service (Specialist Crime Directorate) and within various units in Specialist Operations. The forecast overspend has increased by £0.7m since Period 2 following increasing workloads within the areas of forensics and Specialist Operations.

Employee related expenditure - Overspend of £4.7m – 17.6% of budget

24. The forecast overspend principally relates to the costs associated with seconded officers within Specialist Operations and the cost of Police Staff premature retirements within the Human Resources directorate. The forecast overspend has reduced by £0.1m since Period 2.

Premises costs – Overspend of £5.5m – 2.7% of budget

25. The forecast overspend relates to increased PFI costs associated with an increase in training at Gravesend, non-achievement of property rental savings, additional energy costs due to price increases and costs related to legal and professional fees incurred on capital property projects that have been aborted. These issues are responsible for the increase in forecast of £5.5m from that reported at Period 2.

Transport costs - Overspend of £0.8m – 1.3% of budget

26. The forecast overspend primarily relates to increased vehicle fuel costs affecting all Business Groups. The forecast overspend has increased by £0.3m since Period 2 primarily due to these increased fuel costs.

Supplies and services - Overspend of £17.0m – 4.1% of budget

27. The forecast overspend primarily relates to projected expenditure on forensics (£10m) where forecast demand continues to exceed budget provision. Other areas of overspend relate to expenditure within the Directorate of Information on MoPI (£4.5m) and additional CRIS support costs (£2.0m) resulting from the delay in transition to the new outsource supplier. It is mostly the latter two issues that have resulted in the forecast overspend increasing by £5.8m since Period 2.

Income - Forecast over-achievement of £5.0m – 1.8% of budget

28. The forecast over-achievement of income primarily relates to additional income from third parties that is still subject to negotiation (£3.0m) and additional investment income. The forecast over-achievement of income has increased since Period 2 by £0.2m due to additional investment income.

Budget movements

29. The Met Time project was stopped following a review of the ongoing contractual issues with the suppliers. Further discussions led to the termination of this contract. In view of this decision and while a future direction of the Met Time solution is determined, it is considered prudent that a specific reserve of £3.6m revenue, this being the budget provision for 2006/07, be set up. The creation of a reserve will enable funds to be ring fenced for the Met Time replacement solution, where expenditure will be incurred beyond this financial year. Members are therefore asked to approve a budget movement of £3.6m to reserves following the suspension of the MetTime project.

30. The major budget movements undertaken in Period 4 are shown in Table 2:

Table 2 – Major budget movements actioned in Period 4

Movements in reserves

31. The reserve drawdowns carried out since Period 2 are shown in Table 3:

Table 3 – Reserve drawdowns carried out since Period 2

Capital monitoring

32. The revised budget for the Capital programme is £243.7m. The forecast for the year of £223.2m is £20.5m below the revised budget. The Capital Programme as at Period 4 (to the end of July) shows year to date total expenditure of £43.9m representing 18.0% of the revised budget.

33. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 4 (July) by programme.

Property programme - £12.1m underspend (20.4% of budget)

34. Forecast expenditure against budget reflects the reprogramming of work, not the cancellation of projects. The delays are the result of the timing of approval to proceed with certain projects, and planning and procurement challenges. Finance Services and Property Services are continuously reviewing the phasing of projects to ensure that budgeted expenditure profiles more accurately reflect each project.

Information programme – Excluding C3i Programme – £4.3m overspend (7.1% of budget)

35. The overspend primarily relates to various projects within the infrastructure renewals programme and on the National Strategy for Police Information Systems (NSPIS) Case and Custody project. It is anticipated that the overspend on the NSPIS Case and Custody project will be funded from additional income from the Police Information Technology Organisation (PITO) later in the year.

Transport projects - £1.3m overspend (7.1% of budget)

36. The forecast overspend is due to the cost of additional Partnership vehicles that will be funded by revenue contribution to capital and the costs of Phase 2 of Counter Terrorism vehicle purchases where the costs will be met by specific grant funding. The funding for the costs incurred is expected to be allocated in period 6.

Directorate of Information – C3i Programme - £6.9m underspend (14.4% of budget)

37. The forecast underspend is due to slippage in the acquisition of radio headsets for the Airwave project. A review of the budget profile will take place during the next quarter.

Safer Neighbourhoods programme (Phases 1 to 3) - £7.1m underspend (13.8% of budget)

38. The underspend reflects delays experienced in progressing certain projects on site either due to the timing of site acquisition or planning related matters.

Abbreviations

MOPI

Management of Police Information system

MPS

Metropolitan Police Service

OCU

Operational Command Unit

CRIS

Crime Reporting Information System

TfL

Transport for London

PCSO

Police Community Support Officers

NSPIS

National Strategy for Police Information Systems

TOCU+ scheme

implemented in 2004/05 and 2005/06 that involves a number of Police Officers transferring from various OCUs within the MPS into the Transport OCU

C. Race and equality impact

1. There are none specific to this report.

D. Financial implications

1. The financial implications are those set out in this report.

E. Background papers

• Previous 2006/07 monitoring reports.

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

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