Revenue and capital monitoring report 2006/07 – period 5

Report: 4
Date: 19 October 2006
By: Director of Resources for the Commissioner

Summary

The report provides the revenue and capital budget forecast position for 2006/07 at period 5 (to the end of August). The revenue budget is forecast to overspend by £40.9m (1.4% of budget), which includes £19.1m of estimated additional costs related to Operation Overt/Overamp. The underlying forecast overspend excluding Operation Overt/Overamp is £21.8m.

The Capital Programme as at period 5 (to the end of August) shows year to date total expenditure of £54.8m. This total represents 22.4% of the revised budget. The forecast for the year of £221.6m is £23.8m below the revised budget of £245.4m principally due to the rephasing of project expenditure into future years.

A. Recommendations

Members are invited to:

1. Note the year to date and forecast position for revenue and capital budgets; and
2. Approve budget changes to the capital programme as set out in this report.

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 August. This report includes forecast additional costs in respect of Operation Overt (relating to the arrests and on-going investigations into the plot to manufacture and smuggle explosive devices onto aircraft) and Overamp (relating to the anti-terror raids at an Islamic School in Sussex and a Chinese Restaurant in South London).

2. The position continues to reflect the action plans identified by the Business Groups to control and reduce the overspend position following the express direction of Management Board at their July meeting. The results will be closely monitored with expectation that the forecast overspend will be reduced in future reports to this Committee.

3. Table 1 provides a summary of the revenue forecast and additional cost forecast for the cost of Operation Overt/Overamp. Table 2 compares the forecast outturn variances for Period 4 and Period 5 by Business Group. In overall terms, excluding Operations Overt/Overamp, there has been a favourable movement in the forecast position of £3.2m from Period 4.

Table 1 – Summary of revenue forecast against budget at period 5

Table 2 – Comparison of Period 4 forecast outturn variation with Period 5 forecast outturn variation

Revenue Forecast by Business Group

4. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2. At the last meeting the Committee asked for information on the action plan to deal with the overspending. This is attached at Appendix 3.

Territorial Policing – An overspend excluding Operation Overt/Overamp of £1.9m – 0.1% of budget.

Forecast additional expenditure on Overt/Overamp is £2.4m.

5. The principal reason for the forecast overspend is within running expenses, mainly due to increased expenditure on Interpreters, Forensic Medical Examiners and fuel supply costs. The forecast overspend has reduced by £1.1m since Period 4 mainly due to a revised profile of PCSO recruitment and additional income relating to immigration receipts and forfeiture.

Specialist Crime – An overspend excluding Operation Overt/Overamp of £8.1m – 2.2% of budget

Forecast additional expenditure on Overt/Overamp is £2.7m.

6. The principal reason for this forecast overspend remains the projected expenditure on forensics where demand continues to exceed budget provision. The forecast overspend has reduced by £2.1m since Period 4 mainly within the areas of police pay and overtime.

Specialist Operations – An overspend excluding Operation Overt/Overamp of £12.7m – 6% of budget

Forecast additional expenditure on Overt/Overamp is £13.3m.

7. The principal reason for the forecast overspend remains within Police Overtime which is a consequence of work related to the under resourced position of Dedicated Security Posts. However, the measures taken to control overtime expenditure are having an effect and the forecast overspend on police overtime has reduced by a further £0.9m since period 4 (reduced by £2.1m since period 3). Other pressures include slippages in savings that had been expected from the Counter Terrorism Command restructuring. Overall, the forecast overspend for Specialist Operations has slightly deteriorated by £0.6m since Period 4.

Central Services – An underspend of £1.1m – 3.1% of budget

8. The principal area of the underspend forecast remains within Police Officer and Police Staff pay and relates to vacancies within most parts of the Business Group. The forecast underspend has increased by £0.5m since Period 4 within Police Officer pay following a review of the recruitment profile.

Standards & Intelligence – An underspend excluding Operation Overt/Overamp of £1m – 1.5% of budget

Forecast additional expenditure on Overt/Overamp is £0.1m.

9. The principal area of the forecast underspend remains 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. The forecast underspend is similar to that reported at Period 4.

Directorate of Information – An overspend excluding Operation Overt/Overamp of £1.8m – 0.8% of budget

Forecast additional expenditure on Overt/Overamp is £0.2m.

10. The principal reason for the overspend remains unbudgeted expenditure (£2.0m) on Management of Public Information (MoPI) following recommendations of the Bichard Enquiry and additional CRIS support costs of £1.7m resulting from the delay in transition to the new outsource supplier. This is offset by an underspend within Police Staff Pay (£1.7m) resulting from recruitment difficulties. The forecast overspend is similar to that reported at Period 4.

Central Operations – An underspend excluding Operation Overt/Overamp of £1m – 0.3% of budget

Forecast additional expenditure on Overt/Overamp is £0.3m.

11. The forecast underspend relates principally to the reduced cost of corporate vehicle hire resulting from the new Lex contract and additional income within the Central Traffic CJU for prosecution fees and provision of statements. There has been a small adverse movement in the forecast by £0.1m from Period 4.

Resources – An underspend excluding Operation Overt/Overamp of £0.1m

Forecast additional expenditure on Overt/Overamp is £0.1m.

12. Budget pressures remain relating to Gas and Electricity costs (to be addressed by a budget transfer from centrally held inflation in Period 6), training at the Central Training Unit at Gravesend and legal and professional fees incurred on capital property projects that have been aborted. However, the overspends are offset by additional income from investments/other sources and an underspend within Police Staff pay resulting from vacancies. There has been a small favourable movement in the forecast by £0.2m since Period 4.

Human Resources – An overspend of £1.5m – 1.2% of budget

13. The principal reason for the overspend remains due to the cost associated with Police Staff premature retirements (£1.6m). There has been a small adverse movement in the forecast of £0.2m since Period 4.

Metropolitan Police Authority – An underspend of £0.1m – 0.8% of budget

14. There has been a small favourable movement of £0.1m from the Period 4 position.

Centrally Held Budgets – A favourable variance of £4.0m

15. The forecast underspend results from budgets that have yet to be allocated to Business Groups subject to agreement of bids for non-pay inflation costs that impact on Business Group forecasts. The favourable variance has remained the same since Period 4.

Funded Units - An adverse variance of £2.8m

16. 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 £0.1m, an adverse variance of £2.8m. The adverse variance is principally due to a reduction in the forecast income from Transport for London relating to the Transport OCU and on 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 reduced by £0.4m since Period 4 due to the review of income receivable relating to a number of funded units.

Discretionary Pension Costs – An overspend of £0.3m

17. The forecast overspend primarily relates to additional expenditure associated with commuted injury award payments.

Provisional Revenue Outturn by expenditure/income type

18. Table 3 compares the forecast outturn variances for Period 4 and Period 5 by income/expense type.

Table 3 – Comparison of Period 4 forecast outturn variation with Period 5 forecast outturn variation by Income/expense type

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

Police Officer Pay – Underspend excluding Operation Overt/Overamp of £8.9m – 0.5% of budget

Forecast additional expenditure on Overt/Overamp is £1.2m.

20. The forecast underspend reflects the under-strength position of most Business Groups. The forecast underspend has increased by £2.2m from that reported at Period 4. This is predominately due to revised forecast in various Business Groups following review of the recruitment profiles and unfunded costs associated with various operations.

Police Staff Pay - Overspend excluding Operation Overt/Overamp of £2.6m – 0.5% of budget

21. The forecast overspend is mainly due to additional costs associated with forensics and unfunded operations within Specialist Crime; and additional costs within the Holding Branch in Human Resources that are offset from additional income. These additional costs are partially offset by vacancies within various Business Groups. There has been a small favourable movement in the forecast position of £0.3m since Period 4.

PCSO Pay - Underspend excluding Operation Overt/Overamp of £5.0m – 5.7% of budget

22. 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 £1.4m since period 4 mainly due to a revised profile of PCSO recruitment within Territorial Policing.

Police Officer Overtime - Overspend excluding Operation Overt/Overamp of £8.1m – 7.0% of budget

Forecast additional expenditure on Overt/Overamp is £9.5m.

23. 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 £1.8m since Period 4, primarily within Specialist Crime and Specialist Operations following implementation of tight management controls on overtime expenditure.

Police Staff Overtime - Overspend excluding Operation Overt/Overamp of £2.0m – 6.9% of budget

Forecast additional expenditure on Overt/Overamp is £0.2m.

24. The forecast overspend is principally due to overtime within the forensics service (Specialist Crime) and within various units in Specialist Operations. There has been a small increase in the forecast overspend by £0.3m since Period 4.

Employee Related Expenditure - Overspend excluding Operation Overt/Overamp of £3.3m – 11.6% of budget

Forecast additional expenditure on Overt/Overamp is £5.0m.

25. 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 £1.4m since Period 4, partially due to revised forecasts for PAYE tax liabilities.

Premises Costs – Overspend excluding Operation Overt/Overamp of £5.1m – 2.5% of budget

26. The forecast overspend relates to increased PFI costs associated with an increase in training at Gravesend, slippage 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. The forecast overspend has reduced by £0.5m since Period 4.

Transport Costs - Overspend excluding Operation Overt/Overamp of £1.5m – 2.3% of budget

Forecast additional expenditure on Overt/Overamp is £0.7m.

27. The forecast overspend primarily relates to increased fuel costs for vehicles, which also accounts for the increase in the forecast overspend of £0.7m since Period 4.

Supplies and Services - Overspend excluding Operation Overt/Overamp of £19.8m – 4.7% of budget

Forecast additional expenditure on Overt/Overamp is £2.5m.

28. 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 for MoPI (as described in paragraph 10) following recommendations of the Bichard Enquiry and additional CRIS support costs (£1.7m) resulting from the delay in transition to the new outsource supplier. The forecast overspend has increased by £2.8m since Period 4.

Income - Forecast over-achievement of £5.3m – 1.8% of budget

29. The forecast over-achievement of income primarily relates to additional investment income; income received for Police Officers on Secondment and ACPO support costs; and income for unbudgeted Operations within Specialist Crime. There has been small increase in the forecast over-achievement of income since Period 4 by £0.3m.

Budget movements

30. The major budget movements undertaken in Period 5 are shown in Table 4:

Table 4 – Major budget movements actioned in Period 5

Movements in Reserves

31. The reserve drawdowns carried out since Period 5 are shown in Table 5:

Table 5 – Reserve drawdowns actioned in Period 5

Capital monitoring

32. Members are asked to approve the following amendments to the 2006/07 Capital Programme:

1. An increase in the budget (£4.3m) due to the receipt of an additional grant from Police Information Technology Organisation (PITO) in respect of National Strategy for Police Information Systems (NSPIS) Case and Custody project.
2. A reduction in the budget (£2.6m) due to slippage on the Information Technology section of Safer Neighbourhoods projects into next financial year.

Assuming these adjustments are approved, this will revise the capital budget in 2006/07 to £245.4m.

33. Appendix 4 sets out the expenditure for the 2006/07 Capital Programme as at Period 5 (August) by programme, which shows an overall total of £54.8m. This total represents 22.4% of the revised budget. The forecast for the year of £221.6m is £23.8m below the revised budget.

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 – £0.2m underspend (0.3% of budget)

35. The position has improved from that reported at period 4 due to the receipt of additional income from Police Information Technology Organisation (PITO) in respect of the National Strategy for Police Information Systems (NSPIS) Case and Custody project. The expenditure relating to this project was included in the forecast in period 4.

Transport Projects - £2.3m overspend (12.6% 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 - £6.4m underspend (13.3% 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) - £7.4m underspend (15.1% 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

ACPO

Association of Chief Police Officers

MOPI

Management of Police Information system

MPA

Metropolitan Police Authority

MPS

Metropolitan Police Service

NSPIS

National Strategy for the Provision of Information Systems

OCU

Operational Command Unit

PCSO

Police Community Support Officers

PFI

Private Finance Initiative

PITO

Police Information Technology Organisation

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

Operations

Overt

relating to arrests and on-going investigations into the plot to
manufacture and smuggle explosive devices onto aircraft

Overamp

relating to anti-terror raids at an Islamic School in Sussex and a
Chinese Restaurant in South London

C. Race and equality impact

There are none specific to this report.

D. Financial implications

The financial implications are those set out in this report.

E. Background papers

None

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 3

Explanations of the actions being undertaken by the MPS to address the current forecast overspend position

The forecast overspend position for the MPS’ Revenue Budget was discussed at MPS Management Board and MPS Investment Board during July. Following these discussions, Business Groups were tasked to identify actions that would address this overspend. Additionally, a message from MPS Management Board will be placed on the intranet in the near future highlighting the overspend position and stressing the need to control expenditure in all areas.

The principal areas of forecast overspend are:

• Police Overtime (including Dedicated Security Posts)
• Forensics
• Management of Police Information (MoPI)
• Police staff premature retirements

The following management action is being undertaken in these areas:

Police overtime (including Dedicated Security Posts)

A number of robust and effective measures have been put in place to control expenditure in this area. For example, within the Specialist Crime Directorate, a ban has been placed on all non-operational overtime and a more stringent authorisation process has been introduced which will result in a reduction in forecast expenditure in future periods. Additionally, Specialist Operations Command Team is robustly challenging Commanders regarding overtime with forecast reductions in expenditure expected in future periods.

Forensics

Forensics activity has increased over recent years and currently there is a forecast overspend of approximately £10m. The long-term solutions to the problem are currently under review and a report will be presented to MPS Investment Board by the Director of Forensic Services in the near future highlighting a number of options. In the short-term an enhanced authorisation process will be introduced that will firmly challenge the need for forensics activity to be undertaken in a number of cases.

Management of Police Information (MoPI)

There is currently unbudgeted expenditure of £2.0m in respect of MoPI (related to Bichard recommendations). All costs and project expenditure will be reviewed during the year to identify any further savings that can be identified to support the unbudgeted MoPI costs.

Police staff premature retirements

At the beginning of the current financial year, a policy was introduced by the Human Resources Directorate that stated that Business Groups making individuals redundant, or allowing early retirement would need to fund the first 2 years of the retirement costs from within their existing budgets. Previously, Human Resources had funded the whole retirement costs with Business Groups having little incentive to control expenditure. The new policy has introduced a greater degree of accountability and control for Business Groups. Also, there is now a need for Business Groups to prepare business cases for all individuals who are the subject of a planned early retirement. The vast majority of business cases are considered by the Director of Human Resources before any early retirements are permitted. In the current financial year the number of early retirements approved has reduced significantly from the same period last year.

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