Revenue and capital monitoring report 2006/07 – period 6

Report: 4
Date: 23 November 2006
By: Acting Director of Resources on behalf of the Commissioner

Summary

The report provides the revenue and capital expenditure forecast position for 2006/07 at Period 6 (to the end of September). The revenue budget is forecast to overspend by £35.4m (1.2% of budget), which includes £23.7m of estimated additional costs related to Operations Overt/Overamp. The underlying forecast overspend excluding Operations Overt/Overamp is £11.7m.

The Capital Programme as at Period 6 (to the end of September) shows year to date total expenditure of £63.3m. This total represents 25.5% of the revised budget. The forecast for the year of £208.9m is £39m below the revised budget of £247.9m 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 paper (para 33).

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 September. This paper 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. At both Management Board and Investment Board meetings in recent weeks, detailed discussions have taken place to address the MPS forecast overspend, with a view to bringing actual expenditure back in line with budget by the end of the financial year. Business Groups have been tasked to review overspending budget lines, activities and operations and produce action plans to correct the overspend position. Finance Services, as part of a quarterly review of budgetary performance with all Business Groups, has sought to identify risk areas where either expenditure is currently or predicted to exceed budget and provided the requisite support and advice to assist Business Groups in taking the necessary corrective action. As part of the quarterly review process, the robustness of Business Group forecasts are challenged and opportunities for further income generation explored. The costs of both Overt/Overamp are also the subject of continuing scrutiny and challenge to ensure expenditure is minimised in relation to all activity streams and in particular, the ongoing requirement for mutual aid.

3. At the last meeting of the committee on 19 October members endorsed the preferred priority options for dealing with the additional costs of Operation Overt and Overamp. These options in preferred priority were to minimise the additional spending in the first instance, seek additional funding from government, deliver additional underspends or, as a last resort, use existing reserves. A letter has now been received from the Home Office outlining their response to the request for additional financial support for Operation Overt. The letter does not indicate any additional support for Operation Overt. The MPS are presently reviewing their response and an oral update will be given to the committee.

4. The 2006/07 Police Staff pay award has been agreed at a level of 3% of basic pay and a number of allowances. The budget provision for this pay award is 2.5%. Finance Services are currently developing proposals as to how the impact of the additional cost of the pay award will be managed within Business Groups budgets in the current financial year.

5. The position continues to reflect the action plans identified by the Business Groups to control and reduce the overspend position and this paper reports that the forecast overspend has reduced by £5.5m from the position reported at Period 5.

6. The Period 7 report to Finance Committee will include details of the forecast expenditure on Forensics as requested by Members at the meeting on 19th October 2006. Details will be provided of the total forecast overspend at Period 7, the movement in the forecast position from the previous period and the management action being taken to control expenditure and reduce the forecast overspend.

7. Table 1 provides a summary of the revenue forecast and additional cost forecast for the cost of Operations Overt/Overamp. Table 2 compares the forecast outturn variances for Period 5 and Period 6 by Business Group. In overall terms, excluding Operations Overt/Overamp, there has been a favourable movement in the forecast position of £10.1m from Period 5.

Table 1 – Summary of revenue forecast against budget at period 6

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

Revenue forecast by business group

8. The subjective position by Business Group is at Appendix 1. The overall position by budget category for the MPS is at Appendix 2.

Territorial Policing – An overspend excluding Operations Overt/Overamp of £1.5m – 0.1% of budget. Forecast additional expenditure on Overt/Overamp is £3.7m.

9. 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. There has been a small favourable movement in the forecast of £0.3m since period 5.

Specialist Crime – An overspend excluding Operations Overt/Overamp of £7.7m – 2.1% of budget. Forecast additional expenditure on Overt/Overamp is £2.2m.

10. The principal reason for this forecast overspend remains the projected expenditure on forensics where demand continues to exceed budget provision. There has been a small favourable movement of £0.4m since Period 5.

Specialist Operations – An overspend excluding Operations Overt/Overamp of £13.7m – 6.4% of budget. Forecast additional expenditure on Overt/Overamp is £16.8m.

11. 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. The measures taken to control overtime expenditure continue to have an effect and the forecast has reduced by a further £0.8m since period 5. Other pressures include slippages in savings that had been expected from the Counter Terrorism Command restructuring and on-going costs that relate to Operation Theseus. There has been an adverse movement since Period 5 of £1.0m due to additional costs associated with retaining seconded Police Officers for Operation Theseus longer than previously anticipated.

Central Services – An underspend of £1.5m – 4.5% of budget.

12. 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 5 primarily within Police Officer pay following a review of the recruitment profile.

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

13. 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 in line with that reported at Period 5.

Directorate of Information – An underspend excluding Operations Overt/Overamp of £0.2m – 0.1% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.

14. The principal reason for the underspend relates to Police Staff pay resulting from recruitment difficulties. This underspend offsets the forecast overspend on Management of Public Information (MoPI). The forecast position has improved by £2.0m from that reported at Period 5, primarily due to a reduction in revenue costs associated with capital projects, following a review of the capital programme.

Central Operations – An underspend excluding Operations Overt/Overamp of £1.8m – 0.6% of budget. Forecast additional expenditure on Overt/Overamp is £0.5m.

15. 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 favourable movement in the forecast of £0.8m from Period 5 that relates to a reduction in Police Staff pay forecast following a review of Metcall recruitment plans.

Resources – An underspend excluding Operations Overt/Overamp of £4.5m – 1.6% of budget. Forecast additional expenditure on Overt/Overamp is £0.3m.

16. The forecast underspend relates primarily to additional income from investments/others sources and a review of capital financing costs.

Human Resources – An overspend of £0.8m – 0.7% of budget.

17. The principal reason for the overspend is the unbudgeted cost of Police Staff premature retirements (£1.6m) that is partially offset by the increased income received for Police Officers on secondment. The favourable movement in the forecast of £0.8m since Period 5 is due to a review of the Police Staff recruitment profile and increased income for seconded Police Officers.

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

18. Minor variation.

Centrally Held Budgets – A favourable variance of £4.1m.

19. The forecast underspend results from budgets that have yet to be allocated to Business Groups for non-pay inflation.

Funded Units - An adverse variance of £2.9m.

20. The adverse variance is principally due to a reduction in the forecast for income received 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, due to lower numbers in post. 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. There has been a small adverse movement of £0.1m since Period 5.

Discretionary Pension Costs – An underspend of £1.7m.

21. The forecast underspend has arisen due to the actual number of ill health retirement payments being lower than expected. This has resulted in a favourable movement of £2.0m since Period 5.

Revenue Forecast by expenditure/income type

22. Table 3 compares the forecast outturn variances for Period 5 and Period 6 by income/expense type.

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

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

Police Officer Pay – Underspend excluding Operations Overt/Overamp of £10.5m – 0.6% of budget. Forecast additional expenditure on Overt/Overamp is £1.2m.

24. The forecast underspend reflects the under-strength position of most Business Groups and has increased by £1.5m from that reported at Period 5. This is predominately due to revised forecasts in some Business Groups following reviews of the recruitment profiles.

Police Staff Pay – Underspend of £4.1m – 0.8% of budget

25. There has been a favourable movement of £6.8m since Period 5. Whilst there have been reductions in all Business Groups following more realistic forecasts of recruitment and wastage expectations, a significant cause of the reduction has been the allocation of additional funding for Integrated Borough Operations within Territorial Policing.

PCSO Pay - Underspend of £2.7m – 3.1% of budget

26. 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. However, there has been an increase in the forecast PCSO cost movement of £2.3m since Period 5 mainly due to a revised profile of PCSO recruitment within Territorial Policing and increased recruitment anticipated within the Transport OCU.

Police Officer Overtime - Overspend excluding Operations Overt/Overamp of £9.4m – 8.0% of budget. Forecast additional expenditure on Overt/Overamp is £9.1m.

27. The forecast overspend is mostly a consequence of work related to the under-resourced position of Dedicated Security posts within Specialist Operations. The forecast overspend has increased by £1.3m since Period 5, primarily within Territorial Policing to more accurately reflect the existing overspend within that Business Group.

Police Staff Overtime - Overspend excluding Operations Overt/Overamp of £2.5m – 8.5% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.

28. 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 since Period 5 primarily within Specialist Crime and reflects an increase in premium payments resulting from changes in shift patterns.

Employee Related Expenditure - Overspend excluding Operations Overt/Overamp of £3.8m – 13.4% of budget. Forecast additional expenditure on Overt/Overamp is £7.1m.

29. 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 increased by £0.5m since Period 5 which relates to the retention of seconded officers working on Operation Theseus longer than previously expected.

Premises Costs – Overspend of £5.1m – 2.5% of budget.

30. The forecast overspend has remained similar to that reported at Period 5. 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.

Transport Costs - Overspend excluding Operations Overt/Overamp of £1.8m – 2.8% of budget. Forecast additional expenditure on Overt/Overamp is £3.6m.

31. The forecast overspend primarily relates to increased fuel costs for vehicles. The increase in the forecast overspend of £0.2m since Period 5 relates to increased costs of Overseas travel within Specialist Operations.

Supplies and Services - Overspend excluding Operations Overt/Overamp of £18.2m – 4.3% of budget. Forecast additional expenditure on Overt/Overamp is £2.4m.

32. The forecast overspend has reduced by £1.6m since Period 5 due to an underspend within the Capital programme which will also reduce the associated revenue spend. The forecast overspend primarily relates to projected expenditure on forensics (£10.1m) where forecast demand continues to exceed budget provision. Other areas of overspend relate to additional CRIS support costs (£1.7m) resulting from the delay in transition to the new outsource supplier and slippages in savings that had been expected from the Counter Terrorism Command restructuring (£2.2m).

Income - Forecast over-achievement of £7.5m – 1.9% of budget.

33. There has been an increase in the forecast over-achievement of income since Period 5 of £2.2m. 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.

Budget movements

34. The major budget movements undertaken in Period 6 are shown in Table 4:

Table 4 – Major budget movements actioned in Period 6

Movements in reserves

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

Table 5 – Reserve drawdowns actioned in Period 6

Capital monitoring

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

1. An increase in the budget (£2.5m) due to the receipt of further additional grant from Police Information Technology Organisation (PITO) in respect of National Strategy for Police Information Systems (NSPIS) Case and Custody project.
2. Carry forward of £2.3m relating to the purchase of various vehicles that will now not be delivered until 2007/08.
3. A revenue contribution to capital (RCCO) of £2.3m to fund additional Partnership vehicles.
4. An increase in the budget of £0.025m relating to the implementation of an IT based case management system for the Forensic Audit Branch of the Internal Audit Directorate to manage its workload in line with current and future standards for investigative units.
   Assuming these adjustments are approved, this will revise the capital budget in 2006/07 to £247.9m.

37. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 6 (September) by programme, which shows an overall total of £63.3m. This total represents 25.5% of the revised budget. The forecast for the year of £208.9m is £39m below the revised budget.

Property Programme - £21.2m underspend (35.7% of budget)

38. The Property Services forecast shows an underspend of £21.2m against the current year budget allocation. It is highly probable that most, if not all, of this amount will be required to fund existing approved schemes, which will slip into future years beyond 2006/07. Details of the phasing of these schemes are being developed as part of the work around the revised draft Capital Programme 2007/08 to 2009/10, which is being taken to Investment Board and MPA Finance Committee in November. It is intended that this information will be incorporated into the Period 7 Monitoring Report.

Information Programme – Excluding C3i Programme – £4.2m underspend (6.2% of budget)

39. The position has changed from that reported at Period 5 primarily 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 5.

40. Transport Projects – Nil variance

Directorate of Information – C3i Programme - £6.2m underspend (13.0% of budget)

41. 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 to establish the requirement to carry-forward budget to 2007/08.

Safer Neighbourhoods Programme (Phases 1 to 3) - £7.4m underspend (15.1% of budget)

42. The underspend reflects delays experienced in progressing certain projects on site either due to the timing of site acquisition or planning related matters. Details of the phasing of these schemes are being developed as part of the work around the revised draft Capital Programme 2007/08 to 2009/10, which is being taken to Investment Board and MPA Finance Committee in November. It is intended that this information will be incorporated into the Period 7 Monitoring Report.

Abbreviations

ACPO

Association of Chief Police Officers

MPS

Metropolitan Police Service

OCU

Operational Command Unit

CJU

Criminal Justice Unit

CRIS

Crime Reporting Information System

TfL

Transport for London

PCSO

Police Community Support Officers

PFI

Private Finance Initiative

PITO

Police Information Technology Organisation

NSPIS

National Strategy for the Provision of Information Systems

Metcall

the new Operational Command Unit bringing together all 32 London borough control rooms, Information Room & Telephone Operator Centres

RCCO

Revenue Contribution to Capital

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

Operation Theseus

MPS response to July terrorist attacks

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

• 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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