Revenue and Capital Monitoring Report 2006/07 - Period 7

Report: 4
Date: 21 December 2006
By: Acting Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2006/07 at Period 7 (to the end of October). At this stage, the revenue budget is forecast to overspend by £28.4m (1.0% of budget), which includes £22.2m of estimated additional costs related to Operations Overt/Overamp. The underlying forecast overspend excluding Operations Overt/Overamp (i.e. core budget) is £6.2m (0.2% of budget).

The Capital Programme as at Period 7 (to the end of October) shows year to date total expenditure of £76.3m. This total represents 32.5% of the revised budget. The forecast for the year of £196m is £38.7m below the revised budget of £234.7m principally due to the re-phasing of project expenditure into future years.

A. Recommendations

That

• members note the year to date and forecast position for revenue budgets and the capital programme; and
• approve budget changes to the capital programme as set out in this paper (paragraph 37).

B. Supporting information

Background

1. This paper 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 October. 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. At the last Finance Committee we advised of detailed discussions having taken place with Business Groups 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. The position continues to reflect the action taken by the Business Groups to control and reduce the overspend position and this paper reports that the forecast overspend has reduced by £6.9m from the position reported at Period 6. This follows a reduction of £5.5m reported at the last Finance Committee.

3. Following work to identify the impact of the additional cost of the 3% Police Staff pay award, it has been decided that Business Groups will be allocated budgets equivalent to a pay award of 2.5% in the current financial year. Business Groups will be expected to manage the shortfall within their existing budgets.

4. The 2006/07 Police pay award has been agreed at a level of 3% of basic pay and a number of allowances. Again, the budget provision for this pay award is 2.5%. Finance Services are currently discussing 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. 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 6 and Period 7 by Business Group.

Table 1 - Summary of revenue forecast against budget at period 7

6. There has been a reduction in the forecast overspend position excluding Operation Overt/Overamp of £5.5m from Period 6. The forecast outturn position in respect of Operations Overt/Overamp has also improved by £1.4m since Period 6 mainly due to revised estimates in respect of police overtime. The reduction in the forecast overspend from Period 6 results from actions undertaken by the Business Groups at the request of Management Board and Investment Board. These actions include the continuing tight management of Police Officer overtime; securing additional funding from various sources by Territorial Policing; robust reviews of recruitment profiles to ensure that the forecasts are realistic; halting Police Staff recruitment within the Forensics Service; revised control processes within the Forensics Service to ensure greater focus on value for money; a review of income receivable within a number of Business Groups; an examination of training plans across the HR Directorate resulting in a reduced forecast; and ensuring forecasts are based on sound spending plans clearly linked to delivery of strategic objectives.

Table 2 - Comparison of Period 7 forecast outturn variation with Period 6 forecast outturn variation

Revenue Forecast by Business Group

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

8. Territorial Policing - An overspend, excluding Operations Overt/Overamp, of £0.4m - 0.03% of budget. Forecast additional expenditure on Overt/Overamp is £3.9m.

There is a minor variation to budget of £0.4m. There has been a favourable movement in the forecast of £1.1m since Period 6 following anticipated allocation of Proceeds of Crime Act funding.

9. Specialist Crime - An overspend, excluding Operations Overt/Overamp, of £6.7m - 1.8% of budget. Forecast additional expenditure on Overt/Overamp is £2.0m.

There has been a favourable movement in the forecast of £1.0m since Period 6 following a review of achievable recruitment for the remainder of the year. The principal reason for the forecast overspend remains the projected expenditure on forensics where demand continues to exceed budget provision. Further information regarding forensics expenditure is given at paragraph 33 in this report.

10. Specialist Operations - An overspend, excluding Operations Overt/Overamp, of £17.0m - 8.0% of budget. Forecast additional expenditure on Overt/Overamp is £15.2m.

The principal reasons for the forecast overspend are within Police Overtime which is a consequence of work related to the under resourced position of Dedicated Security Posts, and Running Expenses where adverse variances relate to overseas travel, seconded officers and delays in the achievement of planned savings relating to the restructuring of the Counter Terrorism Command. However, measures taken to control overtime continue to have an effect and the forecast in this area has reduced by a further £2.1m since period 6. There has been an adverse movement in the forecast position since Period 6 of £3.3m following a detailed review of travel and subsistence expenditure and costs associated with retaining seconded Police Officers for Operation Theseus longer than previously anticipated. This area will be examined further as part of the Period 8 process.

11. Central Services - An underspend of £2.4m - 6.9% of budget.

The principal area of the forecast underspend is within Police Officer and Police Staff pay and relates to vacancies within most parts of the Business Group. The forecast underspend has increased by £0.9m since Period 6 primarily within Police Staff pay following a review of the recruitment profile.

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

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 6.

13. Directorate of Information - An underspend excluding Operations Overt/Overamp of £1.7m - 0.8% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.

The principal reason for the underspend relates to Police Staff pay resulting from recruitment difficulties and reflects the current level of vacancies. This underspend offsets the forecast overspend related to the cost of compliance with Management of Police Information (MoPI). The forecast position has improved by £1.5m from that reported at Period 6, primarily due to a review of the recruitment programme within the Technology Group and a reduction in revenue costs associated with capital project delays.

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

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 Criminal Justice Unit for prosecution fees and provision of statements. The forecast underspend is in line with that reported at Period 6.

15. Resources - An underspend, excluding Operations Overt/Overamp, of £8.7m - 3.2% of budget. Forecast additional expenditure on Overt/Overamp is £0.4m.

The forecast underspend relates primarily to additional income from investments/other sources and reduced capital financing costs. The primary cause of the increase in underspend of £4.3m since period 6 is as a result of a review of forecasts in a number of business areas.

16. Human Resources - An overspend of £0.4m - 0.4% of budget.

The principal reason for the overspend is the unbudgeted cost of Police Staff premature retirements (£1.5m) that is partially offset by increased income received for Police Officers on secondment. The favourable movement in the forecast of £0.4m since Period 6 has occurred as a result of a reduced forecast for training expenditure following a detailed examination of training plans across the Directorate.

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

Minor variation.

18. Centrally Held Budgets - A favourable variance of £4.5m

The forecast underspend results from budgets that have yet to be allocated in respect of non-pay inflation.

19. Funded Units - An adverse variance of £3.2m.

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 the Disclosure Service where overhead recovery income targets cannot be achieved due to a higher than expected level of vacancies within the units. There has been a small adverse movement in the forecast variance of £0.3m since Period 6.

20. Discretionary Pension Costs - An underspend of £1.3m.

The forecast underspend has arisen due to the actual number of ill health retirement payments being lower than expected. There has been an adverse movement in the forecast since Period 6 of £0.4m due to a revised estimate of expenditure related to officers within the 30+ scheme.

Revenue Forecast by expenditure/income type

21. Table 3 compares the forecast outturn variances for Period 7 and Period 6 by income/expense type.

Table 3 - Comparison of Period 7 forecast outturn variation with Period 6 forecast outturn variation by Income/expense type

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

23. Police Officer Pay - Underspend excluding Operations Overt/Overamp of £16.2m - 1.0% of budget. Forecast additional expenditure on Overt/Overamp is £1.1m.

The forecast underspend reflects the under-strength position of most Business Groups and has increased by £5.7m from that reported at Period 6. This is predominately due to revised budgets in Territorial Policing that reflect the allocation of Neighbourhood Policing and Proceeds of Crime Act funding, and within Specialist Crime following reviews of the recruitment profiles.

24. Police Staff Pay - Underspend of £5.4m - 1.0% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.

There has been a favourable movement of £1.3m since Period 6 mostly within Central Services and the Directorate of Information who have revised their forecasts of recruitment and wastage expectations.

25. PCSO Pay - Underspend of £2.8m - 3.1% of budget.

The forecast underspend is principally due to the under-strength position within the Transport OCU. There has been minimal change in the forecast since Period 6.

26. Police Officer Overtime - Overspend excluding Operations Overt/Overamp of £6.0m - 5.0% of budget. Forecast additional expenditure on Overt/Overamp is £8.3m.

The forecast overspend has decreased by £3.4m since Period 6, primarily within Specialist Operations where management controls on overtime continue to drive down expenditure, and within Human Resources from the allocation of budget relating to overtime worked by seconded officers. The forecast overspend is mostly a consequence of work related to the under-resourced position of Dedicated Security posts within Specialist Operations.

27. Police Staff Overtime - Overspend excluding Operations Overt/Overamp of £2.8m - 9.6% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.

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 6 of £0.3m.

28. Employee Related Expenditure - Overspend excluding Operations Overt/Overamp of £4.9m - 17.3% of budget. Forecast additional expenditure on Overt/Overamp is £6.9m.

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 £1.1m since Period 6 which relates to the retention of seconded officers working on Operation Theseus longer than previously expected.

29. Premises Costs - Overspend of £6.0m - 2.9% of budget.

The forecast overspend relates to increased PFI costs associated with an increase in training at Gravesend, slippage of property rental savings, costs related to legal and professional fees incurred on capital property projects that have been aborted. The forecast overspend has increased by £0.9m from that reported at Period 6.

30. Transport Costs - Overspend excluding Operations Overt/Overamp of £5.7m - 9.1% of budget. Forecast additional expenditure on Overt/Overamp is £3.3m.

The forecast overspend and increase in forecast of £4.0m since period 6 relate primarily to increased fuel costs for vehicles, overseas travel and subsistence, travel and subsistence of officers seconded to the MPS and vehicle maintenance.

31. Supplies and Services - Overspend excluding Operations Overt/Overamp of £15.2m - 3.6% of budget. Forecast additional expenditure on Overt/Overamp is £2.4m.

The forecast overspend has reduced by £3.0m since Period 6 due to a reduction in forensics expenditure forecast (see paragraph 33) and a forecast underspend within the Capital programme which also reduces the associated revenue spend. The forecast overspend primarily relates to projected expenditure on forensics (£8.5m). Other areas of overspend relate to additional CRIS support costs (£1.0m) resulting from the delay in transition to the new outsource supplier, unbudgeted costs of MoPI (£2.0m), slippages in savings arising from the Counter Terrorism Command restructuring (£2.2m) and additional expenditure on Interpreters (£1.9m).

32. Income - Forecast over-achievement of £5.6m - 1.8% of budget.

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 a reduction in the forecast over-achievement of income since Period 6 of £2.0m, which relates to the funded units where reduced expenditure forecasts in line with revised contract estimates have been matched by reduced income

33. Forensic and External Consultant costs

In line with requests from MPA Finance Committee for more detailed information in respect of Forensics and External Consultant costs, summary information is provided in Table 4 below. With regard to Forensics, a new operational control process has been introduced to bring Forensic expenditure closer to budget with greater focus on value for money and control limits for specific investigations. The framework for savings is focused on current expenditure on Drug and Violent Crime casework submissions including Homicide, where a considerable level of DNA expenditure is currently made. It also targets aspects of current practice by external forensic providers that add to the current costs experienced by the MPS. The savings being sought are immediate and will continue to evolve based on experience gained during the rest of this financial year and can be expected to develop further in the light of operational learning and discussions with existing forensic providers.

34. Costs in respect of external consultants remain a focus of considerable scrutiny and forecast expenditure in this area is reducing as a result of management controls.

Table 4 - Forensic and External Consultant information

Budget movements

35. The major budget movements undertaken in Period 7 are shown in Table 5:

Table 5 - Major budget movements actioned in Period 7

Movements in Reserves

36. The reserve drawdowns carried out since Period 6 are shown in Table 6:

Table 6 - Reserve drawdowns actioned in Period 7

Capital Monitoring

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

1. An increase in the budget of £2.9m due to additional funding received from the Home Office towards the National Automatic Number Plate Recognition Data Centre.
2. An increase in the budget of £6.9m for the purchase of a building in Lillie Road, London following agreement at the MPA Finance Committee in September 2006.
3. Carry forward of £16.5m relating to various projects undertaken by the Directorate of Information that have been re-phased into 2007/08.
4. Carry forward of £6.5m relating to the Information and Communication Technology element of the Safer Neighbourhoods Programme due to delays either in the timing of site acquisition or planning related matters.
5. An increase in the budget of £0.038m for the replacement of MPA IT equipment (network switch and file server to enable continuation of resilient and robust IT services).

Assuming these adjustments are approved, this will revise the capital budget in 2006/07 to £234.7m.

38. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 7 (October) by programme, which shows an overall total of £76.3m. This total represents 32.5% of the revised budget. The forecast for the year of £196m is £38.7m below the revised budget.

39. Property Programme - £22.7m underspend (34.2% of budget)

The Property Services forecast shows an underspend of £22.7m 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. This information will be incorporated into the Period 8 Monitoring Report.

40. Information Programme - Excluding C3i Programme - £0.2m overspend (0.3% of budget)

The position has changed from that reported at Period 6 primarily due to the request to carry forward £16.5m relating to projects re-phased into 2007/08.

41. Transport Projects - Nil variance

42. Directorate of Information - C3i Programme - £8.2m underspend (16.9% of budget)

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

43. Safer Neighbourhoods Programme (Phases 1 to 3) - £7.9m underspend (15.1% of budget)

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. This information will be incorporated into the Period 8 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: Simon Hart, Acting Director of Finance Services

For more information contact:

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

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