Revenue and Capital Monitoring Report 2006/07 - Period 8

Report: 04
Date: 18 January 2007
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 8 (to the end of November). The revenue budget is forecast to overspend by £21.5m (0.7% of budget), which includes £20.6m of estimated additional costs related to Operations Overt/Overamp. The underlying forecast overspend excluding Operations Overt/Overamp is £0.8m (0.03% of budget).

The Capital Programme as at Period 8 (to the end of November) shows year to date total expenditure of £91.2m. This total represents 39.3% of the revised budget. The forecast for the year of £194.6m is £37.3m below the revised budget of £231.9m principally due to the re-phasing of project expenditure into future years.

A. Recommendations

Members are invited to:

1. Note the year to date and forecast position for revenue budgets and the capital programme.
2. Approve the carry forward of £2.5m Capital funding relating to the Information and Communication Technology element of the Safer Neighbourhoods Programme (paragraph 36).

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 November. This paper includes details of 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 previous Finance Committees we have advised of actions 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 £7.0m from the position reported at Period 7. This follows reductions of £6.9m and £5.5m reported at the last two Finance Committees.

3. Following work to identify the impact of the additional cost of the 3% Police Officer pay award, it has been decided that, as with Police Staff Pay, 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. 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 7 and Period 8 by Business Group.

Table 1 - Summary of revenue forecast against budget at period 8

5. There has been a reduction in the forecast overspend position excluding Operation Overt/Overamp of £5.3m from Period 7. The forecast outturn position in respect of Operations Overt/Overamp has also improved by £1.6m since Period 7 mainly due to the re-direction of £2.5m of MPS Counter Terrorism funding towards this operation. At the Finance Committee meeting on 21 December 2006, the MPA Chief Executive announced that discussions were on going with the Home Office regarding additional funding for the MPS to cover the costs of Operations Overt/Overamp. A verbal update will be given at this meeting if any further information is available. The reduction in the forecast overspend from Period 7 results from actions undertaken by the Business Groups at the request of Management Board. Whilst this is encouraging, pressure to control and reduce expenditure will be maintained by Business Groups in order that the overspend position can continue to be managed downwards.

Table 2 – Comparison of Period 8 forecast outturn variation with Period 7 forecast outturn variation

Revenue Forecast by Business Group

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

7. Territorial Policing – An underspend excluding Operations Overt/Overamp of £1.4m – 0.1% of budget. Forecast additional expenditure on Overt/Overamp is £4.0m.
There has been a favourable movement in the forecast of £1.8m since Period 7 following revised Police Officer and Police Staff pay forecasts and revised expectations around recruitment levels.

8. Specialist Crime – An overspend excluding Operations Overt/Overamp of £6.1m – 1.7% of budget. Forecast additional expenditure on Overt/Overamp is £1.4m.
There has been a favourable movement in the forecast of £0.6m since Period 7 following the transfer of the Intelligence Standards Unit, which has an underspend position, from Standards & Intelligence to Specialist Crime. The principal reason for the forecast overspend remains the projected expenditure on forensics where demand exceeds the budget provision. Further information regarding forensics expenditure is given at paragraph 32 in this report.

9. Specialist Operations – An overspend excluding Operations Overt/Overamp of £16.4m – 7.7% of budget. Forecast additional expenditure on Overt/Overamp is £14.6m.
There has been a favourable movement in the forecast position since Period 7 of £0.6m following a detailed review of Police Officer pay forecasts and expectations around recruitment levels. The principal reasons for the forecast overspend remain within 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; and within Police Officer Overtime which is a consequence of work related to the under resourced position of Dedicated Security Posts.

10. Central Services – An underspend of £2.9m – 8.2% of budget.
The forecast underspend has increased by £0.5m since Period 7 primarily within Police Officer pay following a review of the recruitment profile. 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.

11. Standards & Intelligence – An underspend of £1.0m – 1.6% 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. Despite the movement of the Intelligence Standards Unit to Specialist Crime, the forecast underspend has remained in line with that reported at Period 7 due to further reductions to the Police Officer Pay forecast.

12. Directorate of Information – An underspend excluding Operations Overt/Overamp of £3.7m – 1.7% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.
The forecast position has improved by £2.0m from that reported at Period 7, primarily due to the capitalisation of the salaries costs of staff engaged in the delivery of Capital projects. The principal reasons for the underspend relate to Police Officer and Police Staff pay resulting from both the current level of vacancies and the capitalisation of staff costs. The underspends offset a forecast overspend related to the cost of compliance with Management of Police Information (MoPI) and the re-classification of expenditure from Capital to Revenue relating to Airwave rental costs at Heathrow Airport.

13. Central Operations – An underspend excluding Operations Overt/Overamp of £2.5m – 0.8% of budget. Forecast additional expenditure on Overt/Overamp is £0.5m.
The forecast position has improved by £0.7m from that reported at Period 7, primarily due to a review of recruitment expectations within the Police Staff Pay forecast. 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.

14. Resources – An underspend excluding Operations Overt/Overamp of £9.3m – 3.4% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.
The forecast position has improved by £0.5m from that reported at Period 7, primarily due to a review of expected PFI costs within Property Services. The forecast underspend relates primarily to additional income from investments/other sources and reduced capital financing costs reflecting slippage in the Capital Programme.

15. Human Resources – An overspend of £0.5m – 0.6% of budget.
The principal reason for the overspend is the unbudgeted cost of Police Staff premature retirements.

16. Metropolitan Police Authority – A minor underspend.

17. Centrally Held Budgets – A favourable variance of £4.2m
The forecast underspend results from budgets that have yet to be allocated in respect of non-pay inflation.

18. Funded Units - An adverse variance of £3.7m.
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.

19. Discretionary Pension Costs – An underspend of £0.9m.
The forecast underspend has arisen due to the actual number of ill health retirement payments being lower than expected.

Revenue Forecast by expenditure/income type

20. Table 3 compares the forecast outturn variances for Period 8 and Period 7 by income/expense type.

Table 3 – Comparison of Period 8 forecast outturn variation with Period 7 forecast outturn variation by Income/expense type

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

22. Police Officer Pay – Underspend excluding Operations Overt/Overamp of £19.7m – 1.2% 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 £3.5m from that reported at Period 7. This is principally due to the capitalisation of salary costs of police officers engaged in the delivery of Capital projects within the Directorate of Information. Also, there has been a forecast reduction within Specialist Operations following reviews of the recruitment profiles.

23. Police Staff Pay – Underspend of £8.3m – 1.5% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.
There has been a favourable movement of £2.9m since Period 7 mostly within Territorial Policing following revised expectations around recruitment levels.

24. PCSO Pay - Underspend of £1.5m – 1.6% of budget.
The forecast underspend is principally due to the under-strength position within the Transport OCU. There has been an adverse movement of £1.3m in the forecast since Period 7, mainly within Territorial Policing following the accelerated roll-out of Safer Neighbourhoods. This will be funded via additional grant income and the overall position will improve accordingly.

25. Police Officer Overtime - Overspend excluding Operations Overt/Overamp of £6.5m – 5.4% of budget. Forecast additional expenditure on Overt/Overamp is £8.3m.
The overspend is mostly a consequence of work related to the under-resourced position of Dedicated Security posts within Specialist Operations. There has been a minor increase of £0.5m in the forecast overspend since Period 7.

26. Police Staff Overtime - Overspend excluding Operations Overt/Overamp of £2.4m – 8.0% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.
The forecast overspend is principally due to overtime within various units in Specialist Operations and within the Forensics Service (Specialist Crime). There has been a minor increase of £0.4m in the forecast overspend since Period 7.

27. Employee Related Expenditure - Overspend excluding Operations Overt/Overamp of £3.1m – 11.0% of budget. Forecast additional expenditure on Overt/Overamp is £7.0m.
The forecast overspend has decreased by £1.8m since Period 7 due to the capitalisation of employees engaged in the delivery of Capital projects within the Directorate of Information. 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.

28. Premises Costs – Overspend of £4.6m – 2.2% of budget.
The forecast overspend has decreased by £1.4m from that reported at Period 7 following a review of expected PFI costs within Property Services. The forecast overspend relates to slippage of property rental savings and costs related to legal and professional fees incurred on capital property projects that have been aborted.

29. Transport Costs - Overspend excluding Operations Overt/Overamp of £5.7m – 9.1% of budget. Forecast additional expenditure on Overt/Overamp is £3.9m.
The forecast overspend relates primarily to increased fuel costs for vehicles, overseas travel and subsistence, travel and subsistence of officers seconded to the MPS and vehicle maintenance. There has been minimal change to the forecast since period 7.

30. Supplies and Services - Overspend excluding Operations Overt/Overamp of £19.1m – 4.5% of budget. Forecast additional expenditure on Overt/Overamp is £2.6m.
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). The forecast overspend has increased by £3.9m since period 7, primarily due to the re-classification of expenditure from Capital to Revenue relating to Airwave rental costs at Heathrow Airport.

31. Income - Forecast over-achievement of £7.6m – 1.9% 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. There has been an increase in the forecast over-achievement of income since Period 7 of £2.0m relating to funded units where increased expenditure forecasts have been matched by increased income.

32. 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 5 below.

33. 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. There is now a small overspend in this category of expenditure.

Table 5 – Forensic and External Consultant information

Budget movements

34. The major budget movements undertaken in Period 8 are shown in Table 4:

Table 4 – Major budget movements actioned in Period 8

Movements in reserves

35. The reserve drawdowns carried out since Period 7 are shown in Table 5:

Table 5 – Reserve drawdowns actioned in Period 8

Capital monitoring

36. Members are asked to approve the following amendment to the 2006/07 Capital Programme. The carry forward of £2.5m relating to the Information and Communication Technology element of the Safer Neighbourhoods Programme due to delays in the timing of site acquisition/planning related matters.

Assuming these adjustments are approved, this will revise the capital budget in 2006/07 to £231.9m.

37. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 8 (November) by programme, which shows an overall total of £91.2m. This total represents 39.3% of the revised budget. The forecast for the year of £194.5m is £37.3m below the revised budget.

38. Property Programme - £22.8m underspend (34.4% of budget)
The Property Services forecast shows an underspend of £22.8m 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 be re-phased 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 was taken to Investment Board and MPA Finance Committee in November.

39. Information Programme – Excluding C3i Programme – £1.3m overspend (2.4% of budget)
The position reported reflects minor overspends on various projects.

40. Transport Projects - £0.5m underspend (2.7% of budget)
The forecast underspend is due to re-phasing of the delivery of vans for the Territorial Support Group.

41. Directorate of Information – C3i Programme - £8.1m underspend (16.6% of budget)
The forecast underspend is due to re-phasing of 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.

42. Safer Neighbourhoods Programme (Phases 1 to 3) - £7.2m underspend (18.4% of budget)
The underspend reflects delays experienced in progressing certain property related projects 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 was taken to Investment Board and MPA Finance Committee in November.

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

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, A/Director of Finance Services, MPS.

For more information contact:

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

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