Revenue and capital monitoring report 2006/07 - period 9

Report: 4
Date: 15 February 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 9 (to the end of December). The revenue budget is forecast to overspend by £17.5m (0.6% of budget), which includes £19.8m of estimated additional costs related to Operations Overt/Overamp. The underlying forecast underspend excluding Operations Overt/Overamp is £2.3m (0.1% of budget).

The Capital Programme as at Period 9 (to the end of December) shows year to date total expenditure of £109.1m. This total represents 56.3% of the revised budget. The forecast for the year of £183.3m is £10.6m below the revised budget of £193.9m principally due to the re-phasing of project expenditure into future years.

A. Recommendations

That

1. Members note the year to date and forecast position for revenue budgets and the capital programme; and
2. approve budget changes to the capital programme as set out in this paper (paragraph 34).

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 December. 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 being taken 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 £3.9m from the position reported at Period 8. This follows combined reductions of £19.4m reported at the last three Finance Committees.

3. Table 1 provides a summary of the revenue forecast and additional cost forecast for Operations Overt/Overamp. Table 2 compares the forecast outturn variances for Period 8 and Period 9 by Business Group.

Table 1 - Summary of revenue forecast against budget at period 9

4. There has been a reduction in the forecast overspend position excluding Operation Overt/Overamp of £3.1m from Period 8. The forecast outturn position in respect of Operations Overt/Overamp has also improved by £0.8m since Period 8.

Table 2 – Comparison of Period 9 forecast outturn variation with Period 8 forecast outturn variation

Revenue Forecast by Business Group

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

6. Territorial Policing – An underspend excluding Operations Overt/Overamp of £0.9m – 0.1% of budget. Forecast additional expenditure on Overt/Overamp is £4.1m.
There has been an adverse movement in the forecast of £0.6m since Period 8 mainly as a result of the Police Pay inflation budget allocation being 0.5% lower than the actual pay increase and a review of costs relating to Forensics Medical Examiners fees.

7. Specialist Crime – An overspend excluding Operations Overt/Overamp of £4.8m – 1.3% of budget. Forecast additional expenditure on Overt/Overamp is £1.6m.
There has been a favourable movement in the forecast of £1.4m since Period 8 due to slippage in recruitment of Police Staff and management action to reduce future spend within local purchases. The principal reason for the forecast overspend remains in forensics where demand exceeds the budget provision. Further information regarding forensics expenditure is given at paragraph 31 in this report.

8. Specialist Operations – An overspend excluding Operations Overt/Overamp of £18.3m – 8.5% of budget. Forecast additional expenditure on Overt/Overamp is £13.0m.
There has been an increase in the forecast position since Period 8 of £2.0m mainly as a result of increased operational demands on overtime such as Operation Whimbrel (the policing operation set up after the illness and then death of Mr Litvinenko) and revised forecasts for Supplies & Services. 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 mostly a consequence of work related to the under resourced position in respect of Dedicated Security Posts.

9. Central Services – An underspend of £3.8m – 10.7% of budget.
The forecast underspend has increased by £0.9m since Period 8 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 as a result of difficulties in recruiting staff with the necessary experience.

10. Standards & Intelligence – An underspend of £0.9m – 1.4% 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 has remained in line with that reported at Period 8.

11. Directorate of Information – An underspend excluding Operations Overt/Overamp of £4.8m – 2.2% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.
The forecast position has improved by £1.1m from that reported at Period 8, mainly within Supplies & Services resulting from slippage in projects and unfilled vacancies in respect of Police Officers and Police Staff. The principal reasons for the underspend relate to Police Officer and Police Staff pay resulting from the current level of vacancies as well as 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.

12. Central Operations – An underspend excluding Operations Overt/Overamp of £3.9m – 1.3% of budget. Forecast additional expenditure on Overt/Overamp is £0.4m.
There has been a favourable movement in the forecast of £1.4m from that reported at Period 8, primarily due to a reassessment of Police Overtime levels for the remainder of the year and a revised forecast for Police Officer pay within Metcall. There has also been an increase in the Income forecast.

13. Resources – An underspend excluding Operations Overt/Overamp of £11.3m – 4.2% of budget. Forecast additional expenditure on Overt/Overamp is £0.4m.
The forecast position has improved by £2.1m from that reported at Period 8, following the capitalisation of Police Staff costs working on Property Services capital projects and reduced Gas and Electricity prices. The forecast underspend relates to additional income from investments/other sources, reduced capital financing costs reflecting re-phasing of the Capital Programme and the capitalisation of Staff costs.

14. Human Resources – An overspend of £0.7m – 0.7% of budget.
The forecast overspend has slightly increased from Period 8. The principal reason for the overspend remains the unbudgeted cost of Police Staff premature retirements.

15. Metropolitan Police Authority – Minor underspend.

16. Centrally Held Budgets – A favourable variance of £4.0m
The forecast underspend results from budgets that have yet to be allocated in respect of non-pay inflation.

17. Funded Units - An adverse variance of £4.0m.
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.

18. Discretionary Pension Costs – An underspend of £0.4m.
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

19. Table 3 compares the forecast outturn variances for Period 9 and Period 8 by income/expense type.

Table 3 – Comparison of Period 9 forecast outturn variation with Period 8 forecast outturn variation by Income/expense type

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

21. Police Officer Pay – Underspend excluding Operations Overt/Overamp of £17.1m – 1.0% of budget. Forecast additional expenditure on Overt/Overamp is £1.0m.
The forecast underspend reflects the under-strength position of most Business Groups. There has been an adverse movement in the forecast of £2.6m from that reported at Period 8. This is principally due to the police pay award being settled at a higher rate than that budgeted for.

22. Police Staff Pay – Underspend of £14.8m – 2.8% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.
There has been a favourable movement of £6.6m since Period 8 mostly within Directorate of Information resulting from the capitalisation of staff costs. There have also been reductions within Territorial Policing following the allocation of additional budget and within Resources Directorate following a review of vacancy levels and recruitment plans.

23. PCSO Pay - Underspend of £1.4m – 1.6% of budget.
The forecast underspend is principally due to the under-strength position within the Transport OCU. There has been little change in the forecast position since Period 8.

24. Police Officer Overtime - Overspend excluding Operations Overt/Overamp of £6.4m – 5.3% of budget. Forecast additional expenditure on Overt/Overamp is £8.2m.
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 decrease of £0.1m in the forecast overspend since Period 8.

25. Police Staff Overtime - Overspend excluding Operations Overt/Overamp of £2.1m – 7.1% 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 decrease of £0.3m in the forecast overspend since Period 8, mostly within Territorial Policing as a result of management action to control spend in this area.

26. Employee Related Expenditure - Overspend excluding Operations Overt/Overamp of £5.0m – 17.5% of budget. Forecast additional expenditure on Overt/Overamp is £8.2m.
The forecast overspend principally relates to the costs associated with seconded officers (Operation Theseus) within Specialist Operations who are forecast to remain in place until the year end.

27. Premises Costs – Overspend of £2.4m – 1.2% of budget.
The forecast overspend has decreased by £2.2m from that reported at Period 8 principally due to successful negotiations with the MPS gas and electricity supplier that have reduced the forecast expenditure in this area. The forecast overspend relates primarily to legal and professional fees incurred on aborted capital property projects for patrol bases and custody centres as well as reviews of cleaning and facilities management ordered works contracts.

28. Transport Costs - Overspend excluding Operations Overt/Overamp of £6.0m – 9.6% of budget. Forecast additional expenditure on Overt/Overamp is £3.8m.
The forecast overspend relates primarily to increased fuel costs for vehicles, overseas travel, travel and subsistence of officers seconded to the MPS and vehicle maintenance. There has been an adverse movement of £0.3m to the forecast since period 8.

29. Supplies and Services - Overspend excluding Operations Overt/Overamp of £18.8m – 4.5% of budget. Forecast additional expenditure on Overt/Overamp is £2.3m.
The forecast overspend primarily relates to projected expenditure on forensics of £8.3m. Other areas of overspends 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), additional expenditure on Interpreters (£1.9m) and DNA testing (£2.9m). The forecast has reduced by £0.2m since period 8.

30. Income - Forecast over-achievement of £6.6m – 2.2% 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 a small decrease in the variance since Period 8 of £0.9m.

31. 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. Costs in these areas remain a focus of considerable scrutiny and forecast expenditure has reduced from that reported at period 8.

Table 4 – Forensic and External Consultant information

Budget movements

32. The major budget movements undertaken in Period 9 are shown in Table 5:

Table 5 – Major budget movements actioned in Period 9

Movements in Reserves

33. The reserve drawdowns carried out since Period 8 are shown in Table 6:

Table 6 – Reserve drawdowns carried out in Period 9

 Capital Monitoring

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

1. An increase in the budget of £1.2m due to additional funding received from the Home Office towards the Sky project to secure the IT infrastructure.
2. Carry forward of £1.0m relating to the purchase of various vehicles that will now not be delivered until 2007/08.
3. Carry forward of £24.2m relating to various projects undertaken by the Property Services Directorate that have been re-phased into 2007/08.
4. Carry forward of £15.6m relating to the Property element of the Safer Neighbourhoods Programme due to delays either in the timing of site acquisition or planning related matters.

35. Assuming the adjustments are approved, this will revise the capital budget in 2006/07 to £193.9m.

36. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 9 (December) by programme, which shows a year to date total of £109.1m. This total represents 56.3% of the revised budget. The forecast for the year of £183.3m is £10.6m below the revised budget.

38. Property Programme - £0.8m underspend (1.8% of budget)
The Property Services forecast shows small underspend against the current year budget allocation following the request to carry forward £24.2m to 2007/08.

39. Information Programme – Excluding C3i Programme – £2m underspend (3.6% of budget)
The position reported reflects minor underspends on various projects.

40. Transport Projects – Nil variance

41. Directorate of Information – C3i Programme - £7.5m underspend (15.5% of budget)
The forecast underspend is due to slippage in the acquisition of radio headsets for the Airwave project.

42. Safer Neighbourhoods Programme (Phases 1 to 3) - £0.2m underspend (0.9% of budget)
The Safer Neighbourhoods Programme (Phases 1 to 3) forecast shows a small underspend against the current year budget allocation following the request to carry forward £15.6m to 2007/08 on the property elements of the Programme.

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

TAM

Terrorism and Allied Matters

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

Whimbrel

the policing operation set up after the illness and then death of Mr Litvinenko

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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