Revenue and capital budget monitoring 2006/07- period 11

Report: 4
Date: 3 May 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 11 (to the end of February). The revenue budget is forecast to overspend by £4.9m (0.2% of budget), which includes £19.4m of estimated additional costs related to Operations Overt/Overamp. The underlying forecast underspend excluding Operations Overt/Overamp is £14.5m (0.5% of budget).

The Capital Programme as at period 11 (to the end of February) shows year to date total expenditure of £134m. This total represents 57.3% of the revised budget. The forecast for the year of £168m is £66m below the revised budget of £234m 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.

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 February. This report 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 £12.7m including Operation Overt/Overamp and by £12.3m excluding Operation Overt/Overamp from the position reported to the last Finance Committee at Period 9.

3. The final period 12 outturn figures are still being finalised. The direction of travel of the overspend has been in a continued downward direction over recent months and it is anticipated that the final revenue outturn will show an underspending. In the event of the 2006/07 outturn producing an underspend position, a process is underway to manage bids for the maintenance of existing earmarked reserves and the creation of new earmarked reserves. The statutory timetable for the Authority’s final accounts has been brought forward in recent years and the Corporate Governance Committee will be considering the draft accounts at its meeting on 15 June. As the Finance Committee does not meet until 21 June it will therefore be necessary to consider proposals for reserves at the meeting of the Co-ordination and Policing Committee on 7 June to ensure member agreement to the creation of reserves to be included in the final accounts.

4. 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 9 and Period 11 by Business Group.

5. There has been a reduction in the forecast overspend position excluding Operation Overt/Overamp of £12.3m from Period 9. The forecast outturn position in respect of Operations Overt/Overamp has also improved by £0.4m since Period 9.

Table 1 - Summary of revenue forecast against budget at period 11

Table 2 – Comparison of Period 11 forecast outturn variation with Period 9 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 £4.8m – 0.4% of budget. Forecast additional expenditure on Overt/Overamp is £4.1m.
There has been a favourable movement in the forecast of £4.0m since Period 9 mainly within Police Staff Pay (£1.7m) and PCSO Pay (£0.9m) following reviews of recruitment expectations. The forecast for Police overtime expenditure has increased by approximately £2.0m relating to Operation Safeguard (the accommodation of Home Office prisoners within police cells) but this is matched by a corresponding increase in forecast income.

8. Specialist Crime – An overspend excluding Operations Overt/Overamp of £3.4m – 0.9% of budget. Forecast additional expenditure on Overt/Overamp is £1.7m.
There has been a favourable movement in the forecast of £1.4m since Period 9 following reductions in Police overtime expenditure and within DNA testing. 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 32 in this report.

9. Specialist Operations – An overspend excluding Operations Overt/Overamp of £13.6m – 6.3% of budget. Forecast additional expenditure on Overt/Overamp is £12.9m.
There has been a favourable movement in the forecast position since Period 9 of £4.8m mainly following reviews of Police overtime and overseas travel costs. 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.

10. Central Operations – An underspend excluding Operations Overt/Overamp of £4.0m – 1.3% of budget. Forecast additional expenditure on Overt/Overamp is £0.4m.
There has been a favourable movement in the forecast of £0.1m from that reported at Period 9. The underspend results from within police pay where units are below budgeted workforce totals, police overtime where the cost of aid has not been as high as expected, running expenses with underspends on clothing budgets, and within income where there have been additional receipts for prosecution fees within the Central Traffic Criminal Justice Unit.

11. Central Services – An underspend of £4.0m – 11.2% of budget.
The forecast underspend has increased by £0.2m since Period 9 following reductions within publicity expenditure. The principal area of the forecast underspend remains within Police Officer and Police Staff pay and relates to vacancies resulting from difficulties in recruiting staff with the necessary experience.

12. Standards & Intelligence – An underspend of £1.4m – 2.1% of budget.
The forecast underspend has increased by £0.4m from that reported at Period 9 mainly within Police Pay following a review of recruitment expectations. 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.

13. Directorate of Information – An underspend excluding Operations Overt/Overamp of £5.0m – 2.3% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.
The forecast position has improved by £0.1m from that reported at Period 9. 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 (£4.2m). 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.

14. Resources – An underspend excluding Operations Overt/Overamp of £11.7m – 4.3% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.
The forecast position has improved by £0.4m from that reported at Period 9, mainly resulting from increased investment income. The forecast underspend relates mainly to additional income from investments, reduced capital financing costs reflecting re-phasing of the Capital Programme and the capitalisation of Property Services Staff costs (£0.9m).

15. Human Resources – An overspend of £0.2m – 0.2% of budget.
The forecast overspend has reduced by £0.5m from Period 9 following reduced expenditure within the Leadership Academy related to delays in rolling out courses and increased income related to Department for Work and Pensions benefits for both police officers and police staff. The principal reason for the overspend remains the unbudgeted cost of Police Staff premature retirements.

16. Metropolitan Police Authority – An underspend of £0.1m – 1.1% of budget.

17. Centrally Held Budgets – A favourable variance of £4.4m
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 £3.5m.
The variance has reduced by £0.5m from that reported at period 9. 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 – Minor overspend.

Revenue forecast by expenditure/income type

20. Table 3 compares the forecast outturn variances for Period 11 and Period 9 by income/expense type.

Table 3 – Comparison of Period 11 forecast outturn variation with Period 9 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 £18.9m – 1.1% of budget. Forecast additional expenditure on Overt/Overamp is £1.0m.
There has been a favourable movement in the forecast of £1.9m from that reported at Period 9 with reductions in the forecasts in the majority of Business Groups. The forecast underspend reflects the under-strength position of most Business Groups.

23. Police Staff Pay – Underspend of £17.8m – 3.3% of budget. Forecast additional expenditure on Overt/Overamp is £0.1m.
There has been a favourable movement of £3.0m since Period 9 mostly within Territorial Policing, Directorate of Information and Resources Directorate following reviews of vacancy levels and recruitment expectations. The underspend reflects the existing level of vacancies within Business Groups as well as the capitalisation of staff costs (£5.1m).

24. PCSO Pay - Underspend of £2.4m – 2.7% of budget.
There has been a favourable movement of £0.9m in the forecast position since Period 9 following a review of recruitment expectations within Territorial Policing. The forecast underspend is principally due to the under-strength position within the Transport OCU.

25. Police Officer Overtime - Overspend excluding Operations Overt/Overamp of £4.3m – 3.5% of budget. Forecast additional expenditure on Overt/Overamp is £8.1m.
Despite an increase in overtime expenditure within Territorial Policing relating to Operation Safeguard (the accommodation of Home Office prisoners within police cells) which is matched by a corresponding increase in income, there has been an overall decrease of £2.2m in the forecast overspend since Period 9. This reflects reviews of overtime expenditure with Specialist Operations and Specialist Crime. The net overspend remains a consequence of work related to the under-resourced position of Dedicated Security posts within Specialist Operations.

26. Police Staff Overtime - Overspend excluding Operations Overt/Overamp of £2.3m – 7.8% of budget. Forecast additional expenditure on Overt/Overamp is £0.2m.
The forecast overspend is principally due to overtime costs within various units in Specialist Operations and within the Forensics Service (Specialist Crime). There has been a small increase of £0.2m in the forecast overspend since Period 9.

27. Employee Related Expenditure - Overspend excluding Operations Overt/Overamp of £4.7m – 16.1% of budget. Forecast additional expenditure on Overt/Overamp is £8.1m.
There has been a favourable movement of £0.3m in the forecast from that reported at Period 9. The forecast overspend principally relates to the cost of seconded officers (Operation Theseus) within Specialist Operations who are forecast to remain in place until the year end.

28. Premises Costs – Overspend of £3.0m – 1.5% of budget.
The forecast overspend relates primarily to premises cleaning and facilities management contracts. The forecast overspend has increased by £0.6m from that reported at Period 9.

29. Transport Costs - Overspend excluding Operations Overt/Overamp of £5.0m – 8.0% of budget. Forecast additional expenditure on Overt/Overamp is £3.6m.
There has been a favourable movement of £1.0m in the forecast since Period 9 following a review of travel costs within Specialist Operations. 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.

30. Supplies and Services - Overspend excluding Operations Overt/Overamp of £16.1m – 3.8% of budget. Forecast additional expenditure on Overt/Overamp is £2.3m.
The forecast has reduced by £2.8m since Period 9 following revised forecasts within a number of Business Groups. The forecast overspend primarily relates to an overspend on forensics of £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), additional expenditure on Interpreters (£1.8m), DNA testing (£1.9m) and Medical Examiner Fees (£2.5m).

31. Income - Forecast over-achievement of £8.9m – 2.9% 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 a favourable increase in the variance since Period 9 of £2.3m which relates to income for Operation Safeguard (see Police Overtime above).

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 4 below.

Table 4 – Forensic and External Consultant information

Budget movements

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

Table 5 – Major budget movements actioned since Period 9

Movements in reserves

34. The reserve drawdowns carried out since Period 9 are shown in Table 6:

Table 6 – Reserve drawdowns carried out since Period 9

Capital monitoring

35. Appendix 3 sets out the expenditure for the 2006/07 Capital Programme as at Period 11 (February) by programme, which shows a year to date total of £134m. This total represents 57.3% of the revised budget. The forecast for the year of £168m is £66m below the revised budget.

36. Property Programme - £25.9m underspend (38.6% of budget)
The Property Services forecast shows an underspend against the current year budget due to project re-phasing into future years. The underspend includes a MPA approved carry forward of £24.2m to 2007/08.

37. Information Programme – Excluding C3i Programme – £8.9m underspend (16.0% of budget)
The position reported reflects underspends on various projects the majority of which will be requested to be carried forward at the year end.

38. Transport Projects – £0.8m underspend (4.4% of budget)

39. Other Plant & Equipment Expenditure – £0.6m overspend (11.9% of budget)

40. Directorate of Information – C3i Programme - £15.1m underspend (31.0% of budget)
The forecast underspend is due to re-phasing of the acquisition of radio headsets for the Airwave project, associated expenditure and re-phasing of various schemes at Heathrow. The majority of this underspend will be requested to be carried forward at the year end.

41. Safer Neighbourhoods Programme (Phases 1 to 3) - £15.9m underspend (40.4% of budget)
The Safer Neighbourhoods Programme (Phases 1 to 3) forecast shows an underspend on the property elements due to delays experienced in progressing certain projects on site either due to the timing of site acquisition or planning related matters. The underspend includes a MPA approved carry forward of £15.6m 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

1. There are none specific to this report.

D. Financial implications

1. 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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