Revenue and capital monitoring report 2007/08 - Period 11

Report: 04
Date: 17 April 2008
By: the Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2007/08 at Period 11 (to the end of February). The revenue budget is forecast to underspend by £18.6m (0.6% of budget), which includes £5.4m of estimated additional costs related to Operation Seagram.

The Capital Programme as at Period 11 (to the end of February) shows year to date total expenditure of £110.2m. This total represents 61.3% of the revised annual budget. The forecast for the year of £154.9m is £24.9m below the revised budget of £179.8m. (£129.3m below the original annual budget of £284.2m).

A. Recommendations

That Members note the year to date and forecast position for revenue and capital budgets.

B. Supporting information

Background

1. This report provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2007/08 based on the position at the end of February.

Revenue Forecast by Business Group
2. Table 1 provides a summary of the revenue forecast and additional cost forecast for Operation Seagram. Table 2 compares the forecast outturn variances for Period 11 and Period 10 by Business Group.

3. The outturn variance for period 11 is forecast as an underspend of £18.6m. This includes a forecast outturn of £5.4m for the additional costs attributed to Operation Seagram. The period 11 forecast outturn variance excluding Operation Seagram costs is an underspend of £24.0m.

4. Finance Services are currently in the process of discussing the management of the 2007/08 year-end process with individual Business Groups. The likelihood is that an underspend of between £18m and £20m will be delivered which will be available to appropriate to the General Reserve if necessary. On 18 October 2007, Finance Committee resolved to establish a new Modernisation Reserve and to give consideration in the closing of the 2007/08 accounts to a transfer of funds to that reserve to ensure that the benefits promised by the Met Modernisation Programme have adequate resources to finance any initial up-front costs.

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

Table 2: Comparison of Period 11 forecast outturn variance with Period 10 forecast outturn variance

5. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2. The figures in the Appendices include expenditure on Operation Seagram.

6. Territorial Policing – An underspend of £7.5m – 0.6% of budget.
There has been minimal movement in the forecast position from that reported at period 10. As previously advised the forecast underspend relates principally to Police Officer and Police Staff pay due to unfilled vacancies.

7. Specialist Crime – An underspend of £9.6m – 2.5% of budget.
There has been a favourable movement of £2.6m in the forecast position from that reported at period 10. This principally results from reduced forecasts for forensics and DNA charges following lower than expected expenditure in recent months. As previously advised, the forecast underspend relates mainly to Police Officer and Police Staff pay and reflects the current level of vacancies within the Business Group.

8. Specialist Operations – An underspend of £8.6m– 4.5% of budget.
There has been a favourable movement of £2.8m in the forecast position from that reported at period 10. This principally results from reductions in the Police Officer pay and overtime forecasts as well as a reduced forecast for seconded police officer costs. As previously advised a significant element of the forecast underspend relates to vacancies within Counter Terrorism grant funded posts for which a grant deferral is forecast within Centrally Held budgets.

9. Central Operations – An underspend of £2.5m – 1.0% of budget.
A minor change from the forecast variance reported at period 10. As previously advised the forecast underspend relates to Police Officer and Police Staff pay and reflects the current level of vacancies within the Business Group.

10. Operational Services – An overspend of £0.7m – 0.5% of budget.
A minor change from the forecast variance reported at period 10. As previously advised the forecast overspend relates principally to Police Staff overtime within the Central Communications Command.

11. Strategy, Modernisation & Performance – An underspend of £0.9m – 6.2% of budget.
A minor change from the forecast variance reported at period 10. As previously advised the forecast underspend relates to Police Officer pay and Police Staff pay and reflects the current level of vacancies within the Business Group.

12. Directorate of Public Affairs – An underspend of £0.4m – 5.9% of budget.
A minor change from the forecast variance reported at period 10.

13. Directorate of Information – An overspend of £1.3m – 0.6% of budget.
No change from the forecast variance reported at period 10. As previously advised the forecast overspend relates principally to the need to recruit technical specialists to cover vacant posts at an additional cost and increased workstation support costs.

14. Resources – An underspend of £2.5m – 1.0% of budget.
There has been an adverse movement of £0.4m from the forecast variance reported at period 10. This results principally from a forecast increase to premises costs following a detailed review of cost assumption changes relating to Empress State Building financing model. This has been partly offset by a reduction following refunds resulting from successful building rates appeals and an increase in the income forecast for property service charges following negotiations with the Forensic Science Service.

15. Human Resources – An underspend of £1.5m – 1.0% of budget.
There has been an adverse movement of £1.5m from the forecast variance reported at period 10. This results principally from reduced income forecasts relating to sickness benefits and seconded officers and an increase in the forecast for premature retirement costs.

16. Metropolitan Police Authority – An underspend of £0.4m – 3.5% of budget.
A minor change from the forecast variance reported at period 10.

17. Centrally Held Budgets – An overspend of £13.8m
There has been an adverse movement of £4.0m from the forecast variance reported at period 10. This results principally from the need to set aside resources to ensure that the Deployment Plan growth in 2008/09 can be delivered and forecast costs of works in progress that are expected to be charged to the revenue account prior to the year end.

18. Discretionary Pension Costs – An underspend of £0.5m – 1.7% of budget.
A favourable movement of £0.5m from the forecast variance reported at period 10 relating to a reduction in the forecast for ill-health retirements.

Revenue Forecast by expenditure/income type

19. Table 3 compares the forecast variance for Periods 11 and 10 by income/expense type.

Table 3: Comparison of the forecast variance for Periods 11 and 10 by income/expense type

20. Police Officer Pay – Underspend of £35.9m – 2.1% of budget.
This underspend is due to workforce levels being below those budgeted within all Business Groups. The forecast underspend has reduced by £0.4m since period 10. Table 4 shows the Police Officer strength by Business Group at 29 February against the original Budgeted Workforce Total for 31 March 2008 and the forecast strength for 31 March 2008.

Table 4: Police Officer Strength v BWT

Note: Based on current recruitment plans the overall strength at 31 March 2008 is expected to be 31,445.

21. Police Staff Pay - Underspend of £16.5m – 2.9% of budget
There has been a favourable movement in the forecast of £0.9m from the forecast variance reported at period 10. This principally relates to a reduced forecast within Human Resources Directorate following a review of likely recruitment levels. As previously advised, the forecast underspend relates generally to vacancies across a number of Business Groups.

22. PCSO Pay - Underspend of £9.0m – 6.6% of budget.
There has been a favourable movement in the forecast of £0.4m since period 10. As previously advised, the forecast underspend is within Territorial Policing and relates to delays to the planned implementation of changes to the Station Reception Officer role which are to be undertaken by PCSOs.

23. Traffic Warden Pay - Underspend of £0.6m – 5.2% of budget.
A minor change from the forecast variance reported at period 10. As previously advised, the underspend is principally due to the Transport OCU recruiting PCSOs instead of Traffic Wardens.

24. Police Officer Overtime – Overspend of £8.6m – 6.4% of budget.
There has been a favourable movement in the forecast of £0.7m from that reported at period 10. This principally relates to a review of operational activity levels within Specialist Operations. As previously advised the forecast overspend is principally due to Operation Seagram (the response to the vehicle-borne improvised explosive device (VBIED) found in Haymarket at the end of June), Operation Hargood (Policing of the environmental camp at Heathrow Airport) and other initiatives within Territorial Policing to tackle youth crime issues.

25. Police Staff Overtime – Overspend of £4.1m – 13.6% of budget.
There has been an adverse movement in the forecast of £0.3m from that reported at period 10. This relates principally to increased activity within Territorial Policing. The forecast overspend occurs generally across a number of Business Groups with the majority within Operational Services in respect of the Central Communications Command.

26. PCSO and Traffic Warden Overtime – Minor overspend.

27. Employee Related Expenditure – Underspend of £0.6m – 1.6% of budget.
There has been a favourable movement of £1.4m from the forecast variance reported at period 10. This relates principally to a savings within Human Resources to help fund planned expenditure within the Supplies and Services category in respect of Transforming HR.

28. Premises Costs – Overspend of £11.5m – 5.4% of budget.
There has been an adverse movement in the forecast of £4.0m from that reported at period 10. This relates principally to an increase following a detailed review of cost assumption changes relating to Empress State Building financial model and forecast costs of works in progress that are expected to be charged to the revenue account prior to the year end. As previously advised the forecast overspend mainly relates to higher than anticipated rent liabilities and additional repairs and maintenance costs.

29. Transport Costs - Overspend of £6.6m – 11.0% of budget.
There has been a minor adverse movement in the forecast of £0.2m from that reported at period 10. As previously advised the forecast overspend relates mainly to overseas travel and subsistence costs and vehicle hire connected with Operations Seagram and Overt/Overamp within Specialist Operations and increases in fuel costs.

30. Supplies and Services - Overspend of £20.2m – 4.6% of budget.
There has been a minor favourable movement of £0.2m in the forecast from that reported at period 10. As previously advised, the main areas of overspend relate to consultants covering vacancies and additional workstation costs within Directorate of Information; increased Police National Computer charges; accommodation and expenses for mutual aid officers; interpreter and medical examiner fees; increased costs of providing free rail travel and planned expenditure on operations within Territorial Policing.

31. Capital Financing Costs – Underspend of £0.5m – 2.2% of budget.
A minor change from the forecast variance reported at period 10.

32. Income - Forecast over-achievement of £16.6m – 5.0% of budget.
There has been an adverse movement in the forecast of £0.4m from that reported at period 10. The over-achievement of income relates principally to additional event income following the opening of Wembley Stadium, Operation Safeguard (the detention of Home Office prisoners), additional rental and service charge income and other operational receipts.

33. Specific Grant – Forecast under-achievement of £10.5m – 1.9% of budget
There has been a favourable movement in the forecast of £1.1m from that reported at period 10. This relates principally to an increase in forecast grant for ACPO TAM, which is matched by increased expenditure forecasts. The under-achievement of specific grant relates principally to a forecast grant deferral in respect of vacancies within Counter Terrorism grant funded posts.

34. Budget movements
The major budget movements undertaken in period 11 are shown below in Table 5.

Table 5: Major budget movements actioned in period 11

35. Movements in Reserves
The reserve drawdowns and transfer to reserves carried out in period 11 are shown in Table 6.
 

Table 6: Reserve drawdowns / transfer to reserves carried out in Period 11

Capital Monitoring

36. Appendix 3 sets out the expenditure for the 2007/08 Capital Programme as at Period 11 (February) by programme, which shows a year to date total of £110.2m. This represents 61.3% of the revised budget of £179.8m. The forecast for the year of £154.9m is £24.9m below the revised budget. (£129.3m below the original budget of £284.2m)

37. Property Programme – A forecast underspend of £3.3m (8.4% of budget) (£49.3m below the original budget).
The main programmes of work have decreased overall due to the re-phasing of projects into future years. The main projects that have been re-phased are Patrol Bases (£1.6m) and Cobalt Square refit (£0.8m). Additionally, savings have been achieved relating to final account claims for Improvement work at NSY (£0.4m); Local bases (£0.3m) and on the Forward Works plan (£0.7m). These savings have been offset by increases in the forecast relating to the acquisition of residential accommodation in Hendon (£1.0m) and premises for Covert operations (£0.4m).

38. Information Programme – Excluding C3i – A forecast underspend of £13.8m (21.2% of budget) (£29.0m below the original budget).
The underspend is principally due to the re-phasing of the Cobalt Square refit project (£1.6m) and a number of other projects that have been re-phased including Corporate Data Warehouse (£2.8m); MOPI (£0.7m); E Forms (£0.2m); Infrastructure works (£6.8m) and EDRM (Electronic Document Records Management) (£0.7m).

39. MPA Information Technology – £0.4m underspend (100% of budget) (£0.4m below the original budget).
The whole of the Connect Programme will be re-phased into future years.

40. Transport Projects – A forecast underspend of £3.4m (12.8% of budget) (£3.4m below the original budget).
The forecast underspend principally relates to reduced expenditure on boats and equipping for service of TSG carriers. The contract for the replacement of two rigid inflatable boats is now expected to be awarded next financial year. The underspend on equipping for service is due to the ongoing TSG carrier replacement programme, of which two thirds will now be built next financial year.

41. Other Plant & Equipment Expenditure – A forecast overspend of £1.1m (43.9% of budget) (£0.1m above original budget).
This primarily relates to additional forecast expenditure on aircraft and associated support equipment.

42. Directorate of Information – C3i Programme – A forecast underspend of £2.4m (7.7% of budget) (£2.4m below the original budget).
The forecast underspend relates to the Heathrow Special Scheme which will now be funded from the 2007/08 Revenue Budget.

43. Safer Neighbourhoods Programme (Phases 1 to 3) – A forecast underspend of £2.7m (18.6% of budget) (£45.0m below the original budget).
This is due to delays in contract negotiations with regard to procurement of Phase 2 of Safer neighbourhood scheme of works.

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

• 2007/08 budget book
• Previous monitoring reports.

F. Contact details

Report author(s): Simon Hart, Acting Director of Finance Services, MPS

For more information contact:

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

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