Revenue and capital monitoring report 2007/08

Report: 05
Date: 19 June 2008
By: the Director of Resources on behalf of the Commissioner

Summary

The report provides an update on the provisional & unaudited outturn position for revenue and capital budgets in 2007/08. The revenue budget is underspent by £17.9m (0.6% of budget), which includes £5.3m of additional costs related to Operation Seagram. The underlying forecast underspend excluding Operation Seagram is £23.2m (0.8% of budget). The provisional outturn takes account of proposed transfers to earmarked reserves as part of the year-end process of £49.8m.

The provisional outturn for the Capital Programme is £147.8m, which is £32m below the revised budget of £179.8m. (£136.4m below the original annual budget of £284.2m). Initial indications are that an amount of £30m is required to be rephased into future years.

A. Recommendations

Members are invited to:

1. Note the provisional & unaudited outturn position against the revenue and capital budgets for the year.

2. Note and agree the proposed transfers to reserves of £49.8m (paragraph 4).

3. Decide if any part of £17.9m underspend be transferred to a Modernisation Reserve (paragraph 5).

4. Note the proposed rephasing of approximately £30m of capital budgets into future years (paragraph 37).

5. Note and approve the revenue contributions to capital outturn of £25m as indicated in Appendix 3.

B. Supporting information

Background

1. The purpose of this report is to inform members of the anticipated outturn against revenue and capital budgets for the MPA/MPS in 2007/08.

2. The financial year 2007/08 presented a number of key challenges, particularly around the prevention of terrorism and associated operations which were necessary to help keep London a safer city, such as Operation Seagram (relating to the response to the explosive device found in Haymarket in June 2007). Additionally, public order requirements such as Operation Hargood (Policing of the environmental camp at Heathrow Airport), the London Arms Fair, the opening of and subsequent events at the new Wembley Stadium, the Tour de France and many other events made financial management a key issue.

3. Despite the budget pressures the MPS have been able to return, as at March 2007, a provisional revenue budget underspend of £17.9 million (0.6% of budget). This underspend has been delivered alongside significant improvements in operational performance with Robbery down 19.2%; Motor Vehicle Crime down 7.9%; Knife Crime down 15.7%; Violence against the person down 5.3%; Domestic Violence down 6.9%; Racist Crime down 13.3%; Homophobic Crime down 17.1%. Although this underspend represents a favourable outcome to the financial year, a detailed outturn review is currently being undertaken. The findings of the review will assist in improving the financial monitoring processes within the MPS and will be linked to the budget process for future years. Table 1 provides a summary of the provisional outturn and additional costs for Operation Seagram by Business Group.

Table 1: Summary of 2007/08 provisional outturn against budget

Reserves

4. In line with normal and agreed business practice, a number of earmarked reserves have been included in the provisional outturn position. In certain cases, these reserves have been created following delays to the procurement process following MPA scrutiny (e.g. Safer Neighbourhoods Phase 2). In the case of the Transforming HR project, the MPA Full Authority has already considered the reserve funding identified below (£3.2m) as part of the category ‘major change programmes). In the case of the remaining categories in the ‘major change programmes’ – MOPI (£1.5m) and ICPT (£1.35m) programmes, MPA Finance Committee has provided prior approval for funding from the Investment Board fund and the request is to allow the unspent allocation to be carried forward. A revenue reserve has also been created to reflect the revenue support to the MPA agreed revisions to the capital programme and to reflect the MPA’s agreed policy on dilapidations. In addition, a number of bids for other reserves have been submitted by the Business Groups. These bids have been scrutinised carefully to assess their suitability for reserve funding. A summary of the reserves created as part of the agreed business practice and the proposals for the creation of new reserves are summarised below:

Table 2: Summary of reserves created as part of the agreed business practice and the proposals for the creation of new reserve

5. In addition to the reserves described in paragraph 4, a number of reserves have already been approved by Finance Committee during 2007/08, e.g. £11.5m following the delayed implementation of the Police Officer pay award and £7.8m for Criminal Justice initiatives (Integrated Prosecution Teams). If the reserves described in paragraph 4 are approved, this will result in a total increase of £78.8m in the level of earmarked revenue reserves during 2007/08. Following the creation of these earmarked reserves, it is anticipated that £17.9m will be available for transfer to the General Reserve. In October 2007 the Finance Committee agreed that as part of the closing of the 2007/08 accounts it would consider if some underspend (at that time £10m) should be set aside in an earmarked reserve to facilitate further Modernisation of the Service. Committee is therefore asked to decide if some of this underspend is to be transferred to a new Modernisation Fund.

6. In summary, the total transfers to reserves total £102.7m and are made up as follows:

Table 3: Summary of total transfers to reserves

The Treasurer will be reporting on a review of the likely reserves in conjunction with the final work on the budget submission in the autumn and in particular will report on the adequacy of the reserves allowed for in the budget proposals, so that Members will have authoritative advice available when they make their decisions.

Provisional Revenue Outturn by Business Group

7. 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.

8. Territorial Policing – An underspend of £1.9m – 0.2% of budget.
The principal reason for the underspend results from Police Officer and Police Staff pay vacancies within the Business Group. The underspend of £1.9m takes into account an amount of £7.75m that was transferred to reserves during the year to fund Criminal Justice Initiatives in the future as agreed by the MPA.

9. Specialist Crime – An underspend of £11.4m – 2.9% of budget.
The principal reason for the underspend results from Police Officer and Police Staff vacancies within the Business Group. Also, there has been a significant underspend on the Forensics budget in 2007/08. Previously, large overspends had occurred in this part of the business.

10. Specialist Operations – An underspend of £2.7m – 1.5% of budget.
The principal reason for the underspend results from Police Officer and Police Staff vacancies within the Business Group. An amount of £7.9m has been reserved as part of the year-end process to fund capital commitments related to counter terrorism in 2008/09 as agreed by the Home Office.

11. Central Operations – An underspend of £2.0m – 0.8% of budget.
The principal reason for the underspend results from Police Officer and Police Staff vacancies within the Business Group.

12. Operational Services – A minor overspend of £0.3m – 0.2% of budget.

13. Strategy Modernisation & Performance – An underspend of £1.1m – 7.4% of budget.
The principal reason for the underspend results from Police Officer and Police Staff vacancies within the Business Group.

14. Directorate of Public Affairs – A minor underspend of £0.4m – 6.2% of budget.

15. Directorate of Information – An underspend of £0.4m – 0.2% of budget.
The principal reason for the underspend results from Police Staff vacancies within the Business Group. As indicated in paragraph 4, a number of reserves have been created as part of the year-end process (e.g. MOPI and revenue support to capital rephasing) prior to arriving at this outturn figure.

16. Resources – An underspend of £11.5m – 4.7% of budget.
The underspend relates mainly to additional income from investments and other receipts, such as refunds resulting from successful building rates appeals and additional property service charges following negotiations with the Forensic Science Service. As indicated in paragraph 4, a number of reserves have been created as part of the year-end process (e.g. Central London accommodation strategy and revenue support to capital rephasing) prior to arriving at this outturn figure.

17. Human Resources – An overspend of £1.6m – 1.1% of budget.
The principal reason for the overspend results from the increased payments to the Association of Train Operating Companies (ATOC) for the cost of providing free rail travel.

18. Metropolitan Police Authority – A nil variation. As indicated in paragraph 4, a reserve has been created to appropriate the underspend of £0.4m in 2007/08.

19. Centrally Held Budgets – An adverse variance of £11.8m
The overspend results principally from the transfer to a Budget Pressures reserve as indicated in paragraph 4.

20. Discretionary Pension Costs – A favourable variance of £0.3m. – 1.2% of budget.
The variance resulted from lower than budgeted ill-health retirements.

Provisional Revenue Outturn by expenditure/income type

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

22. Police Officer Pay – An underspend of £36.0m – 2.1% of budget.
As previously reported, the underspend reflects the under-strength position of most Business Groups throughout the year.

23. Police Staff Pay - An underspend of £17.1m – 3.0% of budget.
The underspend reflects the level of vacancies within Business Groups throughout the year. A corporate police staff deployment plan review is now underway which will aim to deal with the growing impact of staff rationalisation programmes and improve processes to match staffing resources to approved budgets.

24. PCSO Pay - An underspend of £8.5m – 6.3% of budget.
The principal reason for the underspend results from delays to the planned implementation of changes to the Station Reception Officer role which are to be undertaken by PCSOs.

25. Traffic Warden Pay - Underspend of £1.2m – 10.4% of budget.
The principal reason for the underspend results from the Transport OCU recruiting PCSOs instead of Traffic Wardens.

26. Police Officer Overtime - An overspend of £6.0m – 4.3% of budget.
The principal reason for the overspend results from 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.

27. Police Staff Overtime - An overspend of £4.5m – 14.7% of budget.
The overspend occurs generally across a number of Business Groups with the majority within Operational Services in respect of the Central Communications Command.

28. PCSO Overtime – An overspend of £0.4m – 29.7% of budget.
Minor variation resulting from increased operational activity within Territorial Policing.

29. Traffic Wardens’ Overtime – A minor overspend.

30. Employee Related Expenditure – A minor overspend.

31. Premises Costs – An underspend of £1.6m – 0.8% of budget.
The underspend has occurred mainly as a result of utilities inflation being below the levels assumed in the budget.

32. Transport Costs - An overspend of £10.0m – 16.7% of budget.
The principal reason for the overspend results from overseas travel and subsistence costs and vehicle hire connected with Operations Seagram and Overt/Overamp within Specialist Operations together with significant increases in fuel costs. It should be noted that approximately £3m of Home Office funding was received in 2007/08 and was transferred to the Emergency Contingencies reserve on the balance sheet.

33. Supplies and Services - An overspend of £19.5m – 4.4% of budget.
The principal reason for the overspend results from increased Police National Computer charges; accommodation and expenses for mutual aid officers; interpreter and medical examiner fees and increased costs of providing free rail travel.

34. Capital Financing Costs – an underspend of £5.5m – 25.3% of budget
The underspend results from a reduction in the minimum revenue position required as a result of previous approved capital rephasing.

35. Income - An over-achievement of £15.8m – 4.8% of budget.
The over-achievement of income relates principally to additional investment income, 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.

Capital Monitoring

36. Appendix 3 provides details of the provisional outturn for the 2007/08 Capital Programme of £147.8m. This represents 82.2% of the revised annual budget of £179.8m.

37. The underspend against the revised annual budget is £32m. A report will be provided to MPA Finance Committee in July that will indicate and seek approvals for the rephasing of an element of the 2007/08 underspend into future years. Initial indications are that a request for rephasing of £30m will be submitted. This report will also provide a summary of the revised seven-year capital programme subsequent to this rephasing.

38. Property Programme - £8.4m underspend (21.1% of budget)
The outturn position for the Property Programme indicates an underspend against the revised budget due to project rephasing into future years. The main projects that have been rephased are Patrol Bases and Cobalt Square refit. Additionally, savings have been achieved relating to final account claims for improvement work at NSY, local bases and on the forward works plan. The amount of rephasing into future years will be identified as part of the report to Investment Board in June and MPA Finance Committee in July.

39. Information Programme – Excluding C3i Programme – £2.5m overspend (3.8% of budget)
The outturn position for the Information Programme indicates a small overspend against the revised budget. This is due to additional expenditure that is financed by revenue contributions.

40. MPA Information Technology – £0.4m underspend (100% of budget).
The whole of the Connect Programme is to be rephased into future years.

41. Transport Projects – £5.6m underspend (20.8% of budget)
The forecast underspend principally relates to reduced expenditure on boats, vans and commercial vehicles 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 in 2008/09. The amount of rephasing into future years will be identified as part of the report to Investment Board in June and MPA Finance Committee in July.

42. Other Plant & Equipment Expenditure – £1.6m overspend (63.0% of budget)
This primarily relates to additional expenditure on aircraft and associated support equipment, additional equipment at Wembley Control Room and for Project Victoria.

43. Directorate of Information – C3i Programme - £14.7m underspend (48.1% of budget)
The underspend is due to the rephasing of several projects combined under Hendon MetCall. The amount of rephasing into future years will be identified as part of the report to Investment Board in June and MPA Finance Committee in July.

44. Safer Neighbourhoods Programme (Phases 1 to 3) - £7.0m underspend (48.5% of budget)
This is due to on-going delays in contract negotiations with regard to procurement of Phase 2 of Safer neighbourhood scheme of works. The amount of rephasing into future years will be identified as part of the report to Investment Board in June and MPA Finance Committee in July.

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 2007/08 monitoring reports
• 2007/08 budget book

F. Contact details

Report author(s): Anne McMeel, Director of Resources, MPS

For more information contact:

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

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