Revenue and capital budget monitoring report 2008/09 - period 4

Report: 04
Date: 18 September 2008
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2008/09 at Period 4 (to the end of July). The revenue budget is forecast to underspend by £12.2m (approximately 0.4% of budget). The Capital Programme as at Period 4 (to the end of July) shows year to date total expenditure of £32.5m. This total represents 13.5% of the annual budget of £241.1m. The forecast for the year of £223.6m is £17.5m below the annual budget.

A. Recommendations

That

1. members note the year to date and forecast position for revenue and capital budgets; and

2. approve budget changes as described in paragraph 34.

B. Supporting information

Background

1. This paper provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2008/09 based on the position at the end of July 2008.

Revenue Forecast by Business Group

2. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 4 and Period 3 by Business Group and Table 3 compares the forecast outturn variances for Period 4 and Period 2 by Business Group (Period 2 being the last forecast presented to Finance Committee). The report focuses on the material movement in variances between Periods 3 and 4.

Table 1 – Summary of revenue forecast against budget at Period 4

Table 2 - Comparison of Period 4 forecast outturn variance with Period 3 forecast outturn variance.

Table 3 - Comparison of Period 4 forecast outturn variance with Period 2 forecast outturn variance.

3. The forecast outturn variance at Period 4 is an underspend of £12.2m.

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

5. Territorial Policing – An underspend of £4.2m – 0.3% of budget.
There has been an adverse movement of £1.9m in the forecast position from that reported at Period 3. This is principally within Police Officer Pay where a review of the forecast assumptions is ongoing. There is also an adverse movement in Police Officer Overtime due to increased operational activity, particularly in relation to knife and gun crime.

6. Specialist Crime – An underspend of £1.1m– 0.3% of budget.
There has been a favourable movement of £0.3m in the forecast position from that reported at Period 3, principally within Supplies and Services due to a reduction in forensic charges.

7. Specialist Operations – An overspend of £0.8m– 0.4% of budget.
A minor variation from that reported at Period 3.

8. Central Operations – An overspend of £2.0m – 0.8% of budget.
There has been a favourable movement of £0.7m in the forecast position from that reported at Period 3, principally within Police Officer Pay based on latest recruitment expectations.

9. Olympics Security – An underspend of £0.2m – 2.9% of budget.
There has been an adverse movement of £1.4m in the forecast position from that reported at Period 3, principally within Police Officer and Police Staff Pay. This is due to a budget realignment that reflects the latest spending plans in this area, with the Olympics Security Grant funding budget within Centrally Held being realigned by the same amount. Additional funding is anticipated throughout the year, subject to business cases being approved by the MPA and Home Office and budgets will be amended to reflect any additional grant received together with related expenditure.

10. Deputy Commissioner’s Portfolio – An underspend of £0.7m – 1.3% of budget.
There has been a favourable movement of £0.2m in the forecast position from that reported at Period 3, principally within Police Officer Pay due to the expected level of vacancies.

11. Directorate of Public Affairs – An underspend of £0.5m – 7.2% of budget.
A minor variation from that reported at Period 3.

12. Directorate of Information – An underspend of £0.2m – 0.1% of budget.
A minor variation from that reported at Period 3.

13. Resources Directorate – An underspend of £6.7m – 2.5% of budget.
A minor variation from that reported at Period 3. The underspend is principally due to Police Staff vacancies, rent & rates reductions due to delays in acquisitions, and over achievement of the Investment Income budgeted target.

14. Human Resources – An underspend of £1.6m – 1.0% of budget.
There has been a favourable movement of £1.4m in the forecast position from that reported at Period 3, principally within Police Staff Pay due to the anticipated delays in recruiting staff to vacancies across the majority of the Directorate.

15. Metropolitan Police Authority – An underspend of £0.2m – 1.3% of budget.
There has been an adverse movement of £0.2m in the forecast position from that reported at Period 3, principally within the Employee Related Expenditure and Supplies and Services, due to redundancy costs and anticipated costs of Employment Tribunal cases.

16. Centrally Held Budgets – An overspend of £0.2m – 0.0% of budget.
There has been a favourable movement of £1.4m in the forecast position from that reported at Period 3. This is due to a realignment of the Olympics Security Grant Income budget to match the latest spending plans, which is matched by a realignment of budget within the Olympics Security Directorate. Additional funding is anticipated throughout the year, subject to business cases being approved by the MPA and Home Office and budgets will be amended to reflect any additional grant received together with related expenditure.

17. Discretionary Pension Costs – A minor overspend – 0.1% of budget.

Revenue Forecast by expenditure/income type

18. Table 4 compares the forecast variance for Periods 4 and 3 by income/expense type and Table 5 compares the forecast variance for Periods 4 and 2 (Period 2 being the last forecast presented to Finance Committee). The report focuses on the material movement in variances between Periods 3 and 4.

Table 4 – Forecast outturn by Income/expense type

Table 5 – Forecast outturn by Income/expense type

19. Police Officer Pay – Underspend of £14.7m – 0.8% of budget.
As indicated in Table 6, the current forecast indicates that the original target strength at 31 March 2009 of 32,930 will be achieved. However, the underspend indicated in the Period 4 forecast is due to actual strength at the end of July being below the levels assumed in the original budget. That is the growth profile will be different to that assumed in the original budget. It has been agreed that the size of intakes should be increased to 300 for the remainder of 2008/09 in order to achieve the target strength of 32,930. Territorial Policing and Human Resources have agreed a process to accommodate this increase.
 

Table 6– Police Officer Actual Strength v Target

20. Police Staff Pay - Underspend of £7.7m – 1.3% of budget
There has been a favourable movement in the forecast of £2.1m from the position reported at Period 3. This principally relates to vacancies within Territorial Policing, in particular within the Central Communications Command and also, due to the anticipated delays in recruiting staff to vacancies within the Human Resources Directorate.

21. PCSO Pay - Underspend of £3.8m – 2.7% of budget.
A minor variation from that reported at Period 3. The underspend is due to the current level of vacancies being higher than originally budgeted for. However the overall target numbers are still expected to be achieved by the end of the year.

22. Traffic Warden Pay - Underspend of £0.3m – 2.3% of budget.
A minor variation of £0.2m from that reported at Period 3.

23. Police Officer Overtime – Overspend of £5.4m – 3.9% of budget.
There has been an adverse movement in the forecast of £4.6m from the position reported at Period 3, resulting from unplanned and unbudgeted operational activity, particularly in relation to knife and gun crime within Territorial Policing and Central Operations, and also within Specialist Operations due to vacancies.

24. Police Staff Overtime – Overspend of £0.4m – 1.3% of budget.
A minor variation from that reported at Period 3.

25. PCSO and Traffic Warden Overtime – A minor underspend.

26. Employee Related Expenditure – Underspend of £0.6m – 1.6% of budget.
There has been an adverse movement in the forecast of £0.8m from the position reported at Period 3. This principally relates to a new recruitment drive in Directorate of Information and an increase in external training for both Transport Operational Command Unit and Firearms Unit within Central Operations.

27. Premises Costs – Underspend of £3.3m – 1.4% of budget.
A minor variation from that reported at Period 3. The underspend is principally due to a reduction in rent and rates due to delays in acquisitions.

28. Transport Costs - Overspend of £2.8m – 4.2% of budget.
There has been an adverse movement in the forecast of £1.0m from the position reported at Period 3. This relates to increases in fuel costs.

29. Supplies and Services - Overspend of £3.8m – 0.8% of budget.
There has been a favourable movement in the forecast of £4.6m from the position reported at Period 3. The main reason for the favourable movement is within Specialist Operations and reflects the realignment of the counter-terrorism budget. There has also been a reduction to forensic charges within Specialist Crime Directorate.

30. Capital Financing Costs & Discretionary Pension Costs – Nil variation.

31. Income - Interest Receipts – Forecast over-achievement of £3.2m – 26.9% of budget
A minor variation from that reported at Period 3. The forecast over-achievement relates to higher than anticipated cash balances and increased interest rates.

32. Income - Other - Forecast under-achievement of £8.8m – 2.5% of budget.
There has been an adverse movement in the forecast of £0.8m from the position reported at Period 3. This principally relates to reduced income generated by Operational Information Services (vetting), which is matched by reduced costs within Specialist Crime Directorate

33. Specific Grant – Under recovery of £0.1m – 0.0% of budget.
There has been a favourable movement in the forecast of £1.5m from the position reported at Period 3. This is due to a realignment of the Olympics Security Grant Income budget.

34. Budget movements
The major budget movements undertaken in Periods 3 and 4 are shown below in Table 7 which members are asked to approve.

Table 7 – Major budget movements actioned in Periods 3 and 4

• Following the delayed agreement of the Police Staff pay award for 2007/08, budget allocations have been made from Centrally Held to all Business Groups to cover the full year effect of the pay award on their 2008/09 Police Staff pay budgets.
• Budget amendments relating to changes in the funding streams for both the Olympics and Counter Terrorism are included in this report. With regard to the Olympics, the budget reduction (£1.9m) reflects the latest spending plans in this area, with the Olympics grant funding budget being reduced by the same amount. Additional funding is anticipated throughout the year, subject to business cases being approved by the MPA and Home Office and budgets will be amended to reflect any additional grant received together with related expenditure.
• The budget move for Counter Terrorism expenditure (£3.9m) is to realign budgets to the areas where expenditure is occurring, namely from Police Overtime and Employee Expenditure to within the Supplies & Services category. At the time budgets were allocated, the level of expenditure in each category was not known.
• The budget move for Transforming HR (£1.9m) relates to the re-phasing of expenditure into future years as agreed at the Full Authority meeting on 24 April 2008, and the budget will be held centrally until it is required.
• The allocation from the Investment Board Fund for Developing Resource Management was approved by Investment Board on 27 August and relates to the employment of external consultants to advise the MPA/MPS on strategic procurement issues.
• The budget move for Operation Blunt (£1m) relates to a movement from Police Officer Pay into Police Officer Overtime within Territorial Policing to help fund the additional expenditure in this area.

Movements in Reserves

35. The reserve movements carried out in Periods 3 and 4 are shown in Table 8.
 

Table 8 – Reserve movements carried out in Periods 3 and 4

Capital Monitoring

36. Appendix 3 sets out the expenditure for the 2008/09 Capital Programme as at Period 4 (July) by programme, which shows year to date expenditure of £32.5m. This represents 13.5% of the approved annual budget of £241.1m. The forecast outturn of £223.6m is £17.4m below the approved annual budget. As previously advised, a complete reassessment of the seven-year Capital Programme and budget will be undertaken in the autumn as part of the budget and business planning process. This exercise will provide an update as to the level of capital expenditure that will be delivered in 2008/09 in addition to providing an update to the already existing seven-year capital programme. It is expected that the results of this exercise will be presented to Investment Board in September and subsequently to Finance Committee in October.

37. Property Programme – An underspend of £8.6m – 15.6% of budget
Within the programme, a need for re-phasing has been identified mainly within the TP Estates Modernisation programme at a number of sites, including Marlowe House, Notting Hill Police Station, Greenwich Patrol Base, and Waltham Forest, Greenwich and Barking & Dagenham borough based custody facilities.

38. Information Programme – Excluding C3i – An underspend of £1.6m – 1.9% of budget
This programme is reporting an underspend following rephasing of the Business Systems & Integration programme.

39. Transport Projects – An overspend of £3.6m – 18.3% of budget.
The overspend relates to anticipated expenditure on equipping the MPS fleet for operational service.

40. Other Plant & Equipment Expenditure – An overspend of £0.1m – 48.7% of budget.
A minor variation.

41. Directorate of Information – C3i Programme – An underspend of £0.1m – 1.8% of budget.
A minor variation.

42. Safer Neighbourhoods Programme – An overspend of £5.9m – 18.9% of budget.
The current forecast position reflects the acceleration of the programme and the need to rephase this budget. The overall agreed funding for the programme will not be exceeded. The budget will be rephased in line with the forecast expenditure as part of the reassessment of the Capital Programme explained in paragraph 36.

43. Olympics/Paralympics – An underspend of £11.8m – 47.6% of budget
The Olympics capital funding is subject to business case reviews requiring the endorsement (on an activity by activity basis) of the MPA and the Home Office. The forecast position is based on the assumption that proposed activities will gain approval. A significant element of budget re-phasing is anticipated.

44. Counter Terrorism – An underspend of £5.0m – 25.8% of budget
This is principally due to no suitable site being identified to build a new custody suite and the budget is likely to be rephased into future years.

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

• Policing London 2008-11 Business Plan

F. Contact details

Report author(s): Simon Hart, A/Director of Finance Services

For more information contact:

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

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