MOPAC/MPS Financial Performance Quarter 1 2016/17

This report sets out the current forecast revenue financial position of MOPAC/MPS, a overspend of £4.9m, representing 0.2% of the net budget. The paper includes a series of proposed budget and reserve movements, and the forecast capital position. Progress on planned savings is set out.

That the DMPC

1. Approves the revenue budget movements set out in paragraphs 2.1-2.3
2. Approves the additional use of reserves as set out in paragraphs 2.2-2.3
3. Notes the forecast 2016/17 revenue financial position of a £4.9m overspend (which takes account of the above proposed budget movements and use of reserves)
4. Notes the forecast 2016/17 capital financial position of a £56m underspend (which excludes the proposed capital budget movement)
5. Notes the progress on planned savings, and the actions MPS propose to mitigate the risks

Introduction and background

As part of MOPAC’s and MPS corporate governance arrangements regular monthly and in-depth quarterly monitoring processes are in place to track spend against budget and the achievement of planned savings and income targets.

In line with the Scheme of Delegation and Consent the DMPC is responsible for the approval of all MPS proposed budget movements and virements in excess of £500,000 which are highlighted on a monthly basis as part of the monthly budget monitoring report, and approval of all transfers to and from reserves.

Issues for consideration

Budget Movements

The MPS has submitted a detailed schedule of proposed revenue budget movements building on the budget approved by the Mayor in February 2016. The detail is set out in Appendix 4 of the attached annex.

In summary these relate to changes to

• improve management reporting and updates to assumptions made in the original budget, for example reflecting changes to the service provided to the Palace of Westminster and revised capital financing costs. There is no net effect on the budget;
• reflect changes to grant income and the related expenditure such as protective security grant, Police Innovation Funding and other income. There is no net effect on the budget, and
• Additional spend to be met from additional use of reserves, specifically the firearms uplift, business support services and major change activities.

Specifically in relation to the proposed additional use of reserves of £24m the impact is set out below. With the effect of the 2015/16 outturn the reserves are higher, at £152m at the end of 2016/17 than originally budgeted for at £109m.

The MPS has also submitted a request for an increase in the 2016/17 capital budget of £22.1m. This is to reflect £20.8m (and the equivalent value in funding) of slippage from the planned 2015/16 programme, and £1.3m of relating to MOPAC approved additional costs of vehicles funded by TfL and the Paddington Green development funded by additional capital receipts.

The MPS are in the process of revising the capital programme as part of the 2017/18-20/21 budget submission, which will amend the 2016/17 and future years’ capital budgets to reflect the latest forecast for 2016/17. Currently the 2016/17 forecast is to spend £209m, some £78m less than the proposed budget and £56m below the original budget. On the basis that spend is forecast to be less than the original budget it is not recommended to increase the budget at this stage. This will be kept under review as the capital budget developed.

Forecast Reporting

Taking account of the proposed additional use of reserves and revenue budget movements above, at this relatively early stage of the financial year the MPS are forecasting a net £5m overspend for 2016/17. Appendix 1 of the attached sets out the year to date and forecast position by both budget and business group, the annex explains the major forecast variances which is summary are:

• Shortfall in planned savings – there are significant planned savings of £127m included in the 2016/17 budget, and the forecast is showing a shortfall against this target of £29m, 23%. Of the £29m the MPS consider £20m to have structural delivery problems and may impact also on the delivery of savings in future years. Of the remaining £9m, the savings are expected to be delivered but not in the anticipated timescales. A significant element of shortfall, £11m, is in relation to Digital Policing (DP) who are reviewing their contracts and operating model.
• Officer pay – there is a forecast underspend of £17.3m, of which £13.6m relates to posts which were expected to be externally funded. There is therefore an offsetting forecast under-recovery of income, leaving a net underspend of £3.7m.
• Staff pay – the net forecast underspend of £16.5m on staff pay arises from vacancies mainly in Territorial Policing (TP) and Specialist Operations (SO). Within TP some of the forecast underspend of £13.9m relates to custody and detention officers and is offset by additional Forensic Medical Examiner (FME) costs of £4m. Within SO the £7.5m forecast underspend is linked to grant income.
• Officer overtime – a net forecast overspend of £5.7m which MPS is expecting to alleviate some of this pressure.
• Running costs – forecast overspend of £16.5m mainly in relation to DP and Shared Support Services. The DP contracts and operating model are under review, and mitigating actions in relation to fleet and catering savings are planned.

The capital programme for 2016/17 was approved at a value of £265m. The latest forecast is for spend of £209m, a underspend of £56m. MPS are requesting an increase in the budget of £22m reflecting slippage from 2015/16 of £21m and additional external funding of £1m. However, whilst the forecast is to spend below the approved budget, and with work on-going for a comprehensive review of the capital programme as part of the MPS/MOPAC budget it is recommended that this request is deferred.

Financial Comments

As this is a financial report the financial implications are contained within the body of the report.

Legal Comments

Under section 3 (6) of the Police Reform and Social Responsibility Act, MOPAC is under a duty to secure the maintenance of an efficient and effective police force. Under paragraph 7 of schedule 3 of the 2011 Act MOPAC may do anything which is calculated to facilitate, or is conductive or incidental to, the exercise of its functions. Under section 79 of the Act, MOPAC must have regard to the Policing Protocol when exercising its functions. The Policing Protocol provides that PCCs (including MOPAC) as recipient of all funding, must determine how this money is spent.

MOPAC/MPS as statutory bodies must only budget for activities that fall within its statutory powers. Under the Scheme of Delegation and Consent the DMPC must approve any budget movement for £500,000 or above. Under Financial Regulations all decisions in relation to the transfer in and out of reserves will be made by the DMPC.

Equality Comments

Equality and diversity implications have been considered and there are no negative impacts identified from the proposals.