MOPAC/MPS Financial Performance Quarter 2 2016/17

Reference code: 
PCD 94
Date signed: 
01 December 2016
Authorisation name: 
Sophie Linden, Deputy Mayor, Policing and Crime

Executive summary

This report sets out the current forecast revenue financial position of MOPAC/MPS, an underspend of £7.8m, representing 0.3% of the net budget.  The paper includes a series of proposed budget and reserve movements, and the forecast capital position of £238m. Progress on planned savings is set out.

Recommendation

That the DMPC 
1.    Approves the revenue budget movements set out in paragraphs 2.1-2.3
2.    Approves the reduction in the forecast use of reserves as set out in paragraphs 2.2-2.3
3.    Notes the forecast 2016/17 revenue financial position of a £7.8m underspend (which takes account of the above proposed budget movements and use of reserves)
4.    Notes the forecast 2016/17 capital financial position of £238m spend 
5.    Notes the progress on planned savings, and the actions MPS propose to mitigate the risks 
 

Non-confidential facts and advice to the Deputy Mayor for Policing and Crime (DMPC)

1.    Introduction and background

1.1    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.

1.2    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.

2.    Issues for consideration

Budget Movements

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

2.2.    In summary these relate to changes to: 

•    improved management reporting and updates to assumptions made in the original budget,
•    reflect changes to grant income and the related expenditure such as protective security grant and other income. There is no net effect on the budget, and 
•    reduction in the use of reserves, specifically a reassessment of the redundancy reserve which required less staff exits than originally forecast. 

2.3.    Specifically, in relation to the proposed reduction in the use of reserves of £29m the impact is set out below.  With the effect of the 2015/16 outturn the reserves are forecast higher, at £181m at the end of 2016/17 than originally budgeted for at £109m.

 

2015/16 £m

2016/17 £m

2017/18 £m

2018/19 £m

Budget

Forecast

Forecast

Forecast

Forecast

Opening balance

419

231

109

83

Use in year

(188)

(122)

(26)

(1)

Closing balance

231

109

83

82

Outturn/Forecast

Outturn

Forecast

Forecast

Forecast

Opening balance

419

298

152

126

Use in year

(121)

(117)

(26)

(1)

Closing balance

298

181

126

125

 

2.4.    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 £238m, some £48.7m less than the proposed budget (£287m).

Forecast Reporting 

2.5.    Taking account of the proposed additional use of reserves and revenue budget movements above, the MPS are forecasting a net £7.8m underspend for 2016/17.  Appendix 1 of the attached sets out the year to date and forecast position by budget and explains the major forecast variances which in summary are:

•    Shortfall in planned savings – there are significant planned savings of £126.9m included in the 2016/17 budget and the forecast is showing a shortfall against this target of £42.6m, 34%.  Of the £42.6m the MPS consider £20m to have structural delivery problems and may impact also on the delivery of savings in future years.  Of the remaining £22.6m, the savings are expected to be delivered but not in the anticipated timescales.  A significant element of shortfall within structural delivery is £10m for Digital Policing (DP) and those savings with timing issues is £14.4m for DP, who are reviewing their contracts and operating model.  
•    Officer pay – there is a forecast underspend of £35.3m, of which £6m relates to posts which were expected to be externally funded. There is an offsetting forecast under-recovery of income, leaving a net underspend of £29m. 
•    Staff pay – the net forecast underspend of £22.2m on staff pay arises from vacancies mainly in Territorial Policing (TP) and Specialist Operations (SO). Within TP some of the forecast underspend of £8.6m relates to under strength positions within Criminal Justice, such as dedicated detention officers. 
•    Officer overtime – a net forecast overspend of £10.9m. This reflects the difficulty in achieving planned savings in the 2016/17 base budget. 
•    Running costs – forecast overspend of £37.3m 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. 
•    Grants – forecasting an over-recovery of £5.4m. Additional POCA income grant has been transferred to reserves.

2.6.    The original capital programme for 2016/17 was approved at a value of £265m.  The latest forecast is against a revised budget of £287m with  spend of £238m and underspend of £48.7m.  A comprehensive review is being undertaken of the capital programme areas as part of the annual joint MPS/MOPAC budget scrutiny process. A revised plan for 2016/17 and 2017/18 is being prepared.  

3.    Financial Comments

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

4.    Legal Comments

4.1.    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. 

4.2.    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.

5.    Equality Comments

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