OFFICIAL. Date 14 March 2019 COSLA Conference Centre, Edinburgh

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Agenda Item 10.1 Meeting SPA Resources Committee Date 14 March 2019 Location COSLA Conference Centre, Edinburgh Title of Paper 2018/19 Financial Monitoring Report Presented By Chris Brown, Strategic Financial Planning and Budgeting Lead Recommendation to Members For Noting Appendix Attached Yes Appendix A Period 10 Finance Report PURPOSE The purpose of this report is to provide Members with an update on the financial position of the SPA and Police Scotland for period 10 of the financial year 2018/19. Members are requested to note the information contained within this report. SPA Resources Committee 2018/19 Financial Monitoring Report 14 March 2019 1

1. BACKGROUND 1.1 The SPA Board approved the revenue and capital budget for 2018/19 on 29 March 2018. The budget provides the resources required to support the delivery of the Annual Policing Plan and the Corporate Services Plan, as well as providing the capital and reform investment necessary to drive forward with the Policing 2026 three year implementation plan. 1.2 The operating deficit in the 2018/19 budget of 35.6m has reduced from the 47.2m deficit included within the 2017/18 budget, and is in line with the deficit reduction trajectory set out in the 3 Year Financial Plan. Therefore, this budget continues to honour the commitment made to Scottish Government in relation to eliminating the budget deficit by 2020/21. 2. FURTHER DETAIL ON THE REPORT TOPIC 2.1 Appendix A provides the detailed period 10 finance report. The revenue position period ten is a year to date underspend against budget of 2.8m and as previously reported the quarter three full year forecast operating deficit of 35.6m is in line with budget. There is a year to date capital underspend of 18.4m, driven by the timing of business as usual and change expenditure assumed in the budget. The most recent Capital Investment Group (23 January 2019) received presentations from Capital Budget holders, stating a high degree of confidence in achieving the full year forecast of 37.8m. This is 3.8m below budget, reflecting both the expected rate of monthly spend and anticipated lower than budgeted capital receipts. The year to date revenue reform budget is underspent by 7.6m, mainly related to delays in the recruitment of transformation resource and professional services. The full year forecast is in line with budget inclusive of additional funding allocated to Staff Pay and Reward Modernisation (SPRM). 3. FINANCIAL IMPLICATIONS 3.1 The financial implications are set out in detail within the report. SPA Resources Committee 2018/19 Financial Monitoring Report 14 March 2019 2

4. PERSONNEL IMPLICATIONS 4.1 There are no personnel implications associated with this paper. 5. LEGAL IMPLICATIONS 5.1 There are no legal implications associated with this paper. 6. REPUTATIONAL IMPLICATIONS 6.1 There are no direct reputational implications associated with this paper. 7. SOCIAL IMPLICATIONS 7.1 There are no social implications associated with this paper. 8. COMMUNITY IMPACT 8.1 There are no community implications associated with this paper. 9. EQUALITIES IMPLICATIONS 9.1 There are no equality implications associated with this paper. 10. ENVIRONMENT IMPLICATIONS 10.1 There are no environmental implications associated with this paper. RECOMMENDATIONS Members are requested to note the information contained within this report. SPA Resources Committee 2018/19 Financial Monitoring Report 14 March 2019 3

Appendix A Period 10 Finance Report Year to 31 January, 2018 19 1

2

Executive Summary The revenue position at period ten is a year to date underspend against budget of 2.8m and as previously reported the quarter three full year forecast operating deficit of 35.6m is in line with budget. The year to date actual position versus budget is an underspend of 2.8m which is primarily driven by the gain on disposal of Pitt Street ( 4.7m), lower Police Staff costs ( 1.8m) and additional income ( 5.6m) offset by the additional cost of Police Officers pay award ( 6.2m) and costs of the recent visit by the President of the United States Operation Roll ( 3.2m). The net expenditure forecast is 15.3m higher than budget due to in year pay and other cost pressures including Police Officer pay award, SPRM and Operation Roll. The Scottish Government has confirmed that additional funding of 15.3m has been made available through the Autumn Budget Revision (ABR) and Spring Budget Revision (SBR). Total spend in January 2019 is 0.5m below the quarter three forecast for the month, driven mostly by timing variances relating to the phasing of income ( 0.4m), premises costs ( 0.6m), Forensics ( 0.5m), offset by Police Officer pensions ( 1.0m). There is a year to date capital underspend of 18.4m, related to the timing of business as usual and change expenditure. The most recent Capital Investment Group (23 January 2019) received representations from capital budget holders, stating a high degree of confidence in achieving the full year forecast of 37.8m. This is 3.8m below budget, reflecting the expected rate of monthly spend and anticipated lower capital receipts. The year to date revenue reform budget is underspent by 7.6m, mainly related to delays in the recruitment of transformation resource and professional services. The full year forecast is in line with budget inclusive of additional funding allocated for Staff Pay and Reward Modernisation (SPRM). Revenue Year to 31 January Full Year Budget Actual Variance Variance Budget Forecast Variance YTD Actual v Forecast m m m m m m m Police Scotland 878.3 876.4 1.9 0.0 1,065.7 1,081.1-15.4 Forensics 24.7 23.9 0.8 0.5 30.6 30.5 0.1 SPA Corporate 3.4 3.3 0.1 0.0 4.1 4.1 0.0 Total Net Expenditure 906.4 903.6 2.8 0.5 1,100.4 1,115.7-15.3 Funded By: Grant in Aid 1,064.8 1,080.1-15.3 Operating Deficit 35.6 35.6 0.0 Total 1,100.4 1,115.7-15.3 The forecast operating deficit of 35.6m at quarter three is in line with budget. Removing the effect of non recurring income and expenditure, the quarter three forecast deficit becomes 28.2m on a recurring basis. (see appendix A.2 for details). 3

Revenue Budget Police Scotland Analysis by Spend Type Year to 31 January Full Year Budget Actual Variance Variance Budget Forecast Variance YTD Actual v Forecast m m m m m m m Police Officers 653.9 662.5-8.6-1.1 786.6 803.7-17.1 Police Staff 142.8 141.0 1.8 0.1 177.0 181.3-4.3 Non-Pay Costs 116.3 113.2 3.1 0.6 142.7 142.9-0.2 Income -34.7-40.3 5.6 0.4-40.6-46.8 6.2 Total 878.3 876.4 1.9 0.0 1,065.7 1,081.1-15.4 Police Officers (Year to date: 8.6m overspend; Forecast: 17.1m overspend) Salaries, Allowances and On Costs (Year to date: 6.9m overspend) The overspend reflects the additional cost of the Police Officers pay award above budget ( 6.2m) and cost of new specific allowances created ( 0.7m) to replace overtime costs previously known as held in reserve. (Forecast: 11.9m overspend) This is due to the Officers pay award ( 10.6m), additional Brexit related recruitment in February of 96 officers ( 0.4m) and cost of new specific allowances created ( 1.0m) to replace overtime costs previously known as held in reserve. The budget for these allowances is held within Police Officers overtime. Ill Health and Injury Pensions (Year to date: 1.4m overspend) This overspend is due to the number and value of ill health awards made to date compared with budget ( 0.8m) and an overspend on injury pension payments ( 0.8m), offset by an underspend in pension admin charges ( 0.3m). (Forecast: 0.4m overspend) Once timing issues are resolved there will be an overspend in injury pension ( 0.4m) and ill health awards ( 0.4m), offset by an expected underspend in pension admin charges ( 0.4m). Police Officers Overtime (Year to date: 0.3m overspend) This overspend primarily relates to the cost of Operation Roll ( 1.6m) which will be fully funded. The underlying year to date position excluding Operation Roll is a 1.3m underspend. (Forecast: 4.8m overspend) The forecast overspend relates to: Operation Roll ( 1.6m); costs of European Working Time Directive (EWTD) ( 2.5m); core overtime including Allard ruling and the impact of the number and complexity of major incidents to date ( 2.6m) offset by reallocated held in reserve costs to allowances (as described above 1.0m) and non core (funded) overtime ( 0.9m). 4

Police Staff (Year to date: 1.8m underspend) There is a 1.7m underspend due to vacant posts being in excess of the budgeted vacancy / turnover saving. There is also a 0.6m underspend related to special constables payments. These savings are partly offset by a lower value of ICT staff costs capitalised than anticipated due to the phasing of transformation spend ( 0.3m) and an overspend in staff overtime ( 0.2m). (Forecast: 4.3m overspend) The forecast overspend is due to additional SPRM costs ( 5.9m) offset by the expected full year impact of vacant posts ( 2.0m). Non Pay Costs (Year to date: 3.1m underspend; Forecast: 0.2m overspend) Premises Costs (Year to date: 1.0m overspend) Budgeted savings in the estates department have not been achieved ( 1.0m). (Forecast: 1.5m overspend) The forecast overspend comprises: utilities ( 0.4m), the full year impact of estates savings not achieved ( 1.1m), offset by lower lease dilapidations ( 0.2m). Transport Costs (Year to date: 1.0m overspend) Due to: overspends in vehicle servicing and maintenance ( 0.4m) as a consequence of a reduced vehicle replacement programme in the early part of the year; vehicle hire charges ( 0.3m) and vehicle fuel ( 0.7m), partly offset by underspends arising from the timing of travel ( 0.1m) and mileage costs ( 0.2m). (Forecast: 1.3m overspend) The full year forecast overspend for vehicle servicing and maintenance is capped at the 0.5m overspend due to the impact of a reallocation of capital in quarter four to vehicle replacement and an additional overspend due to Telematics savings not being realised ( 0.7m). Supplies & Services (Year to date: 0.8m underspend) This position mainly reflects underspends on: airwave ( 0.7m), interpreters ( 0.3m), investigative expenses ( 0.1m) and medical fees ( 0.1m). This is offset by spend related to Operation Roll ( 0.5m externally fully funded). (Forecast: 0.3m underspend) Once timing issues are resolved, there is a full year forecast underspend across airwave ( 0.4m), interpreters ( 0.3m) and medical fees ( 0.1m). This is offset by spend on Operation Roll ( 0.5m externally fully funded). ICT (Year to date: 1.5m underspend and Forecast: 1.6m underspend) The year to date and forecast position mainly reflects an underspend on IT maintenance. 5

Admin Costs (Year to date: 0.7m overspend) Within this overspend position there are legal costs overspent ( 1.2m) related to external solicitor fees. This is offset by underspends across printing, stationery and photocopiers costs ( 0.3m) and other fees and charges ( 0.2m). (Forecast: 1.9m overspend) The forecast mainly reflects continued overspends in external legal costs for major cases ( 2.3m) offset by underspends across printing, stationery and photocopiers costs ( 0.2m) and other fees and charges ( 0.2m). Third Party Payments (Year to date: 1.5m overspend) This overspend is mainly related to Operation Roll ( 0.9m externally fully funded) and liability claims for major cases ( 0.3m). (Forecast: 3.3m overspend) This overspend is primarily due to liability claims for major cases ( 1.5m) and Operation Roll ( 0.9m externally fully funded). Furthermore, there is externally funded spend related to the Violence Reduction Unit (VRU) and domestic abuse training. Other Costs (Year to date: 5.2m underspend) This underspend relates to the gain on disposal from properties including Pitt Street ( 5.1m) and recovery of bad debts ( 0.1m). (Forecast: 6.0m underspend) The forecast mainly reflects the gain on disposal from anticipated property disposals. Income (Year to date: 5.6m favourable) Due to additional income ( 1.8m) primarily from football events, concerts and other operations. Extra specific grant funding ( 0.8m) has been received as well as additional mutual aid income ( 0.5m) in relation to operations conducted on behalf of other Forces, additional recovery of income in respect of rental and hire charges ( 1.1m) and other various income ( 1.4m). (Forecast: 6.2m favourable) Over and above the year to date variance of 5.6m there are further favourable variances for services of police income ( 0.4m) and specific grant funding ( 0.5m) to be realised in quarter four. 6

Police Officers & Police Staff Costs Police Officers Costs The budget assumes an establishment of 17,134 FTE Police Officers. The year to date position for Officers salaries, allowances and on costs, excluding the pay award is on budget. The published Police Officer numbers as at the end of December are 17,174.61 FTE. The forecast overspend of 17.1m is primarily due to the Officers pay award increasing costs by 10.6m, additional recruitment in February of 96 officers ( 0.4m), Operation Roll overtime ( 1.6m), other operational overtime ( 2.0) and EWTD ( 2.5m). Police Staff Costs Police staff actual costs continue to track below budget. The year to date budgeted vacancy factor savings ( 5.4m) and managed turnover savings ( 2.7m) have been achieved and represent the gap between the actual and budgeted staff in post. It is forecast that a full year underspend of 2.0m will be achieved due to the number of vacant posts. Based on experience, the vacancy factor saving is assumed to be recurring and hence will continue into future years. The additional managed turnover saving is budgeted and managed centrally within non distributable costs and will be offset by staff savings across other business areas. 5,000 Police Scotland Staff FTE 4,900 4,800 4,700 4,600 Budgeted costs are derived from planned FTEs net of vacancy and managed turnover Vacancy factor and managed turnover savings 4,500 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Budget Baseline FTE Implied Budget FTE net of vacancy/turnover Actual FTE Indicator Full Year Budgeting Assumption Status Vacancy factor saving 6.5m (based on the historic turnover % per Division / Department) Favourable Managed turnover saving (further vacancy managed saving) 3.2m Favourable 7

Revenue Budget Analysis by Business Area Year to 31 January Full Year Budget Actual Variance Variance Budget Forecast Variance YTD Actual v Forecast m m m m m m m DCC Local Policing 49.3 48.2 1.1 0.1 58.8 58.2 0.6 DCC Crime & Op Support 52.9 52.8 0.1 0.0 69.7 69.6 0.1 DCC Professionalism 53.2 53.1 0.1-1.3 64.2 64.4-0.2 Deputy Chief Officer 99.5 96.7 2.8 0.9 117.2 114.9 2.3 Police Officer Costs 622.9 629.8-6.9-0.2 747.9 759.8-11.9 Non Distributable Costs 0.5-4.2 4.7 0.5 7.9 14.2-6.3 Total Police Scotland 878.3 876.4 1.9 0.0 1,065.7 1,081.1-15.4 Forensics 24.7 23.9 0.8 0.5 30.6 30.5 0.1 SPA Corporate 3.4 3.3 0.1 0.0 4.1 4.1 0.0 Total 906.4 903.6 2.8 0.5 1,100.4 1,115.7-15.3 DCC Local Policing (Year to date: 1.1m underspend) The year to date position is mainly due to underspends in police staff costs ( 1.0m) and additional income from various sources ( 2.1m), offset by overspends in overtime ( 1.1m) related to Operation Roll (fully externally funded) and various major incidents ( 0.7m). (Forecast: 0.6m underspend) The forecast underspend relates to additional grant and services of police income ( 2.0m) and staff pay costs ( 1.1m) related to the number of vacant posts within the portfolio. This is offset by overspends related to Operation Roll ( 1.1m), various major incidents ( 1.0m) and the impact of Telematics savings not realised ( 0.4m). DCC Crime & Operational Support (Year to date: 0.1m underspend) This position is mainly due to underspends in police staff costs ( 0.5m), reductions in non core overtime in relation to abnormal load movements ( 0.6m), additional mutual aid income ( 0.5m) offset by overspends on Operation Roll ( 1.8m fully externally funded). (Forecast: 0.1m underspend) An additional 1.9m of income is forecast related to Operation Ailey ( 1.6m) and mutual aid income ( 0.4m) offset by overspends due to Operation Roll ( 2.1m). Staff pay costs are forecast to be underspent by 0.7m due to the number of vacant posts within the portfolio. Third party payments will be overspent by 0.8m related to additional funded spend being incurred by the VRU ( 0.4m) and domestic abuse training ( 0.4m). Core overtime is forecast to be overspent by 0.5m as a result of operational pressures and non core overtime is forecast to be 0.8m underspent due to operations that are fully funded, including abnormal load movements and events. 8

DCC Professionalism (Year to date: 0.1m underspend) Further underspends relate to the Officers overtime contingency ( 1.3m) and staff pay costs ( 1.9m) offset by overspends in external legal costs ( 1.2m), liability claims for major cases ( 0.6m) and ill health and injury pensions ( 1.3m). (Forecast: 0.2m overspend) Staff pay costs are forecast to be underspent by 1.9m related to the number of vacant posts within the portfolio and there is a favourable variance of 1.9m in the central overtime contingency, which is offset by overspends across other DCC portfolios. There is a further overspend by the legal department ( 3.8m) for external legal costs and liability claims for major cases. Deputy Chief Officer (Year to date: 2.8m underspend) Staff costs are underspent by 1.5m due to the impact of vacancies partly offset by delays in ICT capitalisation ( 0.3m). There are also overspends in premises ( 1.1m) and transport costs ( 0.5m) offset by underspends in ICT ( 1.1m), supplies ( 0.6m), admin costs ( 0.4m) and additional recovery of income in respect of rental and hire charges ( 1.0m). (Forecast: 2.3m underspend) The underspend against budget is due to: the number of vacant police staff posts forecast ( 1.7m), ICT maintenance ( 1.1m), additional recovery of rental income ( 1.0m), offset by forecast overspends in vehicle servicing ( 0.5m) and estate savings not achieved ( 1.0m). Police Officer Costs (Year to date: 6.9m overspend) The overspend reflects the additional cost of the Police Officers pay award above budget ( 6.2m) and cost of new specific allowances created ( 0.7m). (Forecast: 11.9m overspend) This overspend is due to the Officers pay award ( 10.6m), additional recruitment in February of 120 officers ( 0.4m) and cost of specific allowances budgeted within overtime ( 1.0m). Non Distributable Costs (Year to date: 4.7m underspend) The underspend is comprised of the gain on disposal of Pitt Street and a VAT reimbursement for costs across various budget categories that had been assumed to be non recoverable but will be reimbursed by HMRC. This position is partly offset by an overspend related to the agreed budgeting process for the police staff managed turnover being held within non distributable costs. (Forecast: 6.3m overspend) The forecast overspend also relates to: additional costs for SPRM ( 5.9m); EWTD ( 2.8m) and the staff managed turnover saving ( 3.2m). Note that the aggregate position on the managed turnover saving across the whole organisation is expected to be a saving of at least 1.7m for the year (see page 7). This is mitigated by the VAT reimbursement, gains on disposals on assets (including the sale of Pitt Street) and the release of various historic accruals. Forensic Services (Year to date: 0.8m underspend and Forecast: 0.1m underspend) Staff costs year to date are underspent by 0.5m (forecast: 0.5m under) due to vacant posts and a further underspend due mainly to delays in Forensic outsourcing work 0.3m (forecast: 0.2m overspend). 9

Capital including Capital Reform The Capital Investment Group develops proposals on capital allocations based on an assessment against policing priorities, business need and available funding. Business as usual (BAU) capital budgets are supported by rolling programmes of investment across key business areas. Change capital budgets are notionally allocated and formally approved through relevant SPA governance following the development of a robust business case. Year to 31 January Full Year Forecast Budget Actual Variance Budget Forecast Variance m m m m m m Business As Usual Estates 3.8 2.8 1.0 4.5 4.5 0.0 Fleet 5.3 5.0 0.3 5.3 7.7 2.4 ICT 6.3 0.9 5.4 6.6 6.6 0.0 Specialist Policing Equipment 2.8 0.8 2.0 3.3 3.2 0.1 Weaponry 0.7 0.7 0.0 1.4 0.9 0.5 Change Corporate Services Transformation 0.0 0.0 0.0 0.1 0.0 0.1 P2P Procure to Pay 0.4 0.0 0.4 0.4 0.0 0.4 Telematics 0.4 0.4 0.0 0.4 0.4 0.0 Estates Transformation 0.0 0.0 0.0 0.0 0.0 0.0 Custody Remodelling 0.9 0.3 0.6 0.9 0.5 0.4 Productions Remodelling 1.1 0.1 1.0 1.1 0.1 1.0 CJ Records Management 0.3 0.0 0.3 0.3 0.2 0.1 Speed Awareness 0.0 0.0 0.0 0.0 0.0 0.0 Mobility 1.8 0.0 1.8 1.8 1.6 0.2 Core Operating Systems 3.0 0.2 2.8 4.9 3.2 1.7 Cybercrime Capability 0.0 0.0 0.0 0.5 0.2 0.3 Payroll Transformation 0.1 0.1 0.0 0.1 0.2 0.1 ICT National Network 1.4 0.4 1.0 1.8 1.5 0.3 ICT ADEL 3.5 3.1 0.4 4.3 3.8 0.5 ICT Digital ICCS 1.2 0.3 0.9 2.5 2.4 0.1 Automatic Number Plate Recognition 0.2 0.1 0.1 0.2 0.3 0.1 Microwave Downlink 0.1 0.1 0.0 0.1 0.1 0.0 Total Police Scotland 33.3 15.3 18.0 40.5 37.4 3.1 Forensics 1.0 0.6 0.4 1.1 1.5 0.4 Scottish Police Authority 1.0 0.6 0.4 1.1 1.5 0.4 Slippage Management 0.0 0.0 0.0 0.0 1.1 1.1 Total 34.3 15.9 18.4 41.6 37.8 3.8 Funding Source: Grant Aid 23.0 24.0 1.0 Receipts 9.7 5.5 4.2 14.0 8.9 5.1 Reform Funding 4.6 4.6 0.0 Capital Grant Income 0.0 0.3 0.3 Total Funding 41.6 37.8 3.8 The year to date capital expenditure is significantly behind expectations ( 18.4m) and the forecast outturn is now 3.8m lower than budget. 10

The available receipts are 5.1m lower than budgeted due to a change in the accounting treatment for disposals. The difference between the sale proceeds and the net book value (NBV) of the assets being disposed should be recognised in revenue whilst the NBV is available to fund capital expenditure. Additional grant funding has been secured from Transport Scotland and Justice Transformation Funding. The most recent meeting of the Capital Investment Group (23 January 2019) included a review of the year to date position. Each budget holder was present and was challenged on: the reasons for year to date underspends and the confidence that they could execute expenditure to budget in advance of the year end. Each budget holder confirmed that they were confident in their ability to spend their allocated capital budget, however the following key risks were noted. Core Operating Systems ( 3.2m): The contract has not been approved by Scottish Government with milestones currently being worked on. There are no reportable barriers to inhibit the ability to spend the budget in line with current forecast. LAN Network (spend within ICT business as usual budget 2.6m): Due to various delays the contract was signed much later than originally planned. Whilst this is now with the supplier the delivery of goods/services will have to be carefully managed to ensure that the capital expenditure will be spent in full by year end. Capital Receipts It is expected that there will be 3.4m of receipts achieved between P9 and P12. However, this will be managed carefully to ensure that if for any reason expected capital purchases cannot be executed, receipts will be managed into the next financial year. Business as Usual Estates (Year to Date: 1.0m underspend; Forecast: on budget) The year to date spend is behind expectations due to a number of significant projects (Haddington relocation, Bilston Glen roof replacement, Lanark upgrade) being delayed or reprioritised. Review of the full year capital projects confirms that the full budget will be required. Fleet (Year to Date: 0.3m underspend; Forecast: 2.4m overspend) A decision to fund an additional 2m vehicles was agreed at Capital Investment Group in response to the reallocation of funding from transformation projects. All orders have been placed and will be fulfilled within the financial year. The further 0.4m overspend is due to the additional requirement to fit out Police vans with speed prevention equipment which has been fully externally funded by Transport Scotland. ICT (Year to Date: 5.4m underspend; Forecast: on budget) In addition to the LAN network noted above, the year to date underspend is due to delays in the roll out of the Voice Network which had been forecast to deliver in November (due to a review being conducted as part of the DDICT business case). Furthermore, delays in the rollout of the desktop refresh due to a lack of technical staff to deliver the installation has also contributed to this underspend. ICT have conducted a review of all capital projects and forecast that budgeted expenditure will be fully incurred. 11

Specialist Policing Equipment (Year to Date: 2.0m underspend; Forecast: 0.1m underspend) The underspend is mainly within the Technical Support Unit where work is being undertaken with the procurement department to progress orders. Challenges are mainly due to a requirement to establish a bespoke procurement pathway. Orders are progressing with suppliers/ procurement who place a high degree of confidence that they will deliver in this financial year. Weaponry (Year to Date: on target; Forecast: 0.5m underspend) There is a 0.5m underspend forecast based on the expected replacement programme. Change P2P Procure to Pay (Year to date: 0.4m underspend; Forecast: 0.4m underspend) The original business case included a 0.3m capital requirement which has subsequently been agreed as no longer critical to the project delivery and the forecast has been updated to reflect this decision. Custody Remodelling (Year to date: 0.6m underspend; Forecast: 0.4m underspend) As a result of budgetary constraints in 2019/20 and reprioritisation, custody remodelling has been halted. The forecast expenditure will includes sunk costs as well as those from which benefit will be derived e.g. WIFI installation in the Custody Hubs. Productions Remodelling (Year to date: 1.0m underspend; Forecast: 1.0m underspend) As a result of budgetary constraints in 2019/20 and reprioritisation, productions remodelling has been halted. The current and forecast expenditure includes sunk costs. Mobility (Year to date: 1.8m underspend; Forecast: 0.2m underspend) The year to date underspend is due to delays in the roll out of the mobility programme. The forecast underspend is related to the under capitalisation of ICT staff below the anticipated level. Cybercrime Capability (Year to date: 0.0m underspend; Forecast: 0.3m underspend) Business cases produced subsequent to the budget allocation for this programme have sought less funding that the original allocated budget. ICT National Network (Year to date: 1.0m underspend; Forecast: 0.3m underspend) Underspends relate to the under capitalisation of ICT staff and a delay to the procurement of network equipment. ICT ADEL (Year to date: 0.4m underspend; Forecast: 0.5m underspend) A review of the ADEL project has identified 0.5m of capital savings from a reduced requirement for external contractors. 12

Revenue Reform The Scottish Government has made up to 29.6m of revenue and capital funding available through the Police Reform and Change Fund. Business cases are required to support the use of reform funding which must demonstrate that spend is transformational in nature and these business cases require the approval of the SPA and Scottish Government prior to funding being released. The table below shows the year to date spend on the revenue element of the reform funding ( 25.0m). The capital element of the reform funding ( 4.6m) is included in the capital section of this report. Year to 31 January Full Year Budget Actual Variance Budget Forecast Variance m m m m m m Revenue TRCG Resourcing 9.2 7.4 1.8 11.6 9.9 1.7 Professional Services 6.1 3.2 2.9 7.7 7.5 0.2 Digital & Efficiency Transformation 2.1 0.2 1.9 2.5 2.6-0.1 Operational Policing Transformation 0.3 0.1 0.2 0.6 0.4 0.2 Corporate Services Transformation 0.3 0.1 0.2 0.5 0.6-0.1 VR VER 1.7 1.1 0.6 2.1 1.2 0.9 SPRM 0.0 0.0 0.0 0.0 2.8-2.8 Total 19.7 12.1 7.6 25.0 25.0 0.0 The year to date revenue reform spend is behind expectations, however there are plans to spend reform funding in full. TRCG Resourcing (Year to date: 1.8m underspend; Forecast: 1.7m underspend) There is an underspend on TRCG transformation resources due to a pause in recruitment related to uncertainty about the availability of funding and affordability next year. Professional Services (Year to date: 2.9m underspend; Forecast: 0.2m underspend) There is a year to date underspend largely due to delays in the approval process for business cases and contract awards. The majority of this budget is contractually committed. Digital & Efficiency Transformation (Year to date: 1.9m underspend; Forecast: 0.1m overspend) There is a year to date underspend due to the delays in approving the contract awards for Mobility and COS. As noted in the capital section, there is close scrutiny currently in place to ensure the budget is spent in line with current forecast. VR/VER (Year to date: 0.6m underspend; Forecast: 0.9m underspend) The VR/VER scheme was paused in September in order to enable the reallocation of funds to SPRM. SPRM (Forecast: 2.8m overspend) An overall staff pay and reward package has been agreed with the Scottish Government, Staff Associations and staff following a successful ballot. It is forecast that 2.8m of reform funding will be required in the current year. 13

Appendix A.1 Threats & Opportunities This appendix sets out the key threats and opportunities that could result in a material change to the forecast outturn. This also includes any budgeting assumptions where there is a risk that the assumption will materially change from what was approved when the budget was set. For each material threat or opportunity, the table below provides an assessment of the probability of the change occurring and the likely financial impact on the outturn. Since the previous monthly finance report a full review of all forecasts has been undertaken and the majority of the previously identified threats and opportunities have now been reflected in the current forecast. Budget area Detail Probability Impact on forecast if risk materialises Risk Owner Mitigation Action / Next Steps Threats Pay Police Officer Overtime There have been a greater number of major investigations (MIs) in the year to date than expected based on historic trends. The costs of the known MIs have been forecast, however, there is a financial risk if this trend continues throughout the remainder of the financial year. Medium 0.5m + DCC Local Policing DCC Crime & OSD Steps are being taken to control overtime spend including the use of the overtime contingency. The central contingency budget has been fully utilised within the forecast. Non Pay Additional Legal Costs The quarter three forecast captured all know legal threats and should there be any further unforeseen costs they are expected to be low value. Low TBC DCC Professionalism Subject to ongoing monitoring. 14

Appendix A.2 Underlying budget deficit The forecast operating deficit of 35.6m at quarter three is in line with budget. Removing the effect of non recurring income and expenditure, the forecast deficit becomes 28.2m on a recurring basis. This aligns with the original budget ( 28.2m recurring from a total deficit of 35.6m). Underlying Budget Deficit Net Exp Funding Deficit m m m Quarter Three Forecast 1,115.7-1,080.1 35.6 Adjust for Non-Recurring Items SPRM recognition payment - 11.5 Operation Roll - 3.2 One- off pay costs (Allard) - 3.5 Forensics Biology Outsourcing -2.1 Other one-off items 4.8 Total Non-Recurring Items -15.5 8.1-7.4 Recurring Deficit 1,100.2-1,072.0 28.2 15