Hampshire County Council
26 June 2006
Value for Money Strategy and Corporate Review Programme
Report of the Chief Executive
Contact: Jenny Heath, ext: 7402 Email: email@example.com.
1.1 This strategy was initiated following the new emphasis on value for money within `CPA 2005 the Harder Test', as well as specific comments in the Annual Audit and Inspection Letter. The general approach to the renewed value for money agenda has been to integrate it within existing processes. By setting out the approach in a separate strategy it makes it more visible, given that fully integrated approaches can become invisible. A Performance Support Network workshop on 16 November 2005 brought together Members and Officers to consider the outline approach, initially agreed by the Corporate Performance and Efficiency Steering Group (CPEG) at its meeting in July 2005.
1.2 This strategy will also support the development of the Corporate Business Plan, recognising the role of value for money and efficiency targets in that plan.
1.3 Cabinet approved the Corporate Review Programme for 2005/06 at its meeting on 27 June 2005, focussing review activities on strategic areas that were likely to generate efficiency gains. Progress with the reviews is shown in Appendix Two, along with an indication of how Members have been engaged. This year it is proposed that the revision of the Corporate Review Programme doubles up as the action plan for improving value for money.
2.1 Hampshire County Council has recognised for a long while that providing economic, efficient and effective services is key to meeting the needs of the people of Hampshire. In this regard, the Council has consistently strived to provide value for money.
2.2 CPA 2005, which represents a significant `raising of the bar', introduced for the first time an explicit assessment of value for money within the revised Use of Resources block. As part of this, local authorities are required to submit a self-assessment of the extent to which the Council provides value for money. Whilst confident that the Council on the whole provides good value for money the challenge is identifying and collating the necessary evidence.
2.3 In 2005 the self-assessment was produced under an extremely tight timetable following the late release of the CPA framework and with some elements of the guidance only emerging a couple weeks before the submission deadline. The information was pulled together on an ad hoc basis from a vast array of sources. A more systematic approach is needed from 2006 and departments have already been asked to make returns on the extent to which they provide value for money as part of the now routine corporate performance reporting.
2.4 In the 2004/05 Annual Audit and Inspection Letter the auditors made the formal recommendation that the Council should seek to "understand high-cost areas through better integrated cost and performance information and a more consistent approach to reviewing value for money". The auditors highlighted the need to:
· Develop approaches to benchmark service costs
· Improve the integration of performance and cost information
· Ensure a greater consistency across all services in establishing links between quality, cost and value for money in setting targets for value for money improvements
2.5 Whilst this and the other formal recommendations have been responded to -through a report agreed by Cabinet on 23 January 2006 - it further highlights the need to tighten Integrated Planning and Reporting processes and the Corporate Review Programme to address this new focus on value for money.
3.1 A draft Value For Money Strategy is attached at Appendix One. It has been developed with reference to the current Corporate Strategy, the forward looking Annual Efficiency Statement (strategy section and Government guidance), the CPA Use of Resources block guidance and key lines of enquiry (KLOE) and Best Value statutory guidance. The Corporate Performance and Efficiency Group (CPEG) have considered the outline approach and areas for potential review at their meetings, while a special Performance Support Network workshop brought together Members and officers in November 2005 to consider the approach and general understanding of efficiency and value for money.
3.2 The CPA Use of Resources block KLOE in relation to value for money highlight a number of essential elements to demonstrate and further improve value for money. These provide a useful set of criteria on which to base any value for money strategy:
· Costs compare well with others allowing for external factors
· Costs are commensurate with service delivery, performance and outcomes achieved
· Costs reflect policy decisions
· The council monitors and reviews value for money
· The council has improved value for money and achieved efficiency gains
· Procurement and other spending decisions take account of full long term costs
3.3 In order to move the agenda forward it is important to `mainstream' the principles of value for money and efficiency as much as possible and clarify what is expected from everyone at all levels of the organisation. Value for money needs to be integrated within the Council's priorities/vision, planning and accountabilities, deployment of resources, monitoring and assessment and awareness/guidance - these are considered below.
The existing Corporate Strategy already contains references to value for money as well as efficiency targets, specifically aiming to keep Council tax increases in the lowest quartile compared to other county councils. As the Corporate Strategy is revised these references should be retained within the Corporate Business Plan and the commitment to achieving value for money strengthened through the supporting Value for Money Strategy.
3.5 Planning & accountabilities
Integrated Planning, which covers service, workforce and budget planning, now explicitly incorporates value for money, with managers asked to include this as one of their service outcomes. This prompts managers to consider the extent to which their service provides value for money, how this can be improved further and what steps to take. This, in turn, should be transferred via the `golden thread' to Individual Performance Plans (IPP) so that all staff understand their role in achieving value for money. Greater benchmarking with other councils is also needed in order to judge relative performance of service costs against quality.
The underlying principle of this integrated planning process is that the authority's top level political vision and the corporate strategy which relates to it flow into the prioritisation of additional resources. This is designed to ensure that investment will prove effective, ie by addressing service priorities which have been identified by the Council.
3.6 Deployment of resources
The Council also seeks to ensure that its financial management arrangements support the economic and efficient use of resources. These are set out in the financial management policy which is reviewed annually and included in the Council's budget book. Key points to note here are that:
· Levels of non earmarked reserves are minimised in order to maximise use of available funds on service provision.
· Provision for inflation is allocated to services at the start of the financial year, so requiring excess inflation to be absorbed through good procurement or other efficiency measures.
· The annual costs of increments are not budgeted for, again on the basis that these should be absorbed.
· Services are expected to contain spending within the approved cash limit, with no supplementary allocations being available other than in exceptional circumstances.
· The rules for carrying forward under and over spendings are designed to ensure that these are sensibly planned, that there is no inappropriate incentive to "spend up" at the year end and that accountability for any overspending is enforced. Accordingly, services are expected to carry forward 100% of any overspend against the overall service cash limit and allowed to retain up to 100% of any planned underspendings identified prior to the approval of the following year's budget, but only 50% of any unplanned underspendings.
· The Council seeks to maintain the level of the locally resourced capital programme by continually recycling surplus assets to generate capital receipts.
· Service managers are incentivised to release surplus assets by being allowed to retain at least 25% and often up to 100% of the capital receipts towards replacement assets for the service.
· Commitment to major investments, including Invest to Save approaches and the use of unsupported borrowing approvals under the Prudential guidelines, is only made where there is a sound business case.
The forward looking Annual Efficiency Statement (AES), submitted to the Government in June, sets out how the Council intends delivering the tough Gershon efficiency targets. The mid-year AES, compiled in November, shows progress against the areas identified for efficiency gains and makes the further link to the appropriate service plan or review as well as those responsible.
3.7 Monitoring and assessment
Value for money has been incorporated within the Corporate Performance Results (CPR), which are returned in November and June. Departments have been asked to submit a short commentary on the extent to which they have provided and improved value for money, From 2006 this will directly feed into the value for money self-assessment. Departments also submit quality cross-check PI information as required for the AES.
Budget monitoring and the mid-year AES form an essential part in monitoring value for money progress and efficiency gains in order for remedial action to be taken as necessary.
The officer's Corporate Performance and Efficiency Group (CPEG) and the Corporate Management Team keep a close eye on both Gershon efficiency and value for money, while Members consider both budget and performance results. The lack of fully integrated performance and budget reporting reduces the clarity of whether value for money is being achieved and this is being addressed through the Integrated Planning and Reporting project.
The awareness and understanding of both staff and Members of the value for money agenda, its implications and its importance with regard to external assessment is essential. A `Key Themes Portal' is being developed to collate guidance and support for a number of themes that have been agreed corporately to affect everything we do. VfM guidance is being included in the Hantsnet website which helps managers integrate these key themes into everyday business. Further thought is being given to more proactive approaches to ensuring managers are aware of how they can take action to improve VfM in planning and delivering their services.
4.1 While mainstreaming value for money into planning and monitoring processes will ensure it features in day-to-day operations, it will not create opportunities to challenge and fundamentally review the way services are delivered or improvement achieved. To do this, Value for Money must also become a main element of the Corporate Review Programme.
4.1 The single review programme approach is also fundamental to complying with the continuing statutory requirement to have a (best value) review programme, while minimising potential bureaucracy. It enables the corporate programme to focus on strategic or cross-cutting areas and allows service reviews to be covered by the service planning regime.
4.2 The programme is based on the premise that there are several reasons for review activity which may cause them to be included in the Council's corporate review programme:
· Looking for ways to resolve a known / perceived problem
· Identifying ways to improve a service or function, looking at efficiency, economy and effectiveness
· Evaluating a pilot or trial before further roll-out or development
Triggers for identifying review topics include: performance results, audit / inspection recommendations, comparative studies, survey results and member / stakeholder interest.
4.3 At the end of each financial year, progress with corporate reviews must be published in the statutory Performance Plan, following reporting through the agreed Member channels.
4.2 Last year the 2005/2006 corporate review programme was presented to focus on Gershon efficiencies, clustered by the categories for improvement defined by Government. It is recognised that efficiency is only part of the primary aim to achieve value for money and so the 2006/2007 corporate review programme take a wider `value for money' perspective as the rationale for selecting areas to review and has removed the artificial categorisation of reviews.
4.3 The Corporate Review Programme is attached at Appendix Two. It is split into two sections:
· The 2005/06 programme with progress against each review and an indication of where full details have been reported
· The 2006/07 programme, showing new and continuing reviews.
5.1 The value for money self-assessment is required by the Audit Commission at the end of July as part of the CPA process. A small Value for Money steering group will manage this process looking to build on the 2005 self-assessment and seeking approval from Cabinet in July.
5.2 As well as returning the Corporate Performance Results, finance and performance officers in departments will need to submit commentaries on the value for money comparative data (county council profiles). The value for money self-assessment timetable is shown in appendix three.
1 That Cabinet approve appendix one as the Council's Value for Money Strategy.
2 That Cabinet approve appendix two as the Council's (Best Value) review programme for 2006/07 and its publication in the statutory update of the Performance Plan on 30 June 20056
Section 100 D - Local Government Act 1972 - background documents
The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.
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