Archived decisions

Contact: Paul Carey-Kent, ext 7524

1 Summary

1.1 This cross-cutting review of the finance function pulls together conclusions from review work covering not just the County Treasurer's department, but also work done by staff carrying out financial administration in service departments. It reports on the outcome of further work carried out with members as a consequence of the options report on this review which was considered by the former Policy and Resources Best Value Panel on 27 July 2001.

2 The service under review

2.1 The finance function will deal with County Council spending of £1,067m, income of £196m and a capital programme of £90m in 2001/02. It also oversees investments worth £2bn.

The cost of the function (much of which is charged to internal customers under Service Level Agreements or Fair Funding arrangements for schools) at the start of the review could be summarised as follows:

£m

County Treasurer's department 10.9

Less external income (2.4)

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8.5

Education Financial Services 0.6

Education Resource Allocation Unit 0.5

Property Finance Team 0.2

Environment Exchequer Services 0.2

Social Service Area Finance Staff 1.6

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3.1

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11.6

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2.2 In addition, there are two significant areas of finance-related spending which are not part of the County's revenue budget. First, external investment advice totally some £2.5m, and second the `Enterprise Project' to replace the Council's finance and related systems with the SAP Enterprise Resource Management System. This is funded on an invest to save basis as part of the Council's Capital Programme with a total investment of over £12m. This major project underlies much of the improvement action planned in the finance function. However, it has been the subject of a comprehensive business case prepared by PricewaterhouseCoopers and approved by members through the former Land Sub Committee. Accordingly, the case for this investment and the assessment of related savings were not repeated in this review, though the action plan features this project given its key importance to the future of the finance function.

2.3 The service specification and project brief for this review were agreed by the Policy and Resources Best Value panel in February 2001. These are attached for information of members new to the review at Appendices A and B.

3 The review process

3.1 The review was carried out so far as possible by integrating it into existing management arrangements. Business planning processes were already well established within the County Treasurer's department, and these were extended to cover the whole finance function and to pick up the broader concerns of Best Value so that a set of sixteen `Best Value plans' for the different sections within the function were produced, together with an overall finance function Best Value plan.

3.2 The basis for analysis in these plans was:

· Application of the European Foundation for Quality Management (EFQM) framework, in line with the preferred corporate management review methodology

· Assessment of the `Four Cs' (challenge, compare, consult, compete)

· Continuation of business planning approaches

3.3 In addition, an Audit Commission check list of the characteristics of a well managed finance function was used to assess performance.

3.4 To provide Best Value, a service must be good and likely to improve. The conclusion of the finance function Best Value review was that this is the case. The main reasons for concluding that the function is a good one were:

· systematic and repeated consultation with customers over the past 10 years has shown high levels of satisfaction

· the District Auditor endorsed the results of the assessment against Audit Commission criteria for the characteristics of good financial management which indicated that all significant requirements are met

· OFSTED recently concluded that financial management support to schools is `very good'

· extensive benchmarking comparisons have been developed for transaction-based services, all of which show the function to be in the lower quartile of cost

· a record of successful competition with the private sector.

3.5 A continuous improvement culture is essential to provision of a good service. The evidence suggests that this has been operative to date (increasing customer confidence scores) and the detailed Best Value plan demonstrates considerable scope for further improvement:

· many small scale actions identified - probably the key to continuous improvement

· one major change - the replacement of the Council's finance and related systems by the Enterprise Resource Management System SAP - which should lead directly and indirectly to improvements across the whole function, including cost reductions

· continuing use of quality frameworks : Charter Mark, ISO9000, Plain English accreditation, Investors in People and application of the European Foundation for Quality Management framework. All of these encourage systematic continuous improvement processes and build on work started in 1988 as "Quality for the 90s" in seeking quality improvements and customer focus in advance of Local Management of Schools.

3.6 All of this is consistent with an approach which attempts to integrate Best Value into existing good management arrangements, and to concentrate on making small and more infrequent major step changes and encouraging a positive working culture as the best ways to secure continuous improvement.

3.7 The full options report contains 136 pages. In view of its length and its previous consideration by the Policy and Resources Best Value panel, it is not duplicated here. However, for the benefit of members new to this review, the summary of the options report is attached at Appendix C. Any member who wishes to see the full report can do so on request to Paul Carey-Kent. Following the review/approval of the options report, this committee appointed members to work further with officers to take forward the following proposed actions:

· Councillors Davidovitz, Ellis, Roberts and Beagley to assist in the development of a financial management policy. This work has been completed and the draft policy is attached at Appendix D.

· Councillor Stocks to assist in the review of the interface between the County Treasurer's department and Social Services. This work has been completed and led to the restructuring of the finance function in Social Services which was implemented with effect from 1 October 2001. As part of these changes, some sixty staff were transferred from Social Services department to County Treasurer's.

· Councillor Cartwright to assist in reviewing the interface between County Treasurer's and the Education department. Initial work on this has been completed and a report setting out the way forward has been agreed by Councillor Cartwright and is attached at Appendix E. These are proposals for future implementation on which other members may wish to comment.

3.8 This further work by members fits in with the actions set out in the improvement plan which is attached at Appendix F for members' approval. Members will, however, see that the improvement plan does not follow the usual approach of setting out related performance indicators and targets. This is because the improvements proposed are in wide-ranging overall processes which should feed into improvements in multiple targets across the whole of the finance function. A more appropriate way to set performance improvement targets is, therefore, to identify the mechanisms through which the Council's financial management policy is intended to be delivered, together with the performance indicators and associated targets which flow from this. This framework is attached as the second part of Appendix D, but as an initial draft only, eg not all the indicators have been developed yet. Any member comments on this part would be welcome. This will then be finalised and built into the first monotoring report on this review.

4 Member input

4.1 Members have contributed both through their input at relevant stages of review at Policy and Resources Best Value panel and Policy and Resources Policy Review Committee meetings; and through working group involvement as set out above. This has worked reasonably despite the discontinuities caused by first the County Council elections and second the modernisation process. Whilst this involvement has probably been less than in most Best Value reviews, this may well be appropriate given that, for the most part, financial management impacts only indirectly on the public.

5 Lessons learnt

5.1 This is the second cross-cutting Best Value review carried out by the County Council following on from that on Passenger Transport. Both reviews have been led at officer level by the Deputy County Treasurer. They have differed considerably in that whilst the transport review pulled together three previous departmental reviews, the finance review was set up as cross-cutting in the first instance. Nonetheless, there is a common theme of ensuring best working relationships between departments and best organisational arrangements stemming from examination of respective departmental responsibilities.

5.2 Use of a common framework across departments to cover the issues raised by the review was successful. An officers' steering group including representatives from the other departments involved in the finance function as well as an external consultant, a personnel representative, external customer representatives (probation and fire services) and central Best Value representatives was used to look at draft findings before they went to members, and this too proved valuable. Such arrangements are commended for future cross-cutting reviews.

5.3 The `gap' which emerged in terms of pulling together and quantifying overall strategy is perhaps unsuprising in a cross-cutting area and could be something which requires checking as an initial starting point on other cross-cutting reviews.

5.4 In discussions with other authorities, no examples have yet come to light of overall cross-cutting finance reviews having been carried out yet. Instead, most authorities are splitting the functions to look separately at for example audit, accounting, tax collection, treasury management etc. This review suggests that such an approach would provide no apparent benefits to set against the narrower vision and diseconomies of scale likely to result from it.

6 Conclusions

6.1 The review has shown that the finance function does operate well, but at the same time that there is much to do to maintain this position and to seek further improvements. Whilst this has been a relatively low profile review, avoiding the use of extra resources by integrating it within existing management arrangements, it has worked well. Member contributions have been helpful towards the smooth running of the review.

7 Summary recommendations

7.1 The main recommendations, reflected in the improvement plan, are as follows:

· complete implementation of the new resource management system as the primary means of achieving financial savings, e-government applications and improving management information

· review options for broader partnership working or externalisation once the resource management system has been implemented

· explore options for further unifying finance functions

· clarify and codify the financial management policies of the Council

· apply for the Charter Mark for pensions services.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

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