ITEM EX10

EXECUTIVE - 22 JANUARY 2002

THE REVIEW OF FINANCIAL MANAGEMENT IN SOCIAL SERVICES

Report by Director of Social Services and Director of Business Support

1. The Executive, at its meeting on 27 November, requested a report on proposals to improve financial and management control processes within Social Services and to include the advice of CareConsult. The Executive Summary and specific action plans recommended by CareConsult are attached. This report summarises their findings and proposes a way forward to ensure the recommendations are implemented where appropriate.

The FINE Project

2. CareConsult were commissioned to undertake a project, subsequently called the FINE (Finance in a New Environment) project, taking an in-depth view of the current financial management arrangements for the Social Services Department, and the development of viable recommendations to strengthen the financial management to rectify the identified areas of weakness.
3. A Project Team consisting of mainly third tier managers worked closely with CareConsult on assembling the evidence, identifying the weaknesses and making recommendations on how improvements could be made. The project was divided into three distinct areas: processes, information and people. The officers involved were selected for their detailed knowledge of these areas with the addition of representatives of the operational managers.
4. During the project, interviews were conducted widely throughout the department to firstly identify departmental perceptions of financial management. Evidence was then gathered to ascertain whether the perceptions were based on fact. Visits were then undertaken with other authorities to compare practice. Finally the project team took part in two workshops to sift the evidence, identify best practice and put together action plans to implement best practice in Oxfordshire.

Current Financial Management and Key Findings Processes

5. The budget setting is top-down and incremental from the previous year’s budget. The process is not linked to activity. Given that service activity is in a large part driven by client need and measured by Government performance indicators, a budget that is not linked to activity is not a realistic translation in financial terms of the service that needs to be delivered. Nor is the budget tied to other plans such as the Social Care plan.
6. Service management below second tier is not significantly involved in the budget setting process. Lack of involvement discourages a sense of "ownership" of the budget leading to inconsistent budget management.
7. In terms of budget monitoring, practice ranges from good to substantially inadequate. In some cases the data provided to managers is good and action is taken on the data. In others data is absent and no action is taken. There is room for improvement in consistently managing costs through more robust financial projections and a greater focus by budget managers on projected overspends. This would allow more timely action to control spending.

  Information

8. The IT systems are dated, relatively inflexible and not user friendly. The systems are stand-alone and the department suffers from a poorly co-ordinated IS strategy. Although there are improvements in train through the MIS project and the SWIFT programme, this will not address all the financial information needs of the department. There is an absence of resources for full SWIFT implementation. The responsibility for delivering services is widely distributed geographically, but the budget managers in the field have too few PCs to enable them to manage their own resources and budgets.
9. The consequence of the above are significant manual manipulation of data and reporting which is both time consuming and prone to error. The delays due to manual intervention also means information is not timely. Budget managers do not consistently receive and monitor activity cost driver information to enable early corrective action. A low level of PCs among service staff makes it difficult to input transaction data or monitor their performance locally.

People

10. The department has a generally "professional social services" culture, in which management and financial skills are generally considered as being of secondary importance to social work know-how by most service managers at all levels. The consequences are financial management procedures which are not linked to activity or outcome; an us and them attitude between finance and service managers leading to limited information sharing; and budget management is not rigorously emphasised in the performance management of the service.
11. Structurally there are few direct reporting links between finance, income and assessments or performance management below Assistant Director level. Furthermore, finance is completely separate from strategic planning. The structure exacerbates the disconnect between finance on the one hand and service planning and operations on the other.
12. Training of budget managers was last undertaken six years ago. This lack of training results in both an absence of budget management skills by service staff and an implied message that budget management is not important. There is no specific financial training available to finance staff. This precludes the development of the finance function towards more value added work.
13. The current scheme of delegation was written in 1997/98 and it is planned to revise it. It is a comprehensive overarching document but there is little explicit detail. The details are held separately by designated officers, which makes it difficult to readily refer to appropriate policies and/or identify inconsistencies.

Comparison with Other Organisations

14. Four County Social Services departments and two London Boroughs were selected for comparison, to identify good practice elsewhere. They were selected on the basis that each of these organisations appeared to have either demonstrated robust budget management performance and/or had successfully addressed past problems in this area. Information on processes, information and people was gathered in interviews lasting up to two hours.

Recommendations from the Project

15. An analysis of the key findings within OCC Social Services department, best practice identified in other organisations, and the individual experience of the FINE project team members, have led to a number of recommendations to meet the objectives set for the project and substantially strengthen the financial management arrangements within the department.
16. The recommendations consist of a number of principles agreed at the workshop which were converted into objectives along with an action plan designed to deliver the objective. These are all detailed in the papers attached to this report. The recommended objectives are:
17. Processes:

• To improve the process for compiling the Revenue Budget for 2002/2003 by introducing in certain key areas a "bottom up" approach, with a view to extending this approach to all budgets in 2003/2004. This will also ensure that the decisions of the Executive and Members are based on a better understanding of what budgets will purchase in terms of care packages.
• To bring in a system for routinely monitoring the budget on a monthly cycle.
• To clearly define who has responsibility for managing each budget and taking appropriate corrective action where necessary.

18. Information:

• In the short term, to automate downloads from Trojan and LAFIS to Excel, and
• to make the best use of non-financial cost driver information currently available.
• In the longer term to ensure that all data required for the service, including business management, is entered once and appears instantly within the information needs of the department. This may be information about individuals, client groups or other aggregations and may be required to be shared with partner organisations.

19. People:

• Re-align Organisational Structure

• Formalise & approve all divisional finance officers as directly responsible to a senior officer in the finance function with secondary responsibility to a service manager.
• Short-term: split staff below DFO’s into groups providing financial advice and support and a group providing financial administration, e.g. processing invoices etc.
• Long-term: move financial administration into service.
• Align budget structure and owners to Social Services organisational structure and decision making points.
• Improve co-ordination between Strategic Planning, Finance, Income & Assessment, and Performance.
• Group the Resources Division and the Strategic Planning and Resources Division together under a Business Support Unit with strengthened co-ordination as mentioned above.

• Ensure service managers’ Job Descriptions include budget responsibilities as part of performance management responsibilities.

• Strengthen focus on budget management within performance management.

• Institute active finance training programmes for finance staff and for cost centre managers.

20. The target environment for financial management in the Social Services department is one where the budget is allocated to operational staff in line with their service objectives; where managers throughout the organisation are appraised against their performance, defined as the delivery of their objectives in line with their agreed resource allocation; and where the staff, Divisional Management Teams and the Senior Management Team all monitor and review objectives, activity and expenditure on a regular basis.
21. To support staff in the delivery of this budgets need to be realistic and deliverable. Managers need to be trained and appraised on competencies that include financial and performance management. Staff are supported by efficient and effective information systems whereby data is input once only and all required information is instantly available to the budget holder. Staff are also supported by a decision support team who provide assistance on costings and activity predictions.

  Implementation and Financial Implications

22. The report points out that action plans are useful only to the extent that they are implemented. In recognition of this some progress has already been made in delivering some of the action plans. Progress has not been as fast as hoped because of the need to absorb most of the work to date within existing resources. With the exception of the Local Information Plan (see below), the additional resources required to deliver the plans, whilst being significant, are nevertheless manageable. Having said that in total the plans do represent a substantial programme of work which needs to be prioritised and managed properly.
23. Each action plans contains details of the resources required to deliver the action required. These resources have been identified in terms of staff days. In the vast majority of cases existing staff could carry out the work. It is doubtful whether this can be absorbed within existing workloads in all cases and attempting to do so will delay implementation, possibly indefinitely. There is an inbuilt assumption that most ongoing work, e.g. by finance staff in providing additional advice and assistance with budget monitoring, will be absorbed within time released by the automation of some processes and the restructuring of the finance function.
24. The total requirement has been summarised by CareConsult since the report was produced. In total approximately 220 staff days are required to implement the recommendations. If it is assumed that additional resources are required for all these days, either for staff to undertake the action plan or back fill for staff that do, the cost is estimated at £75,000. This is a maximum requirement because some work could be absorbed.
25. In addition to this resources will be needed to project manage the action plans, to ensure delivery, and to organise the additional resources. CareConsult recommend an external project manager part time for about six months to undertake this task. Based on their recommendation of one day a week, this would cost a further £16,000. In practice, the external project manager could also carry out some of the detailed work to deliver some of the action plans. The maximum resources required, as recommended by the consultants, totals therefore £91,000. Much of this is one off to get systems and processes in place. However, about £25,000 may be needed on an ongoing basis for training.
26. This excludes any resources needed to improve the information systems within the department. The consultant’s view is that improvements can be made in financial management in the short term using existing systems and the report’s recommendations are geared to delivering such improvements. However, this does not address the resource requirements as a consequence of the department’s Local Information Plan and the need to deliver on the Government’s E-Government and Information for Social Care agenda.

Local Information Plan (LIP)

27. The third objective under Information in paragraph 18 above relates to the wider information needs of the department. The LIP strategy already provided a framework for the delivery of this objective and draws together the key implementation milestones for SWIFT and MIS. The LIP should therefore be developed and form the basis of the detailed implementation plan for meeting this objective, encompassing the wider aims and objectives of a departmental IT/IS strategy within the corporate context.
28. To date only very limited resources have been identified to address the Plan. Funding of £207k has been agreed by the Department of Health and the draft Medium Term Financial Plan contains a "bid" of £500k under unavoidable pressures. There is an issue over how much the Plan will cost to deliver depending upon how sophisticated a system is required and also how much of the necessary infrastructure will be provided corporately, e.g. through the development of the Oxfordshire Community Network. Preliminary indications are that for a lower specification system, £6.5m of capital is required with ongoing revenue costs of £2.4m. This does not take into account any corporate provision which may reduce the costs.
29. Included within the report on the Medium Term Financial Plan to the Executive is a paper concerned with raising performance through e-government. The paper recognises the need to address the shortfall in investment on IT within service budgets. It is proposed to report to the Executive in April on a firm business plan for IT, taking into account service needs and any available revenue and capital funding sources. At that stage the Social Services LIP can be considered within an overall strategic plan for the authority.
30. The Council is currently implementing a new Management Information System (MIS). The Social Services department is also considering implementing the Costed Packages of Care facility on SWIFT. Officers have been involved in identifying what technically is required from the systems. However, there is concern that there is a need to widen the issue and involve the operational staff in identifying in practical terms their information requirements to assist them to manage the business. This needs to be co-ordinated in some way. A bid has been made for resources from sums set aside within the MIS project to assist departments in carrying out this exercise in relation to that project. It is important that the outcome from both these projects and the FINE project are linked. The opportunity could be taken to identify one project manager to implement FINE and link in the department’s requirements for these other projects.

The View of the Social Services Senior Management Team

31. The department’s Senior Management Team has considered the outcome and findings from the review. In general terms the report is welcomed as a valuable piece of work and the Team endorses the recommendations contained within the report. The Team agrees with the general thrust of the report. However, the Team believes that each issue highlighted within the report, whilst being a fair reflection of practice in some parts of the department, is not necessarily representative of the whole department. Having said that the Team agrees that improvement is required in all the areas identified if improvements in financial management are to be made.

Other Related Issues

32. An additional Assistant County Treasurer has been seconded to the Social Services Department for about nine months to assist in the review of financial management within the department and to assist with the control of the budget in the current year and the formulation of the budget for 2002/03. This period of secondment will be coming to an end within the next couple of months. Decisions need to be taken on what changes need to be made to the financial support for the department following the secondment.
33. There are inter-related reviews currently outstanding that need to be considered at the same time. There is the review of the Management Structure within the Social Services Department (recently deferred pending the outcome of the above FINE report) and the wider review of the Education, Social Services and Cultural Services Departments.
34. The two Assistant County Treasurers currently in the Social Services Department, will be advising the Chief Executive, the Director for Business Support and the Director of Social Services on their views about the arrangements for financial management within the department. This will cover both the short term, until the above action plan has been fully implemented, and in the longer term. This advice can then be taken into account in the wider debate.

The Way Forward

35. There is no doubting the importance of implementing the recommendations in the CareConsult report. It is also important that additional resources are identified to both implement the action plans and to project manage them. It is also necessary for the senior officers within the Council to take a personal interest in ensuring progress is made. It is proposed therefore that the Chief Executive commissions a sub-group of the County Council Management Team to monitor progress. This team would agree the arrangements for project management with the Director of Social Services and the Director for Business Support. The issue of the Local Information Plan also needs to be addressed by this sub-group.

RECOMMENDATIONS

36. The Executive is RECOMMENDED to:

1. endorse the CareConsult report (download as .rtf file);
2. agree the recommendations contained within the report;
3. identify the resources to implement the recommendations within the Council’s budget for 2002/03; and
4. ask the Chief Executive to commission a sub-group of the County Council Management Team to monitor progress on implementing the recommendations.

MARY ROBERTSON
Director of Social Services

CHRIS GRAY
Director for Business Support