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ITEM EX6

EXECUTIVE - 30 APRIL 2002

FINANCIAL MANAGEMENT ARRANGEMENTS

Report by Director for Business Support & County Treasurer

1. The Executive on 22 January 2002 asked the Director for Business Support "to report to the Executive on arrangements for restructuring and refreshing cost centre management, ensuring effective use of the new Management Information System (MIS) and for tightening financial monitoring and control".
2. This report is an initial scoping of the project. It sets out progress to date, planned further progress, and issues to be addressed.

Restructuring and Refreshing Cost Centre Management (CCM)

3. The need to improve cost centre management and financial control within the Council has been acknowledged for some time. Training is one aspect of achieving an improvement in performance. It needs to be coupled with a review of management and reporting methods and structures and linked to changes in business processes made possible by implementation of the new MIS.

   Financial Training Update

4. Financial training is aimed at improving performance. The Treasury Services function has a senior finance person dedicated to training and overseeing professional and accounting standards. Part of the Training Officer’s brief is to identify all cross county financial training needs and to ensure that there is an overall training plan which shows how this will be delivered either corporately, jointly or departmentally. Some examples follow in the report.
5. There is an ambitious plan for Management Development under way in the Council. Work has started on preparing the Financial Management module of the new Management Development Strategy. The Treasury Services Training Officer in tandem with the Council’s Management Development Officer is undertaking this.
6. There are currently two CCM training initiatives being undertaken for specifically identified departmental needs. These are in the Fire Service using external facilitators and in Social Services delivered internally. Other training initiatives around CCM and improving financial management are happening, for example, in Education delivered by outposted finance staff.
7. The Training Officer is also ensuring adequate training is available to finance staff on closure of the accounts for 2001/02. This is in progress.

FINE Recommendations

8. The FINE report contained a review of financial management in Social Services with a series of recommendations. The Executive endorsed the report including the recommendations. Paul Gerrish, Senior Assistant County Treasurer, is seconded to Social Services specifically to help improve financial management in the department, and will stay on to implement the FINE recommendations in 2002/03.
9. Cost centre management training for finance staff and cost centre managers is now taking place with further sessions planned. This is a joint venture between Treasury Services central and outposted staff and senior departmental officers. Some 200 cost centre managers have been identified for training. Further training is to be provided to financial administration and finance staff. The model for this training will be replicated in other departments where unmet need is identified.
10. Some of the specific activities undertaken by Social Services demonstrate best practice in improving financial control and management. They have carried out a bottom up budget exercise linking budget to activity. Where this exceeds the resources available then management decisions are made to allocate resources in accordance with priorities. This will be closely monitored and reported monthly to the Social Services Budget Working Group and then on to the Executive.
11. It is intended that the actions undertaken contribute to an improved financial position for Social Services through increased control and sound management.

Other Initiatives

12. Corporate finance has requested that departments identify for every division of service in the budget book a named responsible officer. This is in accordance with the instructions of the Leader of the Council, and to ensure that each component of the budget is allocated to a responsible officer.
13. Performance management carried out by the Council will ensure that Chief Officers and cost centre managers are accountable for their budgets and this forms part of the appraisal process.

Head of Profession

14. Under the restructuring proposals for the new Directorate for Business Support circulated in December 2001 there was a recommendation put forward ‘to review outposting arrangements with a view to tightening financial management and improving the effectiveness of cost centre management’. The implementation of an effective Head of Profession mechanism to oversee issues such as professional standards and staff rotation policies is being taken on via the SFG (see paragraph 15 below) who will progress these issues during the year. John Barker, Assistant County Treasurer for Financial Review, will lead this work. This will enable the new Head of Finance, once in place, to implement a new more robust policy more quickly than otherwise would have been possible.
15. The SFG (Strategic Finance Group) is comprised of the most senior finance officers within each service department together with senior corporate finance officers. The group acts as a forum for discussing strategic financial advice and corporate standards. This group is supported by FMT (Financial Managers Team) who consider operational aspects in more detail.

Ensuring Effective Use of MIS

16. MIS is currently being implemented with a ‘Go Live’ date in October. Departments work to date has largely been to achieve the operational aspects of ensuring this. However the next steps in the project plan entail delivering a Change Implementation Plan for each Directorate that focuses on business re–engineering. The effect of this process will be to maximise the benefits of MIS by devolving real time financial information to frontline managers.
17. However, there will be issues around connectivity (access to the system) for some departments, most notably Social Services. To enable maximum effective use of MIS the issues around connectivity will need to be addressed in departmental IT plans. In particular this will be a priority for Social Services in order to effect the improvements in sound financial management and service delivery.
18. SFG is made up of representatives of all departments. This will be the forum for ensuring corporate reporting standards and requirements are met, and that business re-engineering at a departmental level does not deviate from corporate best practice and goals and objectives. This means that although all departments will not be able to achieve maximum benefit from MIS from October ‘Go Live’, their Change Implementation Plan will ensure there is a process and timetable to achieve this.
19. Training will be crucial to successful implementation for current and new users. Departments are concerned that the training plan provided by the MIS project team will be inadequate for their purposes. The plan is based on much of the training being provided via a system based self-training package. The MIS project team are aware of these concerns and have plans to address them. It is probable that trainers on the system will be made available centrally from October to ensure smooth implementation, and that this support will continue (appropriately scaled down) to meet on going future requirements. However, every effort will be made to maximise the use of the help facilities within MIS itself, as this is the most cost effective option.
20. The key role of SFG will be to ensure that effective use of MIS departmentally delivers more accurate and timely budget and monitoring information to service providers, managers and members. All of this is within the context of what is realistically deliverable from October, with a detailed action plan to achieve optimum use.
21. The system’s potential will far exceed what we are able to exploit immediately. However the facility called Business Warehouse will in the longer term allow more meaningful and advanced reports to be produced combining management and financial information and reporting on BVPIs. In order to do this departmental feeder systems need to be linked into MIS. This will form part of departmental IT plans.
22. There will be efficiency gains from MIS in the slightly longer term – and these are being discussed with departments as part of the budget planning process.

Issues around strengthening Financial Monitoring and Control

23. We now report to the Executive on a monthly basis. There is a monthly exception report and a full report quarterly. The process is being reviewed currently to both incorporate the new rules of virement and to streamline the process. Some improvements have already been made. Directors and the Executive Member "pairs" have a joint responsibility to agree the financial report and to ensure that the key issues are presented to the Executive. This process is reinforced by the County Treasurer’s summary report.
24. The Financial Procedures and Financial Regulations have been reviewed and updated to reflect the adopted political management arrangements. Council adopted the Financial Procedures on an interim basis. The Financial Regulations will operate in this form until formal adoption by Council on 18 June of the substantive Financial Procedures and Contract Standing Orders.
25. The Audit and Risk Management Plan is in place and risk based planning adopted, following the Best Value Review that reported in March 2001. Internal and External Audit are working in a more harmonised way. The Best Value Committee now has responsibility for overseeing the audit function and will consider both internal and external audit reports and monitor the performance and effectiveness of audit and risk management processes within the Council.
26. Relations with the external auditor are good. The Code of Practice (Probity/Finance focus) work routines are well established. Regular relationship meetings take place with the external auditor where any topics of concern are identified at an early stage.
27. Finance professionals at Oxfordshire have a tradition of effective external networking to help take forward initiatives. A recent example is links set up with Warwickshire County Council to draw on their Cost Centre Budget Management best practice initiative.

RECOMMENDATION

28. The Executive is RECOMMENDED to note the report, the progress to date, and the further action to be taken.

CHRIS GRAY
Director for Business Support & County Treasurer

Background Papers: Nil

Contact Officer: Jenny Hydari Tel: 01865 815401

19 April 2002

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