Update on implementation of Activity Based Costing in the MPS: data collection from BOCUs

Report: 5
Date: 17 Feb 03
By: Commissioner

Summary

The Home Office requires that all police forces provide Activity Based Costing (ABC) information to agreed definitions and standards as part of the annual data requirement for 2003-04. This paper updates MPA members on the Home Office's proposals for ABC and the MPS's views on one of the significant aspects of this: the requirement to carry out Activity Analysis (AA) studies on all 32 MPS BOCUs every year. In explaining the MPS's views, this paper also updates MPA members on the Operational Policing Measure (OPM): a measure developed by the MPS to track visible and operational staff deployments.

In a separate, but related, development, the Home Office is also developing a measure of "front-line policing". This report also updates MPA members on the MPS's position on this.

A. Recommendations

MPA members are asked to:

1. Endorse a four-year rolling programme of activity analysis studies on eight BOCUs per year in order to provide data to develop Activity Based Costing
2. Support the MPS's Operational Policing Measure as the basis for the Home Office's measure of front-line policing for all forces.
3. Review the MPS's plans for ABC data collection at COP in March, prior to submission of these plans to the Home Office.

Note: Members are advised that Home Office officials have yet to confirm whether or not the proposed four-year rolling programme of studies is acceptable. MPA and MPS officers are planning to meet with Home Office representatives and an oral update will be provided at the committee meeting.

B. Supporting information

The requirement for activity based costing

1. The Home Office requires that all police forces provide Activity Based Costing (ABC) information to agreed definitions and standards as part of the annual data requirement for 2003-04. This information will be used as part of the Police Performance Assessment Framework (PPAF) currently being developed by the Home Office which in turn is likely to be used to review the police funding formula (possibly 2004-05). In addition, the Home Office is in negotiation with the Treasury regarding implementation of ABC: there is a possibility that forces that do not capture activity based costing information could in future have their efficiency targets increased from 2% to 5% per year.

Implementation of ABC in all forces

2. Accenture has assisted the Home Office with developing proposals for implementation of ABC in all forces from 2003-04. The PPAF Steering Group approved their report on this in December 2002.

3. Implementation of the full ABC model requires that data are collected for the whole of the MPS, including:

• Two-week activity analysis studies of all 32 BOCUs each year (from 2003-04) to inform apportionment of BOCU costs against policing activities.
• Information to apportion the costs of SO, Specialist Crime and TP Pan-London units according to (i) policing activity and (ii) which individual borough these activities supported (for example, existing activity analysis data could inform this apportionment)
• Information to apportion the costs of support units (Deputy Commissioner's Command, HR Directorate, Resources Directorate) to policing activities and to individual boroughs or force-level overheads.

4. Implementation also requires:

• Development of the full cost model for the MPS using ABC software.
• A means of making AA and ABC data available to local managers.

5. The Home Office is keen to ensure that ABC data are produced to an agreed standard to enable comparisons to be made between forces and basic command units (BOCUs, in the MPS). To this end, in mid-April 2003 all police forces will be required to submit their proposals for ABC data collection to the Home Office for quality assurance. Forces will also be asked to submit an in-year ABC return to the Home Office during 2003-04 as a further check on progress.

6. A complete ABC return based on out-turn for 2003-04 will then be submitted to the Home Office in June/July 2004, with data being audited from October 2004 onwards.

MPS view on BOCU data collection for the ABC model

7. The MPS is fully committed to developing activity based costing: it is widely recognised that there is a need to be able to demonstrate our use of resources to stakeholders. Work is underway to identify how the data required for the ABC model might be gathered and to scope the resource implications of implementing the full ABC model. However, MPS senior managers are concerned that the requirement to undertake two-week activity analysis studies of all 32 MPS BOCUs every year is excessive and will be overly burdensome on the organisation.

8. The MPS wishes to negotiate with the Home Office over the number of BOCUs that will undergo activity analysis studies each year, on the grounds that:

• The MPS is already developing the Operational Policing Measure to assist in effectively managing staff resources (see section 6 below); and
• AA studies of all MPS BOCUs each year will cost around £1.3 million (mainly opportunity costs but with some cash costs also) and will cover around 22,000 staff. There are concerns that this could cause disproportionate disruption to the MPS and be perceived as being bureaucratic both internally and externally.

9. The MPS's preferred option is that:

• The MPS continues to develop and use the OPM for its regular monitoring;
• A rolling programme of eight BOCU activity analysis studies are carried out each year to provide: force-wide ABC information; detailed information to supplement the OPM; and allow benchmarking of activity and costs for a manageable number of individual BOCUs each year.

10. This position is discussed in more detail in the sections below and in Appendix 1.

Proposals for AA studies

11. Appendix 1 sets out the advantages, disadvantage and likely costs of carrying out Activity Analysis studies on different numbers of BOCUs each year. The preferred option needs to balance the following:

• The Home Office's requirement for data which are comparable at Force and basic command unit level
• The need to ensure that any data collection is useful to local managers
• The need to minimise the potential disruption and cost to the MPS, and potential external adverse publicity.

12. Activity Analysis studies provide detailed information about how staff spend their time, but require all staff on a BOCU to complete an Activity Analysis card for each tour of duty over two-weeks. Activity Analysis studies of all 32 BOCUs each year would cover approximately 22,000 staff at a cost of around £1.3 million (opportunity cost and some cash cost). Of the other police forces, Greater Manchester Police is the nearest in size to the MPS with around 11,500 staff in total, of which around 7,000 staff are attached to basic command units.

13. The MPS's preferred option is for a rolling-programme of studies covering eight BOCUs each year. This would:

• Provide a large enough sample of data to allow for construction of force-wide activity based costing information each year
• Provide benchmarkable data for all BOCUs over four years, rather than every year, covering around 5,500 police and civil staff attached to BOCUs. (This is approximately the same number of staff as Merseyside Police Force has in total).
• Have a likely cost of around £340,000 each year (opportunity cost, some cash cost).

The operational policing measure (OPM)

14. As mentioned above, the MPS has carried out a large amount of work in the last year to develop other resource management information: the Operational Policing Measure (OPM). This measure has been developed primarily to monitor the level of visible operational policing in the MPS. In particular it has been developed to support budget devolution where BOCUs and OCUs may wish to vary the mix of police and civil staff to increase visibility and increase the time spent by police officers on operational duties.

15. Data for the measure are taken from the CARM duty planning system. This provides information about the planned hours to be worked by staff in different roles as well as major abstractions for police and civil staff in operational units. As part of the OPM, a standard set of categories has been developed based on HMIC role categories to assess whether staff resources: provide a uniformed visible presence; are operational; provide operational support; or provide organisational support. (See Appendix 2 for more detail).

16. The OPM provides regular monthly data in sufficient detail to allow managers and MPS stakeholders to monitor and compare:

• The total number of police and civil staff attached to each BOCU/OCU or Business Group, broken down by the OPM categories
• Potential police hours available for each BOCU/OCU or Business Group
• Visible operational deployments and how civil staff recruitment assists in this. In particular, it can be used to track how the MPS as a whole uses additional police officers and the effect which budget restraints, civil staff recruitment and overall retention may have on visibility and operational policing resource. It will provide the means to analyse police visibility and compare that visibility with performance against policing objectives, the fear of crime and actual levels of crime.
• Abstraction information (sickness, leave, aid, court, recuperative duty, training etc). This provides the means to compare and manage abstraction levels both corporately and locally.
• The number of PCSOs moving onto Boroughs and their level of visibility to the public.

17. The OPM therefore provides information to inform decision-making around devolved budgets, operations, police skills and deployments.

18. Having piloted the measure on six devolved budget pathfinder sites, OPM data are now being collected service-wide, with work taking place to ensure that consistent information can be obtained across the MPS.

Relationship between OPM and activity analysis data

19. The OPM does not collect the same detailed information about activities as is required for the ABC model proposed by the Home Office. (It is inappropriate to collect the level of detail required for BOCU AA studies/ABC model for more than two-three weeks at a time. In addition, the OPM captures data which are a by-product of the duty planning process and does not therefore capture hours against the ABC model activity list).

20. The OPM will provide the MPS with monthly data at a sufficient level of detail to track and manage deployment and use of staff resources, covering all operational police and civil staff continuously. The yearly two-week snapshot of AA data can be used to provide detailed information about how BOCU staff spend their time when on duty. Benchmarking of the OPM across BOCUs could be used to target AA studies where these are most needed (eg where there is exceptionally good or poor performance).

21. While no police force can collect detailed activity information as a by-product of its information systems, some activity analysis studies will be needed in order to meet the requirements of the national ABC model. However, the MPS believes that development and use of the OPM will make a significant contribution to effective management of resources and the Home Office should be persuaded that this reduces the requirement for detailed AA information from all MPS BOCUs each year.

Measure of "front-line policing": a related initiative

22. In addition to developing activity based costing in all forces, the Home Office is required to develop a measure of "front-line policing". This requirement originates from the Public Sector Agreement 2 (PSA2):

“Improve the performance of all police forces, and significantly reduce the performance gap between the best and the worst performing forces; and significantly increase the proportion of time spent on frontline duties”

23. This is a separate initiative to the development of ABC, but related in that the two could require similar data.

24. Accenture are assisting the Home Office with development of the measure of front-line policing. As part of their work, Accenture has consulted the MPS about its Operational Policing Measure. Accenture's work is at an early stage and an options paper is due to be produced (not yet seen by the MPS, as at 27/01/03). This is likely to present options about:

• What the measure should be used for: for example will it be used to set targets for the proportion of time spent on front-line policing, or will it be used to help set performance levels in context.
• How the measure should be defined: for example which roles or activities should be described as front-line; and
• How data for the measure should be collected: for example from annual activity analysis studies or from duty planning systems or other sources.

25. We do not yet know the Home Office's view on these issues: it is possible that they would prefer to use the activity analysis data collected for ABC to provide the data for the measure of front-line policing. However, the MPS has carried out a significant amount of work to develop the OPM. The MPS's view is that this should be used as the basis for developing the front-line policing measure across all police forces (for example defining front-line policing as those duties carried out by visible and non-visible operational staff). The MPS would recommend this approach since:

• We believe that this provides a manageable, ongoing data collection rather than a snapshot of data (OPM data can be collected from duty management systems on an ongoing basis);
• The OPM is designed to provide information about how the mix of police and civil staff impacts on visibility and the time that police officers spend on operational duties. We believe that, in the short term, this measure is more likely to help inform debate on effective use of police resources and overall police numbers than a yearly snapshot of AA data.

Recommendations

26. It is recommended that MPA members:

• Endorse a four-year rolling programme of activity analysis studies of eight BOCUs per year in order to provide data to for Activity Based Costing
• Support OPM as the basis for the Home Office's measure of front-line policing for all forces.

27. It is also recommended that:

• The MPS submit its plans for ABC data collection to COP in March, prior to submission of these to the Home Office.

C. Equality and diversity implications

1. ABC data may provide local managers with additional information on which to assess their compliance with the Race Relations Amendment Act and other requirements to ensure equality of service provision by providing cost to set performance information in context.

D. Financial implications

1. As outlined above, there is a potential risk to MPA/MPS funding if activity based costing is not implemented in the MPS in 2003-04. This risk is not currently quantifiable.
2. Costs of conducting BOCU Activity Analysis studies are shown in Appendix 1.

E. Background papers

• Implementation Of Activity Based Costing In The MPS - MPA Finance Committee Paper, 14 November 2002
• Operational Policing Measure - MPA Finance, Planning and Best Value Committee Paper, 29 May 2002

F. Contact details

Report author: Helen Dean

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1: Options for carrying out BOCU AA studies

Purpose of this appendix

1. The MPS fully supports development of police activity based costing information. However, there are serious concerns among senior managers that a yearly programme of two-week Activity Analysis studies of all 32 BOCUs, as required under the national police ABC model, will be costly and will be perceived as being bureaucratic, both internally and externally.

2. This Appendix sets out the advantages and disadvantages of carrying out studies on different numbers of BOCUs.

Requirements for activity analysis studies

3. Ideally, any programme of studies should satisfy the needs of various parties:

4. The Home Office and Police Standards Unit: ABC data will inform the Police Performance Assessment Framework (PPAF). There is a need for data which are:

• Consistent across all forces to enable comparison (hence the development of a national model with agreed activity codes and cost apportionment);
• Of sufficient detail to provide force-level data;
• Of sufficient detail to support comparisons between basic command units (BCUs).

5. The MPS: Corporately, the MPS supports the development of ABC and PPAF, and therefore the Home Office's requirements, but also wishes to ensure that any data collection costs and disruption to BOCUs is proportionate to the requirement and value of the information.

6. It is also considered that any data collected must be useful to local managers. On this basis, the Activity Analysis Unit (part of Internal Consultancy Group) recommends that for BOCU AA studies:

• These are carried out for complete BOCUs (so local managers have a complete data set for their unit);
• These are preferably carried out simultaneously so that BOCUs who have been sampled can more easily benchmark their data with each other (this also allows for some economies of scale in carrying out groups of studies).

7. MPA: The MPA has requested an MPS paper to help members form a view on these matters.

Timing and organisation of studies

8. The MPS must submit its ABC data collection plans to the Home Office in April 2003. Any programme of AA studies therefore needs to be agreed by Management Board and the Territorial Policing SMT prior to this. A programme agreed by Management Board would also help minimise slippage and help encourage good quality data collection.

9. To obtain representative data the studies need to be carried out outside periods of major annual leave, and will also need to be carried out sufficiently early in the financial year to allow Corporate Accounting Team to submit the ABC data to the Home Office by mid-2004.

Options for activity analysis studies: advantages, disadvantages and costs

10. AA studies are organised by the MPS’s Activity Analysis Unit (three permanent staff). (This unit carries out all AA studies for the MPS, including the current programme for Specialist Operations and Specialist Crime OCUs, as well as BOCU studies and bespoke smaller studies).

11. Carrying out activity analysis studies on a BOCU involves almost all police and civil staff completing optical mark reader cards (AA cards) for each tour of duty over the two-week study period. The advantages, disadvantages and costs of carrying out studies on different numbers of BOCUs are summarised below, with more costing information provided in Annex 1.

Advantages, disadvantages and costs of carrying out AA studies on different numbers of BOCUs

Use of activity analysis data collected during 2002

16. AA studies of four complete BOCUs and part of another BOCU took place in the autumn of 2002 (the data from these is currently being cleaned). These data can be costed to provide the MPS with additional ABC information based on recent data.

17. However, it would be difficult to use these studies as part of the ABC data set for the Home Office for the next financial year as the ABC model will change slightly between 2002 and 2003-04: some changes to activity codes will take place. Some of these are simply name changes to codes. However, some additional activity codes have been introduced to provide finer detail on some existing activity categories (for example a new code of 'fraud' has been introduced: this was previously included in the code 'all other crime'). We estimate that at least 80% of the information would be unaffected by these codes changes, but some assumptions would need to be made in order to fully compare the 2002 data with the new model. These assumptions could be informed by BOCU studies carried out in 2003-04.

Impact on costing of carrying out fewer BOCU AA studies

18. If fewer BOCUs are studied each year, then a service-wide cost model can still be constructed (albeit less accurate than one based on studies of all BOCUs). Cost models can also be produced for those BOCUs studied. However, Corporate Accounting team advises that cost models should not be constructed for those BOCUs where AA studies do not take place (ie, we should not use the AA data from one BOCU as a proxy for data for another). As described in the tables above, the MPS would therefore not be able to provide the Home Office with cost models for all our BOCUs each year.

19. Corporate Accounting Team does not believe that varying the number of BOCUs sampled would make a significant impact on the number of staff they will require to develop the cost models.

Annex 1: Cost assumptions for carrying BOCU AA studies

Data collection for AA studies

1. Data collection for AA studies involves:

• Study set-up and preparation time (eg AA Unit staff time). Some economies of scale can be made in staff time if studies of more than one BOCU are carried out at once.
• Briefing and training of BOCU staff by the AA Unit.
• BOCU opportunity costs: time spent organising the study locally (eg liaison with AA Unit, local trainers carrying out staff briefings; collecting and checking activity cards during the studies to ensure good quality data); time spent by all staff being trained (a 1.5 hour briefing) and a few minutes a day for all staff completing cards during the studies.
• Scanning and cleaning of cards (processing of the activity cards using AA software). The time and effort needed to do this depends on the quality of the cards received from BOCUs. AA Unit would need to be supplemented with temporary staff during this period.
• Building of AA database models by AA Unit staff for use by BOCUs and Corporate Accounting Team.

2. Studies also require spend on printing of activity cards and training materials, with spend on additional equipment to process these for large numbers of studies.

Costs of BOCU studies

3. The table below summarises the major costs of carrying out different numbers of BOCU studies. Detailed costings are available from Internal Consultancy Group.

Information supplied by Kevin Bush, Activity Analysis Unit.

Appendix 2: Operational policing measure matrix categories

1. ‘Visible Operational Uniformed Police’
   Police officers whose primary role is the direct delivery of the overarching aims of the MPS. These officers work in uniform and are principally visible to the public (foot patrols, police drivers, building security, school & sector officers)
2. ‘Visible Operational Uniformed Civil Staff’
   Any non-police officer working for the MPS, visible to the public wearing a uniform. This will include Traffic Wardens, PCSOs and Civilian Front Counter staff etc.
3. ‘Non-uniformed Operational Police’
   Any officer who primarily wears plain clothes, who works either in direct contact with the public i.e. detectives investigating crimes or those deployed covertly on crime detection/reduction operations. Although it is recognised that some of these officers will on occasion wear uniform, such as firearm officers during a raid, they have been categorised by their primary role. This will include proactive crime squads, Youth Offending Teams, CID and Sex Offending Investigation Teams.
4. ‘Non-Uniformed Operational Civil Staff’
   Any non-police officer whose primary role involves direct contact with the public or is in continual communication with them. This will include coroners’ officers, bomb explosive experts and identification officers. Predominately these members of staff do not wear a uniform.
5. ‘Non-Visible Operational Support by Police’
   Police officers uniformed or otherwise offering direct support to Operations. These will include office staff from the intelligence unit, custody, crime desk and CAD.
6. ‘Non-Visible Operational Support by Civil Staff’
   Civil Staff uniformed or otherwise offering direct support to Operations. These will include office staff from the intelligence unit, crime desk, CAD and forensic support.
7. ‘Non-visible Organisational Support by Police Officers’
   Police officers that support the internal needs of the organisation. This will include performance monitoring, training, personnel and finance functions. It will also include senior members of management and ACPO officers that service the needs of the MPS. These members of staff are not primarily visible to the public.
8. ‘Non-visible Organisational Support by Civil Staff’
   Civil Staff that support the internal needs of the organisation. This will include performance monitoring, training, personnel and finance functions, secretaries, typists and senior members of management that service the needs of the MPS. These members of staff are not primarily visible to the public.

OPM Information supplied by:
Karen Turner, HEO, Corporate Performance Group and CI Keith Overstall, Budget Devolution Team DCC2

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