Outturn review 2000/01 - update

Report: 7
Date: 19 July 2001
By: Commissioner

Summary

This report sets out the process and emerging findings from the Outturn Review of 2000/01

A. Recommendation

Members are asked to note the contents of this report.

B. Supporting information

1. At its June meeting, the Committee was informed that, as a result of the overspend and the manner in which it appeared, there would be a formal outturn review process involving the MPS Finance Department, the Internal Inspectorate and the external audit partner, KPMG.

2. Though working together each member of the review process had a different role:

• Finance Department produced the financial analysis and co-ordinated the explanations from Business Groups for their final results. It also provided specific information for the Inspectorate to assist with the reviews they had been commissioned to undertake.
• The Inspectorate are focusing on four major spend areas - police overtime, vehicle hire, DNA/forensic costs and mobile telephone charges. Whilst critically examining the 2000/01 overspend in these categories, they have also been asked to comment on controls, monitoring and any on-going impact in the current year. The results from this review will be used to develop an improvement plan for implementation.
• KPMG are using their involvement in this review as part of the 'Regular as Clockwork' study that they are conducting as part of the audit of the 2000/01 accounts. This study reviews the adequacy and appropriateness of financial controls and processes. Though this study will feed into the Management Letter resulting from the audit process due in the October/December, it is envisaged that initial finding will be available by September.

Progress

3. A substantial amount of financial analysis has been done. The Inspectorate have reported initial findings to Management Board. KPMG have reviewed all the analysis presented to them and are arranging follow up meetings with a number of Boroughs and departments. No feedback has yet been received from the KPMG visits.

4. However, since the pre-audit outturn was reported, a comprehensive action plan has been developed by the Director of Resources. This plan covers all aspects of financial management activities from the closing programme for the 2000/01 accounts to the recruitment and modernisation of the finance function. It is updated regularly and reported to the Commissioner and Deputy Commissioner. Additionally, weekly meetings are held between the Chair and two deputy Chairs of the Finance, Planning and Best Value Committee, the Treasurer and officers of the MPS, usually AC Ghaffur and either the Director of Resources or Head of Finance to monitor developments.

Emerging findings

5. In the absence of KPMG's comments, the process cannot be judged completed, indeed the full findings have yet to be shared with the MPA Treasurer. However there are some emerging findings from the analysis completed to date that can be reported.

6. There is evidence that certain organisational changes, such as the creation of the Serious Crime Group, have developed further than their financial resources will allow. Without proactive management, this will inevitably be a pressure in this year (the paper on revenue monitoring this year refers – agenda item 8). Appropriate action is being devised for Specialist Operations to be realigned within its resource base. It is an issue that will also be addressed during the 2002/03-budget build.

7. The financial discipline that should go hand in hand with operational management is at an early stage of development. This is an area for significant improvement and one that the Management Board has already identified as a key action.

8. There is a perception that financial management information is inadequate. There are a number of issues here. The corporate finance system is available to the vast majority of the organisation, missing only those parts that have not yet been put on the corporate IT infrastructure. It offers 'real time' information. However financial management information does have shortcomings for a number of different reasons:

• the corporate finance system relies on good quality information from its feeder systems. Accurate management information from the payroll is vital given the significant impact pay related expenditure has on the business. There are recognised problems with the quality of payroll coding and the processing of updates and changes. There are issues which both the MPS and its outsource partner must address to improve quality;
• Finance and Resources Managers received training when the finance system was implemented. Although the system has not been changed since implementation, it is possible that with personnel changes over the past 12-28 months, knowledge and familiarity within the user base has reduced;
• the lack of professional financial management capacity has constrained the support available to both OCU/Departmental management and more senior managers for the provision of appropriate analysis and information. This has hampered the percolation of information about the financial regime changes down the organisation. The understanding of the impact that accrual accounting has on budget performance and forecasting is limited in an organisation that has traditionally focussed on cash.

Work in hand

9. Before these findings had emerged from this stage of the review, particular developments have already been commenced which will assist in addressing some of these issues.

10. The addressing of structural budget issues, such as referred to in paragraph 5, is part of the planned budget build for 2002/03. The requirement for budgets to be justified by Business Groups and the scrutiny of these budgets by Members will provide the opportunity for resolution of these issues.

11. The Commissioner has through correspondence and in meetings with the Chairman of the Finance, Planning and Best Value Committee reinforced his commitment to improve financial management with the MPS. The consideration of the financial implication of action and events is now regarded as a necessity. Performance and inspection visits will give due regard to financial performance. Management Board have specifically asked for key budget lines, such as police overtime, to be reviewed on an ongoing basis. The Treasurer has been invited to attend the Commissioner's Management Team meetings on a monthly basis to discuss the financial position and related issues.

12. The increase to finance function capacity is in progress with an extensive recruitment campaign underway together with some offers of secondments from other authorities to increase available resource.

Conclusion

13. Outturn review findings indicate a number of issues to be addressed. Many of these are already the subjects of further work or corrective action within the MPS. The Commissioner is fully committed to aligning budgets to commitments in order that MPS/MPA priorities are met. A further update will accompany the next revenue monitoring report.

C. Financial implications

There are no direct financial implications arising from this report.

D. Background papers

None.

E. Contact details

The author of this report is Robert Alexander, MPS Head of Finance.

For information contact:

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

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