Integrating financial management with service management in the Metropolitan Police Service

Report: 7
Date: 8 November 2001
By: Commissioner

Summary

The MPS has a number of activities under way that will move the Service further towards an integrated financial and service management regime. This report highlights those elements needed to complete the integration, and outlines areas where progress is currently being made.

A. Recommendations

Members are asked to note the current activities and future intentions of the MPS that will bring together financial and service planning and management.

B. Supporting information

Background

1. The MPS has been aware of the need to integrate Financial Management and Service Management for some time. It has also recognised that in an organisation as large and complex as the MPS, not only would this be difficult, but that such a change involved the risk that, if it was not handled carefully, substantial loss of control could occur.

2. It was recognised at the outset that to achieve this integration, it would be necessary to align resource and budgetary control with those most directly responsible for the delivery of the policing service to link up with the decision making that affects the way in which resources are used to achieve policing outcomes. Thus the complex process of devolving budgets and financial management was a necessary component in achieving this integration.

3. A substantial step towards devolving budgets and resource control took place some five or six years ago, with the establishment of cost centres and business groups. The intention was, and still is, to complete this devolution process, but progress was delayed due to concerns over the risk that control could not be maintained whilst a number of other major changes were taking place.

4. These changes included:

• The move from cash accounting to cost or resource accounting;
• The development of a new financial management IT system that would enable cost centred accounting to be managed;
• The creation of the Metropolitan Police Authority and new internal responsibilities with the abolition of the Receiver’s role;
• Boundary changes that had major budgeting implications; and
• A continued political focus both from national and local government that emphasised and debated corporate police numbers, which restricted initial plans to devolve police pay budgets.

5. The upheavals around these issues have now settled down, and it is timely that the MPS continues the process of financial devolution, and takes the necessary steps to ensure that allocation of resources, accountability for their use, and the resultant monitoring of the outcomes of their use, are all aligned with the plans and priorities of the Service, building links between inputs and outputs and outcomes, and demonstrating continued efficient and effective use of resources. The MPA has also expressed its support for rapid devolution.

6. Concerns about the need to control police numbers corporately still exists, but it is now becoming widely recognised that better measures of levels of policing need to be developed. This will both provide output and outcome measures of police activity rather than overall strength, which is an input measure, and enable a measure of devolution to be applied to police pay budgets, which is widely recognised to be necessary if cost-effective resource-based decision making is to take place.

Outstanding Characteristics of an Integrated System

7. There are a number of significant gaps in the current financial and service management regimes that remain to be filled if a fully integrated system is to be achieved. These are:

• A resource allocation process that gives an equitable share of resources to each BOCU, commensurate with its needs in meeting priorities, and sufficient resources to deliver adequate central specialist functions and support services. This will also need to include consideration of what activities might have to be reduced or stopped, given finite resources;
• A planning process that enables the development and agreement of policing priorities to be aligned with the budget setting process in a timely manner;
• An in-year management and monitoring regime of budgets and resources that enables ongoing operational decision making to be to be made, whilst continuing to exercise resource control, and which will allow controlled re-allocation of resources where necessary;
• A performance monitoring regime that that includes the consideration of resources consumed in achieving outcomes.

8. There are also a number of enabling features that will need to be established if the processes above are to be effective. The key ones are:

• Further devolution of budgetary control to levels appropriate to service delivery;
• The development and application of an integrated business planning cycle which will drive the annual timetable for the planning process;
• A management and decision making structure that ensures responsibility and accountability for all resource use, together with an inspection and monitoring regime to ensure that there are no surprises;
• The development of appropriate means of costing the activities of the Service in a way that resource allocation and performance monitoring can be better undertaken;
• The provision of adequate training for managers, and appropriately skilled support staff to ensure that all managers can discharge their budgetary responsibilities.

Current progress of Outstanding Issues

9. The MPS has already embarked on a number of key projects and initiatives that will lead to the provision of the elements described above.

10. Resource Allocation
Work is at an advanced stage in the development of a revised Resource Allocation Formula and process for allocating resources to BOCUs.

11. Alignment of Budget and Priority Setting
The current development of the budget setting process has been accelerated this year to meet the need to align this with the expectations of the Mayor in the GLA budget setting cycle. It is recognised that this has made alignment with the development of the Annual Policing Plan difficult. Work is about to start to ensure that the timetable for the following year’s cycle is consistent with all known requirements.

12. In Year Management and Monitoring of Budgets
As part of the exercise to further devolve budgetary responsibility to six BOCUs, new protocols and controls are being established. These will be further developed as a result of experience gained. The six boroughs are Sutton, Barnet, Hackney, Bromley, Camden and Lewisham. These six “pathfinder” boroughs were chosen to ensure there was a range of boroughs based on their size in terms of police personnel.

13. Performance Monitoring
Performance monitoring is undergoing continuous review to capture and analyse available information. The increased responsibilities of the six BOCUs will be monitored for possible performance indicators (PIs) that can eventually be applied service-wide. As part of the planning process to set priorities for next year, bespoke target setting in a number of areas will be developed.

14. Further Devolution
The pathfinder process of further devolution on six BOCUs in the next financial year will explore the possibility and practicality of which budget lines can be further devolved. This will also enable the issue of devolved police pay to be explored. This will create a major step forward in enabling operational managers to make resource and budget based decisions on a regular basis.

15. Business Planning Cycle
The alignment of the budget and priority setting process described above is the first step in improving the whole process covered by the business planning cycle. Eventually, this will include resource allocation and scenario planning, and will be developed to include strategic decision making that covers operational goals and resource commitments beyond the annual cycle.

16. Financial Management Code
A full financial code of practice will need to be re-established that clearly sets out all budgetary and spending authorities. This will include the protocols and controls developed for the six pathfinder BOCUs. Overall it will establish clear lines of accountability for financially based decision making.

17. Costing
Costing activities has already been undertaken on one BOCU and in parts of SO. It is intended to extend this across the Service early in the new year.

18. Supporting Skills
Activity is currently under way to consolidate financial and personnel support in Headquarters functions in order to release more resources to support BOCUs. Particular consideration is being given to the six BOCUs about to take on further devolved responsibility. Conclusions from this exercise should ensure that lessons are learnt if the exercise is to spread service wide. It is also recognised that managers will need to focus more clearly on the full costs of their decisions, employing business cases and better project management.

Conclusion

19. The MPS has recognised the need to move more swiftly to a position of integrating financial and service management and is currently taking a number of measures to achieve this. It is implementing a number of measures, but remains conscious of the need to avoid a loss of control of the budget process in the meantime. As a result, it also recognises that whilst the aspirations of this integration are not in doubt, it will take some years to fully achieve.

C. Financial implications

Individual projects and initiatives will be subject to business case review.

D. Background papers

Copies of the full Fleet Strategy have been previously distributed to members of the Committee.

E. Contact details

Report author: Tarique Ghaffur, Assistant Commissioner, Performance Review and Standards and John Zlotnicki, Head of Corporate Planning.

For information contact:

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

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