Five year strategy for sponsorship – bid for resources

Report: 15
Date: 24 October 2002
By: Commissioner

Summary

The aim of this document is to obtain Metropolitan Police Authority (MPA) Finance Committee approval to underwrite the Metropolitan Police Service (MPS) investment in an enhanced Income Generation Unit capable of producing a valuable financial contribution towards MPS & community initiatives.

A. Recommendation

That

1. Members are asked to note the contents of this report; and
2. Members are asked to approve the formation of the enhanced unit in the MPS with immediate effect (Option 2) and underwrite the start-up investment required.

B. Supporting information

1. Under the Police and Magistrates' Court Act 1994, now subsumed within the Police Act 1996, police forces were given extended powers to accept offers of gifts, loans and sponsorship, grants from local authorities and income from the sale of goods and services. In addition, the Home Office Financial Management Code of Practice included specific guidelines and limits for police forces to accept gifts, loans and sponsorship. Detailed background information is in Appendix 1.

2. External funding has been evolving within the MPS and various departments carry out the various strands that make up Income Generation; sponsorship, grants, Charitable Trusts and trading. Sponsorship has been managed by a dedicated unit of only two individuals since 1997 and has secured external resources worth up to £1.6m per annum by 2002.

3. In comparison the Central Office of Information (COI) provides a comprehensive publicity procurement service and publicity consultancy service to government departments and agencies. COI became an executive agency in April 1990 and has been a trading fund since 1 April 1991. COI has been able to generate additional revenue for the benefit of clients by co-operation with the private sector in exploiting intellectual property and other know-how. They have a Sponsorship and PR team of 18 and have secured external resources worth up to £10.54m per annum by 2001.

4. The enhanced Income Generation Unit the MPS proposes is fully consistent with recommendations made in the recent Accenture Efficiency & Effectiveness Review.

5. The purpose and make up of the unit has undergone rigorous scrutiny by the MPS Income Generation Steering Group, comprising Director of Resources, Head of Finance, Director of Procurement, Director of Public Affairs, Deputy Assistant Commissioner Territorial Policing HQ and Chief Superintendent Head of Operational Policy Support Unit. It has subsequently received their full support and approval. This unit would aim to generate some £7m per annum within 5 years. The main streams that have revenue-raising potential are events, broadcast media, merchandising, intellectual property rights and sponsorship. The unit will have a specialist in each stream to champion those revenue-producing areas, which are mainly, as yet, undeveloped.

Options for implementation

6. Given the potential scale of impact associated with the sponsorship and income generation team, there are three possible courses of action, which may be considered.

Option 1 - Status quo

7. Maintaining a status quo would mean the MPA will only benefit from approximately £1.8m maximum in sponsorship and income generation per annum. This income represents a ceiling on revenues with all available resources running at maximum capacity. The sponsorship team will continue to be reactive. There will be no growth in new projects.

Option 2 - Full implementation

8. Full implementation of the enhanced unit detailed in Appendix 4 will maximise revenues most quickly, with significant benefit evident at the end of Year 1. Showing revenues of £7m within 5 years the fully implemented team represents almost 20 times return on investment and will firmly endorse its worth by offering a continued valuable contribution to the MPA budget.

Option 3 - Phased implementation

9. Phased implementation will again see early benefits and enjoy higher revenues. It is anticipated that with the immediate addition of 2 managers and an administrator the team will be able to deliver a better service to the MPS. However, expected revenues are only likely to reach a maximum of around £2.5m - £3m within 5 years, far short of the £7m from full implementation.

10. With the further addition of team members over a set period of time we would start to see higher incomes generated as each of the revenue streams can develop into their respective specialised areas. It is expected that we would not be able to achieve £7m until the team has had sufficient time to build on a history of repeat business it is therefore expected to take upwards of 7 years assuming the team reaches full strength within 5 years.

11. The MPS recommends option 2, full implementation.

C. Equality and diversity implications

The development and working practices of the unit will strictly adhere to the equality or diversity policies of the MPS.

D. Financial implications

1. This enhanced unit should be able to recover it’s costs each year and therefore run at no additional cost to the MPA budget. The approximate cost of the proposed unit is £513,000 per annum. This has been based on costs taken from the MPS ready reckoner of service costs - 2001/2002 and includes salaries and overheads. This is 20% of the first years potential revenue and 7% of Year 5. There are however a number of start-up costs in the recruitment of staff and the provision of workstations and accommodation for the new staff. The two existing team members will carry out training.

2. With the skills in place, external resource streams would quickly grow and funding for the unit would therefore be levied on that income generated.

3. MPS Director of Finance has commented that whilst assurances are given that the proposed unit will cover its costs much of the anticipated income is likely to be either non-financial in nature or associated with additional expenditure that would not otherwise be incurred. The income generated will be of positive value to the MPS but does not necessarily translate into a budget saving.

4. The revenue received from Project Penates – the keyholder database (MPA FC 24 October 2002 paper) will also be used to fund the enhanced Income Generation Unit.

E. Background papers

None.

F. Contact details

Report author: Marcus Kendrick, Head of Sponsorship, Procurement Services and Harvey Harley, Sponsorship Manager, Procurement Services, MPS.

For more information contact:

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

Appendix 1: Five year strategy for sponsorship - bid for resources

Background to MPS sponsorship

1. Under the Police and Magistrates’ Court Act 1994, now subsumed within the Police Act 1996, police forces were given extended powers to accept offers of gifts, loans and sponsorship, grants from local authorities and income from the sale of goods and services. In addition, the Home Office Financial Management Code of Practice included specific guidelines and limits for police forces to accept gifts, loans and sponsorship.

2. The Home Office Financial Management Code of Practice stated that “the total value of gifts, loans and sponsorship accepted should not exceed a maximum equivalent value of 1% of force budget annually. As long as it remains below that figure, the authority can assume that the value of gifts, loans & sponsorship will be ignored for the purposes of calculating Government grants to the police authority.” In the case of the MPS this means that approximately £21 million (for 2002 / 2003) can be generated without potentially adversely affecting funding from central and local government.

3. The Chair of the MPA, Toby Harris stated in a speech in October 2001 for the launch of Operation Pimpernal that although “there are still strict controls over sponsorship”, because PFI and PPP are helping to fund new police buildings, hospitals and roads “we can afford to be a little more relaxed and ambitious, and less circumspect.” He continued that “when we look at our ever-dwindling coffers, we need to be a little more aggressive in the way we go about identifying new sources of finance. For example, under present government rules, we are allowed to generate up to £20 million in sponsorship income, that is up to 1 per cent of our total budget. We have a long way to go before we reach that limit, so there is plenty of scope for coming up with new ideas for tapping into this potentially lucrative area of funding.”

4. He went on to say that we “can certainly learn from the private sector about ways of raising finance and we should be open to fresh approaches to old problems.” Finally he stated that “We need to develop partnerships to address these important areas. Partnerships do work, and no one is in any doubt that they are essential for our mutual benefit and understanding of problems and issues.”

5. The former MPS Policy Board agreed in April 1996 and January 1997 that that the MPS should adopt a proactive approach to the acceptance of sponsorship up to the prescribed 1% annual limit and explore actively the proposals for local authority grants. It stated that sponsorship co-ordinators should be appointed within each business group and updated guidelines should be issued to all police Superintendents and above and all civil staff Grades 8 and above in the MPS.

6. The then Deputy Director of Procurement & Commercial Services (DPCS) in consultation with MPS Legal Services wrote a Sponsorship Policy. This provided guidance to those senior members of the Metropolitan Police Service who were generating, or wished to generate, income to support MPS activities. For the sake of clarity, the MPS used the Income Generation definitions published by the Association of Chief Police Officers (ACPO); sponsorship, grants, charitable trusts and trading.

• Sponsorship is a business agreement between the MPS and one or more external party in which the external party meets all or part of the costs of a project, initiative or campaign in exchange for some kind of public recognition. Sponsorship agreements may include the provision of equipment or a service, or the provision of funds, for either a corporate or local initiatives.
  Local community initiatives or partnerships, where executive control is not exercised solely by the MPS but the MPS is represented on the controlling body, are considered as sponsorship if MPS resources are used to secure the sponsorship.
• Grants will usually be offered by an organisation or body for the MPS to carry out a programme of work against a set of mutually agreed criteria. Grants from local authorities or their agents and grants available from appropriate central government initiatives (eg Housing Action Trusts, Millennium Commission, Arts Council, Sports Council) or specific Home Office funding initiatives (e.g. Invest to Save Budget) will be included under this heading. Until the MPA has its own charitable trust grants from all other bodies will be considered as sponsorship.
• A Charitable Trust enables a polcie authority to take advantage of additional types of grants and attracting business donations that are for not-for-profit organisations. The MPA could also commercially trade through its Trust as it will be a stand-alone organisation and would allow certain practices to take place that a police service should not carry out. The feasibility of setting up a charitable trust is beign examined.
• The sale of goods or services refers to those occasions when the MPS charges external organisations for goods or services it has supplied to them in accordance with section 25 of the Police Act 1996. Such goods and services can cover the sale of software licences, training courses, videos, equipment and other material as well as additional policing duties for which charges are also currently made e.g. policing in football grounds and policing film-making in the street.

7. Although the policy was published, the process was potentially complicated and all involved needed a full understanding of what was on offer, what each party received and how the MPS should audit the receipts. It was understood that businesses would have a legitimate commercial interest in offering resources to the MPS, there should have also been a well-intentioned community reason for offering sponsorship. Priority must have been given to the needs of the MPS rather than those of the sponsor.

8. To protect all parties from possible misunderstanding, frustrated expectations and mutual recriminations, it was decided that each Division or Borough should have a Sponsorship Co-ordinator. It was also agreed that only senior MPS personnel – Superintendents and Grades 8 and above – were encouraged to seek opportunities to generate resources (cash or equipment). This soon changed as local borough operational commitments meant senior management teams encouraged Community Officers and Partnership Inspectors to create partnerships on their behalf.

9. As it was vital to ensure that any sponsorship provided real additional resources in developing agreements and in subsequent maintenance and other liabilities, it was stated that any activities to generate additional resources should not conflict with the wider interests of the MPS, must not interfere with the normal performance of police or civil staff duties and must meet the criteria set out in the Sponsorship Policy.

10. To this end an experienced Sponsorship Manager was recruited in 1997 with a remit to centrally co-ordinate all sponsorship and deliver best practice guidance across the boroughs. Their portfolios included raising corporate funds for pan-London initiatives and develop a charitable trust. Based on the Sponsorship Policy, a Sponsorship Handbook was published for all boroughs to follow; this document was organic, so as knowledge grew was adapted to assist boroughs in maximising their income potential.

11. Following the resignation of the Sponsorship Manager in 2001, the deputy took over temporary charge with a remit to manage borough based sponsorship and has been developing the process to overcome existing confusion, local lack of knowledge and a potential slowing of revenues.

12. In 2002, a Head of Sponsorship & Income Generation was recruited following approval from the Income Generation Steering Group. With extensive experience in commercial sponsorship, conference financing, branding and customer relationship management, their remit was to develop corporate revenue streams for pan-London initiatives. Because of their background and experience, the post holder is also identifying and developing many new ideas and initiatives under the wider income generation umbrella.

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