Financial Management Strategic Programme

Report: 08
Date: 24 May 2004
By: Treasurer

Summary

The report sets out progress against the financial management strategic programme.

A. Recommendation

Members are asked to note the progress against the financial management strategic programme and the intention to develop a new improvement programme for the next four years.

B. Supporting information

Introduction

1. The financial management strategic programme was approved by the Finance Planning and Best Value Committee on 21 February 2002. The programme represented a consolidation of a number of initiatives commenced during the previous two years designed to improve financial management in the MPS and the Authority’s finances.

2. Reports on progress against the plan have been provided to the Finance Committee over the last two years. This is a final report against the programme, substantial areas of which are now complete. A new four year programme of financial improvement will be presented to the Committee in July and this will incorporate outstanding issues from the first programme.

Progress

3. Appendix 1 sets out progress against the programme. Each action has been assessed as complete (A), embedded in ongoing routine processes (B) or requiring further development (C). Avoiding the double counting of actions which appear under more than one objective, there are 62 separate actions identified in the programme. 48 (nearly 80%) are categorised as A or B meaning that they are substantially complete. All of the remaining actions, on most of which there has been significant progress, will be picked up in the new programme.

4. An independent measure of the state of financial management in the MPA/MPS is now available through the ‘auditor scored judgements’ (asj) produced as part of the initial performance assessment (IPA) currently being carried out on the MPA by the Audit Commission. This process looks at financial performance across five main headings:

1. financial standing
2. internal financial control
3. standards of financial conduct and the prevention and detection of fraud and corruption
4. financial statements, and
5. legality of significant financial transactions.

There are sub-headings within each of these main areas. Performance is scored on a four point scale where 1 means ‘inadequate’ and 4 means ‘better than adequate’. On each of the five main headings the score, agreed with the external auditor, is 3 meaning ‘adequate’. Within the sub-areas there are a few 4s and a few 2s (‘adequate overall but with some weaknesses to be addressed’) but largely 3s. I have no doubt that if this exercise had been carried out at July 2000 a large number of 1s would have been scored.

5. Particular achievements confirmed in Appendix 1 are as follows.

• The MPS Finance function has been strengthened and its professional quality significantly enhanced (ref 1e). This was an essential precursor for many of the other improvements.
• There is steady improvement in the internal control in the MPS. The control framework has been clearly articulated, the effectiveness of internal audit is recognised by a score of 4 in the asj, and continuing developments in devolved management and risk management help to reinforce a trend which can now be tracked through the Director of Internal Audit’s annual opinion on the adequacy of internal control. (Refs 1a-j, 4a-c, 4b.)
• An effective budget process has been established in the context of unique constitutional arrangements (ref 2a-e).
• The Authority’s funding base has been substantially improved. The decline in grant funding up to 2000 has been reversed although the improvement is artificially depressed by the operation of floors and ceilings. (Ref 7a-e.)
• The Authority’s accounts have received an unqualified audit opinion within three years. The strength of the balance sheet is acknowledged by a score of 4 for financial reserves in the asj. (Refs 8 and 9.)
• The insurance and risk management strategy agreed by the Authority in July 2000 has yielded results in terms of reasonable catastrophe insurance arrangements and in risk management being incorporated in the corporate governance arrangements of both the MPS and MPA. (Ref 15a and b.)
• Long term financial stability has been supported by the transfer of police staff pensions to the principal civil service pension scheme, and will be further assisted by the new financing arrangements for police pensions which the Authority has strongly supported (refs 15c and d).

6. Areas where continuing improvement is required, as will be reflected in the new programme, include:

• The need to embed internal control into the management processes of the MPS and to develop more effective means of spreading financial awareness through the organisation.
• Closely associated with this, the need for continued development of devolved management.
• Strengthening the linkages between financial and business planning.
• Improving the reliability of expenditure/income forecasting in the budget monitoring process.
• Developing the use of improved management information, for example from activity based costing.

7. In addition to taking these issues forward the new financial improvement programme will reflect new areas which were not identified in the original programme.

C. Race and Equality impact

None directly related to the programme.

D. Financial implications

There are no financial implications not reflected in approved budgets.

E. Background papers

None

F. Contact details

Report author: Peter Martin, Treasurer, MPA.

For more information contact:

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

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