2008/09 business and financial planning process

Report: 8
Date: 15 February 2007
By: Director Strategy Modernisation and Performance and Acting Director of Resources on behalf of the Commissioner

Summary

This document outlines the financial challenges faced by the MPS in the medium term and outlines the benefits of a business planning process and meeting these. Key changes to the business planning process for 2008/09 are then proposed.

A. Recommendations

That

1. Members agree the aims proposed regarding the business and financial planning process (as at Appendix 1)
2. Members support the activities required to ensure the MPS focuses on delivery of the strategic priorities, core business and value for money (bulleted list at paragraph 4); and
3. Members note the proposed governance arrangements and the indicative timetable (paragraph 7 to 10)

B. Supporting information

Background

1. At the last meeting of this committee members received an initial report on the plans to further work to develop and make improvements in the business planning process and in particular the alignment of financial planning with business planning, particularly the need to align its resources to deliver on its strategic resources.

2. Sustaining high standards of local service delivery to London’s diverse communities as well as maintaining the MPS involvement in national and international policing activities, inevitably requires the MPS to focus on its priorities and to use its available resources as efficiently and effectively as possible. The financial position for the MPS has been very challenging this year, and is likely to continue to be so in the foreseeable future, for several reasons:

• Home Office budget has been frozen in real terms at the 2007/08 level
• Home Office has indicated that policing is not their main priority. This is almost certain to reduce the overall funding for policing
• Any increases in GLA precept are likely to fund the infrastructure, but not necessarily policing of the Olympics
• Other specific grants have been held at 2006/07 levels in cash terms
• Home Office stresses the importance of sustainable efficiency planning (3% target)
• Home Office may increase efficiency targets for the police service, particularly for cashable savings. This is reinforced by the recent ‘Police Productivity’ paper.

3. The increasing pressure to reduce spending whilst maintaining and improving service delivery mean that it is more important than ever that the MPS focuses on delivery of priorities, core business and value for money. This will require every part of the MPS to make difficult choices and to acknowledge that:

• Any budget reductions need to occur in areas that minimise impact on operational capacity, capability and service delivery;
• The need to do more with less will mean that all units will need to be proactive in identifying long term sustainable efficiencies. This will need to be achieved by, for instance, scrutinising systems, processes, structures and resources, looking at how to maintain and improve productivity and performance whilst reducing costs;
• Really rigorous prioritisation criteria are required to ensure that the MPS invests in areas where the maximum benefit for service delivery will be obtained;
• With regard to initiatives/projects’ contribution to strategic priorities - rather than considering each piece of work in isolation, it is necessary to take an holistic view of all work being undertaken in contribution to each of the strategic priorities;
• Before undertaking new initiatives, affordability will need to be considered, particularly regarding what will need to be stopped or reduced in order to fund the work.

4. An integrated business and financial planning process will contribute to this work by providing Management Board and business groups with information that will be fundamental to supporting:

• strategic decision making;
• making best use of resources;
• continuous improvement in productivity and performance;
• accountability for both plans as well as performance against plans:
  • with regard to delivery of objectives, control of budget and resource use;
  • both internally and to external stakeholders including the public.

Key changes to the business and financial planning process

5. The business and financial planning process will be improved year-on-year through the feedback we have received and through more closely aligning the timetabling of both business and financial planning. However, the suggested changes to the process will need to be iterative and will require more than one financial year to be implemented. Suggested improvements will be taken forward in collaboration with business groups to improve both the process and timetabling in subsequent years. Specifically, this year:

• Communication: Good communication is vital for the finance and business planning process to work effectively. This includes:
  • all decisions regarding the business and financial planning process to be communicated accurately and implemented in accordance with those decisions;
  • between business groups and the Strategic Finance and Planning team;
  • across business groups at both the practitioner and SMT levels;
  • between Strategic Finance and Planning team and Management Board, Investment Board, Performance Board and the MPA.
• Ownership: Whilst the Strategic Finance and Planning team can ensure effective communication with business groups and various boards, business groups, at all levels, will need to be proactive and supportive of the process.
• Aims: It was felt that the aims should be refined from that stated in the Financial Planning Framework Review (April 2006) to ensure that they are fit for purpose in terms of assisting strategic decision making as well as encompassing all vital aspects of the business and financial planning process. The proposed aims are at Appendix 1.
• Learning cycle: These aims are based on the premise that business and financial planning can be viewed in terms of a learning cycle, with regard to the need to plan, deliver and review performance then draw conclusions in order to inform the next planning process. Appendix 2 outlines how the business and financial framework can be aligned to this learning cycle. This demonstrates how strategy, corporate planning, business planning, finance, human resources and performance are integrated and assist the MPS in continuous improvement. This diagram also shows the importance of ensuring that the components are undertaken in a defined order and thus, how critical the timetable is to an effective process.
• Timetable: An earlier start to the process will assist the MPS in migrating towards the aims outlined in Appendix 1. The order in which activities need to be undertaken is critical and must be aligned to the budget planning timetable.
• Costing strategic priorities: The business and financial planning team will work with business groups to assist them in producing business plans that will allow activities contributing to strategic priorities to be identified and indicative costs, both in terms of human and financial resource. This will include the use of Activity Based Costing information (ABC) that is already being produced for the Home Office, allowing the existing information to be further used for the benefit of the MPS. Discussions with TP and the ABC team have confirmed that this is feasible for the 2008/09 planning cycle;
• Integration of capital and revenue processes: There are significant linkages and interdependencies between capital and revenue budgets, therefore there is a need to formalise the links and bring the budget process into the same timeline to develop a coherent process.
• Performance framework: The performance framework should allow the MPS to monitor delivery of its strategic priorities as well as its performance against PPAF/APACS and HMIC baseline assessments. This will require a review of the critical performance areas (CPAs – currently referred to as the Super 13) to ensure that both these needs are being met. In addition, the Strategic Finance and Planning team will work closely with Performance Directorate and business groups to develop a performance framework within the business plans that will facilitate the review of performance against plans (as in Appendix 3) in relation to the strategic priorities.
• Joint meetings of IB and PB: As can be seen from Appendix 2, the business planning process includes monitoring of both investment and performance. Therefore, at relevant points in the business planning process, MPS Investment Board and Performance Board will hold a joint meeting to ensure a holistic process is maintained.
• Targeted savings: As the set of aims suggest, one of the intentions of the business and financial planning process is that the MPS moves away from salami slicing as this does not represent value for money and is not necessarily in the interests of business need or service delivery. However, efficiency planning is never going to be painless. It will require business groups to act in the corporate interest ahead of their own, and to work proactively to identify where genuine cashable efficiency savings can be found. The intention is to move towards more targeted and sustainable efficiency savings and that the efficiency planning process be started earlier.
• Efficiency planning: Efficiency planning will need to be brought into the Financial and Business planning process to support the HO Police Service Efficiency Strategy. The efficiency savings are a key part of the financial planning process with MPS needing to identify efficiency savings and demonstrate that performance has been maintained or improved. These efficiency savings will be as a result of better use of existing resources.
• Equalities and sustainable development: The equalities and sustainable development return is a separate process to the finance and business planning process and is submitted to the GLA as a separate document. For 2008/09, it is intended that this process be integrated within the business and financial planning process, and that there be a single submission to the GLA.
• VfM and Productivity: The MPS is committed to the delivery of both efficient and effective services. In order to achieve this there is a requirement to integrate financial and outcome information to create a corporate view of the efficiency of the organisation. The process proposed is based on a robust performance framework and aims to develop a credible and realistic work programme that will drive change, efficiency, budget planning and outcomes by 2008/09.

Future approach and governance

6. As previously noted members wish to see an improved business planning process which ensures that the authority has put in place a medium term (three year) financial strategy which is linked to the key strategic objectives of the authority and the MPS, and takes account of both local, Mayoral and national priorities, including the requirements of the efficiency agenda. In particular it is essential that business planning is integrated with financial planning and that the authority and MPS business planning drives the medium term financial strategy and internal resource allocation, with changes in allocations determined in accordance with policies and priorities. It is also necessary that the authority’s medium term financial plan be linked to other internal strategies/plans as appropriate, such as human resources and IT.

7. As part of this process the MPS has already set up a multidisciplinary team. It will be appropriate to have MPA representation on this team.

8. The MPS has already made an early start to the development of the medium term financial plan for the period 2008/09 to 2010/11, with Management Board already having considered initial exemplifications. In order that members have sufficient and timely opportunity to scutinise and examine the forthcoming draft business plan it is necessary that

• Early exemplifications of the 2008/09 budget envelope are placed before members
• Initial, developing work on the corporate business plan, including budgets are brought to members at formative stages. This will include emerging views on the corporate objectives which will drive the budget process and initial thoughts on the presentation of the business plan
• Earlier engagement with the Authority on any budget reductions that may be needed. This will probably involve meetings of the informal MPA scrutiny group before the summer
• A first draft business plan for member scrutiny and approval to be prepared in September
• The first draft business plan, including the budget to be available for MPA full Authority at the end of September. This will allow opportunity for full debate and the opportunity for finalisation of the budget for the October 25 Full Authority.

Timetable

9. In order to accommodate these requirements it will be appropriate for budget timetable to include:

• Initial report on the budget envelope to 19 April Finance Committee
• Initial draft corporate business plan to be presented to a joint meeting (to be arranged) of the Finance/PPR Committee. It is suggested that this be held in conjunction with the PPR Committee arranged for 17 May. This will agree the direction of travel for any budget reductions necessary.
• April to June/July MPS work on developing the budget and work on any necessary budget reductions.
• Meetings of the informal MPA budget scrutiny group in early summer
• Draft Business Plan to the joint meeting of Finance/PPR Committee on 20 September
• First draft Business Plan to the full Authority on 27 September
• Final budget to full Authority on 25 October

Abbreviations

ABC

Activity Based Costing

APACS

Assessment of Policing and Community Safety

CPAs

Critical Performance Areas

GLA

Greater London Authority

HMIC

Her Majesty's Inspectorate of Constabulary

HO

Home Office

IB

Investment Board

MPS

Metropolitan Police Service

MPA

Metropolitan Police Authority

PB

Performance Board

PPAF

Police Performance Assessment Framework

SMT

Senior Management Team

TP

Territorial Policing

C. Race and equality impact

There are no specific equality and diversity issues.

D. Financial implications

There are significant financial implications from this report that will affect budgetary decisions for 2006/07 and subsequent years.

E. Background papers

None

F. Contact details

Report author: Angela Emery, SMPD & Adrian Lovegrove, Strategic Finance

For more information contact:

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

Appendix 1

Aims of the business and financial planning process

The key aims of the business and financial planning process are that it will be fundamental to:

• Ensuring the resources of the MPS/MPA are aligned to its corporate strategy and business needs;
• strategic decision making;
• making best use of resources;
• continuous improvement in productivity and performance;
• accountability for both plans as well as performance against plans:
  • with regard to delivery of objectives, control of budget and resource use;
  • both internally and to external stakeholders including the public.

To deliver this, the business and financial planning process aims to:

• Ensure that resources are aligned to Business Groups’ planned activities and that these are consistent with the corporate strategy and business need;
• Allow the whole budget, human and other resources to be scrutinised at both business group and across the MPS to determine whether resources are in the right place to deliver on the corporate strategy;
• Assist business groups in developing objectives and measures at business planning stage which will feed into the Corporate Business Plan that is presented to MB/MPA in September;
• Focus on the medium term for business and financial planning;
• Adopt a holistic approach to capital and revenue investment plans for the medium term;
• Prompt, integrate and monitor implementation of strategic change initiatives;
• Integrate MMP, sustainability and equality requirements into business group planning;
• Assist business groups in considering interdependencies and conflicting plans;
• Facilitate business group and corporate business planning for entire area of business rather than simply growth and savings;
• Promote shared ownership of business, financial and efficiency planning process between business groups and the corporate centre;
• To take a more proactive approach to efficiency planning with the aim of moving away from ‘salami slicing’:
  • Allow the MPS to plan and scrutinise efficiencies;
  • Allowing business groups to plan their efficiency savings.

In addition to consideration of processes, templates and timescales, achievement of these aims will particularly require:

• Operational objective setting and measures to be developed before the business group business plans, followed by the support strategies and objectives;
• A governance framework that assists decision making and accountability;
• A robust performance framework to ensure the delivery of all business group business plans that will review performance, both in terms of budget management and delivery of business group objectives and targets;
• Good communication and commitment to working together from MMP, Strategic Finance with and between business groups.

Send an e-mail linking to this page

Feedback