MPS Development of police activity based costing (ABC): 2006/07 Results

Report: 5
Date: 19 November 2007
By: the Director of Strategic Finance on behalf of the Commissioner

Summary

Since 2003/04, the Home Office has required that all police forces provide Activity Based Costing (ABC) information to agreed definitions and standards as part of the annual data requirement. This report provides MPA Finance Committee with an update on the 2006/07 submission and progress including the high level costing results and development of use of data. It is also the final part to the paper presented at October Finance Committee, which provided information on national and local developments in ABC, along with details of the MPS Productivity Programme.

A. Recommendations

Members are asked to note the contents of this report.

B. Supporting information

2006/07 ABC Model

1. The 2006/07 ABC Model was submitted to the Home Office (HO) as required in mid-October.

2. Significant and rigorous validation was undertaken on the results to ensure the accuracy of the data.

ABC Results for 2006/07

3. The 2006/07 results can be found at Appendix 1. This shows the resources consumed by activity or incident as defined by the HO guidance compared by percentage to 2005/06. This data forms part of the ABC return to the HO from each force. The key items of interest include:

4. Please note that these are the total ABC costs of the listed activities and incidents in accordance with the HO methodology. These are based on Activity Analysis (AA) surveys, management information and the 2006/07 actual costs held on the general ledger.

5. The model allocates the whole gross cost of the MPS to the list of HO activities. Costs shown therefore not only include the cost of time and resources directly used on an activity (e.g. cars, IT), but also include an element for the costs of support departments (HR, Finance, etc) and other overheads too. Therefore, being a large force with over £3bn budget, even activities that attract a small However, the model does provide valuable information about the relative proportion of resource spent on the different activities shown at Appendix 1.

6. Most Similar Force (MSF) comparisons can also be found at Appendix 2 and these demonstrate that the MPS is in line with MSF. This data has been provided by the MSF on a goodwill basis and thus cannot be reported in detail; however the reports provided do indicate that the models are comparable. The HO are expected to release a database of all Force data in due course.

7. The MPS recognises a number of Major Incidents and Special Events that are costed and dealt with e.g. Nottinghill Carnival and the Terrorist threat to blow up aircraft in August 2006.
8. The MPS has a significant number of specialist support OCUs relative to other forces because of volume, greater degree of complexity and serious crime in London, which necessitates such departments such as the kidnap unit.

9. ABC data has the potential to be a useful management information tool in defining the relationship between cost and performance, and a link between performance and efficiency. A full copy of the latest pack containing analysis of the data will be made available in the member’s library.

Links to Other MPS Strategic Objectives

10. ABC is represented on both the Productivity Working Group MMP Delivery Board, to ensure the value of ABC data within these strategic groups can be realised. The potential use of data within these key pieces of work is being explored.

Conclusion

11. The 2006/07 results demonstrate that that production of ABC has been mainstreamed successfully within the MPS and that the HO Annual Data Requirement will continue to be met. The comparison to 2005/06 data demonstrates the sound consistency of data. The MPS will continue to work with the HO on the development of ABC.

List of abbreviations

AA - Activity Analysis
ABC - Activity Based Costing
ADR - Annual Data Return
APACS - Assessments of Policing and Community Safety
BOCU - Borough Operational Command Unit
BVACOP - Best Value Accounting Code of Practice
HO - Home Office
MPA - Metropolitan Police Authority
MPS - Metropolitan Police Service
OCU - Operational Command Unit

C. Race and equality impact

By providing an indication of cost to help set performance in context, ABC data may provide local managers with additional information on which to assess their compliance with the Race Relations Amendment Act and to assess equality of service provision.

D. Financial implications

1. It is important to ensure that the ABC model is implemented effectively in the MPS and accurately reflects MPS activity since the ABC data is already being used within the national police funding formula and grant settlement negotiations between the HO and Treasury.

2. Costs of conducting BOCU Activity Analysis studies were addressed in a paper to MPA Co-ordination and Policing Committee (February 2003). There have been no significant changes to costs, which cover a small Activity Analysis unit of five people and ABC costing team of four (circa £330k per annum).

E. Background papers

MPS Development of Police Activity Based Costing (ABC): Costing Model Developments, 18 October 2007

F. Contact details

Report author: Rachel Musson, Strategic Finance, MPS

For more information contact:

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

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