Assembly Section
Craigantlet Buildings
Stormont
BT4 3SX
Tel No: 02890 529147
Fax No: 02890 529148
email: Norman.Irwin@dfpni.gov.uk
Shane McAteer
Clerk
Committee for Finance and Personnel
Room 428
Parliament Buildings
Stormont
4 April 2008
Dear Shane
COMMITTEE FOR FINANCE AND PERSONNEL REQUEST FOR FURTHER INFORMATION ON DFP REPONSE TO THE COMMITTEE’S REPORT ON EXECUTIVE’S BUDGET 2008-2011
At the briefing to the Finance and Personnel Committee of 12 March 2008, on the DFP response to the Committee’s report on the Executive’s Budget 2008-11, DFP officials agreed to provide further information on some of the queries raised by Members. This is attached at Annex A.
In addition, officials undertook to respond to any further questions, which were set out in your letter of 14 March 2008. The Departmental response to these questions is attached at Annex B.
Yours sincerely,
Norman Irwin
ANNEX A
Queries Raised During Briefing on 12 March
1. Key milestones still to be achieved in respect of Workplace 2010, with slippage against original targets clearly identified.
The key milestones to be achieved by Workplace 2010, with slippage against original targets are outlined below. Slippage in the target dates was caused by a legal challenge from one of the unsuccessful bidders at the Invitation to Negotiate (ITN) phase. This legal challenge has now been resolved.
Milestone |
Target Date |
Original target |
|---|---|---|
Best and Final Offers returned |
June 2008 |
June 2007 |
Announcement of preferred bidder |
December 2008 |
October 2007 |
Contract signature and capital receipt |
March 2009 |
December 2007 |
2. An action plan showing progress to date and future plans to implement the recommendations in the PKF report.
Taking forward the recommendations of the Review of Forecasting and Monitoring - Action Plan
Focus Area |
Priority |
Action |
Target Date |
Responsibility |
|---|---|---|---|---|
Departmental Boards |
1
1
1
1 |
Prepare an example best practice Board report pack and a Board Report Checklist – issued through DFP as guidance Devise core departmental reporting pack through Account NI, including budget reports.
Provide training for Board members to enable the appropriate translation and understanding of the financial information presented to them. Approach Boards to raise the profile of finance in Board meetings.
Accounting Officer / Permanent Secretaries Group (PSG) session on Financial Management |
March 2008 June 2008
June 2008
April 2008
March 2008 |
Finance Director Finance Director
CFG / Finance Directors |
Role of Finance Directors/ |
1 1 1
2
|
DFP refusal to accept business cases without departmental Finance sign-off. Consideration of timing of Board meetings to enable the review of financial reports. Finance Director forum – sharing best practice on a regular basis. Career development considerations – Central Personnel Group (CPG) / DFP discussion on recruiting and retaining finance professionals to take place. Consideration of Finance Director grading (Grade 5 or Grade 3). |
January 2008 June 2008 |
CFG CFG/ Finance Director representative / CPG CFG/ Finance Director representative / CPG |
Systems and Processes |
2 |
Undertake a review of the budgeting and monitoring process and assess potential to change, including level of control. |
TBC |
DFP for recommendation to the NI Assembly |
Relationship with Arm’s Length Bodies / Third Party |
1
|
Training programme for Sponsor Branches to ensure the appropriate level of knowledge and consistency. |
March 2008
|
CFG/ Centre for Applied Learning (CAL) |
| Organisations | 1 1 1 |
Guidance provided on the key areas of concern.
Provide training on Financial Management for Board members. Increase awareness of risk management, including sharing of risk registers between these bodies and departments. |
March 2008 Ongoing |
CFG CFG / CAL Finance Directors AOs / FDs |
3. What has been done to date to implement the Committee’s recommendation to establish a concordat between government and business.
The Economic Development Forum (established in 1999) provides a formal mechanism through which a wide range of key organisations advise Ministers in the Northern Ireland Executive on issues relating to the development and future competitiveness of the Northern Ireland economy.The Forum is a partnership body whose members represent business representative organisations (including the Confederation of British Industry, Northern Ireland Chamber of Commerce and Industry, Institute of Directors, Federation of Small Business), trade unions, the further and higher education sectors, the voluntary and community sector, the agriculture sector and central and local Government.
The Forum, which meets quarterly, is chaired by the DETI Minister. The DRD and DEL Ministers are also members of the Forum. Strategic issues on which the Forum has focused over the last year include the Draft Programme for Government, draft Budget, draft Investment Strategy for Northern Ireland, draft DETI and DEL Coporate Plans, the current skills gap in Northern Ireland and the development of an appropriate policy response to this issue.
Whilst it is clear that there is a need to strengthen the partnership between public and private sectors, this can be most effectively achieved through the current review of EDF. There would be little merit in establishing a new forum with similar representation from those organisations currently represented on the EDF.
As mentioned, a review of the role and focus of the EDF is currently underway. A recognised weakness of the existing functioning of the EDF is the almost exclusive focus on public sector performance/policy and a corresponding failure to consider the important role of the private sector in addressing key factors impacting on the performance of the Northern Ireland economy.
The review will therefore ensure that, in addressing existing weaknesses in NI’s economic performance, the specific actions/interventions required of both public and private sectors are identified / actioned.
ANNEX B
Additional Issues Raised
Recommendation 2 – Regional Economic Strategy
In a recent written answer to an Assembly question, the Minister stated that the Regional Economic Strategy (RES) was being reviewed in parallel with the second Varney review.
What progress has therefore been made to date and what is the deadline and process for having the strategy in place (e.g. will it be consulted on again to ensure targets are sufficiently challenging and measurable as recommended by the Committee)? Could the new RES result in revisions to departmental PSAs?
The Northern Ireland departments have been heavily involved in providing evidence and analysis into the second Varney Review. This input will form the basis for a revised Regional Economic Strategy (RES). As part of the Varney 2 process a DFP-led inter-departmental working group has been set up, with representation from the main departments with an economic policy remit (DETI, DEL, DSD, DRD and OFMDFM). It is envisaged that this working group will continue after the completion of Varney 2 and it is through this process that the revised RES will emerge. The revised RES will be finalised over the summer with input from key stakeholders such as departmental committees, Executive Ministers and the Economic Development Forum. The document will also be subject to a public consultation process.
The targets to be included in the revised RES will be consistent with those included in the Programme for Government (PfG). These targets are stretching and have already been endorsed by the Executive.
The new RES will represent a coherent statement of the policies the Executive will put in place to achieve the PfG targets. This will include existing policies and programmes, along with any new initiatives, where appropriate, coming out of Varney’s second review. It is possible that spending priorities and/or PSAs could change as a result of the revised RES. However, it would be for the Executive to endorse any such changes.
Recommendation 3 – Information and Process
The response states that it is not always possible to link overall allocations between the PfG and the Budget as the Budget is strategic in nature. Could you explain this as the PfG is also a strategic document.
Although the Programme for Government (PfG), Investment Strategy and Budget documents are all strategically focused there are varying levels of detail included with over 300 goals, commitment and targets in the PfG compared to 23 sub-pillars in the Investment Strategy and 75 spending areas in the Budget. In addition, not all the increases in the spending in the Budget will have a direct impact on the PfG whilst not all of the goals, commitments and targets in the PfG will require additional funding.
The response also states that departments link bids to specific priorities areas of activity and revise them once final allocations are confirmed. Does this mean that departments are allocated new resources to support PfG priorities and can then use this money for something else? How can DFP prevent this?
Departments were asked to set out the linkages with specific areas of activity in putting forward their initial spending proposals. However, as the Budget process progressed the allocations made to departments were based upon the amounts required to deliver all the respective commitments in the PfG rather than specific areas of activity. This reflected a greater focus on ensuring delivery with departments given the flexibility in deciding how this was to be achieved in terms of the funding for specific services.
Departments will be subject to the normal controls as part of the in-year monitoring process in terms of the movement of resources between business areas, subsequent to the Budget process, and will continue to be expected to deliver on the PfG priorities.
Recommendation 5 – Departmental Budget Allocations
To what extent did the statutory committee submissions contained in the Committee’s Report influence final budget allocations? Can you give some examples of these submissions being taken into account?
The final Budget allocations reflected the main issues raised in the 10 week public consultation on the Executive’s draft Budget proposals, with particular emphasis on those areas where there had been the largest number of responses. In this respect it is not possible to identify any one particular response as the sole cause of a change in a departmental budget allocation. However, all responses were considered and made a contribution to the Executive decisions on the final Budget allocations.
In terms of the Statutory Committee Submissions, the Committee for Culture, Arts and Leisure raised concerns regarding the level of Arts funding which was reflected in the additional £4 million for DCAL whilst the main concern of the Committee for Health, Social Services and Public Safety was funding for the implementation of the Bamford Review which contributed to the additional £30 million for DHSSPS. In addition, the £205 million additional allocation to DSD was in part due to the particular concerns expressed by the Committee for Social Development in relation to the funding for housing whilst the extra £13 million to DE reflects the Committee for Education’s concerns regarding the funding of projects previously supported by the Children & Young People Funding Package.
Recommendation 6 – Delivery of 3% Efficiencies
What is the process for DFP monitoring progress against departmental efficiency plans and what action will be taken if departments are struggling to deliver efficiencies? Conversely, if departments are easily meeting targets can DFP seek additional efficiencies?
Primary responsibility for the delivery of the 3% per annum efficiency savings target, agreed by the Executive for the period 2008-09 to 2010-11, lies with individual departments. It is important that the position as regards accountability is clear in this respect, specifically that the role of DFP is not to ensure that the targeted level of savings is delivered but rather to monitor progress.
Statutory Committees will wish to be involved in the monitoring of departments in the delivery of efficiency savings, including challenge, with scope for the Finance and Personnel Committee, to take the role of highlighting the importance of this work to other committees as well as co-ordinating the work to ensure that best practice is adopted.
In light of the fact that 3% efficiency savings were removed from departmental baselines at the beginning of the Budget 2008-11 process there will also be a focus on ensuring that savings are not achieved through simple cuts in priority services.
The process for monitoring the delivery of savings has been initiated through the publication of departmental Efficiency Delivery Plans (EDP’s) which set out the key actions departments will take over the next three years to meet the 3% target whilst minimising the impact on priority frontline services.
It is intended that the monitoring of the implementation of the EDP’s will form part of the regular discussions between DFP Supply Officers and departments on key business issues. This will be on a risk based approach whereby more detail and scrutiny is required for EDP’s which are larger in scale and/or appear to be more challenging in terms of implementation. In addition, on a biannual basis overview reports will be produced, setting out how each department is making progress in the delivery of savings as well as the key risks.
As part of the ongoing discussions with Supply Officers there will also be scope for Departments to amend or replace an EDP (provided that the 3% departmental target can still be achieved) if experience shows that it is not possible to take forward the associated key actions without having a negative impact on priority services. Departments will also be challenged by Supply Officers to deliver additional efficiencies.
Recommendation 8 – Benefits from NICS Reform Programme
The Committee has been waiting for some time to see the qualitative and quantitative benefits expected from the NICS reform programme and how these will be measured. How far has this work progressed and will the benefits be included in business plans for the new financial year? Will the reform projects still be delivered in line with the targets in the PfG?
Work has been completed to establish a common approach to benefits realisation across Civil Service Reform projects/programmes and this will form the basis of a model which can be rolled out to support other NICS Departments. A presentation to the Committee is scheduled for 30th April 2008. A brief paper on Civil Service Reform benefits realisation will be issued in advance.
Recommendation 9 – Disaggregation of Reform Programme Benefits from Efficiency Target
The response states that benefits will materialise over the longer term.
Are no benefits expected over the three years covered by the Budget and have these not been quantified?
Some qualitative and value for money benefits will accrue within the Budget period.
The Committee understood that the benefits accruing within the Budget period contributed to the 3% efficiency target, is this not the case?
Some qualitative and value for money benefits will accrue within the Budget period, however as these do not represent cash releasing savings they are not reflected in the 3% efficiency target.
Work has been ongoing on the Benefits Realisation Framework for some time. When will it be sent to the Committee?
There is a presentation to the Committee scheduled for 30th April 2008. A brief paper on Civil Service Reform benefits realisation will be issued in advance.
Recommendation 10 – Widening Customer Base of Shared Service Centres
The scope to extend the shared service centres is feasible but the response outlines the work required of extending the coverage.
Given that the Committee reported in early January, has this work been started?
The shared service centres have not yet reached steady state. Any work to consider the extension of these services should follow stabilisation of the shared service centres.
Are contractual arrangements in place to permit future expansion if this proves to be feasible?
There is scope within the contractual arrangements for the main shared service centres for extension. Indeed, in some cases, the contractor is keen to pursue such developments. Again, this could only reasonably be taken forward following stabilisation.
Recommendation 12 – Public Procurement Savings
Has DFP ensured that departments have included value for money gains from procurement in their efficiency plans? The response also states that Central Procurement Directorate is developing procurement plans to feed into departmental efficiency plans. Given that efficiency plans should already be in place has this work been completed?
It is for each Department to decide on how best to deliver the 3% per annum target set by the Executive and the quantum of value for money (VfM) gains which will contribute to the delivery of this target in discussion with Centres of Procurement Expertise (CoPEs). This figure will vary by Department and depend on the nature of each Department's expenditure priorities and the opportunities which may exist to deliver gains within the next three years.
The Procurement Plans will set out how and when VfM gains on specific contracts will contribute to efficiency targets and the Department's Central Procurement Directorate (CPD) has drafted a template to assist Departments in drawing up their procurement plans. CPD and other CoPEs will work with Departments to finalise their Procurement Plans in the coming months.
Recommendation 14 – Underspend Targets
Recommendation 15 – Underspend and End Year Flexibility
The response reflects an unwillingness to set underspend targets in line with the Committee’s recommendation. Given that DFP has set such targets within the Department, why is there an unwillingness to set such targets for other departments?
Although DFP as a department has set underspend targets for business area, this does not necessarily mean that this approach is appropriate on a cross-departmental basis. In particular, a Departmental Finance Branch, operating under the same Minister, would be expected to have a greater degree of knowledge and control over its respective business areas than DFP would have over other departments. This position does not simply reflect an unwillingness to set targets but rather that a target based approach is not considered to be the best mechanism to reduce the level of underspend with the emphasis instead on improving financial management more generally.
Could individual underspend targets not be set for each department, to reflect their different circumstances, within an overall target which could be in line with the Committee’s recommendations?
Although targets could in theory be set by department there would be a significant difficulty in setting the most appropriate level of target for each department in terms of the target being sufficiently challenging but also deliverable. In particular, it would not simply be matter of a proportionate reduction in the current level of underspend. For example, a department with a current underspend rate of 2.5% may be more able to achieve a target rate of 1% than a department which is currently underspending by 2% because the former currently has significantly worse financial management capabilities and hence much greater scope for improvement.
Therefore setting specific targets for each department would require detailed analysis, as to the lowest rate of underspend that could be achieved given the nature of the departments activities and structure, with the possibility that the resultant overall target for NI departments could be greater than the target specified by the Committee. In addition, such an approach might be counter-productive as departments may expend significant efforts on proving the case for as a high a target as possible which would be more fruitfully focused on the main objective of improving financial management.
The response states that the emphasis should be on value-for-money but what targets are in place in this regard and how will it be measured?
There are no quantitative targets currently in place with respect to value- for-money (vfm), beyond the 3% per annum efficiency savings target, although all departments are expected to deliver the highest level of vfm in order to deliver the best possible public services for the people of Northern Ireland.
Can you clarify DFP’s strategic role in reducing underspend and especially in ensuring that bids are accurate from the outset?
Primary responsibility for reducing the level of underspend lies with individual departments as part of their objective to manage the financial resources made available to them. However, DFP has a strategic role in providing advice and guidance on financial management issues as well as co-ordinating the Budget and in-year monitoring processes.
In terms of ensuring the accuracy of spending proposals, Supply Officers in Central Finance Group have a key role in challenging the information put forward by departments to ensure that both the financial requirements and the associated outcomes, are reasonable and realistic based on the information available.
Recommendation 16 – NICS Financial Management
The response states that a sub-group is looking at the nature and quality of financial information used by departmental boards. Would any of this financial information facilitate scrutiny by statutory committees?
By their nature, board packs contain a lot of detailed management information which is required by Board members in making informed decisions. What might be more meaningful for, and still facilitate scrutiny by, statutory committees, would be summary level information highlighting key financial and management issues affecting departments.
Recommendation 17 – Funding for Cross-Cutting Programmes
The response states that Ministers are considering the extent to which they will fund programmes which were previously earmarked for central funding.
Does this mean that such programmes may not receive the funds which they require and are there not PfG targets for such cross-cutting issues? In view of the Committee’s concerns, what assurance is there that such funding can continue to be accessed by the voluntary and community sector?
The revised Budget was agreed by the Executive on the basis that it provided sufficient funding to deliver the goals, commitments and targets set out in the Programme for Government.
However, this does not necessarily mean that all projects previously supported by cross-cutting programmes will continue to receive funding as these projects will need to be considered against competing priorities in terms of need (i.e. the rationale for the project) as well as efficiency and effectiveness of delivery.
It is the responsibility of individual departments to determine whether services should be provided by statutory, voluntary & community and independent sector based upon value-for-money and the standard of service to ensure the best possible services can be provided within the funding allocated.