Medium Term Financial Plan - Appendix 3 Advisor's Report - Report - 22 October 2012

Supporting Performance – Process  

Selection

PR12  The organisation's medium-term financial planning process underpins its strategic priorities.

1.  Does the Medium-term Financial plan represent a properly resourced, realistic programme of action over the medium term?

2.  Does the Medium-term Financial Plan examine scenarios, risks and sensitivity analysis?

3.  Does the organisation use formal processes to link the Medium-term Financial plan to other organisational plans (e.g. IT strategies, workforce strategy, asset management plans and service development plans)?

4.  Does the organisation use formal processes to link the Medium- term Financial plan to the annual operational budgets?

5.  Does the organisation's Medium-term Financial Plan reflect joint planning with partners and other stakeholders?

6.  Does the organisation regularly review its Medium-term Financial Plan?

7.  Is there a requirement in the Financial Regulations or Standing Financial Instructions to evaluate the financial implications and the long term affordability of new policy options, initiatives and major projects, involving Finance staff and using recognised option appraisal methods?

8.  Is the long term affordability of new investment assessed?

9.  Are there arrangements to review whether expected financial cost savings are realised?

10.  Are there exit plans for time-limited funding streams?

11.  Are targeted zero based budgeting exercises undertaken periodically?

12.  Does the Medium-term Financial Plan consider options for new sources of income, new ways of reducing costs and of attracting additional sources of funding?

13.  Does the organisation evaluate opportunities to invest to save (e.g. early intervention and prevention), identifying evidence, probability and targeting of impact, value for money and methods of realising future benefits and savings?

14.  Does the organisation seek to diversify its funding streams, to reduce risk?

Supporting Performance – Leadership  

Selection

L4  The organisation has a developed financial management strategy to underpin long term financial health.

1.  Does the Leadership Team demonstrate commitment to the strategy for long term financial health through their statements and actions?

2.  Does the organisation review the balance of funding streams to ensure long term financial health, fairness to users, and development of the local economy, for example between tax raising, grant funding and charges?

3.  Are there clear financial management policies that together underpin sound and sustainable long term finances?

Policies may include accounting practices, approach for bidding for external resources, levels of contingency funds and reserves, procurement, asset management, business cases, affordability of capital investment, efficiency gains and targets, financial risk management, risk financing and insurance, treasury management, wider market and trading opportunities, charges and subsidies for users.

4.  Do financial management policies support strategic business aims, resilience and financial standing?

5.  Are financial management policies communicated to Managers and the Management Team, widely understood and consistently applied?

6.  Does the Board or Audit Committee receive assurance on compliance with financial management policies and on the follow up of material deviations?

7.  Are financial management policies reviewed regularly and updated?

8.  Do post-completion project reviews take place and include identification of actions to improve financial management?

9.  Do external audit and inspection comment favourably on the processes for strategic risk management, resilience and financial standing?

Securing Stewardship – Process

Selection

PR8  Budgets are robustly calculated.

1.  Does the organisation produce a Medium-term Financial Plan?

2.  Is the Medium-term Financial Plan consistent with the organisation's aims and objectives?

3.  Does the Medium-term Financial plan take account of local and national priorities, changing legal requirements, demographic trends and demand levels and national standards?

4.  Does the organisation prepare its budget in accordance with its corporate objectives, strategies and Medium-term Financial Plan?

5.  Does a risk assessment of material items of income and expenditure inform budget setting, and their reporting to the Board with financial implications, mitigating actions and contingency provisions?

6.  Are fees, charges and concessions, including new options, related to policy objectives and reviewed annually?

7.  Are revenue and capital budgets based on plans and projections about resource needs, pay and inflation, productivity levels, and income?

8.  Are cost reductions, growth and savings options identified and reliably costed as part of the budget process?

9.  Is the reporting of cashable efficiency gains reconciled with and reflected in the budget?

10.  Are the revenue consequences of the capital programme and other expenditure commitments, including the consumption of capital (e.g. depreciation) reflected in revenue budgets?

11.  Are forecast or actual budget variances and trends reflected in budget preparation?

12.  Are managers fully involved in setting their budgets, working with Finance staff, so that they take ownership?

Supporting Performance – Leadership  

Selection

L3  The organisation integrates its business and financial planning so that it aligns resources to meet current and future

business objectives and priorities. Performance management is conducted through measures of service delivery and clear understanding of the costs incurred.

1.  Does the organisation operate to clear criteria for reviewing and justifying its activities, expenditure and income policies, including the need for public subsidy, the economic value provided, the impact on people most in need, the risks involved and alternative agents of delivery?

2.  Does the Corporate Business Plan demonstrate how resources are allocated strategically to deliver the organisation's aims, objectives and priorities?

3.  Does the Medium-term Financial Plan draw together realistic estimates of funding to support the achievement of strategic objectives?

4.  Does analysis of the medium term financial environment form an explicit backcloth to the Corporate Business Plan?

5.  Is formulation of the Corporate Business Plan, or the linked financial plan, based on analysis of cost implications of policy choices?

6.  Is the Corporate Business Plan developed in collaboration with delivery partners and stakeholders?

7.  Do delivery partners' plans align with the Corporate Business Plan?

8.  Does the Medium-term Financial Plan examine scenarios to develop financial flexibility, adequate contingency and reserves, based on a risk assessment and sensitivity analysis?

9.  Do the Corporate Business Plan and Medium-term Financial Plan address the impact of key external cost drivers: social trends; demographics and changes in service demand; and accelerating commitments? Major examples include elderly social care, waste disposal, pensions, interest rates, environmental sustainability.

10.  Does the Leadership Team approve and understand the demand management strategies for demand led services and activities?

11.  Does the Board and Management Team regularly review priorities to enable resources to be redirected from areas of lesser priority, not relying principally on pro rata cuts to generate savings?

12.  Does the Corporate Business Plan or the linked financial plan; reflect efficiency targets, over a medium term time horizon?

13.  Is the Corporate Business Plan underpinned by clear and coherent operational plans, workforce plans, and procurement plans?

14.  Is the Corporate Business Plan reviewed and updated on a regular basis?

15.  Do measures used for performance management link outputs and outcomes with costs?

16.  Does Board and Management Team reporting bring together information on financial performance, activity levels, outcomes and risk?

17.  Does monitoring of performance give rise to rapid response and corrective action?

18.  Do external audit and inspection comment favourably on the processes for planning and review?

Securing Stewardship – Leadership

Selection

L2  The organisation's leadership allocates resources to different activities in order to achieve its objectives and monitors

the organisation's financial and activity performance.

1.  Do the  Medium-term Financial Plan and budget show the resources allocated to major spending activities and programmes, with useful summaries?

2.  Is the financing of expenditure transparently explained in the budget summaries and reports?

3.  Does the Medium-term Financial Plan project forward the financial position for at least three years?

4.  Does the Board review activity levels, actual spend, balance sheet items, and forecast outturn against the budget, at a minimum quarterly, to ensure the organisation will not overspend and that income and expenditure are in line with budgets and agreed policy, and is achieving planned outcomes?

5.  Do the Management Team review activity levels, actual spend, balance sheet items, and forecast outturn against the budget monthly, to ensure the organisation will not overspend and that income and expenditure are in line with budgets and agreed policy, and is achieving planned outcomes?

6.  Does the Leadership Team monitor Key Performance Indicators at least quarterly?

7.  Is financial information relevant, clearly presented, timely and comprehensible to the non-financial reader? This applies to Board member reports as well as Management Team reports.

8.  Are budgets realistic, with over- and under-spending within expected tolerances?

9.  Are there governance arrangements for scrutiny, review and challenge of the draft budget, including stakeholder consultation?

10.  Are there processes to adjust budgets in year and to seek Board or Management Team level approval if major programmes are varied by more than pre-set tolerances?

11.  Are decisions to change resource allocations transparent, justified and made in accordance with the organisation's rules?

12.  Has the organisation a policy to avoid reliance on one-off resources to finance recurrent expenditure?

13.  Has the organisation a declared policy on treatment of over- and under-spending, including end of year flexibility?

14.  Does the Leadership Team receive reports that show clearly the impact of current allocations and performance on future years?

Supporting Performance – Leadership  

Selection

L6  The organisation develops and manages employees pay and benefits strategically

1.  Is pay based on an analysis and strategic planning for workforce needs?

2.  Do compensation arrangements reward in some way employees with excellent performance?

3.  Are employer pension contributions and future liabilities understood and are they sustainable?

4.  Is the impact of equalities legislation on workforce compensation understood?

5.  Does the organisation monitor and follow the outcome of legal cases that will impact on its pay liabilities?

6.  Are severance terms reviewed regularly and in line with sector comparators?

7.  Is the cost of absenteeism and sickness understood, monitored and reported?

8.  Does the organisation develop strategies to reduce the cost of absenteeism whilst supporting the well-being of employees?

9.  Is incremental pay progression understood and its impact on future payroll costs clear?

10.  Is the organisation clear about its flexibility under national agreements to vary pay?

Supporting Performance – Process  

Selection

PR13  The organisation systematically pursues opportunities to reduce costs and improve value for money in its operations.

1.  Does the organisation examine the relative cost and performance of services, including financial services, and test them against internal and external benchmarks to identify improvements?

2.  Are cost reductions and efficiency routinely sought and realised as part of service reviews?

3.  Do Managers focus on managing their costs and reducing inputs to achieve their goals rather than on using up their budgets?

4.  Are targets for efficiency gains and spending reductions routinely agreed and set?

5.  Does the organisation use national and local performance indicators to monitor performance (including financial performance)?

6.  Are alternative delivery methods (e.g. outsourcing, collaboration and shared services) investigated and pursued?

7.  Is cost reduction targeted at specific budgets or activities, following consideration of priorities, rather than as a standard percentage across all activities?"

8.  Do Managers examine cost drivers of high spend areas to understand risks and options for cost reduction?

9.  Does the organisation work across internal and organisational boundaries to achieve improvements (e.g. pooled resources, end to end process review)?

10.  Does the organisation routinely undertake business process reviews and implement findings?

11.  Does the organisation regularly examine its staffing structure, working practices and pay bill to improve overall productivity?

12.  Does the organisation use technology to improve productivity, e.g. automating processes, implementing self-service or encouraging mobile working?

13.  Is action taken to improve inefficient workflow processes (e.g. using lean thinking techniques, standardised processes, eliminating re-keying, reducing duplication)?

14.  Does the organisation seek opportunities to capitalise on its skills and assets, and to spread overheads, by undertaking work for other public sector organisations where this improves value for money?

Supporting Performance – Process  

Selection

PR14  The organisation systematically pursues opportunities for improved value for money and cost savings through its procurement and

commissioning.

1.  Does the organisation have a corporate procurement strategy?

2.  Does the organisation have procurement capacity to drive and realise the strategy?

3.  Does the organisation develop its capacity by training professionally qualified and expert procurement staff?

4.  Do Managers involved in procurement understand their responsibilities?

5.  Does the organisation publish a forward procurement plan for suppliers?

6.  Does the organisation participate in framework contracts, joint procurement or consortia to exploit economies of scale and market influence?

7.  Does the organisation evaluate appropriate procurement strategies, e.g. lease, buy or make?

8.  Does the corporate procurement strategy incorporate gateway reviews for high risk projects?

9.  Does the organisation ensure most purchasing is under formal contract and monitor off-contract purchasing?

10.  Does the organisation have effective and adequately resourced contract monitoring and reporting arrangements in place?

11.  Does the organisation ensure value for money during the life of a contract through active contract management, creating opportunities for improved methods during long life contracts?

12.  Does the organisation seek value for money through encouraging competition and contestability, accessing wider markets, packaging contracts, supply chain management and developing supplier relationships?

13.  Does the organisation research and gather market intelligence to develop creative solutions with potential suppliers?

14.  Does the organisation work with others to stimulate and develop markets where they are weak?

15.  Is procurement used to meet the strategic objectives of the organisation, including impacts on the environment, workforce training, the local economy or community engagement?

16.  Is e-procurement (e.g. purchase to pay and e-tendering) used as a means of reducing administration costs and/or increasing competition?

17.  Are e-auctions used as a method of increasing value for money?

18.  Does the organisation award contracts through assessing whole life costs and benefits using the appropriate investment appraisal technique?

Supporting Performance – Process

Selection

PR15  The organisation pursues value for money through active management of its fixed assets.

1.  Does the Leadership Team actively review asset utilisation and opportunities for more intensive use and estates rationalisation?

2.  Is there an asset management plan that reviews the condition, sufficiency and suitability of assets in the light of business needs, and ambitions of the Corporate Business Plan?

3.  Does the Medium-term Financial Plan include targets for the value of asset disposals?"

4.  Are asset sales determined by planned rationalisation rather than as a quick fix funding stream?

5.  Are intangible assets, such as intellectual property, actively managed?

6.  Is stock management reviewed to optimise delivery times versus holding costs?