Joined-up journey, by John Thornton

29 Mar 07
The revolution in shared services might be slow in coming, but it will inevitably affect local authorities. This is the ideal time, argues John Thornton, for councils to review and update their financial administration systems

30 March 2007

The revolution in shared services might be slow in coming, but it will inevitably affect local authorities. This is the ideal time, argues John Thornton, for councils to review and update their financial administration systems

'It ought to be a no-brainer,' the exasperated local authority chief executive said as we discussed the hurdles holding up the council's plan for shared financial administration services.

After all, the idea of public bodies sharing corporate and transactional services to provide economies of scale and improve performance is neither new nor radical. It was promoted by Sir Peter Gershon's efficiency review and more recently has been emphasised in the Cabinet Office's Transformational Government strategy and in the local government white paper. This autumn's Comprehensive Spending Review is expected to push it more strongly still.

As a result, all parts of the public sector are now expected to explore opportunities for greater collaboration and to look upon shared services as a way of increasing efficiency. However, so far, there has been a great deal of talk but very little real progress.

There are examples from within individual councils, such as Surrey's shared services centre, which brings together human resources, payroll, finance, revenues, procurement, property and IT activities. And there's the Coventry shared services contact centre, which involves a commercial partner working with all the local councils. Recently, Northumberland and Durham county councils announced that they would share technology, and Northumberland would host financial administration systems for Durham. But such arrangements are rare.

The reasons for this are complex, but most commentators agree that the biggest barriers are cultural and not technological. A soon-to-be-published CIPFA report starts with the premise that the introduction of shared services is an opportunity to improve and modernise service delivery, as well as reducing costs. It encourages councils that are thinking about collaborating to review their existing services and reassess both their existing and future requirements for financial administration systems. For these purposes, 'financial administration' means the transactional procurement, payment, income and accounting processes that support a local authority.

Picture the scene in a typical council payments section a few years ago. You would have a team of people dealing with massive amounts of post. The invoices could arrive at any number of offices addressed to anybody who might commission goods and services. Often invoices could sit in in-trays for days, perhaps even weeks, waiting for authorisation and coding. They would then be forwarded to the payments team, who would sort them into suppliers, check that the payment slips had all been properly completed, batch them up for payment, prepare 'batch-listings' and forward the lists to data-processing to create the files that would make the payments and generate the cheques/remittance advice notes for posting.

Soon, however, most of the payments in leading local authorities will be generated electronically through the workflow and procurement systems. So, for example, when somebody receives the new laptop, stationery or service that they ordered – they simply tick the box on the system to confirm receipt; the coding and authorisation were dealt with when the goods were ordered. The system then automatically relates the payment to the purchase order, the payment is made electronically via the bank, the remittance advice is e-mailed and the payment automatically cancels the commitment/accrual in the accounting system.

These practices are not revolutionary and are being implemented in many local authorities. The London Borough of Bexley, for example, has adopted a strategy to encourage its suppliers to move to electronic invoicing and then link the approval and payment processes via its workflow system. Increasingly, it is directly interfacing its internal business systems that generate payments with its accounts payable system to minimise rekeying and manual input.

Another London borough, Lambeth, now requires all invoices to be sent directly to a contractor's site in the Midlands, where the invoices are scanned and checked before processing through the council's workflow system.

These types of changes are even more pronounced if we look at the impact of new technologies on the procurement and income functions. A lot of procurement decisions now take place outside the office. Modern councils therefore need the ability to procure, authorise and execute in real time against approved, online, simple-to-use catalogues of goods and services.

So, for example, when a member of the adult services team carries out an assessment in somebody's home, they ought ideally to be able to agree, book and authorise the start of the care package remotely, with the system automatically generating the internal and external electronic purchase orders for, say, cleaning, meals, day-care attendance and transport. At the same time, the systems should be generating the appropriate commitments in the accounting system, as well as a request that a printed copy of the arrangements be sent to the client.

Modern procurement systems combine flexibility with consistency of approach and ensure compliance with corporate policies. They work on the basis that paper processes should be minimised and that procurement should be based primarily on the principle of 'self-service'. Ideally, there should be high levels of integration with suppliers' systems to minimise the rekeying of data, improve both the quality and responsiveness of services, and thereby more effectively manage the supply chain.

Wokingham Borough Council is one of those leading the way in this respect. It believed that staff at all levels were spending an unacceptably high proportion of time on tasks that could be improved by using modern financial administration systems, in areas such as making, sending and tracking requisitions, purchase orders and commitments. By putting in more modern processes, it was able to save almost £400,000 a year.

When it comes to income collection, we know that collection rates and customer satisfaction both increase dramatically if you make payment as easy as possible, particularly in areas such as parking fines where the payee is being 'forced' to pay rather than taking a service. Local councils can now offer a full range of modern self-service payment channels and make cost-effective use of third-party intermediaries to avoid high-cost initial investment and specialist in-house staff.

Some of the most advanced collection systems in local government are used by Transport for London for its congestion charge and travel fares. For the former, there are no tollbooths or barriers around the charging zone and no physical tickets or passes are required. Motorists can pay for the congestion charge online, at shops, petrol stations and car parks, by telephone, by post, or by mobile phone using an SMS text message. Users of London's tubes, buses, Docklands Light Railway and trams can store daily, weekly, monthly or annual travelcards or any cash amounts on TfL's electronic Oyster card. This is then touched against special readers at stations or on buses and trams to allow access.

Another pioneer is Westminster City Council, which recently announced that it was going to accept SMS text messages as a way of paying for parking meters in the borough. Motorists can now easily set themselves up with a pay-by-phone parking account, either via a secure website at home, or via a touchtone phone or SMS text on the street. They will thereafter simply be able to pay for their parking with a quick phone call or text. There is no need to display any proof of purchase in the vehicle, as parking attendants can check if payment has been received using their hand-held computers, which are automatically updated once a phone payment has been made. For the council, this service will help eliminate theft, fraud and vandalism to parking meters. It will also reduce the cost of cash collection and the maintenance of machines, allowing the council to reinvest savings in other transport improvements.

If we look at accounting and financial management systems, we see that budgetary control, month-end reporting, consolidations and year-end closure of accounts are all being increasingly automated. As a result, reporting cycles are becoming much shorter and more responsive, providing earlier warnings of key variances. The financial management system is increasingly being linked with other desktop tools to facilitate faster analysis and more flexible, tailored presentation of reports. Also, the integration of workflow into financial management means that systems, procedures and reporting structures can be quickly amended and updated to respond to changing requirements.

A number of local authorities are considering bringing in 'executive dashboard' systems. These constantly collect financial, operational and performance data that have been selected by individual managers and present it in graphical form, much like a car's dashboard of instruments. Another development is Business Process Execution Language. This is the latest emerging best practice for integrating and interfacing systems to ensure processes are not broken by manual steps between systems. This way, end-to-end processes that cross systems can become much slicker and will provide good financial data to support financial reporting.

Wokingham is an example of a council that has procured a whole new set of integrated systems. The results have been impressive. The council has been under growing pressure to achieve more with less and several years ago suffered significant budget management problems, including a major overspend that was not picked up until very late in the day and worryingly low levels of reserves. Graham Ebers, corporate head of finance, explains: 'It became clear that in order to overcome the huge financial challenges facing the council, a major rethink of our systems was needed.'

The main financial administration systems were implemented in January 2005, with payroll following in April 2006. Now for example, payroll is entirely electronic, with only P60s and P45s being printed, to comply with statutory requirements. As a result of these changes and others, Wokingham has received a very favourable Comprehensive Performance Assessment report and is now rated as a four-star council for its use of resources. According to Ebers: 'This highly integrated approach has not only driven massive efficiencies across the organisation but has also significantly strengthened the council's financial management, which has benefited both staff and taxpayers.'

Financial administration services should not be regarded as mere back-office functions that go unnoticed by citizens and service users. They can be pivotal systems in the modernisation and improvement of customer services, as well as key elements of any efficiency programme. The adoption of a shared services approach to their provision therefore provides local councils with the opportunity to benchmark existing practices, clarify their transformational goals, share the investment and risk, and substantially reduce costs. As my chief executive friend explained, it should be a no-brainer.

John Thornton is a member of the CIPFA IT panel and a director of e-ssential Resources. He is an independent adviser and writer on business transformation, e-government and innovation. CIPFA's report, Local authority administration services — emerging trends in the context of shared services, will be published on April 24

PFmar2007

Did you enjoy this article?

AddToAny

Top