Inspiring Your Next Success!® Company Confidential ...Presentation Transcript
Local Management Accounting Team Review Presentation of Findings DATE: July 07 Consultants: B.Brownlee, A.Duguid, J.Herman, C.Stone Ref: Final Draft DCLG-LMAT Rev-110707-1.3
LMAT Review - Contents
Requirements & Objectives
Scope and Principles for Change
Business Case for Change
Future Ways of Working
Local Management Accounting Team (LMATs) – Baseline Analysis
Strengths & Issues
Implications of Issues
Annex A – Current LMAT Organisation Structures
MANAGEMENT SUMMARY SUPPORTING EVIDENCE
LMAT Review - Requirements & Objectives
The LMAT Review seeks to address the following:
How are the LMATs currently structured and constituted, and what are the inefficiencies and issues?
How can the LMATs add the most value in the future, in the light of proposed changes?
Is there a sound business case that underpins the changes and what does this constitute?
To identify and analyse the staff and activities that currently encompass the LMATs.
To evaluate potential future ways of working and
The potential savings arising from changes to roles, structures and ways of working
LMAT Review - Scope & Principles for Change
Scope – LMAT’s current activities - excludes Government Offices of the Regions (GOs) and the wider CLG family
The principles for change to consider:
Centralisation of transaction processing
Greater focus on added-value services
Group Management Accountants (GMAs) and their staff to come under the control of the Finance Directorate
LMAT Review - Project Approach
The LMAT Review was structured as a project over a five week elapsed period comprising the following phases:
Project Initiation to establish project communications and administration
Baseline analysis of current ways of working
Evaluation of potential futures ways of working
Gap analysis between current and future ways of working
Presentation and final reports
LMAT Review - Project Approach Issue Surfacing Structured Interviews with GMAs, LMATs, Central Finance, FSSD & other stakeholders 1.Project Initiation 2. Current Ways of Working 3. Future Ways of Working 4. Report Establish Project
Risk & Issue log
Communicate with Stakeholders • Plan & Objectives • Timescales & Approach • Required involvement Confirm with Sponsors
Terms of Reference
Roles & Responsibilities
Commence Baseline Analysis
Obtain available base data
Construct Interview agendas
Maintain Issue log
Data Gathering • Headcount, grades, locations • Organisation Structures • Volumes, resource drivers • Actual & Required Outputs Current LMAT analysis • Staffing and Structures • LMAT issues • Scope for changes, added - value services, efficiencies LMAT Design Principles • Confirm & Agree Design Principles • Organisational options • Change management Evaluate Future Ways of Working • Organisation structure • High level Processes • Resources / FTEs • Business case evaluation Evaluation / Gap Analysis • Organisation structure • High level Processes • Resources / FTEs Develop and Test Presentation / Report • Develop presentation and test with stakeholders • Take into account other change initiatives Develop & present Draft Analysis & Evaluation Presentation / Report • Objectives • Analysis & Evaluation • Options • Change / Next Steps • Risks Briefing & Support for CLG July Board Wk 1 Wks 1 - 3 Wks 3 - 4 Wks 4 - 5 Key Deliverables Assess Current Ways of Working • Key activities and numbers of staff • Structures, IT support • Resources & Outputs Finalise Evaluation with Sponsors 5. Board Support Wks 6 - 8 Project and Change Management
Management Summary - LMAT Baseline
Numbers : (source: LMAT Review – June 07)
The total LMAT establishment is 94 with current in post headcount of 89, 4.51% of 1,972 headcount within the Groups, £3.4m total LMAT payroll cost to Department
An EO and AO headcount of 56, primarily focused on transaction processing, costs £1.8m per annum
At least £1m+ per annum, 29% of LMAT payroll costs of £3.4m p.a., is involved in managing invoice processing arising from c34,000 orders p.a. of which 75% (25,000) are for less than £1,000
The average LMAT process cost is, therefore, c£29 per order
The core Departmental spend is c£33bn of which only c£10bn is subject to LMAT oversight
Department has never achieved a stable population of qualified GMAs, the LMAT leaders
Resource flexibility is diluted given the prevalence of small teams in LMATs and the difficulty in managing LMAT resources across the Department.
Only 10 of the 28 HEO and SEOs are fully or partly qualified accountants (CCAB) limiting the practical delivery of value-added service
Quality of service delivery not consistent and effectiveness of professional oversight variable
LMATs significantly resourced... … but not effectively organised, focused and competent to deliver value
Management Summary - Findings
LMATs undermined by:
insufficient resource of qualified accountants
diversion of resources to manage the payment of invoices that are not compliant with the procurement process
lack of consistent capability across the LMATs to participate in and to provide value-added services for decision support
Appropriate toolsets not provided to the LMATs and budget managers
Programme Management, payroll and personnel systems are not interfaced or integrated. There are no standard forecast, planning and programme management tools used across the Department.
Lack of clarity between the line and the LMATs with regard to accountabilities and responsibilities for financial reporting and outturn forecasting of programme spend
Non-compliance by the line with the prescribed procurement process.
Plan to centralise transaction processing in the shared service centre was abandoned in 2005 because of non-compliance.
The LMAT structure does not extend to all the Departments core Groups e.g. Thames Gateway, ERDF.
LMATs well designed, planned, piloted... … but roll out not resourced and poorly implemented
Management Summary - Business Case for Change
LMATs have, therefore:
not achieved core objectives of:
more effective and accurate information
realisation of any significant efficiency and procurement savings
not been able to develop beyond exercising basic financial controls and record keeping to provide added-value management and decision support information
lack of discipline in the verification of balance sheet items
misuse of the accruals process
been required to support a non-compliant procurement process
for example, obtaining evidence of procurement authorisation after goods and services have been delivered and the invoice received.
become an unattractive working environment, lacking a clear career structure and difficult to attract high calibre civil service staff
Unsatisfactory and inefficient working arrangements… … resulting in not meeting the core objectives
LMAT Review – Business Case for Change
The cost of doing nothing is to continue:
not meeting the core objectives of the original LMAT strategy
wasting resources of at least £1m p.a. on the LMATs supporting a non-compliant procurement process
The business case for change constitutes the following elements:
Improving the effectiveness of the LMATs to support the Department in:
Ensuring financial control and the quality of financial and management information
Maintaining the integrity of the balance sheet
Providing decision support and value-added services to the Group DGs
Timeframe – targeting a completion date of 31/12/07 to provide the focus and urgency required to drive the programme of change and realise the benefits at the earliest opportunity
Gross headcount savings in the LMATs arising from centralisation of transaction processing of at least 29 FTEs costing £1m per annum
Potential efficiency savings in Central Finance arising from reductions in Quality Assurance and reworking of submissions from the LMATs
Potential additional cost of resources that may be required in the shared service centre
The Smarter Business Process outline business case sets out the options for centralising transaction processing for invoicing currently undertaken by the LMATs.
this business case concluded that the option with the largest saving is to “tackle compliance issues with centralising transactional processing” and
used as a baseline for calculating savings in transaction processing the assumption that 23 EOs and 17 AOs costing £1.1m per annum are doing transaction processing full time.
The LMAT review has identified that:
Of the LMAT headcount of 89, 56 (30 EOs, 20 AOs and 6 contractors) costing c£1.8m p.a. are made available primarily for transaction processing,
The LMAT resources absorbed by transaction processing amounts to 29 FTEs, costing £1m per annum, across all grades
Additional resources may be required within the shared service centre focused on placing purchase orders, scanning paper invoices and processing invoices for payments. The additional resource requirements are dependent upon the design of the re-engineered processes and supporting technology.
Future Ways of Working - Design Principles
Centrally managed core of LMAT finance specialists working in partnership with Group Management Teams
Transactional activity from purchase ordering to invoice payment centralised within the Shared Service Centre
LMATs focused upon the delivery of value-added financial and risk management services, supporting effective decision-making and able to respond flexibly to emerging business needs, for example
Ensuring the accuracy, integrity and understanding of the balance sheet
Facilitating the identification of financial pressures that may impact the delivery of a programme’s outcomes
Engagement in the forecasting and management of programme resources beyond the current financial year
Providing management information and appraisal techniques to facilitate the value for money management of resources
Managing relationships in order to access and leverage knowledge expertise within the Group and Department.
Future Ways of Working - Design Principles
Supporting the Corporate New Ways of Working to enable prioritisation of resources and transparency of performance
One view of programme, accounting and HR data and information. No need to expend resources reconciling disparate systems, with consequent risk of misreporting.
GMAs adept at building relationships within Groups and considered a trusted financial expert, aware of the policy and programme challenges facing the Group
LMATs have oversight and accountability for all financial management activities with a Group
The Finance Director accountable for:
Recruitment and resource management across the LMATs
Professional & career development
LMAT processes and systems
Knowledge sharing and best practice
Resource Management across the LMATs
Future Ways of Working - Design Principles
Finance is an attractive place to work providing
A formalised career structure
Professional training and development opportunities
Valued experience for fast trackers
Exemplar for the new ways of working
Rewards for successful delivery and outcomes
Management Summary - Gap Analysis
A clear vision and definition of the strategy for financial management within the Dept and the role of the LMATs within that.
Use of the “Financial Management Capability Maturity Model” or other such model to assess current competence and development path .
A clearly defined LMAT strategy that driving delivery and performance management.
A strategy to develop financial management competences across the Dept.
Focus on the original LMAT strategy of effectiveness and efficiency is not currently central to scoping and defining the roles, accountabilities and responsibilities of the LMAT.
No understanding of CLGs financial management objectives
Managed exit / re-deployment
Skills and personal development training
Role definition and recruitment of required expertise
Building confidence of Group Management Teams
Significantly reduced resource but far more skilled and competent
Resource consolidated into flexible pool of expertise that can be managed as a Dept. resource.
Focused on value-added services
Centralised management – GMAs and other finance personnel reporting to the Department’s DG Finance.
89 people, predominantly AO and EO
Organised in small teams within LMATs
Focused on transaction processes
Management of the LMATs and other finance personnel, devolved to the Groups, GOs and other parts of the wider CLG family.
Structure & People Bridging the Gap Future Current
Management Summary - Gap Analysis
Clarity on performance objectives
Change in reporting structures to extend the LMAT structure to all finance personnel within the Group
Explicit and managed career development opportunities
Continuous improvement in capability
All financial management personnel within the Groups e.g. ERDF, LGF to be within the LMAT structures subject to appropriate oversight and control
No explicit career structures
No performance measurement and management system that is linked to an LMAT strategy, desired outcomes and individual performance
Not all finance personnel within the Groups are within the LMAT structure
Structure & People (contd)
Integrated system architecture
Extending the use of existing tools by the line
Shared Service Delivery
Integrated Financial, HR and programme management systems across the Dept. with clear information owners
Limited integration between financial and HR systems, payroll and programme delivery
Ongoing use of local spreadsheets
Systems Bridging the Gap Future Current
Management Summary - Gap Analysis
Refreshed business processes
Managed migration of activity to Shared Service Centre
Driven by the strategic and operational needs of the Department.
Transaction processing centralised within a Shared Service Centre
Less doing it by the book and more attention to getting things done in the most effective and efficient way, taking proper account of risks and how they are addressed.
Line responsibilities embedded
LMAT Operations Manual
Weak financial controls
Weaknesses in balance sheet verification
Process Bridging the Gap Future Current
Next Steps - Implementation Risks
A restructuring and change programme for the LMATs must take account of:
1. Benefits not realised
Failure to obtain the commitment of senior managers will limit the realisation of financial and performance benefits
FSSD is unable to effectively interact with the line resulting in LMATs continuing to handle transaction processing enquiries
2. Reduction in performance while change is being effected
Change implementation will potentially reduce the initial perceived performance of the LMAT because of staff uncertainty and weaknesses in existing LMAT management
3. Implementation perceived to have failed because stakeholder expectations not managed
Expectations raised by the original roll-out have not been met. The upgrade of the LMATs further inflates expectations and undermines future LMAT credibility
Next Steps - Implementation Risks (contd)
4. Departments reputation impacted through mismanagement of employee relations
Consultation with staff and the Trade Union Side, concerning potential redeployment and recruitment are not well managed
5. Change Programme fails through lack of resource and ability to integrate all the change initiatives
Change Programme is not adequately and competently resourced
The scale of change throughout the Dept. is not managed and inter-dependencies between initiatives are not identified
Management Summary - Next Steps
Doing nothing is not an option because of the waste of resources within the LMATs and the requirement to improve basic financial controls.
CLG Board support is sought to adopt the following LMAT restructuring proposals for change with a target completion date of 31 December 2007 for centralisation of transaction processing:
Transfer the primary reporting line for the LMATs to the DG Finance & Corporate Service Delivery, Hunada Nouss
Centralise invoice transaction processing in the shared service centre
Agree to the initiation of an implementation programme to enable the LMATs to focus on added-value services and to deliver the change
It is proposed that the preparation of the detailed plan including resource requirements and the availability of investment funding will be completed by the end of August. This opportunity will need to be taken forward on an invest-to-save basis. However by delivering at pace the Department will realise financial benefit before the end of the current financial year.
Further detail regarding the above recommendations is provided within the ensuing slides…
LMAT Review - Next Steps
Transfer accountability for the LMATs to the Finance Directorate in order to speedily:
align the DG Finance reporting structures with the current responsibility for providing assurance to the Department’s Accounting Officer regarding the integrity of the Resource Accounts
develop the LMAT strategy in the context of the Department’s strategy for financial management
determine financial management objectives, disciplines and priorities
manage the skills and resources across the LMATs
manage professional & career development
establish LMAT processes and systems
promote knowledge sharing and best practice
create an attractive working environment
LMAT Review - Next Steps
Accelerate, as a matter of urgency, the current Smarter Business Process approach to centralising transaction processing
the current approach is to tackle compliance issues with centralising transactional processing
reframe the procurement process problem as
“ what must we do to transfer processing to the shared service centre as a matter of urgency, efficiently and effectively in compliance with a revised set of rules for accounts payable?”
determine the financial risk exposures and how to mitigate and manage them, and
determine the necessary and sufficient conditions to enable centralisation.
LMAT Review - Next Steps
3. Implementation Programme
a . Review and update the original LMAT strategy with respect to:
The vision and objectives for the LMAT in the context of the Department’s financial management strategy
Challenge the requirement for the LMAT structure
“ What should the LMAT be doing and why?”
Manage the Step-up through the Financial Management Capability Maturity Model
The challenge of resourcing the LMATs with appropriately qualified finance staff
b . Provide appropriate toolsets for programme and budget management, management reporting and forecasting.
identify the needs of the Department for programme, financial and management reporting
design the ICT and process architecture to support the Department’s business and financial needs
map the current standard application set to the ICT and process architecture identifying the need for any additional systems and facilities
LMAT Review - Next Steps
3c LMAT Capabilities - resource the LMATs with the required level of professionally qualified personnel
In the context of the LMAT strategy, establish the financial management objectives and the associated performance management systems
Assess the skills and capabilities required to deliver the LMAT strategy
Re-define the LMAT structures, roles and role descriptions
Develop appropriate grading structures and job titles that match the scope of responsibilities and provide opportunities for career development both within finance and the wider civil service, for example:
Group Management Accountants to be accorded titles that better describe their status and responsibilities (Group Finance Manager/Director/Group Finance and Planning Director).
Manage the exit and recruitment of personnel to fit the roles
LMAT Review - Next Steps
3d LMAT Structures
Redesign the LMAT structures to incorporate financial management oversight and accountability for all financial management activities within the Department including Local Government Finance, European Regional Development Fund, Thames Gateway and any other financial management resources within the Groups .
4 Change Management, Communications and Culture
Sponsorship – ensure strong sponsorship and buy-in of Director Generals
Consultation with staff and unions, preference exercise design and implementation
Change management – provides glue for both LMATs and centralisation
Unfreeze the current, implement new design and refreeze so it sticks
Identify and deploy levers to overcome passive resistance
Gather feedback from staff and adjust the plan
Next Steps – Programme Management Plan
5 . Programme Management Plan for completion by end of December 2007 to include:
determining the source of funding for the change as part of the business case
governance framework and creation of Project Initiation Documents
confirmation of work streams and requirement for internal and external resources
programme, project managers
change and stakeholder management expertise
expertise on finance transformation
expertise in the complex preference exercise process and consultation with the Trade Union Side
process and implementation expertise
business case and benefits realisation manager
initial consultation with the Trade Union Side and staff
integration with other Department initiatives
development and management of the business case process
Management Summary - Implementation Plan Overview Establish Project Steering Group July Decision / Sign-off Next Phase Change Management, Communications and Culture LMAT Capability & Structure Centralise Transaction Processing Project Management / Business case management Immediate Action / Mobilisation Change Implementation Project Review LMAT Strategy & Transfer control of LMATs Implementation planning - Project plan, resourcing - Integration with other projects - Update LMAT Vision & Strategy Decision to centralise Transaction processing Risk assessment, end to end process agreement. FSSD Readiness Transfer responsibility to FSSD, performance management system, data and process changes Plan to Close the LMAT capability gap Design roles, responsibilities, Secure required GMAs Deploy new roles, structures, performance targets in all core parts of the Department Vision, Objectives & Strategy Staff, department and stakeholder continuing communications & feedback, ways of working & Change Management Workstream Completion be end of December 2007 Performance feedback including staff perceptions Staff changes Consultation and Preference exercises Staff changes 1 2 3 4
Next Steps - Change Implementation Core Components Programme & Change Management Strategy Implement the LMAT Strategy in the context of developing CLGs financial management competencies Stakeholder & Customer Needs Understand how to deliver value To the business for financial information & decision support Central finance for financial information & control Other stakeholder needs People
Put the right people in place
Manage out poor performers
Provide career structure
Control from the Centre
Provide the right tools IT Applications: -Budgeting, Programme management & planning -Integration of programme tools with SAP -Decision support tools Management Techniques: -Performance measurement and management Systems & Infrastructure Integrate the processes -LMAT, business, procurement, & accounting -Centralisation of transaction processing -Reinforce accountabilities & responsibilities Ways of Working Deployment Service Delivery Objectives Resources Tools
Local Management Accounting Team Review Baseline Analysis
Background to the Assignment
The Department is changing:
Moving towards a strategic and policy focus with delivery through partners, supported by a slimmer, professional core able to deliver with reduced resources
The LMATS were introduced in 2005/06, following a successful pilot. The current business perception is that although improvements have been made in terms of data integrity, the quality of the service being delivered by LMATs is not consistent and the primary focus remains on transaction processing rather than on the value-added services envisaged in the LMAT business case
The Central Procurement Division Smarter Business Process outline business case for the centralisation of invoice processing assumes a baseline of LMAT transaction processing costs of £1.1m that requires validation
The professionalisation of the Department’s financial capability continues to gather pace and is essential if it is to meet the future financial management challenges that will arise as a result of tight constraints on public expenditure
Local Management Accounting Team Review Original LMAT Strategy
LMAT Original Strategy
Proposed changes included:
Centralisation of invoice processing to FSSD
A CPD procurement specialist within the LMAT
Transfer SAP processing from the line to the LMAT
GMA to report to the local Group Director General
GMAs to be qualified accountants
Local Management accountants to be at least part qualified accountants
LMAT to provide a finance support role to programme budget managers
Accountability for strategic planning and performance reporting to be transferred to the GMA or a BDA
Maintain the responsibility of a PBM to manage the Programme
GMA to provide financial management and policy advice to Group senior management
… and the realisation of significant efficiency and procurement savings
To contribute to the improvement of financial planning and control processes… X X X X X X X X Implemented?
LMAT Original Strategy Implementation
Only two of the proposed changes have been successfully implemented!
Local Management Accounting Team Review Current Analysis Headcount
Current LMAT Analysis - Headcount
The total LMAT in post headcount is 89, 4.51% of 1,972 headcount within the Groups
The range of LMAT size ranges from the smallest (PPI) at 2.92% to the largest (Gov & Comms) at 6.25% as a % of Group total headcount
There is no obvious correlation between LMAT and Group size
There is an unclear differentiation between the roles and responsibilities of the EO and AO grades
No correlation between the size of the Group and the LMAT headcount
Current LMAT Analysis - LMAT Scope
The LMATs have oversight and responsibility for only 31% £10bn of the core Departments total expenditure of £33bn
The remaining £23bn is managed outside of the LMAT structure with limited direct oversight and input from the LMATs
Local Management Accounting Team Review Current Analysis Organisational Structure
Current LMAT Analysis - Typical Organisational Structure
LMAT organisation structure has narrow spans of control (1 to 1 relationships) with limited sharing of EO/AO resources across an LMAT
EO/AO Headcount of 56 costing £1.8m per annum will be directly impacted by Centralisation of transaction processing
GMA SEO HEO HEO EO EO AO AO AO (Qualified Accountant) (Qualified or finalist) (Qualified /studying) Studying CIMA/ACCA May or may not be AAT 26 = £0.8 30 = £1.0m TOTAL 89 staff = £3.4m per annum Current Headcount & average direct annual salary costs Deputy Director Finance Directorate Transaction Processing 4 = £0.3m Support to the DG 7= £0.4m 22 = £0.9m Support to BMs & Central Finance Traditional hierarchical structure… … but not consistent with new ways of working
Local Management Accounting Team Review Current Analysis Process Costs
Current LMAT Analysis - Process Costs
£1m+ per annum, 29% of LMAT payroll costs, absorbing 1/3 rd of the FTEs across all the grades is involved in managing the procurement and invoice process.
This is likely to be an understatement as the LMATs are not structured for efficient workload management and productivity is considered to be low.
The Smarter Business Process Business case assumed an annual cost for transaction processing of £1.1m in respect of 40 EO/AOs, which is consistent with the results obtained from the activity analysis.
Under utilisation is likely to be analysed to processes such as “other activities” and “training and personal development”.
Average process cost per order = £29 (£1m/34,000)
£1m + per annum consumed by processing invoices… Source: Activity Analysis returns completed by the GMAs … of which 75% (c25k) of purchase orders are for less than £1,000.
Local Management Accounting Team Review Current Analysis Skills and Competencies
Current LMAT Analysis - Financial Management Capability Model Level 1 START UP Level 2 CONTROL Focus on compliance and control Level 3 INFORMATION Focus on measuring how resources are used and managing for the efficient and economical use of resources Level 4 MANAGED Focus on balancing efficient and economical use of resources with quality / effectiveness of results achieved Level 5 OPTIMISING Focus on continuous improvement and learning
LMATs level of maturity is variable
Focus remains on Level 2 and attaining effective control and compliance
Level 3 provides the base from which LMATs can provide the desired value-added capability
Level 2 OBJECTIVES
Financial & Outcome information
Level 3 OBJECTIVES
CLG stuck at level 2… … but LMATs need to step-up to at least level 3
Current LMAT Analysis - Skills and Competences
As part of the Department’s Keegan action plan objective to develop “quality financial management in the line” there is a specific action to identify and mandate the required grades and qualifications for GMAs and LMAT staff and to restructure the LMATs and improve skills to provide stronger support to the line.
Although all GMAs are now qualified accountants, those holding or studying for a recognised accounting qualification at the SEO/HEO grades is currently only 35% (10 out of 28) and are not universally pursuing an accounting qualification.
However, the competence, i.e. the ability to deploy technical accounting skills and experience, even amongst the qualified accountants, is considered by the line to be insufficient to meet their needs for “value-added” services such as financial risk management, technical advice and guidance, investment appraisal, forecasting and other types of decision support.
Low level of accounting qualifications… … impairs the capability to provide added-value services to the line
Current LMAT Analysis - Professional Qualifications
Only 10 of the 28 HEO/SEOs are fully or partly qualified accountants (CIMA, ACCA, ICAEW)
51% of LMAT staff do not hold or are studying for a financial qualification
There is evidence of renewed interest in finance qualifications especially amongst the EO and HEO grades
LMATs are reliant upon a limited pool… … of fully qualified and experienced staff
Local Management Accounting Team Review Current Analysis Ways of Working
LMAT Original Strategy - Roles & Responsibilities The responsibilities for the LMAT roles… … were clear but remain largely unfulfilled RESPONSIBILITIES ROLES
Financial Management & Transaction Service to a Directorate for both programme and administration expenditure:
Assistance & Support to Budget Managers
Ensuring the quality of financial data and complying with reporting timetables
Liaison point for cascading from Central Finance financial reporting policy and procedures
Finance Support Officers (HEO/AO) Financial Management Advice to the Line (Directors, Divisional and Programme Budget Managers) Local Management Accountant (SEO)
Line Management of the LMAT
Financial advice in support of Group strategy development
Programme & Admin financial planning
Compliance with HMT, CLG financial policies and procedures
Reports to the Director General and provides support to the Finance Directorate
Group Management Accountant
Current LMAT Analysis - Ways of Working
People and Structure
small team approach does not support resource flexibility and capability development and is inconsistent with the New Ways of Working being developed by the Department .
time allocated to core activities is spread across the grades
lack of a clear definition of roles and priorities
AOs and EOs priority is completing the procurement and invoice paper-chase
Delivery approach focused upon compliance with process rules and the LMAT Operations Manual rather than business requirement
for example the management of the procurement process
No consistent, shared timetable for the completion of key financial tasks and controlling the quality of the content
For example the production of monthly reports and balance sheet reconciliations
The systems (SAP, spreadsheets, programme management, payroll and HR) do not provide a common and consistent view of data and need to be manually reconciled with each other.
Inefficiencies are inherent … … in all aspects of current ways of working
Procurement Process High Level Process
Compliant Procurement Process
A compliant procurement has the following process steps:
An authorised “request for procurement” (RFP) if not covered by a blanket order
A purchase order sent to the supplier (PO)
A goods received note (GRN) to evidence supply
A supplier invoice that matches with the RFP, PO and GRN.
This process is applied to all procurements that are not done electronically or using the Government Procurement Card.
75% of procurements (c25,000 per annum) are for less than £1,000
The Procurement Process Supplier Delegated Authoriser Line Manager LMAT 1. Need & preferred supplier identified 2.Give authority to proceed 3.Obtain price, Negotiate terms with supplier 3.Agree terms with customer 4.Complete Purchase Requisition Form 5.Authorise PRF
Process /rules (<£20k)
7.Complete & submit PO 8.Process PO 9.Deliver Goods/ Services in accordance with PO 10.Receive Goods/Services - Complete GRN 12. Produce Invoice for accepted goods/ services 15.Authorise Invoice 16.Process Invoice for Payment against PO & GRN FSSD 17.PAY Invoice 11. Input GRN to SAP 13. Invoice date stamped, FAX File 14. Auth’n Needed? Y N
Non-Compliant Procurement Process
Non-compliance with the procurement process means that some or all of the required documentation (RFP, PO,GRN) is not available, with the consequence that the SAP accounting system will not accept the supplier invoice as valid and one that can be processed for payment.
The majority of procurements (70%+) are non-compliant and for amounts less than £1,000.
On receipt of a non-compliant invoice, the LMAT will seek to identify the business manager responsible for the procurement and who has the appropriate delegated authority.
The missing documentation (RFP, PO, GRN) is then generated and processed to maintain the audit trail and enable the invoice to be cleared for payment.
Operation of a non-compliant process is resource intensive for the LMATs, costing £1m+ per annum and arguably provides little, if any, internal control benefit.
Non-Compliant Procurement Process Supplier Delegated Authoriser Line Manager LMAT 1. Need & preferred supplier identified 2.Give authority to proceed 3.Obtain price, Negotiate terms with supplier 3.Agree terms with customer 4.Complete Purchase Requisition Form 5.Authorise PRF
Process /rules (<£20k)
7.Complete & submit PO 8.Process PO 9.Deliver Goods/ Services in accordance with PO 10.Receive Goods/Services - Complete GRN 12. Produce Invoice for accepted goods/ services 15.Authorise Invoice 16.Process Invoice for Payment against PO & GRN FSSD 17.PAY Invoice 11. Input GRN to SAP 13. Invoice date stamped, Reconstruct missing documentation X X X X X X FAX File 14. Auth’n Needed? Y N X Non-compliance steps
Current Ways of Working Strengths & Issues
LMAT Review - Current State - Strengths
The Smarter Business Process Business Case is being actioned in order to fix procurement non-compliance and facilitate centralisation.
The CLG Board are committed to quickly address the issues impacting the perceived poor performance of the LMATs
The role of the LMATs in controlling the SAP input has improved the quality of accounting data.
The LMAT roles are now physically established in the business
LMATs support the procurement process as currently defined.
LMATs are a repository of inherited corporate knowledge
LMAT Review - Current State - Issues
Issues are well understood and acknowledged but what to do next?
LMATs well conceived, piloted, planned but poorly implemented:
Local Implementation Managers not appointed
Resourced with personnel with insufficient skills and competencies
Appropriate toolsets not provided to the budget managers and the LMATs
Non-compliance with procurement process by the business
Over-compliance by the LMATs
LMATs not structured for efficient use of resources
Responsibility for the prompt payment indicator is with the LMATs not the Line.
LMAT Review - Current State - Issues
LMATs delivering a poor service to Central Finance and the business
Central Finance still required to retain resources to manage financial control and quality assure information received from the LMATs
Inconsistent level of qualifications, skills and competencies across the LMATs
Lack of Financial Control
Lack of focus on basic financial controls e.g. balance sheet reconciliations, as evidenced by recent NAO reports
The scope of the LMATs does not extend to some areas within the Department that are responsible for large programme budgets or the collection and redistribution of grants and rates. Such expenditure amounts to £23bn (69%) of the Department’s expenditure. These areas e.g. Local Government Finance, are supported by finance staff who have no accounting qualifications and
LMAT Review - Current State - Issues
Lack of appropriate toolsets
There is no CLG consistent view of data as accounting, programme management, payroll and personnel systems are not interfaced or integrated. Manual reconciliations must be performed to reconcile between, for example payroll v personnel, accounting v programme management. Failures to keep the systems reconciled may result in misreporting of spend, errors in forecasting and having no control over commitments.
Integrated applications for programme, financial and resource planning and forecasting
Integration between HR and payroll systems
Inadequate Performance Measurement & Management
Apart from the prompt payment indicator, there are no evident LMAT key performance indicators
LMAT Review - Current State Implications of Issues
Inadequate financial oversight by the DG Finance over all of the Department’s core expenditure of £33bn p.a.
Managing controls over an ineffective procurement process absorbs 29% (29 FTEs) LMAT resources costing £1m per annum.
Marginalised by the business – lack of finance input to “value-added services” policy development, business cases, submissions to Ministers
Over Resourced & Under Skilled
More people than needed to do the wrong things right e.g. manage the P2P process
GMAs need to be more finance directors than management accountants
LMATs do not have the appropriate systems to facilitate delivery of value-added services.
Resources not managed
No clear career structure for finance staff and the GMAs
There is no structure to enable resource management across the LMATs.
Risk of financial control failure
Reputational Risk of failure of financial controls/procurement
The LMAT strategy was not implemented
An insufficient spread of financial trained and competent staff
The LMATs and the line were not provided with the appropriate toolsets that are integrated with the accounting system to enable consistent planning, performance monitoring and forecasting.
The LMATs are not meeting their core objectives of:
Enhancing financial planning and control
Realising efficiency gains
Resources are being wasted on transaction processing without any understanding of the financial and non-financial risk exposures inherent in operating a non-compliant procurement process.
The current LMATs do not have the capabilities to effect the changes required and provide added value service to the line.
Risks of doing nothing
Continued waste of resources at least £1m per annum
Not providing basic financial management control
Not providing decision support information
Risk of financial control failure and NAO censure
Annex A Current LMAT Organisational Structures
GMA Finance HR, Transformation Strategy & Performance Unit Knowledge Management & IT Working Environment Legal HEO EO AO AA CSU SEO Nigel Smith Neluka Vithanage Natasha Whitney Stephen Chapman Teresa Samuel Patricia Boakye-Yiadom Nicholas Kapor Dawn Smith Anzell Van Heerden Patrick Crown Audrey Burth Max Siksnys Sukuma Lahiri Ajibade Ogunro Gloria Gabari Hasha Shah Roger Palmer Victoria Reville Derek Blackhall (qualified accountant) +Allen Chapman Contractors (CIMA) (CIMA) 20 Headcount Corporate Delivery & Transformation LMAT Structure
SEO Firelink Fire Control New Dimension Ken Naden HEO EO Alison Alleyne Jennifer Sealey Gillian Allchurch AO Kamalasany Ravindran Pankaj Yadav Tirath Lotay Elizabeth Davis Andrew Moorcroft Subhra Mukherjee Tim Fuller GMA (CIMA) (AAT) ACCA Finalist (Studying) (AAT) (CIMA) Fire & Resilience LMAT Structure 16 Headcount Ralph Moran Admin & other Gary Hope New Dimension Assets Pauline Cairney Firelink Fire Control Sarah Maryon F&R Programmes Julia Carroll Admin Zareen Ahmed
Governance & Communications LMAT Structure GMA SEO AO HEO Ralph Moran Equalities Fire & Resilience Steve Bradshaw Race, Faith & Cohesion Women & Equality Unit, DG’s Office EO Shafi Khan Edwin Gomes Usman Ghanti Esa Manley Toyosi Ogunyemi Bryn Reynolds CIMA (CIMA Studying) Paul Searles Vacancy Dave Starbuck Vacancy Local Democracy, LMAT, DG’s Office Local Gov Finance Sohini Mehta Mita Das Suzanne Ward Bithika Mitra Gary Mehler Tola Ariyo
Deputy Prime Minister
Regina Obiora Directorate of Communications Sajal Das Berkman Osman Gabriel McGuigan Janice Newman Ritis Haria Una Savage AAT studying AAT Provides training support (Studying ACCA) CIMA Studying CIMA Governance & Communications See separate org chart 23 Headcount
GMA SEO HEO AO Philip Mabe Katherine Hitchman Vacancy Barry Pullum EO
Akeem Yusuf Elena Figueira
Ayesha Mazhar Onome Oteri
Victoria Adekoyu (Cont)
Euphemia Dourado (Cont)
Patricia Opara (Cont)
New Housing & Sustainable Development Regional Urban & Economic Policy Analytical Services
John Hutchinson (Interim) GMA SEO HEO AO EO Kurt Horder Olusola Jolaoso (Akin) Divya Patel Beverley Kong Theophilus Holdbrook Rodney Bholan Victoria Akeredolu Simon Newitt John Brookes Danny Fairbrass Kevar Bheda Oluwagbenga Odubunmi (David) Local Authorities Agreements New Deals for Communities LMAT Support LDR & CGD Places & Communities LMAT Structure 13 Headcount