5.1 Ibbs found a situation that was potentially disastrous. There were no financial targets; little forward planning or financial management information; no performance measurement or reporting; no bringing together of full costs, nor comprehensive budgeting, nor matching financial authority with operational responsibility. No professional financial advice was available. There could thus be no confidence that the Houses overall needs were being met, nor that it was getting good value for money.
5.2 The starting point was that a complete overhaul of financial systems was an inescapable necessity. A modern, comprehensive and computerbased system was essential. Change would have to be tailored to the special needs of the House, and involve the minimum of expenditure. A key element in introducing professional financial management was the appointment of a Finance Director, personally responsible to the Accounting Officer, and so to the House. As the Houses Principal Finance Officer he would also have a wider role in providing professional financial support through the Clerk to the Speaker, the Commission and other policymaking bodies. He would be Head of a revamped Administration Department, to be called the Department of Finance and Administration (DFA).
5.3 Ibbs saw the new DFA as being the mainspring for further administrative and financial developments.
5.4 Ibbs foresaw substantial change. The accounts functions of the Fees Office would continue, together with the service to Members in respect of salaries, allowances and pensions. But in addition the Department would have to develop and install a comprehensive financial management information system and fullcost departmental budgets. Ibbs saw this as a substantial undertaking, occupying at least twelve months.
5.5 The DFA would develop and offer to the Commission, Committees and Departments a range of financial services, including financial planning, monitoring and review, and the financial appraisal of new proposals. It would also provide dedicated support for the new post of Director of Works.
5.6 The DFA would continue to provide personnel services to the Departments of the House a more difficult task as the Civil Service, the statutory comparator, moved away from centrally controlled pay and conditions.
5.7 Ibbs acknowledged that these new functions would require skills which might not exist in sufficient quantity. These, acquired either through training or staff changes, would be a priority.
5.8 Annex H of the Ibbs Report considered a number of methods and techniques used elsewhere, and assessed their possible contribution to better financial management in the House. The Report acknowledged the special circumstances and requirements of Parliament, but judged nevertheless that these methods could be adapted and applied effectively:
budgeting and manpower planning, to ensure that resources are used to best effect and as a basis for assessing performance. The largely demandled House services would require commensurately skilful planning; but the regularity of many activities, and forecastable staff costs, would offset these difficulties. The process would have to be supported by reliable data
performance measures, enabling managers to assess the economy, efficiency and effectiveness of their work; and providing benchmarks for productivity and efficiency gains. The data would have to be simple to understand and easy to collect in the course of business. Ibbs acknowledged that some of the work of House Departments would be very much more amenable to this approach than others, but felt that performance assessment in some form would be applicable to all types of activity
reporting and accountability. Ibbs noted that almost all public sector bodies were required by Parliament itself to report regularly. This might embrace aims, activities, achievements, performance against targets and a view of future activity and developments. The purpose was twofold: to provide information, but also to demonstrate accountability. Ibbs noted in particular that there was little material of this kind in the annual report that the House of Commons Commission is required by statute to make, and he recommended that departmental annual reports (with cost and performance data) should be published as annexes to the Commissions Report
objective setting, focusing attention on the organisations purpose and priorities, and need for matching resources. Overall objectives should cascade down into divisional, sectional and personal objectives. Ibbs acknowledged that some types of activity in House Departments would lend themselves better to this process than others
financial management information. Ibbs found the Houses financial information systems to be inadequate. They were not able to provide data on the volume, nature or timing of the demand for services; it was thus not possible to calculate unit costs and make informed decisions about the use of resources. Ibbs suggested that unit cost measurement for different activities might also allow reassessment of established practices which might be expensive or inefficient. He also acutely, in our view suggested that the publication of unit costs would indicate to
users the actual cost which they were incurring, which might encourage costconsciousness and help regulate demand.
5.9 In recommending these methods and techniques, Ibbs emphasised that there was no need for managers to be overwhelmed by statistics, but that it was important that they should be able to have information which
they themselves saw as valuable for improving efficiency and the quality of service.
5.10 A Director of Finance and Administration (DoFA), recruited from outside the House Service, was appointed in July 1991. He became Head of the new Department of Finance and Administration, and the Houses Principal Finance Officer and Principal Establishments Officer. His successor, the present DoFA, was appointed in January 1997.
5.11 A Finance Office, separate from the Fees Office (which continued to be responsible for Members pay, allowances and staff) was established in September 1991. Initially staffed by 23 personnel from the Fees Office, one of its principal tasks was to implement the financial management recommendations of the Ibbs Report.
5.12 The postIbbs transfer to House control of the HMSO Vote involved setting up systems for checking and paying invoices of some £1 million per month. The transfer of the Works Vote also required the transfer of the associated administrative, personnel and financial control systems from the Property Services Agency. Works payments (about 400 per month, totalling some £2 million) were taken on by the Finance Office. The House also took responsibility for over 200 transferred staff.
5.13 Ibbs had seen the DFA as the mainspring for further administrative and financial developments, including a comprehensive financial management information system and fullcost departmental budgets in the first twelve months. Progress on this, and on the range of financial and personnel services the Ibbs team foresaw being provided by the DFA to other Departments, was relatively slow.
5.14 We think there are four main reasons for this:
a very low baseline: the systems and techniques required were embryonic or nonexistent
- the requirement upon the DFA to introduce
major change has had to be combined with routine delivery of services, the volumes of which have increased. Over the period 199394 to 199899 payments rose from 11,429 to 18,869 a year (+65%); staff changes from 1,207 to 1,432 (+19%); and recruitment exercises from 107 to 198 (+85%). DFA staff levels have remained broadly constant (+1.7%) over the period
the degree of independence of other Departments: In a corporate culture, different elements of the organisation would own change of this sort adapting it for maximum local effectiveness, but jointly committed to the process. The federal structure has been a barrier to change of this sort. It may also be that in the years immediately following the Ibbs settlement the DFA could have been more effective in persuading other Departments of the possible benefits of improved methods for managing their operations
lack of financial imperative: the House Votes have not been cashlimited and even within a noncash limited régime, there has been until recently a fairly relaxed approach to setting budgets and priorities, together with a widespread assumption that money will always be forthcoming if it is thought to be needed
5.15 It is now eight years since the start of the Ibbs change process. Over most of this period, change has been much slower than Ibbs envisaged. However as we noted in paragraph 4.59 over the last two to three years progress has been made, and the process of change has been accelerating.
5.16 We now examine the present state of play on each of the aspects of financial management discussed in the Ibbs Report (see paragraph 5.8 above).
5.17 The main developments have been:
- Departments have responded to the requirement of stricter financial discipline urged by the Finance and Services Committee at the end of the last Parliament; this is reflected in the individual Departmental Reports attached to the Commissions 199798 Annual Report
- business and financial planning has produced better linking of objectives and service levels to cost projections, and better accommodation of Housewide issues
- following recommendations by the Board of Managements Corporate Management Working Group, a common approach and format for Departmental plans has been introduced
- Although the preparation of threeyear plans will continue following the replacement of the Public Expenditure Survey by the Comprehensive Spending Review (CSR) in which the House Administration voluntarily takes part the Commission has also agreed to an integrated fouryear review of financial plans, linked to Departments business plans
- substantial effort is being made to improve the quality of estimating, especially on salaries, security and printing and publishing (which together represent some 70% of expenditure on the Administration Vote)
- the Board of Managements examination of proposed increased in expenditure is now more rigorous, and linked more closely to the achievement of stated Departmental aims
- each Department has appointed a Departmental Finance Officer; and the DFOs form the Planning and Management Committee (Finance) set up in February this year
- the newly created PMC(F) has played an effective part in the current PES/Estimates round (although Departments have not yet reached the point of being constructive critics of each others plans). It has also worked effectively on crosscutting issues
- business cases (introduced April 1997) are now required for all projects with life cycle costs of more than £150,000, to be considered by the Board of Management. These contain the standard elements of identification of need, possible solutions and their feasibility (taking account of costs and operational requirements), clear and measurable objectives, and assessments of risk and of the implications for other Departments and services
- Housewide Establishments and Financial Policies and Procedures were published in August 1998 following approval by the Board of Management. These set out delegations and authorities, with associated thresholds, so that Departments (through Departmental Finance Officers), and the Finance Office (as well as the National Audit Office) have a clear understanding of functions, responsibilities and limits. The financial policies are based on Government Accounting
- there is wider awareness of the possibility of outsourcing. The longterm users of outsourcing have been the Clerks Department, who for more than 30 years have bought in a wide range of specialist advice to assist in the support of Select Committees. 90 specialist advisers, many of great eminence, are currently appointed. With the transfer of Works to the Parliamentary Works Directorate, a major area of outsourcing to contractors was added. Recent developments include the use by the DFA of a contractor to provide a gateway to a range of contract and procurement services (from April 1998), and the use by the Serjeant at Armss Department of a wider range of contractors (in addition to the longstanding arrangement with the Metropolitan Police for the supply of security and protection services)
- there has been increasing emphasis on more effective contractual and procurement management. Some negotiating skills and market knowledge have been bought in by the DFA. Standard contracts have been introduced. Departments have shared information on contractors and costs, leading to the issue of a House Purchasing Manual in December 1998. Nevertheless, an external purchasing review carried out for the Serjeant at Arms (reported October 1998) identified a need for a wide range of professional contracts and procurement practices in the three elements of that Department (Core Serjeants, the Parliamentary Communications Directorate and the Parliamentary Works Directorate). The PWD was identified as being especially vulnerable; the recommended term appointment of a Deputy Director (Contracts and Procurement) has now been made
- resource accounting and budgeting (RAB): following agreement by the House of Commons Commission that RAB should be introduced for the two merged House Votes with minimal load on Departments, preparations were being made by the Finance Office for its introduction in 19992000 at the same time as Government Departments. These included the definition of Departmental aims and development of the methodology required (such as capture of accurate information, introduction of stock control, the identification of fixed assets, the definition of asset life and depreciation policy). Final accounts for 199899 have been produced in both cash and accruals format, and a draft balance sheet has been submitted for approval to the National Audit Office. The Members Salaries etc. Vote is to move to an RAB basis by analogy; but as no assets or capital are employed the practical change will be minimal
- manpower planning: for most of the period since the Ibbs Report, Departmental staffing levels were controlled through approvals of complement by the Commission or the Clerk, on the recommendation of the Board of Management or the Head of the Establishments Office. The Staff Inspector scrutinised any proposed increases or regradings, and carried out a cyclical programme of departmental inspections to monitor standards and make recommendations for change if necessary. This had the disadvantage that the Staff Inspectors detailed scrutiny of increases normally happened after approval of the necessary Estimates provision; and, historically, staff costs were overprovided for in the Estimates (being based on complement rather than on staff in post). The result was an incremental approach to staffing which meant that there was no broad view of manpower levels required
In November 1998 the Commission approved the Board of Managements proposal that staffing costs should be held within a net financial limit in the short term (to April 2000). On 14 December 1998 the Commission approved the Boards proposal for a Housewide system for the control of manpower costs, with the following key elements:
- cases for increases based on Departments total needs, not on the requirements of an isolated service improvement; scrutiny by the Board of Management before approval of Estimates
- greater financial stringency accompanied by increased flexibility in deployment and grading of staff within control totals
- regular audit to ensure value for money and common standards
- Departments responsible for recording manpower usage and band levels to support PES/Estimates submissions, for audit and for publication in Departmental plans and Commission Annual Report
- reviews of recruitment policies and procedures, and of training and development policies, are planned
- Senior Management Reviews of each Department were carried out by a highlevel internal team in 199697. These were aimed at making longstanding management structures simpler and more appropriate to the tasks being performed. The implementation of the Reviews recommendations is now largely complete
5.18 Performance measurement is widely, but not consistently, used throughout the House Departments. The concept is generally understood; but techniques of measurement need further development, with greater consistency between measurements applied to similar activities.
5.19 There is a tendency to report activity rather than performance. As Ibbs acknowledged, some activities in House Departments lend themselves more easily to performance measurement than do others. Activity information is also easier to collect, and in the reactive Parliamentary environment its value should not be underestimated; but it should not be confused with, nor replace, performance measurement.
5.20 The next step in this process will be in the development of more comprehensive measures for resource accounting and budgeting. Possibilities being explored (with a view to formulating six or so measures for each Department) include:
- effectiveness: service level delivery
- against management standards of quality
- against customer satisfaction where possible
- efficiency: as measured, for example, by:
- unit costs
- other appropriate benchmarks
- indicators of internal progress such as
- IiP accreditation
- achievement of major project milestones
5.21 This has two purposes: to give information about the organisation and to demonstrate accountability for public funds.
5.22 The information side has been strongly developed. Departmental reports are included in the Commissions Annual Report (as recommended by Ibbs) and they are of good quality, covering activities, achievements and plans in some depth, together with performance measurement to the extent we noted above. The Annual Reports contain summaries of the two House Votes (Estimate and outturn for year under review, plus Estimate for the forthcoming year) together with cost summaries and activity indicators over the previous three years, and statements of staff changes and regradings, complements, and salaries and allowances. Presentation is good, with effective use of graphics. Organisation charts for the House Administration complete the picture. We think that in most respects the document compares well with other public sector reports of a similar type; but we note that it does not contain the detailed three-year plans which appear in Government Departments annual reports.
5.23 Further improvements will be possible with:
- reporting of the manpower planning and control system from April 2000
- the introduction of resource accounting and budgeting
- development of performance measures (also in the context of RAB)
- development of cost information (see paragraph 5.48)
- formulation by the Commission of a strategic plan (see paragraph 15.7)
5.24 In the context of the greater financial responsibility to be borne by the House with the transfer of works and other services, the Ibbs Report suggested that the National Audit Office should carry out regular value for money (VFM) studies, which would be subject to review by the Public Accounts Committee as part of its annual programme of work. We understand that, by agreement between the NAO and the Finance and Services Committee, these VFM studies have not taken place in the form envisaged. Emphasis has instead been placed upon the role of the Houses internal audit service in adding VFM work to its audit programme, with the secondment of NAO personnel as required.
5.25 The current audit arrangements are therefore as follows.
5.26 The Comptroller and Auditor General (C&AG) is the external auditor of the three Appropriation Accounts (for the Administration Vote, the Works Services Vote and the Members Salaries etc Vote). This focuses on transaction information, on accounting and financial control systems which underpin proper financial reporting, and on risks to regularity and propriety. He provides an audit opinion on each, as he does to Parliament on the Appropriation Accounts of Government Departments. In doing so, he must be satisfied that each account properly presents the expenditure and receipts of the relevant Vote, and that the money has been applied for the purposes intended by Parliament and conforms with the relevant authorities. The audit work necessary to support the C&AGs opinion is carried out by the NAO.
5.27 The C&AG also audits other House accounts such as those for the Refreshment Department and the History of Parliament Trust (which is funded by a grant-in-aid from the Administration Vote). The C&AG has not qualified any of the Houses accounts, nor reported upon them (although any suggestions for improved financial controls are passed to the Clerk of the House and senior finance staff).
5.28 The programme of internal audit is approved by the Clerk of the House and by the Finance and Services Committee.
5.29 The Internal Auditor is supported by three professional staff, and is directly responsible to the Clerk. The focus of internal audit is on the systems and controls underpinning the Houses operations, including those supporting financial transactions, but taking business risk into account. Internal and external audit should complement each other; co-operation between the House internal audit and the NAO seeks to minimise duplication.
5.30 In 1997-98 Coopers and Lybrand conducted an independent review of Internal Audit, endorsed changes made over the previous two years and concluded that a risk assessment model needed to be in place before the Government Internal Audit Standard could be complied with. This has now been done, and internal audit of the Administration Vote and the Works Services Vote now meets the Government Internal Audit Standard.
5.31 Following the recommendations of the Senior Management Review of the Department of Finance and Administration, Internal Audit was amalgamated with the Staff Inspection function to form the Internal Review Service. This is a sensible development, not least with new manpower planning and control systems in prospect.
5.32 We think that the
framework of audit arrangements is satisfactory, but that effectiveness and control could be improved. We return to this in paragraph 15.69.
5.33 There has been considerable recent progress towards the setting of objectives, allied with the use of performance measurement. In Departmental terms, desired outcomes have normally been in terms of aims rather than quantifiable objectives; this is likely to change with the introduction of RAB. The overall effectiveness of objective setting would be greatly helped if the Commission were to set strategic aims and priorities for the House Service. There is already extensive setting of objectives at office, unit and section level, based on the required contribution to a Departments aims.
5.34 Personal objective setting is now fully part of the staff appraisal system: for the Senior Commons Staff (SCS pay bands 1 and 2, former Grade 5 and above) starting in the 1997-98 reporting year, and for Pay band A1 (former Grade 6) and below, except for craft and catering grades, starting in the 1998-99 reporting year. Achievement of objectives is an important factor in the overall assessment of performance and so in determination of performance-related pay. Personal objectives are linked upwards to wider office objectives and Departmental aims.
5.35 The SUN Accounts business system was introduced in the DFA in April 1992. Unstructured alpha-numeric subheads were replaced by structured expense codes, allowing collation of costs on a House-wide basis.
5.36 The Finance Office in the DFA produces the following reports for House Departments (as well as for its own consumption):
- standard management accounts showing expenditure by expense code are produced monthly for each Department. This information goes to Departmental Finance Officers and appropriate extracts to individual budget holders. More detailed lower-level reports are produced for budget managers in some Departments
- monitoring of expenditure profiles and cost reports by month, year to date, and against previous year
- a range of specific reports for individual Departments, for example: payroll reports for the Refreshment Department and PWD; European delegation expenditure, broken down by Member/visit/Committee/delegation, for the Clerks Department; and profit and loss accounts for the Parliamentary Bookshop
5.37 The DFA also carries out overall Vote monitoring and produces PES/Estimates database information for the Treasury. It monitors cash flow on all three Votes, also for the Treasury. The Department produces formal Appropriation Accounts for the Treasury and the NAO.
5.38 A wide variety of personnel management information (mainly relating to starters, leavers, probation and absence) is also prepared, and the Department has the capability to generate a range of reports based on Member/staff/payroll/allowance information.
5.39 The DFA is working towards the introduction of a generic management information reporting system, overarching the systems at present in use. This will allow reporting on any aspect of payroll, personnel, asset and financial information carried on DFA server-based systems.
5.40 There is a demand from some House Departments for better information, or information in different categories or formats. The DFA is consulting with other Departments about the nature of the management information it supplies, and the scope for making it more useful and user-friendly. Simplification of the chart of accounts may assist in this process.
5.41 The Serjeants Department and the Refreshment Department are what might be termed the transactional Departments, providing goods and material services. They have substantial systems of their own to support their own types of business, in addition to drawing on financial information provided by the DFA.
5.42 A summary of financial and other management information available to Departments appears at Annex F.
5.43 The availability of financial and other management information is one side of the equation; its application to provide effective management is the other. The Ibbs Report concentrated on financial management information; we have widened this to encompass the use of all types of management information in House Departments.
5.44 The variety of developments reflects the range of roles and services in each Department. Some provide knowledge and consultant type functions, exemplified in the management and direct support of Parliamentary business, and provision of advice and information. These functions need collegiate sharing of views, information and professional developments. Transactional, commercial and service activities, on the other hand, need more directed management towards specific outcomes. But there are no hard and fast divisions; both approaches are relevant to all Departments in varying degrees.
5.45 Management information financial and otherwise is being refined and improved. Overall, it is developing in a way appropriate to the type of business being conducted. There are two main areas for improvement:
First, in the shorter term it would be possible to collate and present information in a House-wide form which would be more useful to the Clerk of the House, the Board of Management, and Departments, than it is at the moment
Second, it does not yet (except in the Refreshment Department) meet a key Ibbs requirement: providing cost measurement of Departmental activities
We look first at improvements which could be made relatively quickly.
5.46 The Clerk and the Board of Management need better
corporate information, reported monthly. The exact mix will be for them to decide, but it could include the following:
cash flow statement, showing spend to date, target to date, annual estimate and annual forecast
operational costs statement, to ensure that costs are within the resource budget. It would include manning costs, depreciation and cost of capital charges, broken down as necessary, with reasons for variations explained. House-wide allocation policies will be needed for these
staff activity report: staff in post (by full time equivalent), manpower budget, and manpower forecast. Sickness and training targets and forecasts could also be included
activity report: based on sitting days and hours, committee and other business activity. Key indicators will be those with influences on cost (staff, overtime, security, energy, etc)
projects and other items on which the Clerk and the Board want to exercise particular surveillance, for example the IT convergence programme
5.47 Departmental management information will match the corporate headings because each Department will be part of the whole (and Department Heads will need to be briefed on problems and variances in order to be able to handle them at Board level). The information will go down to lower levels (sub-Department or Office, unit and section) and project information will be an important element. Lower level information for individual managers will need to be tailored from these components.
5.48 If the consumption of resources to support an activity or an iterative process is known, then priorities can be set on the basis of proper information; there may be a basis for looking again at the cost and method of some routine work; and the real cost per use or per user can be known which may itself be a basis for more discriminating and economical use of services.
5.49 This technique needs to be applied intelligently and realistically in the House environment. In what we have called the transactional or commercial activities it could, for instance, inform decisions on staff levels and possible outsourcing. In the core businessthe direct support of Parliamentary activities one does not stop doing something, or do it less well, because it is expensive. If something is needed, it is provided, to the appropriate standard, as quickly as necessary. But even in this area, cost information has a role to play. Could elements of Select Committee support (travel arrangements, or information and press relations, for example) be more cheaply provided by a central unit in the Committee Office rather than by individual Committee staffs? Perhaps, perhaps not; but without cost information no-one will know. And if the answer is that it could be cheaper, that is still only one driver; Select Committee managers will need to be convinced that a new system will be of the same or better quality. But an element in their consideration would now be whether savings could release resources (including time) for other purposes.
5.50 The current strategic review of information is another example. The real cost of providing information to the outside world by request, category and source is not known. If it were, informed judgements could be made about resources and priorities. How economical and effective is the central provision of some types of information? Would greater delegation to information
originators produce resource savings which could be reinvested elsewhere?
5.51 The collection and interpretation of cost information will have to reflect House circumstances. Some staff (for example in the procedural Offices in the Clerks Department) have several quite distinct jobs with fluctuating demands on time which will make allocation of costs difficult. And if a particular Department is required to maintain a capability, that has to be done regardless of possibly low usage which would suggest unrealistically high unit costs.
5.52 The introduction of resource accounting and budgeting will be an important step in improving cost information. The inclusion of accommodation costs will also inform longer-term decisions about:
- relocation of some activities outside the comparatively expensive Parliamentary estate (outhousing)
- multiple use of facilities such as office space (known as hot-desking). This is especially relevant when staff located at a distance need to be at the centre for short periods
5.53 Once better cost information is available, comparisons with best practice elsewhere, and benchmarking of similar activities, will be possible. This is already practised by the Refreshment Department, and could be extended into other areas, for example processing of payments, aspects of staff and payroll services, and heritage maintenance and conservation. It is of course important to compare like with like to produce valid data. The Internal Review Service will have a part to play in developing and applying comparators.
5.54 There is already awareness of cost information issues at a senior level in the House Service; and unit and activity costs will be an important element in developing the Commissions strategic plan to provide the framework within which the Board of Management can work.
5.55 SUN Accounts is the main finance system and is operated by the Department of Finance and Administration. However, in the House Service as a whole, there is a variety of accounting and financial systems. There are no doubt various possible reasons for this:
- the federal structure allowing even encouraging separate development
- a wish to tailor systems to the particular requirements of Departmental business
- dissatisfaction with access to, or the service available from, the
SUN system. A factor in this has probably been the extent to which the PDVN has been able to support such access
5.56 There is room for development and improvement of accounting systems:
coverage: there is still significant manual handling of invoice and other material which has to be input as a separate operation. It will be important to end or reduce duplication of operations: we see no reason why some accounts functions in PWD, for example, exactly parallel those in the DFA but are carried out separately
access: Departmental usage requirements will vary, but there will be advantages in direct access, particularly to a more integrated system, and in the ability to tailor reports to local requirements
ensuring that the PDVN is able to handle businesscritical systems