Document Sample
					                                                               AGENDA ITEM 11.3


                              Report to Cabinet

                                19th June 2007

            TITLE:       Annual Efficiency Statement - Backward
                         Look 2006-07

            PORTFOLIO:   Finance and Resources

            OFFICER:     Corporate Director and Chief Finance

            WARD:        Non-Specific

1     Recommendations

1.1   That the DCLG efficiency statement requirements are noted

1.2   That the 2006/07 Backward Look Efficiency Statement is approved

Reason for Recommendations: In order to comply with the Department for
Communities & Local Government (DCLG) requirements in respect of the delivery of

2     Executive Summary

2.1   Members received a report in December 2004 detailing the requirements
      arising out of the Gershon Review of Public Sector Efficiency that was
      conducted during 2004.

2.2   The review identified a number of areas where services delivered in the public
      sector could be delivered more efficiently. Following the development of the
      outcomes of the review three-year efficiency targets were set for each central
      government department.

2.3   Local government is required to achieve some £6.45 billion of efficiencies by
      2007/08 which equates to 2.5% in each of the next three financial years, half
      should be cashable i.e. should be able to be diverted into frontline service
      delivery. Initial targets based on SR 2004 have now been revised to take into
      account the actual Out-turn for 2004/05. This Council is now expected to
      achieve some £928,000 by 2007/08. The cumulative target for the end of
      2006/07 was £629,000.

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2.4   Local authorities are able to retain the efficiencies generated but have to
      demonstrate to DCLG how future efficiencies are to be achieved and where
      they have actually been achieved.

2.5   Further guidance has been issued by DCLG for the production of Annual
      Efficiency Statements by local authorities. The statement continues to be
      based on self-assessment, however, clearer instructions have been given with
      regard to the best practise and issues for consideration. These have been
      reviewed and changes made where necessary.

2.6   The 2006/07 Backward Look Efficiency Statement is required to be submitted
      by 8th July 2007. This is in line with DCLG’s requirements which are detailed
      in Appendix A.

2.7   The draft version of the 2006/07 Backward Look Efficiency statement is
      attached at Appendix B for members’ consideration and approval. If approved
      this will be submitted to DCLG within the timescale set.

2.8   The analysis of the statement shows that the cumulative efficiency savings
      generated at the end of 2006/07 were £716,232. This is some £87,232
      (13.9%) ahead of the cumulative target of £629,000

3     Evaluation of Options

3.1   There are no options to consider as completion of the Annual Efficiency
      Statement is a statutory requirement.

4     Implications

4.1   Community Safety:          None

4.2   Employees:                 None

4.3   Diversity:                 This report has been prepared in accordance with
                                 the Councils Equality and Diversity Policy

4.4   Financial:                 The efficiencies outlined in the 2006/07 Efficiency
                                 Statement have already been incorporated into
                                 the Council’s 2006/07 Accounts Closure.

4.5   Legal:                     None

4.6   Sustainability:            None

                              ANDREW P. STOKES
                   Corporate Director and Chief Finance Officer

                                      - 2 -
Background Papers                 Location           Contact
Cabinet Report – Gershon          Moorlands House    Andrew P Stokes
Review      of   Public Sector                       Corporate Director and Chief
Efficiency (07-12-04)                                Finance Officer
                                                     01538 483554
ODPM - Efficiency Technical
Note     (ETN)   for     Local
Government (January 2005)
ODPM – Delivering Efficiency in
Local Services One Year On
(February 2006)

ODPM – Measuring and
Reporting   efficiency Gains
(February 2006)

ODPM – Measuring and
Reporting efficiency Gains (May

HM Treasury – Releasing the
resources     to  meet    the
challenges ahead: value for
money      in    the    2007
Comprehensive        Spending



Interests Declared:

                                             - 3 -
5     Background and Introduction

5.1   In December 2004 Cabinet received a report outlining the outcome of a report
      from a review by Sir Peter Gershon which was commissioned by the
      Chancellor in August 2003.

5.2   The main purpose of the review was to identify resources from activities that
      could be undertaken more efficiently in order to put more money into frontline
      services that meet the public’s highest priorities. The review identified six
      priority areas for the focus of the achievement of savings. These were as
      follows: -

         More collective and professional procurement across the public sector
         More efficient provision of back office functions such as HR, Finance,
          ICT and Property Management
         Transformation of transactional services such as benefits processing
          and council tax collection by accelerating the use of new technology
         Reducing the amount of resource that is spent on setting policy,
          allocating funding and regulating quality by simplifying processes
         Reducing the cost burden of the regulation of private sector companies
          by securing high levels of public benefit at the lease cost to both
          businesses and government
         Increasing productive time available to frontline staff by reducing
          bureaucracy and reducing the turnover of staff

5.3   The review was conducted through a number of stages and involved
      gathering benchmark data on efficiency from government departments and
      wide range of consultation with other public sector bodies.

5.4   The review produced overall efficiency targets for each government
      department and in response departments were required to produce detailed
      efficiency technical notes (ETN) which set out that departments approach to
      measuring the efficiency achieved over the next three years.

5.5   The targeted efficiency required from local government is some £6.45 billion
      which represents some 2.5% per annum over the three years commencing in
      2005/06. DCLG is required to lead and co-ordinate with other government
      departments the collective local government package.

5.6   The local government ETN was published on the 9th November 2004 which
      confirmed the overall efficiency target and set a requirement that at least one-
      half of these savings should be “cashable” i.e. they should deliver a direct
      financial saving or benefit that can be spent elsewhere. Other savings (“non-
      cashable”) do not necessarily lead to lower costs but will lead to improved
      performance for the resources used.

5.7   Local authorities are able to reinvest the savings made into their own frontline
      service priorities but will be required to produce an Annual Efficiency
      Statement (AES) for each financial year detailing the individual savings
      achieved in the previous year and proposed for future years. DCLG has also

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      required that the Audit Commission includes an assessment of the AES in
      each future CPA report and that it is incorporated into the annual external

5.8   The government has also reviewed the progress made and issued further
      guidance on measuring and reporting the efficiencies. In 2005/06 local
      authorities highlighted efficiency savings totalling £1.9bn, which was
      significantly ahead of the £1bn target set for councils. A further 31.3bn is
      expected by the end of 2006/07 totalling £3.1bn, surpassing the 2007/08
      cumulative total of £3bn, one year early.

5.9   The purpose of this report is to outline the efficiency requirements and to seek
      approval for the Council’s 2006/07 Backward Look Efficiency Statement.

6     Local Authority Efficiency Requirements

6.1   DCLG requires councils to achieve 2.5% per annum improvements on their
      2004/5 actual expenditure, of which at least half should be cashable. By
      2007/8, efficiency gains equivalent to 7.5% of the 2004/5 outturn should be
      achieved. This Council’s target for 2006/07 was £299,000.

6.2   Efficiencies are required from capital investment as well as revenue
      expenditure. Councils have full flexibility on the workstreams by which they
      achieve efficiencies, subject to the proviso that they attain cashable gains of
      at least 1.25% per annum.

6.3   All guidance stresses that efficiency is not about cuts, but about raising
      productivity and enhancing value for money. It states that efficiency gains
      accrue when projects achieve one or more of the following: -

         reducing inputs (money, people, assets, etc) for the same outputs;
         reducing prices (procurement, labour costs, etc) for the same outputs;
         getting greater outputs or improved quality (extra service, productivity, etc)
          for the same inputs; or
         getting more outputs or improved quality in return for an increase in
          resources that is proportionately less than the increase in output or quality.

6.4   The guidance also stresses that certain types of activity are not acceptable as
      efficiency gains. These are specified as follows: -

         Re-labelling of activity (e.g. reclassifying inspection as advice);
         Cuts that result in poorer services for the public; or
         Increased income purely from higher prices in fees and charges to the

6.5   The guidance goes on to state that cashable gains represent the potential to
      release resources for reallocation elsewhere. By contrast, non-cashable gains
      are achieved through such means as improved quality or additional outputs
      for the same level of resources.

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6.6   DCLG recognises that most councils already follow good practice in planning
      for, and monitoring progress on, improved efficiency and value for money by:

         identifying actions to improve efficiency and quantifying expected gains in
          setting the annual budget as part of medium term financial planning;
         monitoring progress on their actions, to determine whether any change in
          plan is required;
         identifying the financial impact of actions taken after the end of the
          financial year.

6.7   The process of accountability for improved efficiency is being formalised by
      DCLG in two different ways:

         a requirement to complete a self-assessed Annual Efficiency Statement in
          two parts (a forward look statement that details the efficiencies planned for
          the year and a backward look statement that confirms the actual
          efficiencies achieved); and
         a requirement from single-tier and county councils (with the exception of
          those with excellent status under CPA) to provide DCLG with a self-
          assessed mid-year update.

      The full scrutiny process in relation to the backward looking statement, is
      detailed in Appendix A

6.8   The Comprehensive Spending Review 2007 ensures the continued need for
      efficiencies within the local authority agenda. It outlines proposals to seek 3%
      annual efficiencies for the period to 2010/11, compared to 2.5% for the current
      CSR period. Further targets and details are yet to be published.

7     Annual Efficiency Statement

7.1   The primary source of information on efficiency gains by each council is a
      self-assessed Annual Efficiency Statement (AES) to be signed by the Leader
      of the Council, Chief Executive and Chief Financial Officer.

7.2   The backward look for 2006/07 efficiencies is required on or before 8th July
      2007. The statement should include an outline of the strategy for securing
      efficiency gains, the key actions taken during the year, and the efficiency
      gains achieved as a result from them. It also details those efficiencies which
      are expected to be maintained through to 2007/08.

7.3   Councils should include the backward-looking Statement in the Value for
      Money self-assessment to be submitted to the Audit Commission from 2006
      as part of the annual Use of Resources assessment. Councils may also
      choose to include the Statement as part of their Best Value Performance

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7.4   Subject to the Audit Commission’s current consultation, the Commission will
      consider the Statement in its annual “Use of Resources” judgement. The
      process for this assessment will be incorporated into the annual external
      audit. The assessment will be provided by the Audit Commission to the
      Council and DCLG by mid-December following publication of the statement.

7.5    The timetable for 2007/08 can be summarised as follows: -
 5.1 Timescale for future actions on measurement (2004-2006)
                   Date                                       Action
On or before 12th April 2007               Local authorities will need to submit the
                                           forward part of the AES looking ahead to
                                           the year 2007/8
On or before 5th July 2007                 Councils submit the backward part of the
                                           AES, setting out efficiency gains
                                           achieved in 2006/7
On or before 15th November 2007            Single tier and county councils that do
                                           not have Excellent status are required to
                                           provide a mid-year update to DCLG
                                           Exempt councils are invited to provide
                                           returns to this timescale
On or before 8th July 2008                 Councils submit the backward part of the
                                           AES, setting out efficiency gains
                                           achieved in 2007/8

8     SMDC Efficiency Requirements

8.1   DCLG has calculated this Council’s cumulative efficiency requirements as
      follows: -

              2005/06 Efficiency Target                         330,000
              2006/07 Efficiency Target                         629,000
              2007/08 Efficiency Target                         928,000

9     2006/07 Backward Look Efficiency Statement

9.1   The 2006/07 Efficiency Statement is attached at Appendix B for members’
      consideration and approval. It should be noted that prior to submission of the
      return to DCLG a detailed review was carried out by Internal Audit to ensure
      that the claimed efficiencies are accurate.

9.2   Members will recall that the 2005/06 Backward Look Efficiency Statement
      identified efficiencies totalling some £377,209 that had been achieved against
      the target of £330,000.

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        9.3     A number of these efficiencies were one-off in nature and therefore will not
                count towards the 2006/07 cumulative target. The table below shows that
                some £259,807 of the efficiencies were realised again in 2006/07: -

              Efficiencies 05 / 06                     2005 / 2006                    C/Fwd 2006 / 2007
                                           Cashable      Non-        Total     Cashable      Non-      Total
                                                       Cashable                            Cashable
                                               £          £           £           £           £           £
New Service Arrangements                      20,540             -    20,540      20,540                  20,540
                                              20,540             -    20,540      20,540                  20,540
Corporate Services
E-Payments                                         -        1,933      1,933                   1,933     1,933
Increase in Collection Rates - NDR            42,870            -     42,870      42,870           -    42,870
Regeneration Staffing Reductions              33,552            -     33,552      33,552           -    33,552
Management/Administration Budget Savings     161,403            -    161,403     109,000           -   109,000
Restructure Graphics section                  10,125            -     10,125      10,125           -    10,125
Licensing increase productivity                    -       36,008     36,008           -           -         -
                                             247,950       37,941    285,891     195,547       1,933   197,480
ITNET Contract Arrangements                   28,000             -    28,000           -           -           -
Post in Procurement                           10,316             -    10,316      10,316           -      10,316
                                              38,316             -    38,316      10,316           -      10,316
Productive Time
Home Working                                   1,497        1,983      3,480       1,497        992        2,489
                                               1,497        1,983      3,480       1,497        992        2,489
CRM Implementation                            28,982             -    28,982      28,982           -      28,982
                                              28,982             -    28,982      28,982           -      28,982

TOTAL                                        337,285       39,924    377,209     256,882       2,925   259,807

        9.4     The table below shows that there were new efficiencies totalling £456,425
                realised during 2006/07. When these are added to the efficiencies that were
                identified in previous years but recurred in 2006/07 the cumulative position is
                that efficiency savings have been sustained against the 2005/06 budget level
                totalling £716,232. This is some £87,232 (13.9%) ahead of the cumulative
                target of £629,000.

        9.5     The cumulative total comprises some £657,828 of cashable savings which is
                far in excess of the requirement of 50% of the total (£314,500).

                                                   - 8 -
2006/07 Efficiencies                               Cashable        Non Cashable      Total
                                                      £                 £
                               Brought Forward           256,882             2,925     259,807
Culture & Sport
Leisure Centres Mgt Procurement                          102,130                       102,130
                                                         102,130                       102,130
Environment Services
Increased income from recycling credits                   24,000                        24,000
                                                          24,000                        24,000
New contract arrangements                                 29,000                        29,000
                                                          29,000                        29,000
Corporate Services
E-Payments                                                                   5,288       5,288
Rationalisation of Telephony                               1,250                         1,250
Rationalisation of ICT Systems                             9,350                         9,350
Shared Service Provision                                  37,930                        37,930
Review of Management Structure                            32,971                        32,971
Subscriptions and Association Membership                   5,000                         5,000
Increased Use of Industrial Units                         14,235                        14,235
                                                         100,736             5,288     106,024
Improvement in Routine Procurement Processes              23,080                        23,080
                                                          23,080                        23,080
Productive Time
Document Management (Revs & Bens)                          3,354                         3,354
Home Working                                                 505              992        1,497
Electronic Agendas and Minutes                             2,700                         2,700
Workforce Planning Review                                 40,000                        40,000
Licensing increased productivity                          18,668                        18,668
Building Control increased productivity                   25,033                        25,033
                                                          90,260              992       91,252
CRM Implementation                                        27,740            49,199      76,939
                                                          27,740            49,199      76,939
Revised Animal Welfare contract                            4,000                         4,000
                                                           4,000                 -       4,000

Total New Efficiencies for 2006/07                       400,946            55,479     456,425

Total Including Brought Forward                          657,828            58,404     716,232

Cumulative Efficiency Target                             314,500                       629,000

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                                                  APPENDIX A

Annual Efficiency Statements – Scrutiny Process

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