Assessing Value for Money in Supporting People Services

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                        Gateshead Supporting People

              Assessing Value for Money in Supporting People Services




1.1       Purpose

          Administering Authorities are required as part of the service review process to
          assess the value for money (VFM) for services to ensure they represent ‘Best
          Value’.

          A robust and transparent methodology is important for structure and
          accountability when making VFM judgements.


1.2       Aims and Objectives

          This guidance is to be utilised when assessing Value for Money (VFM) for
          services receiving Supporting People funding in Gateshead.

          The aim of this guidance is to

      •   Provide a consistent and accurate assessment tool for assessing value for
          money
      •   Allow for objective, accountable, and transparent value for money
          assessment
      •   Consider individual service characteristics and quality when assessing value
          for money
      •   Take into account appropriate guidance on assessing value for money
      •   Provide guidance for analysing Supporting People budgets



1.3       Definitions

          The Office of the Deputy Prime Minister (ODPM) define VFM as “a judgement
          about the price of a service in the light of the perceived value of that service”.
          (OPDM Introductory Practice Aid)

          A Cost Effectiveness Analysis (CEA) compares the costs of services that aim
          to achieve similar outcomes.

          A Cost Benefit Analysis (CBA) compares the costs and benefits of different
          types of services that don’t necessarily aim to achieve the same outcomes.

          Service Reviews focus on Cost Effectiveness Analysis (CEA), although
          Commissioning Bodies are recommended to consider Cost Benefit Analysis
          (CBA) when agreeing priorities.
1.4   How we will determine Value for Money

      We will assess the value of a support service by assessing its contribution to
      meeting desirable outcomes such as:

          •   Contribution to relevant strategies
          •   Meeting identified demand
          •   Delivering good quality
          •   Targeting people in need
          •   Meeting aims and objectives
          •   Satisfying service users and stakeholders
          •   Financial savings (e.g. preventing the escalation of need)
          •   Meeting contractual obligations
          •   Intended Benefits (Outcomes) for Service Users

      The sources of information that will be used are:

         •    Involving services users in service review and validation visits
         •    Involving stakeholders in service review
         •    Examining Quality Assessment Framework
         •    Assessing key requirements of strategic relevance and demand
         •    SP Performance Framework – Key Performance Indicators and
              Service Performance Indicators

      ODPM define cost as:

          •   Cost of the service
              Divided by
          •   Volume of service delivered

      Determinants of Cost

      The price of a Supporting People service will be defined from the weekly (or
      annual) contributions from all public budgets (eg. including Supporting
      People, Health, Social Services, etc). Only income that is funding housing-
      related support will be counted when considering the price of SP services.
      Sensitivity will be exercised when considering any funding sources that are
      time limited, for specific initiatives outside of the ‘core’ service being provided
      and/or secured through providers’ independent fundraising efforts.

1.4   High cost services

      A definition of a high cost service is:

      ‘A scheme for which, due to the high level of unit cost in provision of the
      service, the Commissioning Body requires the Administering Authority to
      report details of its costs and the range of SP services provided to the service
      user’



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      Factors which lead to high cost services are:

      •   Staffing levels
      •   Specialist services requiring more qualified and experienced staff (e.g.
          services for people with challenging behaviour, people for whom
          communication is difficult etc).
      •   High running costs due to the nature of the service eg high travel costs in
          a rural floating support service.
      •   A need to operate a service at less than maximum utilisation in order to
          be able to respond to periods of high demand for emergency referrals, e.g
          domestic violence refuge or direct access hostel.
      •   A local labour market where there is a shortage of suitable staff (demand
          for staff is greater than supply).
      •   High Management overheads


1.5   Low Cost Services

      Low priced services are usually those serving people with low support needs.
      However a number of other factors may lead to low prices and consideration
      should be made as to the future stability of the service and whether the
      service is sustainable at a low running cost.

      Factors to consider that may result in a low cost service are:

          •   Use of volunteer staff
          •   Under- resourcing leading to staffing levels that are too low to provide
              a quality service
          •   Low paid staff leading to recruitment and retention problems
          •   Low contribution to central overheads leading to an inadequately
              resourced provider organisation.
          •   Funding from a range of sources such as charitable payments or other
              funding, with SP only responsible for a small proportion of total costs.
          •   Cross – subsidy or loss making ( deliberate or otherwise by the
              provider)
          •   Efficiency gains or economies of scale achieved which have not been
              replicated or are not possible within other services.
          •   Market conditions where a large number of suitable providers have
              competed for business


1.6   Eligible Services

      Prior to a Value for Money Review being carried out, each service will have to
      meet the eligibility criteria as agreed locally by the Commissioning Body.



2.0   Tools for assessing Value for Money

      Government guidance requires a basic assessment of value for money as
      part of Stage II in the current review process. As part of our basic assessment
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      we will use the most recently published ODPM National and Regional data.
      This data identifies upper and lower quartiles and allows us to compare the
      weekly unit cost per service user for similar services.

      The limitations of this are that it:

          •   Does not look at inputs of the service
          •   Does not highlight high hourly rates
          •   Does not prompt an analysis of where the SP grant is actually being
              spent
          •   Looks at actual expense not value
          •   Does not provide information on the characteristics of the service,
          •   Does not look at other funding going into the service

      Nevertheless, the quartiles are a useful tool to provide an initial value for
      money assessment that is further expanded through an analysis of

          •   Hourly rates
          •   Staff to service user ratios
          •   Weekly support hours per service user

      Service providers will have access to all the evidence which is used to assess
      the VFM of the service. All documents will be made available and calculations
      will be explained to the provider.

      Figures will be compared to the actual cost of similar services (the costs of
      similar services will be made available but the services will not be identified).
      This will be based on the information gathered by the Supporting People
      review team, and the most recently published ODPM quartiles and any
      subsequent data provided by ODPM to assess VFM

      The weekly unit cost per service user is calculated by

      Block Gross contracts

      Total Annual Contract Sum ÷ No of units ÷ 52

      Subsidy Contracts

      This is the current figure per unit.

      •   The National and Local Regional upper and lower quartiles price for the
          appropriate accommodation type and client group will be referred to


2.1   Hourly Support Rates

      Hourly rates are an important element of the value for money assessment as
      it defines the cost in relation to an input into the service. Weekly costs per
      service user are often within the quartiles, but the hourly rate may be high.

      Cost per hour of service =

                       Annual contract price ÷ no. of weeks
                      Staff hours per week spent on support
                     (obtained from the KPI’s contract page)
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      •   Compare hourly support rates with similar services.

      •   Arrive at an hourly rate using the support hours specified in the service
          specification.


2.2   Staff to Service User Ratios

      The staff / service user ratio sets out the number of staff compared to the
      number of service users. This gives the number of hours of all staff who are
      employed.

      Staff service user ratio is calculated as follows:

      The number of Support Hours calculated as full time equivalent staff ÷
      Number of service user

      e.g. Scheme A has 21 service user with 2 fulltime support workers. Each
      worker spends 100% of their time on support and works 37.5per week.( 37.5
      x 2 = 75hours) Management spend 9 hours per week on support. Therefore
      total fulltime equivalents = 75 hours + 9hours = 84hours ÷ 37.5 = 2.24. Staff
      ratio = 2.24 ÷ 21 service users, which equates to 0.11 members of staff per
      service user.


2.3   Weekly Support Hours Per Service User

      An indicator of the levels of support is the weekly support hours per service
      user.


      Number of support hours per week
      Number of service users

      E.g. – Scheme A has 21 service users, with 4 full time support workers Each
      support worker works 100% on support duties 37 hours per week (37 x 4 =
      148 hours) Management spend 10 hours per week and administrative staff
      spend 8 hours per week on support service related duties = 18 hours + 148 =
      166 hours a week on the support service divided by 21 service users = 7.90
      hours per week full time staff support.

      We will consider whether the staffing levels are justified by comparing with
      similar services.


2.4   Contract Information

      Contract information will be amended following any changes to the contract
      and it is this information that will be used to assess VFM.




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2.5   Benchmarking Databases

      Nationally published benchmarks for SP services are currently relatively
      limited. ODPM have published some national and regional analyses of SP
      funding of different types of services for different user groups based on
      platinum cut data. As well as using this data we are part of the Tyne & Wear
      Cross Authority Group Benchmarking Club, that shares cost information on
      local services between Administering Authorities.

      To this end we are currently working with the Cross Authority Group (CAG) to
      be part of a local benchmarking club. Belonging to this group will help in the
      process of identifying benchmarks on a regional basis.

      When comparing services, we will compare similar services and take into
      account reasons why costs may be either unusually high or low.

3.0   Examining Supporting People Service Budgets

      Recent reviews have highlighted the need to examine budgets as a standard
      part of the review process. This is required so that we can check exactly what
      SP grant is paying for and to ensure we are not in breach of our grant
      conditions by paying for ineligible services.

      Providers are contractually obliged to provide any information reasonably
      requested as part of the review.

      All services will be asked to submit a budget on an annual basis which states
      where Supporting People grant is to be spent.


      See ‘VFM (Annual Assessment)’ document for sample budget headings
      that will be used to confirm actual expenditure.

3.1   Ineligible and Eligible costs

      There are many costs of running a supported housing service that are not
      eligible for Supporting People funding. Some floating support services are
      likely to get their only income from the Supporting People grant.

      For accommodation based services, it is important to acknowledge that costs
      related to the building or tenancy management are not support costs.

         •   Costs relating to the building or tenancy management should be paid
             out of rents
         •   Costs for providing communal services such as gardening, window
             cleaning, and communal utilities should be paid out of the service
             charge
         •   Personal use of utilities should be paid for by the tenant




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3.2   Housing Management and Support Split

      The budget analysis should identify what proportion of certain costs are being
      charged to support. Many services see the provision of support as their core
      business, and have apportioned the costs heavily to the Supporting People
      grant.

      There is no guidance on the set percentage of which duties should be split
      between housing management and support for accommodation based
      services. Providers should justify why there is a high percentage of time/costs
      to Supporting People.


      Questions to ask when examining budgets:

      Staffing

          •   Who does housing management? If is it support staff or managers, is
              some of their salary paid out of rents?
          •   Does SP grant pay for pensions? If so, are all staff receiving a
              pension?
          •   Does the overall manager work on other services? Should part of the
              salary be charged to that service?
          •   Are recruitment and training costs split between the rent and support?

3.3   Overheads/On costs/Office costs

      The ODPM has highlighted the need for thorough Value for Money
      assessments with regards to overheads.

      Overheads are those costs of a service that result not from the direct
      activities of the service itself but from the activity of the organisation that
      provides the service. Examples might include a share of the following:

          •   finance department
          •   IT infrastructure costs
          •   human resources department
          •   administration
          •   insurance
          •   audit and accountancy
          •   publicity
          •   office accommodation
          •   legal costs
          •   quality control and policy development etc.


      The costs listed above are all a necessary part of running a service.

      Points that will be noted when assessing overheads:

      •   It is possible for organisations to hide unjustifiable costs in their
          overheads, or to use overheads to create cross-subsidies between
          services (i.e. by unjustifiably charging higher overheads to some and
          lower overheads to others). It will be reasonable, therefore, to question
          the overhead component of a support charge if it appears unreasonable.
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         •    We will avoid making arbitrary reductions to funding                                  on    the
              unsubstantiated grounds that “the overheads seem too high”

         •    Overheads that represent between 10-15% of direct service costs1 are
              well within the normal range.

         •    Costs well below this range may indicate that a provider is not adequately
              resourced at the centre and so may have an inadequate infrastructure to
              ensure the sustainability of the service. In a case such as this further
              investigation will be necessary.

         •    Particular care will be exercised when comparing voluntary and private
              sector services with those run by the local authority because it is very
              common to find that local authority service budgets do not always properly
              reflect the full cost of services. This could arise from under-developed
              allocation of management and overhead costs to services and so can
              lead to unfair cost comparisons if not rectified. We will therefore, assure
              ourselves that management and support costs have been properly
              included in the costs of any services under consideration.

         •    We will verify that the associated running costs of the service are
              apportioned correctly between the rents and support.

         •    We will use benchmarking to compare the percentage of overheads for
              similar services

         •    Overheads may also include an element of profit or reserves. Some
              providers are motivated (at least in part) by profit. If they cannot make a
              profit from their services they are likely to leave the market, thus leading
              to a reduction in supply and in choice.

         •    All organisations, including not-for-profit sectors (RSL, Local Authorities
              and Voluntary Sector agencies) need reserves to carry them through
              periods of financial difficulties (indeed SP providers are required to be
              financially sound) and meet development costs. Reserves are only built
              up through the accumulation of annual surpluses, which are necessary in
              order to ensure financial stability

         •    All overhead costs will be scrutinised, but particularly overheads over
              20%.


3.4      Voids

         The pricing of accommodation based ‘block gross’ (i.e. short term non-
         chargeable) services were subject to a 10% reduction in SP grant to allow for
         voids.

         Some providers of floating support services also anticipated this deduction,
         although no actual deduction was made. The price of floating support

1
  Direct service costs are those incurred as a direct result of operating the service e.g. support staff, cost
of premises where the service is located etc. – as opposed to indirect costs which arise from the
infrastructure which exists to support the service (and often other services) e.g. the costs of activities
such as financial management, human resource management, marketing and publicity etc.
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      services may therefore have been inflated by providers and may require
      further scrutiny.

3.5   Other Ineligible Costs

      Supporting People grant should only to be used to fund housing related
      support.

      At Service Review an analysis of whether any ineligible tasks such as
      personal care or intensive counselling will be carried out.


3.6   Ineligible Service Users

      Some service users are ineligible for SP grant. This is because they are
      under a statutory duty and the cost of the support is paid by health and social
      care. These include

          •   Looked after /eligible children
          •   Asylum seekers

      If any of the above groups are accommodated at a scheme, and the contract
      is block gross the provider should inform the SP team, who will follow and
      agreed procedure for ineligible service users. This includes a process of
      reimbursing costs.

4.0   Involving Providers In Assessing Value for Money

      Where Value for Money has been highlighted as an issue in stage II of the
      review, providers should be informed, and should be given the opportunity to
      contribute to the VFM assessment. The provider should be given the
      opportunity to:

      •   Verify the interpretation of information
      •   Self assess the VFM of their service
      •   Compare the cost of their service with similar local services
      •   Confirm and share calculations
      •   Confirm that the records and information on the service are correct ( i.e.
          staff hours, staff ratios, hourly rates )

      A meeting should be set up, or included as part of stage III of the Review
      Process.

      In consideration of the saving requirement on the SP budget it is expected
      that providers should aim to proactively manage costs and maximise value on
      a ongoing basis in order to offer up saving where possible.


5.0   Assessing VFM at stage III of the Review Process

      If the weekly cost per service user per week is above the upper quartile, and
      further assessments conclude that the service is high cost then the VFM
      assessment will need to be considered in stage III of the review process. This
      gives providers an opportunity to justify the high cost of the service with
      evidence and state the impacts of any funding cuts.

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      Negotiations will start with the SP review team stating reasons why they
      consider the service to be of high cost. If possible this should be highlighted
      as early as possible in the review.

      The provider should be asked to consider savings. The SP team will start
      negotiations by offering the top quartile cost for the service type as a starting
      point. Providers will be asked to consider this and reply to the SP team within
      15 working days.

      The provider will need to write to the SP team with a response to the
      proposal.

      The provider will need to consider

         •   What impact will the funding reduction have on the service?
         •   How will it affect risk?
         •   What impact will it have on staff morale and recruitment?
         •   What other funding can be obtained for the service?
         •   Are the costs accurately apportioned between housing management
             and support?
         •   Are there any options for expanding the service within existing costs?
         •   Is the service being compared to the correct upper quartile for the
             most appropriate client group?

      Some services have a wide variety of client groups, or have traditionally
      classified themselves as a certain client group, but are now specialising. In
      some circumstances, the primary client group of the service will need to
      change e.g. a ‘single homeless with support needs’ service may actually
      mainly take ‘young people at risk’. The quartile for ‘young people at risk’ is
      higher than ‘single homeless with support needs’ therefore the service will
      appear better value for money.

      The SP review team will consider the economies of scale of smaller services
      who are not able to compete with larger services.

      The SP review team will need to meet with the provider to consider
      reasonable cost savings for the year. Consideration will need to be given for
      year on year savings targets.



6.0   Linking VFM and Quality and Outcomes

      When assessing VFM it is important to consider the holistic value of the
      service. VFM assessments should not be stand –alone judgements, which will
      only focus on price. Considering value for money involves looking at the
      quality of services as well as costs and looking at how the costs contribute to
      the outcomes of the service.

      When assessing VFM, the following qualitative indicators should be
      considered in an objective and consistent way:

         •   Validated QAF grades/ Provider’s Self-Assessments
         •   Strategic Relevance
         •   Local demand for the type of service
         •   Service user satisfaction
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         •   How the service contributes and records service user outcomes (e.g.
             how many service users moved to independent living, how many
             gained employment, KPI’s etc)
         •   Whether the service is flexible and contributes to emerging priorities
             as identified in the SP strategy
         •   How the service promotes move on options for service users when
             appropriate


      When assessing outcomes a balance needs to be considered, as focusing
      too much on outcomes may deter providers from working with people with
      complex needs. Assessing outcomes should be appropriate to the client
      group, and used alongside other indicators of quality.

      The SP team are working on a methodology for measuring qualitative data
      and service outcomes in the future.

7.0   Justifying High Costs

      Where the unit costs of a service are considered high according to the value
      for money assessment, the provider will be expected to justify the high costs.
      This could include providing more information on successful outcomes of the
      service, and/or details of all expenditure.

      If a high cost service is agreed, additional monitoring of outcomes may be a
      condition of the funding.


8.0   Proactive VFM assessment

      The SP Review Team will be proactive when assessing value for money for
      services as the opportunity arises outside the ongoing programme of reviews.
      This could be as a response to Government directives (such as the
      Independent Review) or via the establishment of priorities (such as the
      Supporting People 5 year strategy).

8.1   This VFM procedure could be amended in response to any changes in local or
      national policy directives associated with the Commissioning Body and/or
      ODPM.

9.0   List of Appendixes

      See VFM (Annual Assessment)




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