It is unclear how a move to shared services would
benefit government departments because of the government's
inability to measure the current costs of corporate services,
according to a Committee of Public Accounts report published
today.
The report,
Improving Corporate
Functions Using Shared Services, blamed the lack of reliable
cost information on the government's reliance on outdated IT
systems and poor-quality management information.
This lack of dependable data about the performance of individual
departments makes it impossible to measure just how departments
sharing back-office processing would deliver efficiencies and the
£1.4bn annual savings that the Cabinet Office estimated in May 2006
could be achieved by a shared services model.
The Cabinet Office said collecting such information was a
challenge because there were no consistent standards for defining
shared services or how activities and their related costs should be
reported.
The Committee of Public Accounts report said if a public body
did not obtain "clear information on the relative performance of
departments' corporate services", it was not obvious "how the
£1.4bn potential annual savings from shared services [estimated by
the Cabinet Office] will be achieved".
The shortage of basic information meant the Cabinet Office was
able to collect data from only nine departments and other public
entities. This data was then used to extrapolate a total annual
government spend of £7bn on finance and human resources
functions.
At a Committee of Public Accounts hearing in December 2007, the
Cabinet Office admitted it had lost its calculations and the
underlying data used to devise the estimate. But it still estimated
it could save £1.4bn or 20% of current estimated expenditure if a
more widespread move to shared services took place no timeline for
realising such savings was provided.
The Committee of Public Accounts criticised the Cabinet Office
for "poor cost control" in its own department. In financial years
2005/06 and 2006/07, the National Audit Office indicated that its
shared services team cost the taxpayer £3m.
But the team itself was unable to provide details on how much
money it had spent in that time or how much had been allocated to
different activities because of failures in recording and analysing
expenditure.
The team also failed to provide information about the
cost-effectiveness of moving to shared services, to analyse the
risks involved in adopting the model, or to offer advice on how to
manage them.
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Shared services >>
Committee of Public Accounts
Recommendations
- The Cabinet Office needs to develop standard definitions of
what corporate services comprise, and standard ways of reporting on
related costs and activities.
- The Cabinet Office should regularly benchmark the performance
of individual government agencies against centrally agreed criteria
to identify scope for further improvements.
- Government departments' internal audit functions must provide
assurance that Cabinet Office standards are being followed
consistently.
- The Cabinet Office needs to routinely record and analyse all
its expenditure and assess the cost=effectiveness of action it has
taken in order to improve performance and operational
efficiency.
- Departmental management boards must regularly obtain clear
information on the cost and performance of corporate services to
understand how they contribute to achieving key business objectives
and whether they provide value for money.
- Departments should publish an overview of the performance of
corporate services in their annual reports, including an analysis
of costs by corporate function, and how shared services are being
used to improve value for money.
- To encourage greater uptake of
NHS Shared Business Services, the Department of Health must
lead by example and become a customer now that the system has been
revamped to meet its needs. The NHS Shared Business Services
currently has 89 customers out of a potential 416 it requires 22
more to break even and 180 more to deliver the forecast savings of
£250m by 2014/15.
- To improve productivity and reduce delays, the Department of
Health needs to work with NHS bodies, whether they are NHS Shared
Business Services customers or not, to dramatically improve the
proportion of invoices that match purchase orders.
- To remove doubts about cost savings achieved due to staff
reductions after the introduction of shared services, HM Prison
Service must obtain better tracking information, which should be
validated by internal auditors or third parties.
- HM Revenues & Customs and the Department of Work and
Pensions must work on providing shared services to smaller public
sector bodies to achieve savings through economies of
scale.