ITEM 9

IMPLEMENTING ACTIVITY BASED MANAGEMENT

1. Purpose of Report 1.1 relation to the implementation of activity based management (ABM) across the Council.

This report conveys the recommendations of the October 2002 Scrutiny Committee in

2. Background 2.1 a Finance Sub-committee decision to implement ABM across all services. Member overview of the project passed to the Scrutiny Committee at its inception.

ABM incorporates time recording and activity based costing. The project started with

2.2 A report to the July 2002 Scrutiny Committee highlighted that implementation progress continued to be much slower than anticipated and attributed this to a lack of corporate resources and competing priorities. Members welcomed the actions taken by the Chief Executive to instruct the recasting of an adequately resourced project plan and agreed with the need to accord the project the highest corporate priority.

2.3 A report to the October 2002 Scrutiny Committee reviewed the current implementation approach, identified some clear objectives and outcomes, developed a new implementation approach and outlined some resource requirements (see Appendix 1).

2.4 decision relating specifically to the Finance Sub-committee:

The minutes of the Scrutiny Committee (see Appendix 2), include the following

“to recommend to Finance Sub-committee that the Council move towards the full implementation of Activity Based Budgeting at earliest opportunity and in any event no later than April 2005, with earlier implementation for services which have implemented ABM and that 5225k be allocated over a two year period to this project starting from financial year 2003-04, the exact amount being dependent on the project plan.”

3. Key Issues Activity Base #Policy Led Budgeting 3.1 their 2002-05 Service Plan (see the extract in Appendix 1). By using this “activity based budgeting” (ABB) approach, the planned use and cost of resources will be more clearly demonstrated to stakeholders, particularly Members when making budget allocation decisions. Thus, for example, the planned and real cost of key projects such as LSVT, Schools PPP, etc. will be open to greater scrutiny allowing more informed judgements relating planned and actual benefits to planned and actual costs. It will enable Members to make informed decisions, for example to scale up or down or to disband a project by investing more, less or no resources.

The extension of ABM to budgeting has already been used by Property Services in

Report . Report

Implementation Resources 3.2 commence very early in 2003. Effectively this means the implementation budget requirements will be needed for 2003-04 and 2004-05.

To meet the Scrutiny Committee implementation date of April 2005, work must

3.3 approach to ABM implementation that seeks to streamline the process and minimise the burden on services. The pilot is due to complete later this month and will provide firmer information on which to base estimated costs.

Modernising Services are currently working with the Museums service to test a new

3.4 Based on the estimated work plan for the Museums pilot, and to achieve the Scrutiny implementation date of April 2005, a very rough estimate suggests that 3 full-time staff will be required, supported by data input staff from time-to-time, costing approximately 5225k. Detailed estimates will be available in December this year based on the project plan flowing from the completion of the Museums pilot.

Operational Resources 3.5 No provision exists in the Council’s revenue budget estimates for the ongoing operational costs of ABM. At this early stage, it is very difficult to guess the level of operational resources that will be needed. The report to the October 2002 Scrutiny Committee noted that there is a need for future budget provision and that a report detailing the estimated costs would be prepared at the earliest opportunity.

4. Recommendations

Members are asked to: 4.1 earliest opportunity following implementation of ABM.

AGREE that the Council implements Policy Led/Activity Based Budgeting at the

4.2 NOTE that a sum of approximately 522513 over 2003104 and 2004/05 will be required to advance this project and to agree that it is considered as a major policy initiative in developing the budgets for the next 3 years.

4.3 and that a report will be prepared at the earliest opportunity.

NOTE that no revenue budget provision exists for the ongoing operation of ABM

Alan Welsh Modernising Services Manager Tel. 01387 260662 E-mail alanw@,dumgal. eov.uk 13 November 2002

Leslie Jardine Corporate Director for Corporate Services 1 18 English Street, Dumfries

Background Papers: “Implementing Activity Based Management” Scrutiny Committee 23 October 2002 (item 5) Other papers are noted in Appendix A to Appendix 1 of this report

APPENDW-

Report Department for Corporate Services Report . 66 ’

APPENDIX I Report to 23 October 2002 Scrutiny Committee

IMPLEMENTING ACTIVITY BASED MANAGEMENT

1. Purpose of Report 1.1 This report reviews the current implementation approach, identifies some clear objectives and outcomes, develops a new approach and outlines some resource requirements.

2. Background 2.1 A history of the project is included in Appendix A.

2.2 The focus of future external audits of best value appears to be moving towards three areas: governance, performance management framework and actual performance. The introduction of ABM across all services will be an important development in the Council’s performance management framework. Additionally, the information produced by ABM will help the Council to improve performance. Hence, ABM is a key element in meeting expected best value requirements.

2.3 the Project Plan to reflect the specific actions and the resources needed to fully implement time recording and activity based costing across all Council services.

July 2002 Scrutiny Committee endorsed the decision of the Chief Executive to recast

3. Review 3.1 already produced two project plans, neither of which has worked effectively. Hence, rather than a detailed project plan what is needed first is a fundamental review of our approach.

This report does recast the project plan. So far, the implementation project has

3.2 Taking into account the secondment of the lead officer in May 2002, it has taken about 18 months to complete these services. Some progress has also been made with time recording in other services. The cold facts are, however, that at the current rate of progress it will take many more years to complete implementation across the Council. Clearly fundamental changes are needed.

To-date, 8 services have completed or virtually completed ABM implementation.

3.3 implementation. The reviews highlight a need for a new approach with:

Appendix B contains the issues arising from internal and external reviews of

a) clearer objectives and outcomes; b) better project management; and c) adequate resources.

To be successful, the reviews conclude that implementation must be driven by corporate directors, minimise the administrative burden on services and staff, developed at individual services level, take a “top-down”, streamlined approach and be managed and operated corporately. 4. Objectives and Outcomes

Report Department for Finance and Corporate Services Report - 51

4.1 further by the project steering group:

The following key objectives are suggested, but these may need to be developed

a) To deliver significant, ongoing outcomes that support the effective and efficient management of the Council as detailed in 4.2 below.

b) To improve the Council’s performance management framework as a key element in improving services and meeting best value requirements.

c) To facilitate the Council’s move towards Activity Based Budgeting to deliver policy led budgeting as required by the Corporate Plan.

To achieve the key objectives, ABM must be implemented in all Council services.

4.2 amongst others:

ABM must be capable of producing timeous and relevant management data to inform

a) strategic and operational change management decisions; b) best value strategic, performance and operational service reviews; c) corporate and service plans; d) ad-hoc service inquiries; and e) resources allocation decisions.

The success of ABM should be regularly measured against the ongoing achievement of these outcomes.

4.3 Council, Scrutiny Committee are asked to agree the following policy:

To ensure ABM is used to support the effective and efficient management of the

All services must make use of ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations.

Activity Based Budgeting 4.4 their “value”. ABM is based on time and costs and a natural extension to this is Activity Based Budgeting (ABB) or policy led budgeting, whereby budgets are allocated to planned activities and policy projectshnitiatives as an essential element of corporate, service and financial planning. Policy led budgeting is a key development in the Corporate Plan. By using ABB, the planned use and cost of resources is more clearly demonstrated to stakeholders, particularly Members when making budget allocation decisions. An example of the ABB approach, taken from the Property Services Service Plan 2002/03 - 2004/05, is included in Appendix C. Unlike traditional budget statements, this shows how the service intends using resources to deliver specific services.

ABM is a means by which the Council’s various activities are evaluated to determine

4.5 compared with the allocated budget. The ‘true cost’ of providing that activity can then be evaluated to inform Members’ decisions on the future level of resources to invest in the activity dependant on its “value”. (Please note that ABB will not replace traditional budgeting, as this will be needed for financial control purposes.)

Actual time and costs spent on activities are recorded using ABM and these can be

4.6 Consequently, Scrutiny Committee are asked to recommend the adoption of the following policy by the Council:

The Council moves towards the full implementation of Activity Based Budgeting at the earliest opportunity.

Report Department for Corporate Services Report

5. Project Management 5.1 develop a new implementation approach, MoST have worked very closely with Property Services and their keen participation has been very helpful.

Property Services are without doubt the most developed users of ABM. In looking to

5.2 The Council’s Strategic Management Framework highlights the need for guidance on project planning to ensure that services manage projects using a structured approach. Guidance was subsequently published to tailor the use of PRINCE 2 (PRojects IN Controlled Environments) for use by the Council. PRINCE 2 provides an environment that supports and facilitates the effective management of projects. The methodology has recently been adopted for the “Blue Sky” project with significant benefits. Consequently, the ABM project and will use the appropriate elements of PRINCE 2 .

Implementation Principles 5.3 To accelerate implementation across the Council and achieve key objectives, the corporate approach to time recording should be to restrict it to higher levels, i.e. to core functions and to key activities within these. This will speed implementation considerably.

5.4 Furthermore, as a general best value principle, time recording should continue to operate at this higher level. This will minimise staff time spent recording time, make it easier for staff to use, hence encouraging their participation as well as making time recording more timeous and accurate, link directly into activity based costing and produce useful management information that is more usable.

5.5 More detailed time recording should only be allowed where there are specific and suitably demonstrated corporate and/or service needs for the information at that level, e.g. for a service review. Furthermore, such detailed time recording should only be allowed for a limited timescale. This principle will reduce the cost of operating time recording across the Council.

New Approach Pilot 5.6 Museums service that seeks to test a new streamlined and more corporately driven approach. This will:

MoST, with the help of Property Services, will soon commence a pilot with the

a) implement time recording and activity based costing as a sinale process; b) take a “top-down” approach by identifying core functions from service plans and then

the key activities within each core function, applying corporate standards to ensure compatibility;

c) restrict time recording to the same levels as those in activity based costing. One benefit of choosing the Museums service is that it will require a solution for staff without access to a computer.

5.7 hours to implement and test over approximately 10 weeks. This time estimate doesn’t yet include the time needed to install time recording software on desktop computers. The pilot should be completed and tested by the end of November.

The project plan for the Museums ABM pilot estimates that it will take about 80

Report Department for Finance and Corporate Services Report * 5-9

A

6. Resources 6.1 In re-casting the project plan, the Chief Executive has asked that resources needed for implementation are clearly identified. The level of resources applied to the project is also the final area of concern raised by our supplier. This issue has been discussed several times by the Scrutiny Committee. The new approach, being piloted by the Museums service, specifically sets out to minimise the burden on service staff during implementation and operation of ABM. There is, of course, a need to ensure that corporate implementation and ongoing operational resources are sufficient.

Ongoing Corporate Operational Resources 6.2 staff requirements. This will need to be re-visited once some major services are “up and running”. Meantime, implementation staff will have to cover operational work. This will inevitably deflect them from implementation and hence the situation must be carefully monitored. No separate budget provision exists for the ongoing operation of ABM and some future provision will need to be made.

It is extremely difficult at this very early stage to even guess the level of operational

Corporate Implementation Resources 6.3 The resources needed depend on how many individual services there are, how long different elements of implementation actually take, how many implementation projects can be handled simultaneously, when essential service inputs are available, and how quickly the Council wishes to complete the project.

6.4 levels can only be a very rough guess. Even then, they will still be an informed guess as there are obvious difficulties in extrapolating initial experiences in one small service across the entire Council.

Until at least the implementation element of the Museums pilot is completed, resource

6.5 services still require implementation. Based on the approach to be adopted for the Museums pilot, very rough calculations suggest that: If a new service starts implementation:

A quick skim through the revenue budget estimates book shows that 70 individual

a) Every 2”d week, it may take between 3 to 3.5 years and 2 full time equivalents (FTE) to complete the implementation project; or

b) Every week, it may take between 1.5 to 2 years, but that the resource requirement may increase to 3 FTE, mainly due to implementing more services simultaneously.

Please note that the FTEs are very rough estimates and currently exclude service staff resources and I.S. staff resources needed to install time recording software on desktop computers. Given pro-active support from services, the implementation period may be reduced considerably.

6.6 staff resources, Members are asked to consider and agree the preferred implementation timescale for ABM. Once a target has been established, a more accurate costed project plan can be prepared. Clearly, the timescale decided will affect the introduction of Activity Based Budgeting.

To assist with the preparation of a recast project plan and with the identification of

6.7 are needed, including:

Although the above projections are approximate, it is clear that certain resource types

a) Project Manager - to achieve the project objectives and outcomes.

Department for Finance and Corporate Services Report Report c 6 0

b) Systems Officer - to create and maintain appropriate structures in time recording and activity based costing.

c) 1.S technical support - to install relevant software, create and maintain links, etc. d) Clerical support - to maintain project and system records.

6.8 Given the potentially medium-term nature of the appointments and the development opportunity for staff, it is suggested that the Project Manager and Systems Officer should be provided by attachment, if possible. It is likely that additional budget will be required to “backfill” the attachment posts. Issues related to technical support will be discussed with Information Services and it is expected that clerical support can be provided from within the resources of the new Corporate Services department.

6.9 systems officer to the project. The budget implications of these posts are discussed below. Other resource requirements, e.g. ongoing operational staffing resources will be assessed when the project matures.

To avoid further delay, the Council should act now to appoint a project manager and

Budget Implications 6.10 Until the recent secondment, a permanent member of staff in MoST was the lead officer for this project. This officer also undertook other duties within MoST. The assessment of our supplier suggests that this officer has exercised considerable technical skills. Project management, however, has not gone well, although the high level of co- operation needed in the current approach was a contributory factor. The project needs a new approach and adequate resources to revitalise it.

6.1 1 The project manager and systems officer might cost between S60k to S75k per annum, depending on salary grades. “Backfilling” cover may be needed in the attached employees service(s). The secondment of an officer to CSG in May 2002 has left MoST with budget sufficient to cover the costs of attachments, but only until the end of 2002-03 when the secondee is due to return. It is, however, uncertain whether the secondee will return to MoST. Clearly such circumstances would reduce the budgetary impact by enabling some costs to be met fiom the existing MoST staffing budget. This situation may become clearer over the next few months. A further report, containing a project plan and costs, will be submitted to Scrutiny Committee at the earliest opportunity.

6.12 timescale will need to be regularly assessed during the implementation period. Clearly, delays in approving budget and in appointing key staff will delay the project further.

With this level of resources, implementation may still take 3 or more years. This

7. Conclusions 7.1 and efficient management of the Council. It has the highest corporate priority and is taking too long to implement. A new approach is needed.

This project seeks to produce significant, ongoing outcomes that support the effective

7.2 ABM must be driven by corporate directors, minimise the administrative burden on services and staff, be developed at individual services level, take a “top-down”, streamlined approach and be managed and operated corporately.

7.3 use the appropriate elements of PRINCE 2.

The new approach must imbed structured, disciplined project management and will

Report Department for Finance and Corporate Services Report

. 61 *

h

7.4 recording must be restricted to higher levels. More detailed analysis should be allowed, but only for specific purposes and limited periods where the business case is suitably demonstrated.

To accelerate implementation to deliver the key objectives and best value, time

7.5 ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations.

To help ABM meet its key objectives, all services must be required to make use of

7.6 the Council should implement Activity Based Budgeting (policy led budgeting) in all services at the earliest opportunity.

To demonstrate more clearly, the planned use and cost of resources to stakeholders,

7.7 may be needed. Delays in making resources available will further delay the project. Ongoing staff resources are also needed and budget provision will need to be made.

Implementation staff resources are urgently needed and additional budget provision

8. Consultation 8.1 Services have been consulted in preparing this report.

The Senior Management Team, Head of Information Services, Head of Property

9. Recommendations Members are asked to: 9.1 the success of ABM (section 4).

AGREE the objectives, ongoing outcomes and related proposals for measuring

9.2 AGREE that all services must make use of ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations (para. 4.3).

9.3 AGREE to recommend to Finance Sub-committee that the Council move towards the full implementation of Activity Based Budgeting at the earliest opportunity (para. 4.4 to 4.6).

9.4 AGREE that additional future budget provision is needed for the ongoing operation of ABM and to receive a report identifying the requirements (para 6.2).

9.5 ask officials to prepare a report identifying a project plan to meet this timescale together with the resource requirements (para. 6.6).

CONSIDER and AGREE a preferred implementation timescale for ABM and

9.6 Manager and Systems Officer and to RECOMMEND that Finance Sub-committee immediately allocate up to S75k per annum starting from financial year 2003-04 (para.

AGREE that urgent action is taken to appoint staff to fill the posts of Project

6.10 - 6.12).

Report Report Department for Finance an

7

Alan Welsh Modemising Services Manager Tel. 01387 260662 E-mail alanw@dumgal.gov.

13 October 2002

Julian Cowie Director for Finance and Corporate Services Carmthers House English Street Dumfries DG12HP

Background Papers: These are noted in Appendix A.

APPENDW-

Report Department for Finance and Corporate Services Report . 63

Appendix A

Project History 1. time recording and activity based costing systems.

The Activity Based Management (ABM) project encompasses the implementation of

2. In March 2000, Dumfries & Galloway Council became the first local authority in Scotland to decide to implement Activity Based Management (ABM) across &l services.

3. implementation strategy based on a need to develop our understanding of the process, software and implementation requirements, as follows:

Phase 1 - to include Property Services, Legal Services, Information Services,

Phase 2 - to include all other Council departments.

Following tendering, the October 2000 Finance Sub-committee agreed an

Modemising Services (MoST) and Trading Standards.

After an initial training period, implementation started in December 2000.

4. Phase 1 implementation was virtually complete and with the level of staffing resources available, implementation had taken much longer than predicted.

In October 2001, the Scrutiny Committee noted a progress report informing them that

5. At the same meeting, the Scrutiny Committee approved that the Dumfries & Galloway Constabulary implement an activity based costing system common to all Scottish forces and agreed an implementation plan for the remaining departments in two tranches to be implemented by November 2002 and December 2003.

6. In June 2002, the Scrutiny Committee was informed of the secondment of the ABM lead officer to Commercial Services, to provide cover as part of Council re-structuring exercise, effective from 1 May 2002 until at least 31 March 2003. A number of options for continuing were presented to Scrutiny Committee, alas, all were problematic and offered no real solution. The Committee asked the Chief Executive to clarify the timetable for the Management of Change in relation to its impact on the ABM project.

7. and the remaining departments to recast the Project Plan. In doing so, he asked for the identification of the specific actions required by departments and the resources they will need to commit to fully implement time recording and activity based costing across all Council services. He also asked for the identification of the corporate resources needed to deliver the recast Project Plan. The Chief Executive will ensure that the revised Project Plan is considered by the Senior Management Team to ensure that this project is accorded the highest corporate priority.

Following the June Scrutiny Committee meeting, the Chief Executive asked MoST

8. The July 2002 Scrutiny Committee received a further report clarifying the situation regarding the project. The report highlighted that implementation progress continues to be much slower than anticipated and that this will continue to be case, regardless of the impact of the secondment. It highlighted a lack of corporate resources and competing priorities as the prime reasons for this situation. Members welcomed the actions taken by the Chief Executive and agreed with the need to accord the project the highest corporate priority.

Report Department for Finance and Corporate Services Report e 6 4

Current Position 9. Architectural Services, Accountancy and Exchequer and Roads have reached the final stages of testing their implementation. Of the first tranche, some progress is being made with the Assessor, E&I, Personnel and Revenues. Little or no progress has been made with the remaining departments in this tranche, i.e. Commercial Services and Social Services.

10. time recording. The Council Secretary, Emergency Planning, and OCE have made a start with time recording. Community Resources are identifying their activities. No progress has been made with Education and Housing.

Of the second tranche, Environmental Health, Fire Brigade and Registration are using

Report Department for Finance ard Corporate Services Report b5

Appendix B

Project Reviews Internal Review 1. recasting the Project Plan:

The internal review has identified the following issues that must be dealt with in

a) The department-by-department approach is too vague for effective project management. Some way of pinpointing individual responsibilities and timescales is needed.

b) Separating the implementation of time recording from activity based costing is wasteful, it takes a long time and re-visits similar areas. Some way of doing both at the same time should be developed. Time recording has been driven by departmental needs, it can be very detailed and time consuming to introduce. This “bottom-up” approach causes problems later when we attempt to “shoe horn” this detail into the corporate activity based costing system. Some way of streamlining time recording to ensure it meets corporate requirements is essential.

d) Long lists of detailed time recording codes can make time recording more difficult for staff to use. This tends to reduce the accuracy and timeousness of time recording. It also means staff tend to spend more time recording time. A more streamlined approach is essential. Too much detail can produce a plethora of reports. This can be difficult for management to interpret and use effectively. Corporate and departmental priorities have clashed when it comes to implementing ABM. A stronger corporate lead is needed that reduces the administrative burden on departments to an absolute minimum.

g) The decentralised approach to operating time recording and activity based costing seriously threatens the integrity of the overall ABM system. It is also expensive in that more software licences are needed and expertise must be developed and maintained in numerous service areas. Centralisation is essential for best value and operational reasons. Time recording is an essential, integral part of ABM. The separate development and ongoing operation of Rapport (the Council’s in-house time recording software), does not ensure that Rapport meets the needs of ABM. The capabilities of Rapport to meet ABM needs at a reasonable cost must be carefully assessed. As a project with the highest corporate priority, ABM must drive the development and ongoing operation of all time recording software within the Council. Thus time recording must be managed and developed as an integral part of ABM. If ABM is to be implemented across all Council services within a reasonable timescale, corporate ABM requirements must take priority over departmental requirements during the implementation period.

c)

e)

f)

h)

Supplier’s Review 2. whilst the technical side of our implementation is exemplary, project management could have been much better. They believe the main reasons for this are a conflict between corporate and service priorities, stemming mainly from a lack of clarity about corporate needs and the level of resources devoted to the project.

Our supplier has independently reviewed our progress to-date. Their view is that

Report Department for Finance and Corporate Services Report - Gd’ _ -

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Appendix C

Core Services Plan

Estate management Property review Strategic maintenance Building safety Energy management Project audit Accreditation Corporate support Activity Based Budget

PROPERTY SERVICES 3 YEAR ACTIVITY BASED BUDGET

176.2 1,193.8

168.3 169.7 1,225.5 1,255.2

2002-03 fOOOs 239.9 168.5 120.1 133.9 169.0 90.2 96.1

Finance Budget Variance

I

1,193.8 1,225.9 1,255.2 -0.0 -0.4 0.1

280.6 164.5 123.6 174.0 139.8 84.3 90.3

2004-05 fOOOs 288.7 168.7 126.3 178.6 144.4 86.4 92.6

Source: Property Services Service Plan 2002103 - 2004105 (Item 6, Corporate Services Committee 17 September, 2002)

Department for Finance a Corporate Services Report - 69 I

Report

APPENDIX 1 Report to 23 October 2002 Scrutiny Committee

IMPLEMENTING ACTIVITY BASED MANAGEMENT

1. Purpose of Report 1.1 This report reviews the current implementation approach, identifies some clear objectives and outcomes, develops a new approach and outlines some resource requirements.

2. Background 2.1 A history of the project is included in Appendix A.

2.2 The focus of future external audits of best value appears to be moving towards three areas: governance, performance management framework and actual performance. The introduction of ABM across all services will be an important development in the Council’s performance management framework. Additionally, the information produced by ABM will help the Council to improve performance. Hence, ABM is a key element in meeting expected best value requirements.

2.3 the Project Plan to reflect the specific actions and the resources needed to fully implement time recording and activity based costing across all Council services.

July 2002 Scrutiny Committee endorsed the decision of the Chief Executive to recast

3. Review 3.1 already produced two project plans, neither of which has worked effectively. Hence, rather than a detailed project plan what is needed first is a fundamental review of our approach.

This report does recast the project plan. So far, the implementation project has

3.2 Taking into account the secondment of the lead officer in May 2002, it has taken about 18 months to complete these services. Some progress has also been made with time recording in other services. The cold facts are, however, that at the current rate of progress it will take many more years to complete implementation across the Council. Clearly fundamental changes are needed.

To-date, 8 services have completed or virtually completed ABM implementation.

3.3 implementation. The reviews highlight a need for a new approach with:

Appendix B contains the issues arising from internal and external reviews of

a) clearer objectives and outcomes; b) better project management; and c) adequate resources.

To be successful, the reviews conclude that implementation must be driven by corporate directors, minimise the administrative burden on services and staff, developed at individual services level, take a “top-down”, streamlined approach and be managed and operated corporately. 4. Objectives and Outcomes

Department for Finance an Report . Report

4.1 further by the project steering group:

The following key objectives are suggested, but these may need to be developed

a) To deliver significant, ongoing outcomes that support the effective and efficient management of the Council as detailed in 4.2 below.

b) To improve the Council’s performance management framework as a key element in improving services and meeting best value requirements.

c) To facilitate the Council’s move towards Activity Based Budgeting to deliver policy led budgeting as required by the Corporate Plan.

To achieve the key objectives, ABM must be implemented in all Council services.

4.2 amongst others:

ABM must be capable of producing timeous and relevant management data to inform

a) strategic and operational change management decisions; b) best value strategic, performance and operational service reviews; c) corporate and service plans; d) ad-hoc service inquiries; and e) resources allocation decisions.

The success of ABM should be regularly measured against the ongoing achievement of these outcomes.

4.3 Council, Scrutiny Committee are asked to agree the following policy:

To ensure ABM is used to support the effective and efficient management of the

All services must make use of ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations.

Activity Based Budgeting 4.4 their “value”. ABM is based on time and costs and a natural extension to this is Activity Based Budgeting (ABB) or policy led budgeting, whereby budgets are allocated to planned activities and policy projects/initiatives as an essential element of corporate, service and financial planning. Policy led budgeting is a key development in the Corporate Plan. By using ABB, the planned use and cost of resources is more clearly demonstrated to stakeholders, particularly Members when making budget allocation decisions. An example of the ABB approach, taken from the Property Services Service Plan 2002/03 - 2004/05, is included in Appendix C. Unlike traditional budget statements, this shows how the service intends using resources to deliver specific services.

ABM is a means by which the Council’s various activities are evaluated to determine

4.5 compared with the allocated budget. The ‘true cost’ of providing that activity can then be evaluated to inform Members’ decisions on the future level of resources to invest in the activity dependant on its “value”. (Please note that ABB will not replace traditional budgeting, as this will be needed for financial control purposes.)

Actual time and costs spent on activities are recorded using ABM and these can be

4.6 Consequently, Scrutiny Committee are asked to recommend the adoption of the following policy by the Council:

The Council moves towards the full implementation of Activity Based Budgeting at the earliest opportunity.

Report Department for Finance and Corporate Services Report 67 1

5. Project Management 5.1 develop a new implementation approach, MoST have worked very closely with Property Services and their keen participation has been very helpful.

Property Services are without doubt the most developed users of ABM. In looking to

5.2 The Council’s Strategic Management Framework highlights the need for guidance on project planning to ensure that services manage projects using a structured approach. Guidance was subsequently published to tailor the use of PRINCE 2 (PRojects IN Controlled Environments) for use by the Council. PRINCE 2 provides an environment that supports and facilitates the effective management of projects. The methodology has recently been adopted for the “Blue Sky” project with significant benefits. Consequently, the ABM project and will use the appropriate elements of PRINCE 2.

Implementation Principles 5 .3 To accelerate implementation across the Council and achieve key objectives, the corporate approach to time recording should be to restrict it to higher levels, i.e. to core functions and to key activities within these. This will speed implementation considerably.

5.4 operate at this higher level. This will minimise staff time spent recording time, make it easier for staff to use, hence encouraging their participation as well as making time recording more timeous and accurate, link directly into activity based costing and produce useful management information that is more usable.

Furthermore, as a general best value principle, time recording should continue to

5.5 More detailed time recording should only be allowed where there are specific and suitably demonstrated corporate and/or service needs for the information at that level, e.g. for a service review. Furthermore, such detailed time recording should only be allowed for a limited timescale. This principle will reduce the cost of operating time recording across the Council.

New Approach Pilot 5.6 Museums service that seeks to test a new streamlined and more corporately driven approach. This will:

MoST, with the help of Property Services, will soon commence a pilot with the

a) implement time recording and activity based costing as a sinrile process; b) take a “top-down” approach by identifying core functions from service plans and then

the key activities within each core function, applying corporate standards to ensure compatibility;

c) restrict time recording to the same levels as those in activity based costing. One benefit of choosing the Museums service is that it will require a solution for staff without access to a computer.

5.7 hours to implement and test over approximately 10 weeks. This time estimate doesn’t yet include the time needed to install time recording software on desktop computers. The pilot should be completed and tested by the end of November.

The project plan for the Museums ABM pilot estimates that it will take about 80

Department for Finance a Services Report - Report

4

6. Resources 6.1 In re-casting the project plan, the Chief Executive has asked that resources needed for implementation are clearly identified. The level of resources applied to the project is also the final area of concern raised by our supplier. This issue has been discussed several times by the Scrutiny Committee. The new approach, being piloted by the Museums service, specifically sets out to minimise the burden on service staff during implementation and operation of ABM. There is, of course, a need to ensure that corporate implementation and ongoing operational resources are sufficient.

Ongoing Corporate Operational Resources 6.2 staff requirements. This will need to be re-visited once some major services are “up and running”. Meantime, implementation staff will have to cover operational work. This will inevitably deflect them from implementation and hence the situation must be carefully monitored. No separate budget provision exists for the ongoing operation of ABM and some future provision will need to be made.

It is extremely difficult at this very early stage to even guess the level of operational

Corporate Implementation Resources 6.3 The resources needed depend on how many individual services there are, how long different elements of implementation actually take, how many implementation projects can be handled simultaneously, when essential service inputs are available, and how quickly the Council wishes to complete the project.

6.4 levels can only be a very rough guess. Even then, they will still be an informed guess as there are obvious difficulties in extrapolating initial experiences in one small service across the entire Council.

Until at least the implementation element of the Museums pilot is completed, resource

6.5 services still require implementation. Based on the approach to be adopted for the Museums pilot, very rough calculations suggest that: If a new service starts implementation:

A quick skim through the revenue budget estimates book shows that 70 individual

a) Every 2nd week, it may take between 3 to 3.5 years and 2 full time equivalents (FTE) to complete the implementation project; or

b) Every week, it may take between 1.5 to 2 years, but that the resource requirement may increase to 3 FTE, mainly due to implementing more services simultaneously.

Please note that the FTEs are very rough estimates and currently exclude service staff resources and I.S. staff resources needed to install time recording software on desktop computers. Given pro-active support from services, the implementation period may be reduced considerably.

6.6 staff resources, Members are asked to consider and agree the preferred implementation timescale for ABM. Once a target has been established, a more accurate costed project plan can be prepared. Clearly, the timescale decided will affect the introduction of Activity Based Budgeting.

To assist with the preparation of a recast project plan and with the identification of

6.7 are needed, including:

Although the above projections are approximate, it is clear that certain resource types

a) Project Manager - to achieve the project objectives and outcomes.

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b) Systems Officer - to create and maintain appropriate structures in time recording and activity based costing.

c) 1.S technical support -to install relevant software, create and maintain links, etc. d) Clerical support -to maintain project and system records.

6.8 Given the potentially medium-term nature of the appointments and the development opportunity for staff, it is suggested that the Project Manager and Systems Officer should be provided by attachment, if possible. It is likely that additional budget will be required to “backfill” the attachment posts. Issues related to technical support will be discussed with Information Services and it is expected that clerical support can be provided from within the resources of the new Corporate Services department.

6.9 systems officer to the project. The budget implications of these posts are discussed below. Other resource requirements, e.g. ongoing operational staffing resources will be assessed when the project matures.

To avoid further delay, the Council should act now to appoint a project manager and

Budget Implications 6.10 Until the recent secondment, a permanent member of staff in MoST was the lead officer for this project. This officer also undertook other duties within MoST. The assessment of our supplier suggests that this officer has exercised considerable technical skills. Project management, however, has not gone well, although the high level of co- operation needed in the current approach was a contributory factor. The project needs a new approach and adequate resources to revitalise it.

6.1 1 The project manager and systems officer might cost between f60k to f75k per annum, depending on salary grades. “Backfilling” cover may be needed in the attached employees service(s). The secondment of an officer to CSG in May 2002 has left MoST with budget sufficient to cover the costs of attachments, but only until the end of 2002-03 when the secondee is due to return. It is, however, uncertain whether the secondee will return to MoST. Clearly such circumstances would reduce the budgetary impact by enabling some costs to be met from the existing MoST staffing budget. This situation may become clearer over the next few months. A further report, containing a proiect plan and costs, will be submitted to Scrutiny Committee at the earliest opportunity.

6.12 timescale will need to be regularly assessed during the implementation period. Clearly, delays in approving budget and in appointing key staff will delay the project further.

With this level of resources, implementation may still take 3 or more years. This

7. Conclusions 7.1 and efficient management of the Council. It has the highest corporate priority and is taking too long to implement. A new approach is needed.

This project seeks to produce significant, ongoing outcomes that support the effective

7.2 ABM must be driven by corporate directors, minimise the administrative burden on services and staff, be developed at individual services level, take a “top-down”, streamlined approach and be managed and operated corporately.

7.3 use the appropriate elements of PRINCE 2.

The new approach must imbed structured, disciplined project management and will

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7.4 recording must be restricted to higher levels. More detailed analysis should be allowed, but only for specific purposes and limited periods where the business case is suitably demonstrated.

To accelerate implementation to deliver the key objectives and best value, time

7.5 ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations.

To help ABM meet its key objectives, all services must be required to make use of

7.6 the Council should implement Activity Based Budgeting (policy led budgeting) in all services at the earliest opportunity.

To demonstrate more clearly, the planned use and cost of resources to stakeholders,

7.7 may be needed. Delays in making resources available will further delay the project. Ongoing staff resources are also needed and budget provision will need to be made.

Implementation staff resources are urgently needed and additional budget provision

8. Consultation 8.1 Services have been consulted in preparing this report.

The Senior Management Team, Head of Information Services, Head of Property

9. Recommendations Members are asked to: 9.1 the success of ABM (section 4).

9.2 AGREE that all services must make use of ABM information in relation to strategic and operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations (para. 4.3).

9.3 AGREE to recommend to Finance Sub-committee that the Council move towards the full implementation of Activity Based Budgeting at the earliest opportunity (para. 4.4 to 4.6).

9.4 AGREE that additional future budget provision is needed for the ongoing operation of ABM and to receive a report identifying the requirements (para 6.2).

9.5 ask officials to prepare a report identifying a project plan to meet this timescale together with the resource requirements (para. 6.6).

9.6 AGREE that urgent action is taken to appoint staff to fill the posts of Project Manager and Systems Officer and to RECOMMEND that Finance Sub-committee immediately allocate up to S75k per annum starting from financial year 2003-04 (para.

AGREE the objectives, ongoing outcomes and related proposals for measuring

CONSIDER and AGREE a preferred implementation timescale for ABM and

6.10 - 6.12).

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Alan Welsh Modernising Services Manager Tel. 01387 260662 E-mail alanw@dumgal.gov.

13 October 2002

Julian Cowie Director for Finance and Corporate Services Carmthers House English Street Dumfries DG12HP

Background Papers: These are noted in Appendix A.

APPENDIX/-

Department for Finance and Report 1

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Appendix A

Project History 1. time recording and activity based costing systems.

The Activity Based Management (ABM) project encompasses the implementation of

2. Scotland to decide to implement Activity Based Management (ABM) across

In March 2000, Dumfries & Galloway Council became the first local authority in services.

3. implementation strategy based on a need to develop our understanding of the process, software and implementation requirements, as follows:

Phase 1 - to include Property Services, Legal Services, Information Services,

Phase 2 - to include all other Council departments.

Following tendering, the October 2000 Finance Sub-committee agreed an

Modernising Services (MoST) and Trading Standards.

After an initial training period, implementation started in December 2000.

4. Phase 1 implementation was virtually complete and with the level of staffing resources available, implementation had taken much longer than predicted.

In October 2001, the Scrutiny Committee noted a progress report informing them that

5 . At the same meeting, the Scrutiny Committee approved that the Dumfries & Galloway Constabulary implement an activity based costing system common to all Scottish forces and agreed an implementation plan for the remaining departments in two tranches to be implemented by November 2002 and December 2003.

6. In June 2002, the Scrutiny Committee was informed of the secondment of the ABM lead officer to Commercial Services, to provide cover as part of Council re-structuring exercise, effective from 1 May 2002 until at least 3 1 March 2003. A number of options for continuing were presented to Scrutiny Committee, alas, all were problematic and offered no real solution. The Committee asked the Chief Executive to clarify the timetable for the Management of Change in relation to its impact on the ABM project.

7. and the remaining departments to recast the Project Plan. In doing so, he asked for the identification of the specific actions required by departments and the resources they will need to commit to fully implement time recording and activity based costing across all Council services. He also asked for the identification of the corporate resources needed to deliver the recast Project Plan. The Chief Executive will ensure that the revised Project Plan is considered by the Senior Management Team to ensure that this project is accorded the highest corporate priority.

Following the June Scrutiny Committee meeting, the Chief Executive asked MoST

8. The July 2002 Scrutiny Committee received a further report clarifying the situation regarding the project. The report highlighted that implementation progress continues to be much slower than anticipated and that this will continue to be case, regardless of the impact of the secondment. It highlighted a lack of corporate resources and competing priorities as the prime reasons for this situation. Members welcomed the actions taken by the Chief Executive and agreed with the need to accord the project the highest corporate priority.

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Current Position 9. Architectural Services, Accountancy and Exchequer and Roads have reached the final stages of testing their implementation. Of the first tranche, some progress is being made with the Assessor, E&I, Personnel and Revenues. Little or no progress has been made with the remaining departments in this tranche, i.e. Commercial Services and Social Services.

10. time recording. The Council Secretary, Emergency Planning, and OCE have made a start with time recording. Community Resources are identifjrlng their activities. No progress has been made with Education and Housing.

Of the second tranche, Environmental Health, Fire Brigade and Registration are using

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Appendix B

Project Re views Internal Review 1. recasting the Project Plan:

The internal review has identified the following issues that must be dealt with in

The department-by-department approach is too vague for effective project management. Some way of pinpointing individual responsibilities and timescales is needed. Separating the implementation of time recording from activity based costing is wasteful, it takes a long time and re-visits similar areas. Some way of doing both at the same time should be developed. Time recording has been driven by departmental needs, it can be very detailed and time consuming to introduce. This “bottom-up” approach causes problems later when we attempt to “shoe horn” this detail into the corporate activity based costing system. Some way of streamlining time recording to ensure it meets corporate requirements is essential. Long lists of detailed time recording codes can make time recording more difficult for staff to use. This tends to reduce the accuracy and timeousness of time recording. It also means staff tend to spend more time recording time. A more streamlined approach is essential. Too much detail can produce a plethora of reports. This can be difficult for management to interpret and use effectively. Corporate and departmental priorities have clashed when it comes to implementing ABM. A stronger corporate lead is needed that reduces the administrative burden on departments to an absolute minimum. The decentralised approach to operating time recording and activity based costing seriously threatens the integrity of the overall ABM system. It is also expensive in that more software licences are needed and expertise must be developed and maintained in numerous service areas. Centralisation is essential for best value and operational reasons. Time recording is an essential, integral part of ABM. The separate development and ongoing operation of Rapport (the Council’s in-house time recording software), does not ensure that Rapport meets the needs of ABM. The capabilities of Rapport to meet ABM needs at a reasonable cost must be carefully assessed. As a project with the highest corporate priority, ABM must drive the development and ongoing operation of all time recording software within the Council. Thus time recording must be managed and developed as an integral part of ABM. If ABM is to be implemented across all Council services within a reasonable timescale, corporate ABM requirements must take priority over departmental requirements during the implementation period.

Supplier’s Review 2. whilst the technical side of our implementation is exemplary, project management could have been much better. They believe the main reasons for this are a conflict between corporate and service priorities, stemming mainly from a lack of clarity about corporate needs and the level of resources devoted to the project.

Our supplier has independently reviewed our progress to-date. Their view is that

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Appendix C

PROPERTY SERVICES 3 YEAR ACTIVITY BASED BUDGET

Core Services Plan 2002-03 2003-04 2004-05 fOOOs fOOOs fOOOs

Estate management 239.9 280.6 288.7 Property review 168.5 164.5 168.7 Strategic maintenance 120.1 123.6 126.3 Building safety 133.9 174.0 178.6 Energy management 169.0 139.8 144.4 Project audit 90.2 84.3 86.4 Accreditation 96.1 90.3 92.6 Corporate support 176.2 168.3 169.7 Activity Based Budget 1,193.8 1,225.5 1,255.2 Finance Budget 1,193.8 1,225.9 1,255.2 Variance -0.0 -0.4 0.1

Source: Property Services Service Plan 2002103 - 2004105 (Item 6, Corporate Services Committee 17 September, 2002)

Report and Corporate Services Report

APPENDIX 2

Extract from minutes of 23 October 2002 Scrutiny Committee

5. Director for Finance and Corporate Services dated 13 October 2002.

IMPLEMENTING ACTIVITY BASED MANAGEMENT - Report by

Decision

AGREED

5.1 success of ABM;

the objectives, ongoing outcomes and related proposals for measuring the

5.2 operational change, service reviews, service plans, ad-hoc service inquiries and resource allocations;

all services must make use of ABM information in relation to strategic and

5.3 to recommend to Finance Sub-committee that the Council move towards the full implementation of Activity Based Budgeting at earliest opportunity and in any event no later than April 2005, with earlier implementation for services which have implemented ABM and that S225k be allocated over a two year period to this project starting from financial year 2003-04, the exact amount being dependent on the project plan;

5.4 to receive a report at the next meeting outlining the project plan, estimated costs, budget and other resource requirements and a list of all services to allow for their prioritisation;

5.5 ABM be implemented in all services by April 2005; and

5.6 Systems Officer.

urgent action is taken to appoint staff to fill the posts of Project Manager and

ABCaMWM to Fin Sub Nov 2002 Appendix 2

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