Management > CIO

Westminster and BT try to bed down 'complex' shared HR and Finance project

David Bicknell Published 16 February 2016

Tri-borough Managed Services Programme, offering potential £30m cost savings, has proved an implementation challenge

 

Westminster City Council and BT insist that a complex project to provide a shared human resources (HR) and finance service across the Tri-borough is delivering benefits, despite reports of implementation headaches.

Council documents indicate that the implementation difficulties of the Managed Services Programme (MSP) have led to concerns over a "significant risk of completeness of the balances in the financial statements" and some suggestions that payroll information is not up to date and not all employees are being routinely paid.

Chief information officers (CIOs) in other London boroughs say they are aware of the problems in delivering the HR and finance project and have expressed surprise that knowledge of the programme's difficulties has not emerged before.

However, in a statement, Westminster City Council said that the HR and finance systems are producing the information it needs to meet its financial commitments and that payments are being paid correctly and routinely.

A council spokesman said: "In any change programme, issues can arise as processes bed down but are then dealt with through appropriate management activity and joint working with relevant partners."

A BT statement also said, "Providing a shared HR and finance service across three councils is highly complex and with programmes of this type you would expect some issues to arise.

"However, having one system across all three councils is already helping them work more closely together to deliver better services. The single system is benefiting them by providing a single operating model, enabling officers to work effectively across the Tri-borough."

The London Tri-borough is a unique collaboration between Westminster City Council and the London boroughs of Hammersmith & Fulham and Kensington and Chelsea to share services and combine their back office and management costs.

When the collaboration got underway in 2010, the Tri-borough's plan was to make savings of £33.4m by 2015/16 and these are now believed to have risen to around £43m a year by 2015/16 and closer to £47m by 2016/17.

The Westminster deal with BT was first announced in January 2013 with the plan being to overhaul the council's HR and finance systems to achieve savings of £30m.

The deal, which was recommended to Westminster's Tri-borough partners Hammersmith & Fulham and Kensington and Chelsea, potentially meant a radical redesign of corporate human resources and finance services across the three authorities.

At the time, Westminster said the managed services procurement, which consists of a four-year framework and a call-off contract for services for up to five years with the right to extend by a further three years, would save millions of pounds for taxpayers and speed up service for residents. It added that the procurement has been undertaken on a Tri-borough basis with full engagement with staff from Westminster, Hammersmith & Fulham and Kensington and Chelsea.

Council HR services were due to transfer in November 2013, with Finance following at the end of March 2014. Westminster's HR and finance systems would then be managed by BT, which Westminster said would lead to greater efficiencies and the ability to introduce state-of-the art technology.

Westminster said the advantages of the deal included:

- Replacing older computer systems in finance and HR departments
- Giving managers and staff the latest technology tools
- Cutting duplication and red tape, and allowing a close relationship with one company as service manager
- A faster and more efficient service that will benefit residents

Documents suggest the planning assumption for the Tri-borough Managed Services Provider Go Live was that all three boroughs would go live for Finance in April 2014 to coincide with the start of the 2014/15 financial year.

But "based on plans and information from BT, and consultation with both HR and Finance, this appeared to be a higher risk approach for all three boroughs than was previously appreciated and it would unnecessarily compromise the overall quality of both the finance and HR system builds.

"It was therefore widely accepted that the originally intended implementation of HR and Payroll for WCC in November 2013 was not achievable."

The documents suggest that in order to plan revised dates to enable the launch of the service in a timely manner and at the lowest overall risk, an extension of existing HR services was approved.

"A further extension, for a period of 6 months to November 3, 2014, was approved owing to delays in the implementation of the Managed Services Programme and to ensure continuity of service of the services, at a cost of £2,395,981.

"After full consideration of the current programme and in agreement with BT, it was determined that the optimum go live date for the Managed Service was April 1, 2015. Consequently, there were a number of contracts which needed to be extended to avoid a gap in service prior to the new Go Live date, of which the existing Serco agreements for Banking & Control and HR Services were amongst the most critical."

The delays have had a knock-on effect.

In the minutes from an Audit and Performance Committee meeting held on December 2 last year, a note on Internal Audit says, "The Committee expressed concern that no internal audit work had yet been undertaken on the council's key financial systems due to the issues around the implementation of the Managed Services Programme. Ordinarily the audit team would have identified the key controls, verified their adequacy and undertaken some compliance testing against them.

"But because changes are still being made to the systems, key controls have not been reviewed at this stage. However, as previously reported to the committee the finance team were undertaking extensive testing and verification to provide themselves with assurances that the financial systems are as accurate as they should be within a small margin of error. "

An Audit Plan for Westminster prepared by the accountancy firm Grant Thornton also pointed out that, "As is usual in public sector entities, we have determined materiality for the statements as a whole as a proportion of the gross revenue expenditure of the council. For purposes of planning the audit, we have determined overall materiality in the context of a reader of the whole statement of accounts to be £13,910k (being 1.5% of gross revenue expenditure in 2014/15). We will consider whether this level is appropriate during the course of the audit and will advise you if we revise this.

"Our reason for selecting this level of materiality is based on the risks associated with the new financial ledger system which was implemented from April 1, 2015 under the Managed Services programme. This programme has resulted in significant risk to the council. The council continues to take significant steps to mitigate this risk. As a result of the current issues being faced by the council in the implementation of the ledger, we have set the testing threshold (tolerable error) at 60% of materiality. For 2015/16 this is £7,914k and all balances over this level will be audited."

Discussing the "significant risks", the audit report specifically says, "Managed services partnership (risk of incomplete transfer of data from the old system to the new system).

"The tri-borough councils implemented a new financial ledger through a managed services partnership with BT from April 1, 2015. There have been a number of difficulties with the implementation which give rise to a significant risk of completeness of the balances in the financial statements, including:

- Reconciliations are not carried out timely and there are a large number of unreconciled items in the income and cash balances

- Expenditure payments are not being made correctly

- Some income received by the council is unallocated and being held in a suspense account

- Payroll information is not up to date and not all employees are being routinely paid

"The council is proactively managing the service problems and is in regular contact with BT, including finance officers visiting the BT office on a monthly basis. Improvements are being made in the transactional processing every month but there remains a risk to the audit opinion."

In addition, a Quarter 3 Performance Report considered by Westminster's Audit and Performance Committee on February 3, said:

"HR is still providing extensive support with the embedding of the HR side of the new Managed Service Programme.

"Over the last quarter we have seen some improvements in payroll accuracy however a major concern is that the payroll financial reconciliation has not been completed and the pensions interface with Surrey County Council has not been delivered.

"There remain concerns about the Agresso system development, controls and response times. Weaknesses in system controls expose the councils to incomplete and inaccurate data being posted, data breaches and reputational damage.

"As a result of the implementation of Agresso joint Finance and HR ERP system provided by BT, HR is not able to report on the key indicators for sickness and turnover since Quarter 1. This is as a result of the lack of availability of the required reports from BT at this stage. Work is on-going to resolve these issues however progress has been slow."

Comment

The ambition shown by the Tri-borough in setting out to share services between the three councils has been a bold and imaginative response to austere times. So, in some ways, it is disappointing to have to report on what appear to be some problems in the delivery of this shared HR and Finance project. The problems have been common knowledge to some London CIOs for months.

BT pulled off a major coup by securing Lot 1 of the pan-London Outsourced Managed Services framework agreement for HR and finance services in January 2013, and there are clearly significant potential savings in store for the council if the managed services programme delivers.

A further 17 councils had originally expressed some initial interest in using the framework. But the take-up and experience of using such frameworks is generally patchy. And as the framework's timeline nears its end and reports of a challenging implementation emerge, the likelihood is that those councils will consider alternative plans, if they were ever seriously considering using the framework.

A Tri-borough ICT strategy document admits that "Delivering cross-council services and closer integration with external partners will depend on ICT as a key enabler. This means ICT must support mixed delivery models, enabling data to be transferred to single Tri-borough systems or shared between separate council systems. For example, finance data for various services will be managed at a Tri-borough level, but will also need to be reconciled back to individual council finance systems."

The idea of the shared HR and Finance system, with all the potential cost savings in prospect, may have appeared like a land of milk and honey on the horizon for the Tri-Borough. Unfortunately as with most "integration" projects - 'integrated' is surely one of the most dangerous of words in IT terms - there are a few dragons to slay along the way first. Let's hope BT and Westminster's swords remain sharp.








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