Feature / Mirror mirror

Despite the financial assessments facing commissioners, Nottinghamshire County PCT was keen to hold a mirror up to its finance function. Steve Brown reports

You might think PCT finance functions had faced enough scrutiny in recent years without volunteering for additional reviews. But that is what Nottinghamshire County Teaching Primary Care Trust did at the end of 2007. It has not led to a revolution in the provision of financial services. But it did highlight existing good practice and the scope for improvements. Many of these changes have been or are being implemented and the finance team is better prepared for challenges to come.

It was in late 2007 that Mike Alexander, finance director at Nottinghamshire County, decided to get a second opinion on the performance of the finance function. He admits it was partly motivated by the PCT’s assessment under the Audit Commission’s auditors’ local evaluation (ALE). It had posted an overall rating of 1 in 2006/07, driven by its

1 assessment in financial management. This had been the first year of operation for the PCT, created by merging six local PCTs under the commissioning a patient-led NHS changes.

 

Fitness for purpose

The fitness for purpose review that accompanied the PCT reconfigurations across England also suggested there was room for improvement in the PCT’s overall performance and in aspects of its finance performance.

The assessments were understandable. As with most reconfigured PCTs, 2006/07 had been a transition year – getting basic systems in place for the merged bodies rather than pushing performance. In December 2007, performance was already on the up (the PCT was to record a level 3 ALE assessment for the year with 3s in all five assessment categories other than internal control). But even with what many finance directors saw as assessment overload, Mr Alexander was keen for another view. This was not to counter any of the existing assessments, but to identify a way forward for improvement, building on existing good practice and improving where necessary. He wanted to challenge the finance team.

He turned to KPMG for this second opinion, impressed by the work it had undertaken on its Being the best – the NHS finance function report. This research built on work commissioned by KPMG and performed by the Economist Intelligence Unit. It showed that across the globe, top-performing organisations have top-performing finance functions that spend more time on decision-making and adding value.

‘I have always known it is my team that will help deliver much of the future agenda, such as world class commissioning (WCC),’ says Mr Alexander. ‘While I felt they were equipped with much of the necessary capacity and skills to address these challenges, I also felt it was important to stretch their thinking – and mine – on how we could best develop our function and be truly supportive of the wider organisation.’

After KPMG met staff to reassure them that the focus was on systems and processes not personnel, the process started with a questionnaire for the finance department’s service users. Such questionnaires had been filled in before but the consultants followed up the paper-based exercise with workshops – providing an opportunity (away from finance staff) for budget holders to discuss their experiences, issues and future demands.

Consultants also held confidential meetings with the PCT’s top finance managers to explore their workings as individuals and as a team.

Added to the mix were a further detailed questionnaire for finance staff, interviews with board members and a review of key outputs from finance.

Although the private meetings between KPMG and finance department customers may have sparked anxiety among finance managers, they got a big vote of confidence. ‘Budget holders were very supportive of the finance function,’ says Mr Alexander. ‘That was a good message given the transition we had gone through. Instead the key issues that emerged were around our internal processes. We perhaps hadn’t looked at how we could make the best use of systems and we still had a lot of duplication. Internally we weren’t making best use of what we had.’

 

Better use of resources

Mr Alexander points at the finance system – a good system not being used to its full capacity. Managers had a tendency to undertake manual interventions or prepare spreadsheets rather than run a report from the system – often using an approach they were familiar with rather than a more efficient but alien process.

KPMG assessed the PCT on criteria on three fronts: systems and processes; supporting the business; and continuous improvement. It used a sliding scale for assessment, stretching from ‘not fit for purpose’ to ‘leading edge’.

‘On systems and processes we were good on integration with the rest of the organisation but poor on reviewing and continuously improving processes,’ says Mr Alexander. On supporting the business, the PCT performed better. ‘We had a good understanding of the business and we were good at providing challenge to services, for instance around the costs of activities,’ he says. ‘But we weren’t good at horizon scanning. We had a tendency to live in the here and now, rather than looking at risks and opportunities in the near, medium and long term.’

He says networking was also lacking. Senior managers weren’t getting the chance to mix with other finance and health professionals – inside or outside the organisation. A clear recommendation from KPMG was for a detailed finance training and development programme to be put in place, helping managers to acquire a ‘deeper skill set than commonly associated with traditional treasury and management accounting functions’.

The consultants also called for multi-disciplinary teams to be set up to address the major development requirements . ‘This was looking ahead to WCC and the need to work more closely with colleagues on strategic initiatives and business cases,’ says Mr Alexander. ‘Although it worked well at senior level, middle grade finance staff were not as exposed to the wider world.’

Finance reporting was also highlighted as needing improvement. KPMG suggested an integrated performance dashboard that incorporated finance, human resources, estates and commissioning objectives. Finance information needed to be: clear and simple; focused on significant issues and exception based; forward looking; and consistent. One recommendation called for a finance and performance committee to be considered, enabling in-depth discussion of finance issues.

The PCT posted a mixed performance in continuous improvement, scoring well on skills, qualifications and technical proficiency but poorly on finance and personal development planning. Mr Alexander was urged to set up regular, formal communication with the whole team to boost understanding and challenge organisational goals.

He says communication needed to improve and steps have been put in place. A full debriefing at month-end gives the team time to reflect on performance, talk about improvement opportunities and improve understanding of the financial status.

For more efficient reporting and analysis, the PCT has established a systems development accountant role to develop reporting and use of IT applications. The department structure has been reviewed to focus on key areas – financial governance and management and commissioning. This involved a review of vacancies and increasing capacity in the commissioning side.

A directorate training programme has been developed covering finance and areas such as WCC. ‘This programme aims to improve knowledge of what the team does and how we fit into the organisation,’ says Mr Alexander.

As a result of the review, the finance function has adopted key performance indicators. Nottinghamshire’s indicators fall into three categories: staffing (including turnover, use of temps and sickness); month-end (such as closedown times, meetings with managers, error rates);  and team-specific (such as practice-based commissioning, monitoring reports and contract payments).

David Sharif, senior manager at KPMG who led the review, says it is a rigorous process that looks at outputs, outcomes and customer views. But he says the strength of the process is that it is done with the finance team, not to it. ‘It uses their experience to highlight the issues,’ he says. ‘The teams have it within themselves to improve. It is about helping them see the improvements that could be made.’

Mr Alexander agrees the review helped to flag up the team’s potential. Although the WCC review may have pushed the department in a similar direction, he says the KPMG review was deeper and challenged the PCT’s internal processes. ‘It definitely helped us to be more prepared for WCC,’ he says.

It was six months from the consultants’ arrival to a report being presented to the PCT. But Mr Alexander does not see it as a one-off event despite the existence of the annual use of resources and WCC finance assessments. ‘WCC is more about board grip,’ he says. ‘This is about asking if the finance department provides an effective service, how do we know our services are effective and how do we become a world-class finance function. It is something we’d want to do periodically. It is easy to think you are providing a good service, but having an external view based on international benchmarks is really helpful.’

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