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Financial Planning

Introduction

The Agency was established on 1 April 2003 on a cash neutral basis and hence, during our first four years we have had to manage our available resources very firmly to enable us to:

  1. merge the activities inherited from our principal predecessors (the Public Health Laboratory Service,
    the Microbiological Research Authority and the National Radiological Protection Board);
  2. integrate the staff welcomed from 80 separate employers;
  3. harmonise and modernise our systems and working practices; and
  4. find the resources to carry out new activities in line with our expanding role.

This has had to be carried out whilst managing significant cost pressures outside of our control including the introduction of the Consultants Contract and the Agenda for Change initiative.

In addition, since the latter part of 2004/05, the Agency has been part of the review of Arm's Length Bodies conducted by the Department of Health. As part of this, the Department has critically reviewed the amount of grant in aid allocated to the Agency and has imposed some challenging savings targets.

Strategic planning : 2008-2013

The Agency is in the process of developing its strategic plan for 2008-2013. This recognises that we need to find ways of funding our new and increasing responsibilities and cost pressures. There is no doubt that the Agency's remit is increasing and the Agency must be able to meet changing and additional priorities. There can be no initial expectation that current operational functions will be able to be reduced as a result of taking on additional work. However, additional activities clearly require additional resources and these resources will need to be identified.

Where appropriate, additional funding will be sought from DH, but in the political context of the ALB savings programme and considerable financial pressure within the NHS itself, the strategy will recognise that funding will not always be available and indeed may even be reduced.

The Agency's Finance strategy for the strategic planning period 2008-2013 will therefore identify and explore potential ways to address funding issues. These will include:

  • Increasing external income, thereby generating funds which can be used to meet new activities;
  • Improving efficiency of current operations, thereby releasing resources or funds which can be used to meet new activities;
  • Stopping or reducing current activities, thereby releasing resources or funds which can be used to meet new activities;

However, the strategy will recognise that all of the above should be part of a continual cycle; they should not just be a response to a new resource need but an ongoing process of financial and operational growth and efficiency improvement.

The funds identified from the above process will be channelled through a Development Fund which will assist in applying the funds to priority new or enhanced activities.

In conjunction with this, the strategy will also consider:

  • the overall level of funding that would enable the Agency to operate at an optimum level; and
  • the appropriate and optimum balance between grant-in-aid funding and external income.

Resource allocation

In addition to overall funding levels and in order to ensure that the ongoing process of financial and operational growth and efficiency improvement is facilitated, the strategy will also consider the Agency's internal processes for allocating and controlling funds.

Currently funds are allocated by devolving budgets in accordance with management arrangements (i.e. to Centres/ Divisions, then Departments/ Units). This method will be evaluated against alternative methods (such as allocating the funds directly to the Agency's programme areas). At an Agency level, it is essential that the strategic plan sets out clearly the Agency's priorities and intended outputs; at a finance strategy level it is imperative that we have a sound process for ensuring that funds are allocated to match the priorities and to activities providing the most outputs. The Agency's Finance and Resource Management system has the information to facilitate this analysis and we will be working to ensure that this capability is fully utilised throughout the strategic planning process.

As part of the ongoing process to improve resource allocation and to improve the financial information available to the business units, we have recently commenced a programme of rolling budget reviews which will cover the whole Agency over the course of the year and on a cyclical basis. The purpose of these reviews is threefold:

  1. To put in place financial plans for future years. This will streamline the annual budget process and will provide budget centre managers a longer term financial planning horizon.
  2. To review the financial processes and reports to ensure they meet the needs of the business under review to improve decision making.
  3. To review the Financial and non-financial resources and plans with a view to improving the delivery of financial and non-financial objectives.

In addition to the rolling budget review process, the Agency is also operating an 'Efficient and Effective' initiative. This is a programme of work, initiated as a response to the Department of Health's Review of Arms Length Bodies, to critically review the Agency's operations. The programme has been designed to achieve the financial targets required by the review but will also aim to modernise our processes (both health services and corporate functions) in order to streamline and improve our service delivery. The programme began in 2006 and includes the following areas of work:

  • Reviews of our Centre for Infections; Centre for Emergency Preparedness and Response, Local and Regional Services, our Regional Laboratory network and our Corporate Services functions;
  • Rationalising our accommodation across the country. The Agency inherited 140 locations and has already reduced these to 93. We plan to reduce this number further but without jeopardising operational needs;
  • Improving our communication infrastructure;
  • Introducing more efficient procurement arrangements; and
  • Streamlining our back-office functions.

 

Conclusion

The high level framework described above provides the Agency with a sophisticated framework for ensuring that we continually improve our processes, prioritise our resources and increase the efficiency and effectiveness of our operations.