Agenda item

Presentation explaining how the Council’s Corporate Recharge System works

The Panel received a report of the Head of Strategic Finance and a presentation explaining the background and current system for recharging support costs to individual service cost centres.

The Finance Manager provided the presentation which included two examples of the recharge process.  It was noted that if a service were to be outsourced, the recharge support costs would be shared between the remaining council-run services.  This could lead to questioning as to whether the levels of staffing in the relevant support services were still appropriate for the remainder of the council-run services.

Following a question from the Vice-Chair, Councillor Rackett, the Finance Manager explained that the recharge was calculated on historical information.  For example, officers were currently calculating the recharge support costs for the 2013/14 budget.  The estimates were then reviewed once the final accounts were closed.  He advised that the legal department completed time sheets recording the support they gave to other services.  Other support services calculated the charge in other ways; Human Resources calculated the recharge based on the number of people within a service; IT calculated it by the number of computers in each service. 

Following a question from Councillor Khan, the Finance Manager advised that if a service were outsourced then the support services' functions were likely to be carried out by the new service provider.  This would mean that either the support charges to those services remaining with the Council would be increased or there would be a review of the support service and possibly the reduction in the number of staff within that support service.

The Finance Manager commented that as yet there had been no recalculation of support charges should IT be outsourced.

The Head of Strategic Finance provided an example.  He explained that if Waste Services were to be outsourced there would be an overall reduction in the need for support services as much of this work would be carried out by the outsourced supplier. In the case of the HR support service it had been estimated that there could be a reduction of up to two people from the section.

The Chair asked whether the Council could incur additional costs due to redundancy costs for any staff who were no longer required.

The Head of Strategic Finance advised that it was in the interest of staff to be TUPE’d to the outsource provider.  Should they not transfer then there may not be the work within their original department and they would be made redundant. 

Councillor Watkin, Portfolio Holder for Finance and Shared Services, referred to a previous review of recycling costs and comparisons with other authorities.  This had been made difficult as it was not possible to compare like for like costs.  He had noted that the Finance Manager had referred to the CIPFA Code of Practice and a standard approach for all authorities.  He asked whether this was the case.  He felt that in smaller organisations it would become more difficult to redistribute costs amongst the remaining services. 

The Finance Manager advised that there would be a loss in the economy of scale.  He explained that in the case of Human Resources it would be providing a service to fewer people.

Following a question from Councillor Khan regarding the distribution of recharge costs for shared services, the Finance Manager explained that the recharge costs for ICT went into the shared services account; it was then divided on a percentage basis between the two authorities.  The share given to Watford Borough Council went into the Watford client account.

The Head of Strategic Finance advised that if a different type of arrangement were in place, for example the lead authority model, the lead authority for a service would charge the other authority who was using the service.

The Chair thanked the officers for the presentation.

RESOLVED –

that Budget Panel notes the current processes.