“What can UK Government learn from its international peers?” GFP Conference

1. “What can UK Government learn from its international peers?”GFP Conference 19 November 2009 Andy Potter Gillian Russell

2. Agenda • Background to Deloitte Global Study – Mastering Finance in Government • Overall Global Findings • A UK Perspective • Breakout session 1 and feedback • Investing in Outcomes – Case Study • Breakout Session 2 and feedback • Q&A

3. Why we did the study… Rising healthcare costs Balancing the needs of the ageing and young Financing long-term capital needs Rising Citizen Expectations

4. Background of global finance transformation survey • Deloitte Research conducted a global survey to understand the maturity of the finance function in governments across the world. • The survey results were supplemented with secondary research and case studies. • Few responses received from the UK. More than 200 responses from across the world 31 68 54 13 2 3 2 2 8 4 14 Source: Deloitte Research Global Study on Finance Transformation

5. Key findings of the survey • Significant gaps exist between current finance capabilities and government needs. • Lack of up-to-date information for decision making • Inadequate information on costs • Relationship between investments and outcomes is unclear • Most finance organisations do better in the tactical roles (Steward and Operator) than at the strategic roles (Strategist and Catalyst) - the roles that are the most critical to addressing many of government’s biggest fiscal and operational challenges. • The greatest need in government finance today is for a finance function that can offer timely information to influence key operational and strategic decisions – to drive efficiency and cost savings. Leading Edge Strategist Catalyst Threshold Performance Performance Execution Finance Function CFO CFO Focus Focus Triangle Triangle Control Efficiency Operator Steward

6. The UK Perspective (results from 7 UK Public Bodies) UK scored well UK scored less well Somewhat Disagree Somewhat Agree Strongly Agree Disagree Neutral Finance Master UnitedKingdom Global Average

7. Breakout Session 1 Discuss in table groups: • Finance is still not viewed as a catalyst for change in the organisation –is this true, and if so, what needs to change to make this happen? • How should we leverage existing management information to identify areas for cost savings and what can we do to improve our management information

8. Decision-making not consistently evidence-based Investments based on strategic decision-making and evaluation Strategic options evaluated once , annually Strategic evaluations and investment proposal development continuous throughout the year In-year pressures handled on a case-by-base basis In-year pressures handled within the ongoing strategic decision-making process and framework Costs managed so that funding envelope is not exceeded Value managed recognizing that cost is a constraint Case Study: The Ontario Ministry of Health and Long-Term Care is embarking upon a major transformation The Ministry of Health and Long-Term Care (MOHLTC) is Canada’s largest health care organization, with an annual budget in excess of $40B to serve 12 million residents. In order to mitigate the projected rate of increase in health expenditures in Ontario, improvements are required in the way that resource allocation decisions are made. • MOHLTC has concluded that the relationship been investments and outcomes must be better understood when strategic and operational resource allocations are being made. Tomorrow… Today… Portfolio Management Vision Portfolio Management will support the Ministry's new role as steward of the health system by aligning strategy and target setting, investment decision-making and performance measurement around a common view of value. Source: Ministry of Health and Long-Term Care, 2006

9. From a financial perspective, Portfolio Management is at the heart of the transformation Portfolio Management is a process to identify, evaluate and prioritise investments in order to maximise value and ensure the sustainability of the health system Strategic Plan + other influencers Strategy Development • Portfolio management provides the means to ensure the linkage between the strategies of the individual portfolios and the performance scorecards (outcomes) of the portfolios • Investment portfolios are typically structured to create accountability for achievement of defined outcomes and control over the resources required to do so OperatingFunding Strategy Maps StrategicInvestment Budgeting PortfolioManagement PerformanceMeasurement and Target Setting + other Health System Funding Scorecards influencers AccountabilityAgreements Accountability and Performance Management Source: Ministry of Health and Long-Term Care, 2006 Results

10. Customised evaluation approaches will be required for different investment types STRATEGIC INVESTMENTS OPERATIONAL INVESTMENTS System CapacityBuilding Innovation Health System Value Existing OperationsMaintenance ProductivityImprovement

11. VALUE and RISK criteria are being developed to help prioritise and align investments with strategic objectives Value category Risk criteria Internal and external stakeholder alignment Impact on outcomes Feasibility Sustainability of outcomes Skills and capabilities Timeline to outcome Implementation timeline Critical foundational Legal/contractual element obligation

12. Breakout Session 2 Discuss in table groups: • How do you prioritise investment decisions today and how transparent and consistent is the process? 2. What challenges do you see in adopting portfolio management techniques to assist with resource allocation in your organisation?

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