A Value for Money Framework for UEL

Status: Approved 19th May 2014

1. Introduction

1.1 The Higher Education Sector continues to face a number of challenges, many of which relate directly to the resources available to support front line teaching. These pressures are part of the daily challenge that we face at the University of East London (UEL), where we strive to deliver the very best possible experience and outcomes for our diverse student community.

1.2 To achieve this objective, we recognise our responsibility to ensure that every pound of UEL’s money is spent wisely and prudently. In short, we must achieve value for money (VFM) from all our activities (however they are funded). The University in common with other Higher Education Institutions (HEIs) is committed to the pursuit of economy, efficiency and effectiveness as part of its corporate and academic strategy.

1.3 Indeed, in his most recent report for Universities UK (UUK), Professor Ian Diamond reported that some £480 million of efficiency and value-for-money savings were delivered by universities in 2011/12 alone (on top of the £1.4 billion saved since 2005). The UUK report also highlights how the sector is innovating and driving best practice, which through the excellent sector wide efficiency exchange is being promulgated and promoted to all institutions.

1.4 Here at UEL, we seek to adopt good practice and incorporate VFM principles in all our activities, and to undertake reviews at suitable frequencies to ensure that VFM is widely and transparently demonstrated.

1.5 This document has been prepared for the approval of Audit Committee, to provide a framework within which UEL might effectively discharge its responsibilities to achieving value for money.

2. Defining what we mean

2.1 The phrase 'value for money' (VFM) is most commonly used to describe whether or not an organisation is obtaining the maximum benefit (within the resources available to it) from the goods and services that it acquires and provides. Some elements may be subjective, difficult to measure, intangible and therefore open to misunderstanding. For these reasons, sound judgement is always required when considering whether VFM has been satisfactorily achieved or not. Such

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considerations are not only a measure of the cost of goods or services. They also take account of the mix of quality, cost, resource use, fitness for purpose, timeliness, and convenience, in judging whether good value has been achieved.

2.2 Achieving VFM is also often described in terms of the 'three Es' - economy, efficiency and effectiveness:

1. economy - minimising the cost of resources for an activity (is about 'doing things at a low price')

2. efficiency - performing tasks with reasonable effort (is about 'doing things the right way')

3. effectiveness - the extent to which objectives are met (is about 'doing the right things').

The model of VFM can also be represented as follows:

2.3 Whilst each of these elements of VFM are important in their own right, it is probably true for UEL that a very particular emphasis arises from the notion of fee-paying students expecting value for their money in terms of completion, achievement and employability. These outcomes are of paramount importance to us in gauging the extent that we may have achieved value for our students’ money.

2.4 UEL’s VFM policy is endorsed by VCG and the Board of Governors and will be reviewed on an annual basis to ensure that it is in line with the UEL’s objectives and that it encompasses all of our activities.

3. Aims

3.1 To achieve good VFM, UEL has set itself the following aims:

a. to integrate VFM principles within our existing management, planning and review processes, particularly in respect of major projects or activities which have significant financial implications;

b. to adopt recognised good practice where this makes sense and provides benefit to UEL;

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c. to undertake or commission specific VFM studies on areas of activity identified as worthy of review;

d. to benchmark UEL’s activities against those of similar organisations where this is considered useful;

e. to respond positively to opportunities to enhance the economy, efficiency or effectiveness of our activities;

f. to promote a culture of continuous improvement;

g. to demonstrate clearly to both internal and external observers that the achievement of VFM is being sought across all of our Schools and Professional Support Services; and

h. to ensure that all staff recognise their continuing obligation to seek VFM as part of their day to day activities.

i. to adopt key performance indicators for VfM for reporting to the Board (on an annual basis).

4. Responsibilities

4.1 Under the Financial Memorandum between HE institutions and the HEFCE, UEL (in step with all other institutions) has a clear responsibility to obtain 'value for money'. Although this is a reasonable aim for many organisations, it is of particular relevance to institutions such as ours, where so much of our funding comes directly or indirectly from the public purse. These responsibilities do not stand alone but, rather, they sit alongside and complement our wider priorities and strategies (for example in the fields of diversity and sustainability) and other corporate objectives.

4.2 But as well as pubic funding, virtually all HE institutions (including UEL) receive a significant proportion of their income from wider sources, including grants, fees and charitable income. UEL’s institution's assets would not exist without such income streams and it is only right that we should treat all income by the same standards that we would treat public income.

4.3 In general terms, the Board of Governors is responsible for the VFM that is obtained from UEL’s activities. The Board is reminded annually of this duty through the “members’ responsibility” statement in our statement of annual financial accounts. Whilst maintaining this ultimate oversight in practice, the responsibility for VFM is delegated by the Board to the VCG.

4.4 The Audit Committee has a particular duty with regard to VFM. The HEFCE Audit Code of Practice requires all Audit Committees to state formally in their annual reports to their Boards of Governors whether or not they is satisfied with the arrangements in place within the University to promote VFM.

4.5 In order for our Audit Committee to give this assurance to the Board of Governors, VCG has undertaken to provide a formal report describing how the VFM Policy has been implemented over the preceding 12 months.  This Report, together

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with any supplementary report from our internal auditors, will be prepared for the Audit Committee in time for the preparation of the Audit Committee's annual Report, and in time to inform the Board’s approval of the annual statement of accounts.

4.6 The VCG is required to put in place the necessary arrangements to ensure that VFM is being sought. The Deputy Vice Chancellor and Chief Operating Officer has specific delegated responsibility to keep the Board of Governors and the Audit Committee advised of UEL’s VFM issues (for example, the publication of relevant advice or reports).

4.7 HEFCE carries out sector-wide VFM studies. From time to time, the National Audit Office (NAO) also investigates subjects relating to Higher Education. The VCG is expected to approve responses to VFM studies conducted by HEFCE and the NAO and to monitor any follow up action that may be required. The VCG will receive such reports, in addition to the School or Professional Support Service concerned, and will approve the University's response to such a report. It will also seek to benchmark the University's performance against these reports.

4.8 Whilst the Board and VCG bear ultimate authority for the University’s VFM policy, the achievement of true value for money lies in the activities of all colleagues across UEL and is not restricted to those with resource or financial responsibilities.

4.9 A table showing the many areas where VFM might be considered is show at Appendix A.

4.10 To help discharge these responsibilities, a small “steering group” will be created, chaired by the Deputy Vice Chancellor, to provide advice and direction on VFM matters, as well as overseeing the implementation of this strategy across the University.

4.11 The specific responsibilities for the Steering Group are shown at Appendix B.

4.12 All Managers have the executive responsibility to maintain an awareness of good practices in their own area of operation and to ensure that these are followed appropriately, within available resources and in line with the corporate objectives. All staff should endeavour to seek and achieve VFM in all activities and to bring to management's attention any opportunities for improvement.

5. Embedding VFM Principles

5.1 Integration. VFM should be a routine part of the decision-making process at all levels of management throughout UEL. This is particularly important in planning or reviewing activities with significant financial implications. The VCG will seek assurance that VFM aspects are being given due consideration in any aspect of expenditure and will raise any concerns through the appropriate decision-making processes. In this respect, achieving value for money should be seen as part of the overall picture of maintaining good financial governance across the University, which includes having appropriate financial regulations, expense claim and other financial policies, which are all up to date and disseminated across the institution.

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5.2 As part of the integration of VFM into routine decision-making, Schools and Professional Support Services will be asked to submit a brief report on the application of VFM principles annually within future planning rounds, detailing the measures proposed to improve economy, efficiency and effectiveness, and quantifying any financial benefits. Such reports should draw attention both to existing activities that demonstrate continuing VFM and to new opportunities for improving VFM. The VCG will wish to be satisfied that VFM issues are being adequately addressed and that all major areas of expenditure, including staff costs, are being properly scrutinised.

5.3 Schools and Professional Support Services are best placed to identify opportunities for achieving greater VFM within their areas of responsibility (there is, for instance, a direct correlation between improved VFM in procurement terms and institutional progress against the Procurement Maturity Assessment). Our staff know what measures are likely to be effective, having regard to their particular circumstances and needs. Managers in these areas will also know how to enlist the support and co-operation of staff.

5.4 The VCG will take the lead in promoting the sharing of good practice throughout UEL, where this has implications for VFM. The adoption of good practice is one way of demonstrating that VFM has been sought and achieved. Where this is identified and potentially applicable in another Schools or Professional Service, this will be appropriately communicated.

5.5 Benefits. Where it is appropriate to do so, managers should always undertake a full assessment of the objectives of an activity. Such an 'assessment' should also demonstrate that the proposed activity fits in with the University’s objectives and policies. Where this does not happen, an activity is, by definition, not achieving what the University has set out to do.

5.6 Through properly documented planning and assessment (maintaining an audit trail), and the adoption of open processes involving all interested parties, staff can publicly demonstrate a commitment to achieving propriety as well as VFM. This is increasingly important in a world of growing accountability and responsibility, and is essential for an institution like ours that is receiving public funds. UEL has a responsibility to show that it operates honestly, fairly and without bias.

5.7 The University also needs to comply with legal and other associated requirements. By adopting and being able to demonstrate good practice, the risk of failing to identify and comply with such requirements is significantly reduced.

5.8 All activities have risks attached. Incorporating risk management principles of identifying, evaluating and putting in place appropriate mitigation can also contribute towards VFM. Although it is not necessary to undertake a full risk assessment for each and every activity, an inadequate risk assessment, particularly for significant activities, can result in poor value for money.

5.9 Methods. An assessment of VFM can be achieved in a number of ways, for example:

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a. through benchmarking an activity against similar activities in other organisations or institutions;

b. by using performance indicators; c. through conducting VFM studies (possibly in conjunction with other

institutions); d. by seeking out and then adopting recognised good practice where this

can be adapted to UEL’s circumstances; e. through internal audit work. Although our internal auditors have a primary

responsibility for assessing UEL’s internal control system, our auditor (BDO) is frequently well placed to assess and comment on VFM in the areas reviewed (this is reported in individual audit reports and in the internal audit annual report);

f. through retaining documentation that shows how an activity has been planned to incorporate VFM, and evidence of the good practices adopted; and

g. by examining the results or outcomes of an activity.

5.10 There are a number of ways in which a commitment to the achievement of VFM can be made clear. Good management practices that seek to integrate VFM principles and the active promotion of a culture of continuous improvement are two very obvious examples. Conducting a VFM study does not, in itself, demonstrate VFM. Rather, this is achieved by the right action being taken on the result of the study and on any action taken in response to its findings.

5.11 Brief details on how a successful VMF study might be undertaken are shown at Appendix C.

5.12 VFM studies are frequently undertaken in conjunction with other organisations. This enables comparisons to be made (including the use of benchmarking) and each can draw upon good practice identified elsewhere. There is no right answer as to who should undertake a VFM study. The people involved in any VFM assessment should, between them, have a basic range of skills, including an understanding of VFM study methodology and project management, and a reasonable knowledge of the subject itself. They may be internal UEL colleagues or external experts. Internal auditors also have the knowledge, skills and experience to contribute to such work.

5.13 The HEFCE has a specific responsibility for VFM and conducts studies under arrangements approved by a VFM Steering Group (which includes sector representatives). The Council also publishes VFM advice which institutions can use as self-assessment tools. The outcomes of the VFM studies are published, with guidance to help universities assess their own position in any particular area being studied. The guidance generally promotes self-assessment by management, although the work could be done by the institution's internal auditor, or any other appropriately appointed person.

5.14 It may assist the University if an action plan were to be drawn up to ensure that all aspects of UEL’s VFM policy is fully embedded and effectively implemented in all aspects of the University’s business. A specimen action plan, which sets out a range of activities that might be undertaken is attached (for illustrative purposes) at Appendix D.

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6. Recommendation

6.1 It is recommended that the Audit Committee approves this VFM framework.

Dusty AmroliwalaDeputy Vice-Chancellor & Chief Operating Officer

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Appendix A

Areas of ActivityAreas of Consideration for VFM ActivityThis list is not intended to be exhaustive, but is provided for illustration. Some areas may have a potential for cost saving and others can be relatively straightforward to review or market test. Ideally where high spend areas or known efficiencies are identified, these should form the concentration of effort towards deploying VFM activity.

CATERING ENERGY ENTERTAINING Alternative forms of

provision Staff costs Supplies Income

recovery/charging policy

Alternative sources Consumption/

conservation

Alternative forms of provision

Accommodation charges

Catering charges

ESTATES MANAGEMENT

INFORMATION SYSTEMS

INSURANCE

Maintenance cleaning

Grounds maintenance

Space management Building project

Facilities management

Purchase versus leasing

Technical support (central/local)

'Ownership' (central/local)

Disaster recovery Update/replacement

policy

Competitive tendering

Costs versus risks

LIBRARY SERVICES PHOTOCOPYING PURCHASING

Staff costs Income recovery

Equipment rental Usage Income recovery Paper contracts 3rd Party revenue

Central contracts Competitive

tendering Academic

equipment purchases

RESEARCH SECURITY SPORTS FACILITIES Management of

contracts Purchase and

ownership of assets Purchase and

ownership of resulting work

Intellectual property rights/royalties/ patents/technology

Asset protection Alternative forms of

provision Outsourcing

Alternative forms of provision

Income recovery Staffing and

maintenance Charging policy 3rd Party revenue

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transferSTAFFING TELEPHONES TRANSPORTATION Use of recruitment/

temporary agencies Personnel

management policies, for example, sickness and absence management

Outsourced payroll

Line and equipment rentals

Call charges Usage Income recovery

Vehicle purchase versus leasing

Vehicle usage Servicing and

maintenance Replacement

policy

TREASURY MANAGEMENT Investment returns Cashflow

management Banking services

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Appendix B

DRAFT Terms of Reference for UEL’s Value for Money Steering Group

Membership:

This Group should be chaired by the Deputy Vice Chancellor and Chief Operating Officer and made up of a cross section of UEL colleagues (to be appointed) and, also, an invited external member.

Terms of Reference:

promote a culture of continuous improvement throughout the institution; where specific areas are considered for VFM attention, review the results of

the initial information-gathering exercise, and determine where there is scope for review;

prioritise activities for which there is scope for review, taking into account institutional priorities;

monitor VFM developments from all sources to ensure that an appropriate response can be made to new opportunities as they arise;

implement a plan of VFM studies - which may be conducted internally, externally or by the internal audit service (with the approval of the audit committee) - and benchmarking exercises. Working groups may be established for this purpose;

consider any VFM reports from the HEFCE, the National Audit Office, the internal audit service and any other relevant source, and take appropriate action on their recommendations;

monitor the implementation of any studies undertaken. This will include ensuring that agreed recommendations are implemented, and assessing the outcomes to see whether better VFM has been achieved (for example, through financial gains or better quality). Monitoring will also include following up all reviews after an agreed interval. (The ultimate measure of the value of a VFM study is the extent to which the improvements identified are achieved);

ensure that market testing of all externally contracted services is properly conducted by line management at the agreed frequency, and consider other market testing opportunities;

encourage the adoption of good practice in all areas throughout the institution by all appropriate means, and review the reasons for not adopting recognised good practice in any area; and

review existing performance indicators on key elements of the institution's activities to contribute to its assessment of economy, efficiency and effectiveness.

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Appendix C

Undertaking VFM Studies

A typical VFM study might involve the following activities:

Background work review existing information, relevant reports, internal audit work, good practice

guidance; meet relevant staff and discuss area of activity; determine whether or not to proceed with study; establish working group with appropriate staff and independent chair, and

prepare terms of reference; and define objectives and scope of work and prepare project plan.

Conducting the study collect facts from internal and external sources, including comparative

statistics, performance indicators and benchmarks as appropriate; review and consider results with working group; develop recommendations or identify opportunities for improvement; and agree draft report with management and complete an action plan.

Reporting report findings on a continuing basis to working group; report findings on a continuing basis to Steering Group (or VCG) and seek

approval for action required where appropriate.

Follow-up confirm actions implemented as agreed; confirm achievement of improvements; and report results to interested parties as above.

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Appendix D

Action Plan

To enable UEL’s VFM policy to be effectively implemented it is important to identify the tasks required and to formulate an appropriate action plan.

The kinds of activities that might populate such a plan are set out below:

1 Getting visible ownership and agreement from VCG, Audit Committee and Board.

2 Communicating to staff the new policy and how it is conjoined with the Corporate Objectives.

3 Confirmation of the role of the VFM steering group.4 VCG to approve clear terms of reference for the SG and to include VFM

as a regular agenda item.5 Minutes to be kept for the steering group to provide an audit trail on VFM

as the agenda item being discussed and appropriate decisions being made.

6 The SG to receive all reports on benchmarking and best practice studies being carried out across the institution.

7 VFM activity to be included into UEL’s performance management system as an item for appraisal for managers.

8 Project appraisal procedures to include section on how project adheres to VFM principles.

9 Instigate in the business planning process a standard section to be completed within the draft business plans of Schools and Professional Services.

10 Issue a light touch ‘self-assessment’ questionnaire in order to assess Schools and Professional Services readiness (and to raise the profile of VFM).

11 Consider the use of Internal Audit to provide an assessment on the effectiveness and compliance towards VFM across UEL.

12 Steering Group to contribute towards the assurance statement based upon their oversight throughout the course of the year.

13 Where appropriate, existing policies and procedures to be updated to reflect the adoption of VFM principles

14 Head of Governance and Legal to include an item on VFM issues on the agenda for each Audit Committee meeting. This may include any items derived from the VFM steering group, internal audit, VCG, or from any other relevant source.

15 In its annual report to the Board, the Audit Committee to state whether or not it is satisfied that satisfactory arrangements have been put in place by VCG to promote economy, efficiency and effectiveness. (This is a mandatory requirement of the HEFCE Audit Code of Practice).

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