Area Summary: Efficiency Savings Programs

Relevant audits

Audit Office	Report Title (click on title to access summary)	Publication date
NAO	Progress in Making NHS Efficiency Savings	December 2012
NAO	The BBC’s Efficiency Programme	November 2011
Audit Scotland	Improving Public Sector Efficiency	February 2010
NIAO	Review of the Efficiency Delivery Programme	December 2012

Example of audit objectives

• To assess the progress made in making efficiency savings in 2011-12 and to determine whether the NHS is well placed to make the required efficiency savings in future years. (view report summary)
• To assess whether public bodies have the building blocks in place to identify, measure, manage and report efficiency savings under the Efficient Government Programme. (view report summary)
• To assess the extent to which the 2008-11 Efficiency Programme delivered efficiency savings. (view report summary)
• To assess the BBC’s approach to delivering its efficiency programme against the principles of effective structured cost reduction. (view report summary)

Example of audit criteria

• The NHS delivered the forecast efficiency savings for 2011-12, while maintaining the quality of, and access to, healthcare. (view report summary)
• The programme to deliver efficiency savings is being implemented effectively. (view report summary)
• The NHS is well placed to make the required efficiency savings over the three years, 2012-13 to 2014-15. (view report summary)

Example of evidence gathering and analysis techniques

• Examination of a sample of 42 efficiency projects. (view report summary)
• Examination of savings data reported by the NHS and the Department of Health. (view report summary)
• Review and analysis of trends in the delivery of savings by NHS trusts and NHS foundation trusts, including their performance in delivering cost improvement programmes. (view report summary)
• Data analysis to identify trends across a range of indicators relating to the quality of, and access to, healthcare. Used data on NHS activity, waiting times, healthcare associated infection rates and patient experience. (view report summary)
• Conducting web-based surveys of all primary care trust clusters and NHS providers. (view report summary)
• Assessment of the approach of the BBC’s external auditor to testing the financial savings from the programme. Interview of the external audit team and review of the approach they had taken as set out in the terms of reference for the engagement. Review of the external audit reports to management on the programme and other programme documentation to assess whether issues were being raised and responded to. (view report summary)
• Analysis of over 50 performance measures monitored by the BBC over the course of the programme to date. Comparison of the BBC’s performance measures to the programme’s baseline year, 2007-08, to identify instances where performance had fallen by more than 5 per cent; checking whether the BBC had provided explanations. (view report summary)
• Tracking a sample of performance measures back to the underlying data to determine whether they were being presented accurately. (view report summary)
• Analysis of the reported and forecast financial data over the course of the programme. Comparison of overall progress to date and each area’s progress against their targets, and forecast savings and risk against the targets. (view report summary)

Example of findings

• For around two thirds of the projects examined, NIAO can offer no assurance that genuine efficiency savings have been achieved. This reflects a lack of understanding by departments of what represents an efficiency saving, and a lack of sufficient financial and performance information. (view report summary)
• Around a third of the projects reviewed did not have the basic financial and performance information necessary for auditors to make an informed judgement on the achievement of efficiency savings. (view report summary)
• Departments, on the whole, measured only inputs, in cash terms, but there was little focus on the measurement of outputs, quality, and the extent to which frontline services were protected. Efficiencies cannot be validated unless departments collate all the necessary information. (view report summary)
• Departments did not always net off the upfront investment costs or the additional recurrent costs necessary to deliver an efficiency. (view report summary)
• There was a number of examples where departments had increased charges as a means of raising income. These are not genuine efficiencies, but transfer the cost onto service users. (view report summary)
• Departments failed to challenge or validate efficiencies where the implementation lay with Arms-Length Bodies (ALBs), imposed percentage reductions without a clear analysis of baseline positions and failed to ensure frontline services were not affected. (view report summary)
• The BBC is delivering value for money from its efficiency programme in that it is on track to exceed its target of delivering £487 million sustainable, cash releasing net savings by 2012-13, whilst its overall performance in terms of audience measures has not declined. The efficiency programme is therefore proving a clear success in the terms set for it. It is, however, hard to say whether the target set was sufficiently stretching and the BBC cannot say whether all the savings represent genuine efficiencies.(view report summary)
• The NHS has made a good start and clearly delivered substantial efficiency savings in 2011-12. These savings will need to be maintained and built on if up to £20 billion is to be generated by 2014-15. For the NHS to be financially sustainable and achieve value for money in the future, it will need to quicken the pace of service transformation and make significant changes to the way health services are provided.(view report summary)
• We estimate that up to £520 million of the reported savings for 2011-12 were non-recurrent (one-off in nature), meaning the NHS will have to find replacement savings in future years. (view report summary)
• In seeking efficiencies, some public bodies – around a fifth of councils and a third of NHS bodies – have relied on non-recurring savings such as asset sales. It is reasonable to take advantage of opportunities like this as part of longer-term service planning and restructuring, but relying on one-off savings in the short term is not a sustainable option for the future. (view report summary)
• The public sector has reported £839 million of efficiency savings in the first year of the Efficient Government Programme. This is 57 per cent higher than the £534 million target. Of the reported savings, £254 million (30 per cent) have been delivered through better purchasing, better asset management and shared services, but there is still scope to increase savings. (view report summary)
• Although public bodies have overall cost information, they still do not have sufficient information on unit costs and costs related to activity and quality of services. This information is needed to demonstrate improvements in efficiency and productivity and to provide assurance that the savings reported through the Programme are being delivered. (view report summary)
• Planning for two per cent efficiency savings each year will not be sufficient to bridge the gap between projected future spending and future funding. (view report summary)
• Public reporting of efficiencies was not transparent, comprehensive or meaningful. (view report summary)

Example of recommendations

• The Department should provide better guidance to the NHS on how to measure and report efficiency savings, so that the total savings reported are more strongly supported by robust data. (view report summary)
• The Scottish Government and public bodies should:
  • consider using alternative providers of services, if these providers can improve the efficiency, productivity or quality of services;
  • improve information on costs, activity, productivity and outcomes, including setting baselines to measure performance against;
  • give greater urgency to developing benchmarking programmes;
  • reduce reliance on non-recurring savings to meet financial targets and generally use these as part of a wider and longer-term strategy; and
  • report efficiency savings consistently. (view report summary)

• Departments should do more work to improve information systems, particularly to identify the unit cost of activities and to quantify current performance. (view report summary)
• Departments should establish measures of inputs, outputs and quality of service for all savings programmes; ensure that a robust baseline is established; and that all these measures are monitored and reported on comprehensively, on an annual basis. (view report summary)
• In measuring and reporting future savings, all up-front investment and recurrent costs should be counted and netted off the reported figure. (view report summary)
• Departments should provide a strong challenge function to their Arms-Length Bodies in relation to the planning and delivery of future efficiency measures, including the need to ensure that quality of service is maintained. (view report summary)