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2013 - the year of compliance?

Against a backdrop of the tough economic climate and job losses across the public sector, how can organisations meet the internal and external compliance requirements in the year ahead? Marie Coley SIRM, a member of the Institute of Risk Management (IRM), head of health & safety and environmental management at Addaction and former Business Services Manager for Defence Estates (a former executive agency of the MoD), asks if 2013 will present the biggest compliance challenge yet.

Greater financial pressure and increased scrutiny from the Government has faced the public sector since the start of the recession in 2008.

The public sector is facing real challenges to reduce its spending and restructure service delivery.

This has been evident across local authorities, the Audit Commission, Health & Safety Executive (HSE), Department of Energy and Climate Change (DECC), the NHS and many other organisations suffering widespread job losses.

These cuts have also led to the withdrawal and decommissioning of public services and the termination of contracts. The 2010 Spending Review requires government departments to reduce their budgets by 19% on average over four years. It is estimated that 500,000 public sector jobs will be lost during this time.

Given the changing landscape, many organisations and risk professionals are asking how they can manage, maintain and improve performance whilst meeting internal and external compliance standards? Could 2013 be the public sector’s biggest challenge yet?

The compliance shift

Organisations in the 21st century have much to contend with in terms of compliance with legislation, Approved Codes of Practice (ACOPs), regulatory standards and contractual obligations; not to mention internal measures, business plans, performance-related targets, guidance and protocols.

All of these compliance requirements stand organisations in good stead but it is becoming increasingly diffi cult to achieve with dwindling resources. The UK’s participation in the European Union has, some would say, created a raft of irrelevant legislation and directives, whilst others would argue it has produced a level playing fi eld for neighbouring countries and markets to compete.

Much closer to home, business minister Michael Fallon announced in 2012 that health and safety laws would be relaxed through deregulation and advised that safety measures are disproportionate in the workplace. Fallon believes that ‘cutting red tape’ will not only reduce costs to organisations but also increase productivity. This political shift has created new challenges and risks for the public, private and third sector – steering organisations towards self-regulation and outsourcing.

The outsourcing challenge

In September 2011 the HSE’s Info Line service was decommissioned after a consultation process. The public sector and other organisations no longer have health and safety telephone support and guidance.

Instead they are now directed to the HSE website which is also predominantly the case for Reporting of Injuries, Diseases and Dangerous Occurrences (RIDDOR). In some ways this has prevented public bodies and organisations from being ‘nannied by the state’. However, it seems to have created weaknesses and vulnerabilities in public services and other sectors that are left to independently research and interpret legislation with little or no clarifi cation or support. Similarly in 2010, the Audit Commission was restructured and now no longer inspects local authority services. One of the main purposes of the Audit Commission was to protect the public purse by working to improve service outcomes, identify weaknesses and publicise what worked well. After 11 years the auditing contract has been outsourced to four private companies for a period of fi ve years to carry out inspections of local public bodies in England, resulting in the closure of the Audit Commission’s in-house audit practice and the transfer of over 700 staff to the private sector.

Other regulatory bodies should take heed. Organisations should review their objectives alongside a gap analysis to ensure their service delivery is meeting compliance standards. The Care Quality Commission (CQC) has faced political criticism from MPs who stated that it has a “long way to go” before it is up to scratch.

Although significant changes have been made, it has been suggested that CQC lacks the resources and manpower to conduct extensive inspections of public sector services. A signifi cant number of organisations, like the Audit Commission and local authorities such as Barnet Council, have turned to procurement contracts to reduce their expenditure. Barnet Council proposes to outsource its services to Capita as part of a £320m deal over ten years. This enables the public sector to buy in expertise, guidance and support and also reduce the level of risk to their business operations.

Procuring contracts via the private and third sector is a model that has been used successfully – and unsuccessfully in some instances – particularly over the past 15 years. It is being frequently integrated into public service departments and NHS trusts’ ways of delivering services. Private Finance Initiatives (PFI) and Public Private Partnership Initiatives (PPPI) have also enabled organisations to focus on core service delivery while peripheral support services were contracted out.

As more contracts outsource provisions, there are major implications for the client, provider and end user. If the procurement process and business operations are not effectively managed by all stakeholders, and if organisations lack a shared common goal or culture, the key priorities and outcomes will vary. The intention of some private and thirdsector organisations may be heavily infl uenced by their own immediate environment and challenges; for example the company’s bottomline profits.

Creating successful partnerships

With £82bn per annum spent on public sector commissioning, it is predicted that £58bn will be outsourced by 2015. The stakes are high and these challenges need to be addressed. Improving the procurement process will directly improve compliance standards. This can be achieved with a robust governance framework, alongside corporate accountability and responsibility for decisions made by the organisation and those who affect it.

The public sector must encourage due diligence as part of their tendering process and contract management. Moving forwards the public sector must make informed decisions based on the resources available. It must determine if outsourcing could be more costly in the long term, and decide what truly benefi ts the interests of the client and the end user.

Partnerships should encourage transparency, openness and honesty to gain a better insight into overall performance. Regular reviews of key targets and diffi culties, if done correctly, can encourage mutual respect, professional understanding and a positive risk culture.

In order to improve compliance in 2013 it is important to provide adequate resources and evaluate the organisation and contractors’ levels of competency before awarding or reviewing contracts. This should be based on the client’s expertise, robust internal auditing and independent experts with a proven track record. This will reduce the degree of client liability and identify compliance issues that may arise.

Promoting good compliance

Trade unions are known for supporting public service workers and helping members fi ght for equality of rights, fair pay, tougher laws and compensation. Due to the changes taking place within the public sector, trade unions are being encouraged to look not only inwards to support staff but also outwards. Many unions campaign against p r i v a t i s a t i o n and forms of PFI contracts that may result in the transfer of public sector workers to the private sector. Trade unions could expand their focus to organisationa l structures and the administration of key business operations. This new role could be challenging but it may help to balance the argument for and against outsourcing and effectively meeting compliance standards.

Training providers and accreditation bodies also have a part to play in developing employers’ and staff understanding of their risk profi le and exposure. Employers must skill-up new and existing workers to provide services, but also broadly understand the importance of compliance and its integration with performance.

In the UK, training providers and accredited bodies have trained organisations’ employees in the art of benchmarking and measuring themselves against recognised standards. A bolder approach is required, with a clear shift away from being totally process-driven to more innovative and sector-specifi c measures and indicators. Many experts would argue this is already being done; however, one could debate how effectively it is working.

Heed the call

A message is being sent to organisations by the Government and its statutory bodies: compliance standards must be met and maintained across the public, private and third sector. Although signifi cant changes are taking place with the uncertainty of the economy, the public sector must not fail to deliver.

There is a need for compliance standards both internally and externally and for these to be monitored, particularly with the number of changes taking place. There is concern that the removal of some regulatory bodies and transfer to the private sector can potentially make the client and provider vulnerable, especially if they are small-to-medium sized organisations and those who lack expertise compared to large organisations that hide behind red tape/ bureaucracy.

Each sector has its own drivers and diffi culties it must face but ultimately this should not impact on the end user. These organisations are separate entities that must work collectively to achieve the end goal.It is important that the public sector does not give away or sell off its assets – the family jewels.

Contracting out knowledge and expertise could make some departments redundant, losing control of their business operations, sight of risks and new business opportunities.

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