Frank Wilson on shared resources and diversifying into property
0Frank Wilson trained at Selby District Council before moving to Hambleton and then to West Oxfordshire in 2006. He is strategic director for resources for the District Councils of West Oxfordshire and Cotswolds and finance director for Ubico, the waste company owned by Cotswolds and Cheltenham.
Room 151: You seem to have your hands full. How is it being a shared resources director?
Frank Wilson: I think every finance director in the country has his hands full to be honest with you. The background to it goes back a long way. One of the main reasons for the success in the shared services between Cotswolds and West Oxfordshire has been its incremental nature. It started when the councils agreed to share a chief executive nearly four years ago now. Then there was a change in management, someone left, so I took over part-time here and part-time there and have been doing that for three years now.
That was the beginning, but the bigger prize was in what more we could deliver in terms of shared services.
As ever with being shared over two places you still have two separate councils. You have to respond to two separate cabinets, two separate back bench arrangements. Each council has a different culture, although politically they are of a similar make up. The difference in culture was a bit of a surprise when I first started. They just do things in different ways. So that was quite challenging actually, you have to put on a different hat for each different council.
I spend two days a week physically over in Cirencester for Cotswolds and then three days in Witney, West Oxfordshire but if anyone from the one council wants to contact me when I am at the other, they can just ring me up or email me. In certain times of the year you do get pinch points, and then you’ve got to rely on having great people in your team to support you.
Room 151: How is the decision made for West Oxfordshire to have you for three days and Cotswolds for two?
FW: Well the concept is that I am equally shared, but what you want to try and avoid is too much movement from one place to the other. It kills your time, you lose one and a half hours in the day moving from one to the other and that’s not great efficiency. So the fact is I am available to both councils each day every day.
Room 151: What would you say to councils looking at merging the FD role?
FW: The obvious advantage for both councils is financial but you have got to look at the bigger picture and what you can further drive through. We have been able to do a series of further shared services and next year we are budgeting between the two councils to save about £1.5m through a range of shared services covering shared management, revenues and benefits, ICT, legal etc.
We also have just gone live with Go Shared Services which includes not only Cotswold and West Oxfordshire but also Cheltenham and the Forrest of Dean. That has been a significant piece of work. It started three years ago too when West Oxfordshire were looking to replace their ICT systems. We were one of a couple of councils left on the platform and it was going to be de-supported at some stage. At the same time because of our contacts with Gloucestershire we realised that councils over there were doing the same thing.
We got together and started talking about doing a shared procurement but it developed into a shared service. Eventually after a lot of toing and froing we decided to share all finance and HR services. So that included jointly procuring our new suite of financial systems including payroll, HR and the like, and implementing those.
So technically starting November 1 we will have a new structure to deliver those services. Employees are all employed by Cotswolds and there are Section 101 agreements to deliver those services. That is going to deliver 23% savings for each council on back office cost.
Room 151: Why is it only technically starting in November?
FW: The structure is only just coming into place now because first we had the business plan stage, then we had to procure, then it was implementation. Now that is a significant task for one council. For four it’s well, more significant. And we talk about four councils but there are two add-ons to that: the service also delivers to Cheltenham Borough Homes, an arms length housing association, and also to Ubico, which is the joint waste company between Cheltenham and Cotswolds. I am also the finance director for that as part of my role as finance director for Cotswolds.
So we have various arrangements but some councils, even ones close to us here such as South Oxfordshire and Vale of White Horse, have really integrated their councils. Here we have adopted this more flexible strategy because it doesn’t always suit each service.
It’s hard to say what the optimum size of these shared services is and I think that is a piece of work that needs to be done in the future. What is the best number of councils in a shared service?
For us at the moment with Go, four seems to be enough. The people running it have put an enormous amount of effort into implementing systems, changing structures, all the change management that goes with staff from four councils going to one of those councils. There are a lot of softer skills required and we have had some good people in place to help do that.
Room 151: So you’re saving £1.5m next year though sharing, how does that work out going forward?
FW: Well we expect the amount to get larger as we go on because so far we have only worked our way through around half of the organisation. We’ve focused on back office and tried to avoid front line and we’ve made significant savings while improving performance in revenue and benefits for example. So £1.5m will be the saving next year between the two councils, Cotswold and West Oxford. Moving ahead it will increase as both councils determine what the strategy is going to be.
That will have to be done and agreed by both councils as the next phase. Phase one was about sharing some management, phase two was about delivering on revenues and benefits and some of the smaller services, phase three was ICT, legal services and that is now in place, the savings are in the budget for next year and we’re going to now talk to councillors about where they would like to go next with it.
Room 151: You have quite a large property portfolio. How did that come about?
FW: I have been here six years and about four or five years ago we started looking at our investment strategy. We had an amount of capital related cash which was invested in cash with fund managers and Councillors were keen to diversify as we were at the whim of interest rates.
So the financial crisis started to happen and we had around £60m in cash holdings. We were subject to the vagueries of the market in terms of interest rates so we started to diversify and had probably just done our first transaction when the financial crisis hit. Suddenly interest rates fell from 6% to 0.5%. You can imagine on a portfolio of £60m what that means. Our budget for investment income fell from in excess of three million to less than half a million.
So we accelerated the strategy and did much more. Where we are at now is we have about £30m in property across a range from industrial, retail, offices. It’s nicely balanced.
Room 151: Where are the assets?
FW: There’s quite a lot outside the district, we are generally Oxfordshire based but not exclusively. We have some property down in Poole in Dorset, some in Essex as well, but the larger portions are in Oxfordshire but not necessarily in West Oxfordshire. It is done for investment purposes after all, not from an economic development perspective.
Room 151: What is the portfolio yielding?
FW: It looks to be about 7.25% for next year so we are really pleased. We did it in tranches where we started off with quite a significant amount then paused and looked to see how it was going. Everyone was comfortable with the approach. We discussed it with our advisers and did more. We have another deal that should be done in the next couple of weeks to complete the current tranche.
We talked to Arlingclose, our advisers, about rebalancing the portfolio but we don’t have a specific property adviser.
Having seen the success with West Oxfordshire we have adopted a similar approach with Cotswolds although not to the same extent. They don’t have the amount of capital but we have put about £5m in and that has delivered seriously enhanced reserves compared to cash.
Room 151: And so what do you keep in cash?
FW: In terms of West Oxfordshire we still have around £22m of cash with Investec. It used to be a segregated mandate and now it’s in a pooled fund. We changed that a couple of years ago because we felt that in a low interest rate environment it (the segregated account) couldn’t really deliver added value. The pooled fund arrangement seemed to suggest that it can deliver value when the market was moving both ways.