1.18 We found there was sufficient evidence to support £1,232 million of the £1,372 million of the forecast savings we examined (or 90 per cent of our sample population). The calculations for the savings were clear, the evidence base was available and any assumptions made were realistic. Where benchmarks were used there was a strong evidence base. Our full findings are shown in Figure 3.
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Figure 3
Overall findings from our sample
| Cash-releasing | Other efficiency | cash-releasing scope | Totals |
Sufficient | 801 | 253 | 178 | 1,232 |
Partial | Nil | 48 | Nil | - |
Insufficient | 92 | Nil | Nil | 92 |
Totals per saving | 893 | 301 | 178 | 1,372 |
NOTES
1. Assurance levels are defined in Appendix One and are discussed in paragraph 1.12.
2. A number of the savings reported were a mixture of cash-releasing efficiency, other-efficiency and cash-releasing scope reduction elements, and those savings have been split accordingly in the table.
Source: National Audit Office analysis
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1.19 There was partial evidence for £48 million of the savings we looked at or 3 per cent of our sample population. The basis for determining the value of these savings is subject to some uncertainty because, in the absence of actual cost data, they are based only on an estimate of costs saved. All of these savings fell into our category of 'other efficiency savings' and were the result of good contract management which enabled authorities to get more benefit from their contracts for no additional cost.
1.20 Overall £1,280 million of the savings we looked at (or 93 per cent of our sample population), were supported by sufficient or partial evidence. However, we also found that £92 million (or 7 per cent) of the reported signed savings from the sampled population of £1,372 million lacked sufficient evidence. The £92 million arose from three cases which are described below:
• In the first case, HM Treasury told us at the start of our review that one authority (a department) had notified it that a signed saving of £48 million was being contested by the contractor. The contractor and department had agreed a two-year interim deal on indexation on the contract. The intention was to conclude a final agreement on indexation at the end of the two years. In its calculation the department assumed the lower cost base at the end of the two-year period would continue through to the end of the contract, which would lead to future savings of £48 million. However, the contractor contends that at the end of the two-year period, the contract cost base will revert to the level it would have been without the two-year adjustment. The department is currently in negotiations with the contractor to resolve this matter. This demonstrates the importance of making a clear written record of discussions with contractors.
• In the second case staff turnover and poor record keeping meant the current postholder could not locate any documentation or other form of 'corporate memory', to support a £37 million reported signed saving.
• In the third case, an authority reviewed the benchmarks used to calculate the savings on one very large contract and, in response to our review, reduced a saving of £315 million by £7 million (amounting to 2 per cent of the saving).
1.21 The population of savings making up the £1.6 billion is not homogenous, as the nature of each contract and the savings derived vary from contract to contract. Furthermore, we excluded the smallest savings from the population before picking our sample (to avoid the selection of small savings, which would incur an excessive audit burden). However, if we were to assume the same rates of savings identified from our sample of 15 savings apply to the total population it would indicate that there is sufficient evidence for approximately £1,440 million (90 per cent) of savings, partial evidence for £60 million (3 per cent) of savings and insufficient evidence for £110 million (7 per cent) of the total reported forecast savings.8
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8 Figures are rounded to the nearest £10 million to avoid spurious accuracy. Therefore figures do not sum to the total £1,603 million reported forecast savings.