BCSTA Fraser Valley Branch Meeting
Thursday, November 18, 2004
Alternate or Shared Services Delivery Discussion Agenda
Background and Meeting Pre Work
Further to the Branch meeting of October 20, 2004, there was strong indication that Fraser Valley trustees should devote a full meeting to the subject of alternate/shared services. Upon [Maple Ridge trustee] Jim Sinclair’s proposal that SD#42 organize this meeting it is recommended that all trustees read the alternate services discussion paper prepared by Don Woytowich, ST from SD#42. In addition, it would be useful for boards being represented at the November 18th Branch meeting to have discussed the substance of the paper within their own board prior to this meeting. Moreover, it is recommended that such a discussion exclude staff. This is not a topic to add to your normal meeting agendas. It is further recommended that trustees and boards participating in this meeting refrain from engaging their respective staff in any discussion about this topic. The primary reason is there is a real reluctance on the part of any staff to invest any time on this subject as is evidenced by the fact there appear to be no significant staff led initiatives in the area of alternative/shared services among school districts. If there are, they are very well kept secrets. Our meeting will exclude staff as discussed for the express purpose of facilitating an open and frank exchange about the subject.
Discussion questions for November 18
- What does Alternative/Shared Service really mean?
- Is there general agreement on the concept as trustees choose to define it?
- If so, what are the guiding principles that should direct exploration of this concept?
- Should we communicate with the Minister and MLA’s and if so, why and what’s the message?
- How should we engage our staff?
- Should we develop terms of reference for a task team, and if so, what should be contained in these terms of reference?
Alternate service delivery
An option for administrative service delivery
Context—The New Reality
Alternate Service Delivery (ASD) is a much talked about and studied concept that has preoccupied much of the public sector for the past several years as a response to meeting the diametrically opposed initiatives of cost containment/reduction and quality service. ASD encompasses such diverse initiatives as simply cutting or eliminating currently performed functions and obtaining these services from the private sector, simply privatizing functions to more elaborate solutions such as the creation of new forms of business entities or partnerships to provided services in a much more cost effective manner. There is little argument that resources within the education sector have been eroded to a level where the provision of a quality education is at best difficult, and at worse, virtually impossible. As of late, funding has become more prescriptive, in terms of meeting Ministry and contractual imperatives. Districts have, for the most part, been left to their own devices to allocate resources within a structured framework which has left little discretionary funding to pursue local community programs and initiatives.
The Ministry’s attempt at reducing administrative expenditures has centered on the amalgamation of Districts and the elimination of Boards. This actually saves little, and tends to make a mockery of local autonomy and appropriate representation. There is justification to the comment that some excess still remains in the system. However, this excess is not readily addressable by Districts working in isolation. Rather than pursue the amalgamation of Districts and the elimination of Boards, an alternative that would leave local representation intact, could be the formation of a "Service Bureau" approach in which common administrative and support functions could be pooled and made available to participating Districts.
The Ministry is of the opinion that considerable excess capacity still remains within the system, and realistically, they are right. Particularly in administration, at the senior management, excluded, and supervisory levels. The formation of a Service Bureau would allow for significant elimination of duplication in management/supervisory levels and support/administrative services that are common to all Districts, and other public sector organizations. The types of services that lend themselves well to this type of approach are, accounting, finance, purchasing, payroll, personnel, student support services, Information Technology, transportation, capital construction, maintenance, and some educational administrative functions.
A Service Bureau can be a virtual entity, there is no need to house all functions in one location and it is likely that functions will be housed where it makes most economic sense to house them. While there is a need for a CEO of the Service Bureau there is no need for that individual to have all staff in one location or to be located in only one center. This individual would be responsible to, and report directly to the various Boards that participate in the Service Bureau. This will further support the delivery of unique services to Boards based on local initiatives and desires. Service Bureaus do not make policy or decisions, they provide custom service to clients/owners based on their specific requirements. Service Bureaus are large enough to create significant economies of scale and are able to attract and retain high quality staff resulting in quality service delivery.
Service Bureaus of this type typically start as a joint venture owned by the founding/participating clients. The Joint venture is typically a not-for-profit organization. The Board is comprised of the clients making it a very service/client oriented entity with all surpluses being reinvested back into improving services or reducing costs. The Board of this entity would consist of members of the Districts that participate in the Service Bureau. This makes the Service Bureaus primary purpose for being service at the lowest cost possible. There is no profit motive so any surplus must be either paid back to Districts or be reinvested back into service efficiencies and innovations. Once established, Service Bureaus may provide services to other entities through a strict fee for service arrangement or through participation in the joint venture.
The move to a Service Bureau concept will not occur if left to the initiative of Districts. The discussion soon turns to one of self preservation and turf protection. To many, the concept of shared services revolves around the idea that somehow through putting all of the clerical/support staff from several Districts into a room together somehow, as if by magic, savings will result. This may have at some point in time held some credibility, however, long gone are the days when clerical/support workers where not taxed to their limits as a result of ongoing cuts. The savings left in the system are those that will result through the elimination of management and supervisor levels which are replicated across the province. There is in every district a Secretary-Treasurer, an Assistant Secretary-Treasurer and numerous supervisors which through amalgamation could be reduced/eliminated. True, some savings will be achieved through the streamlining of services, and the use of new technology that could be justified as a result of increased volumes. However, these savings pale in comparison to the potential savings resulting from the reduction in the number and levels of management/supervision.
Some question the need to move to a unique business entity and look to contracting out. Contracting out is a panacea that has lured many organizations into a position where they have lost control of standards, and have no ability to recapture control of standards. It is unwise to assume that an entity that pays taxes and must create a profit for its shareholders can compete with one that is not limited by these constraints. Some suggest that savings can be achieved through the formation of a School District Corporation and moving all support functions into that entity, saving money through lower wages and benefits. This is highly unlikely, as the issues of successor rights and a common employer, would result in the best of the contracts held up as being the contract for the new entity. This may also be an issue for contracting out, particularity if the contractors sole contract, or major portion of its business, is with the Districts it is serving. Contractors make money by lowering wages and increasing workloads to a point where the quality of services suffers. In the end one typically gets what one pays for, and no more.
The question often raised is what incentive is there for Boards to reduce administrative costs through shared services if they have balanced budgets already. Simply put, it is time to look at the bigger picture. Every dollar that we spend on administration is one more dollar out of the classroom. The funding envelop for education is not growing, and is likely to grow even less with the emphasis being placed on Health Care, therefore, if we are to keep pace with student needs we need to find ways to reallocate within a funding envelop under attack by inflation and escalating needs of students. Put simply, "If we keep doing what we have been doing, we will keep getting what we’ve been getting" continuing to implement change in a piece-meal manner will get us exactly what we have been getting, less funding for the classroom. It is time for re-engineering not renovating. A total restructuring of support services is required which will take some overall commitment and leadership from the Ministry or from Boards. One need only to look to Alberta, a province awash in revenue where school Boards, even large ones like Calgary, and Edmonton, are being forced to reverse their strategies for unique schools and unique programs due to funding pressures, while at the same time being faced with threats of amalgamation of Boards. Does the amalgamation of Boards and the dilution of representation and autonomy really support learning?
Historically each School District has assumed the role of administering programs and services related to the delivery of education to constituents within the boundaries of their District. These services are a combination of both educational (policy) and administrative (business support) services. While there are many valid arguments for unique and significantly different educational programs and focuses within Districts, this same argument cannot be made for business services which, for the most part, are common in nature with only cosmetic differences. This is not to say that the model would only consist of one model for the delivery of businesses service only, that under the skin the processes are surprisingly uniform. This does not mean that business services that are not identical cannot be delivered from one common entity. There are many Service Bureaus in existence that offer their services to a wide array of clients all with what appears, at least on the surface, to be unique requirements. There is no need to retain Business Services within a School District in that these are support service with no policy purpose. The policy functions would remain with the Board, the function of the new entity—Delegated Administrative Organization—is to deliver the level of service requested in the manner requested to the benchmarks for service established by the client.
Defining a delegated administrative organization
Delegated Administrative Organizations providing administrative and business services through a Service Bureau are not new and have been in existence over 10 years. DAOs owe their existence to governments re-thinking service delivery in an attempt to reduce costs while retaining control over policy matters, and levels of service. There is no one model for a DAO, because the needs and expectations of the stakeholders will differ from one group to another. However, in the case of School Districts it would appear to be appropriate to create an entity that is a not-for-profit organization whose Board of Directors would consist of the Boards participating in the initiative. This could be accommodated through the entity being a spin off of the District’s Business Corporation which could be constituted as a holding company for several other independent initiatives. DAOs display the following common characteristics:
- They are a legal entity separate from its owners and Board of Directors.
- They are self-funded through fees for services assessed to owners and others at large.
- DAOs are typically incorporated as not-for-profit organizations.
- They operate as administrative and management organizations in the private sector.
- DAOs provide services through a Delegation Agreement.
- DAOs are run by a Board of Directors representing, for the most part, major users.
- DAOs operate under a set of bylaws agreed to by the owner Boards.
Administrative responsibility must be delegated to a distinct legal entity. This can be accomplished by:
- establishing a DAO (as a legal entity) and then delegating to it; or
- delegating the authority to an existing legal entity.
The DAO must be independent of its stakeholders and separate from the owner Boards. It must be able to administer delegated responsibilities while reflecting the best interests of the Owner Boards, stakeholders, the Provincial Government, and the public in general.
Delegation of administrative responsibilities requires that the original delegate (i.e., Boards) ceases to have that administrative authority. The DAO assumes the administrative authority and associated responsibilities and costs.
The most common legal entity chosen for a DAO is a not-for-profit organization. The reason for this is that this form of business has no focus on profit. In this way the entity can focus all of its energy and talent on service efficiency, and meeting expectations of the Owner Boards. The Board of Directors has a vested interest in efficiency as they are funding the entity and any savings can be diverted back into service delivery or rate reductions. There is no benefit to the DAO hoarding surpluses as there are restrictions to the amount of surplus funds a not-for-profit organization may hold (150% of the annual budget). Being an incorporated legal entity, a DAO would have all the normal powers of a business, including the ability to:
- regulate its own procedure and operation
- hold and dispose of property; and
- enter into contracts.
As a private sector operation, the DAO would be able to secure funds from any avenue available to private sector entities. DAOs are expected to be self-funded, with DAO revenues channelled back to fund the operation. Fees for services from Owner Boards would be supplemented with revenues generated from other entities that may or may not be owners. There is no need to limit clients to Boards or merely to the public sector, clients from the private sector could also be pursued to increase scales of economy and scope.
The DAO would generate its own revenue and be liable for its own debts. It is intended that fees collected would be the DAO's responsibility. There will be no restrictions placed on these funds by the Financial Administration Act or any other government legislation dealing with public organizations or funds.
There is no single model for DAOs. Further, it would be inappropriate to tie the concept to one particular example.
There are principles common to DAOs, such as management by a Board of Directors. However, the structure of a specific DAO will be determined by what is most appropriate under the circumstances. For example, a DAO with several Owner Boards may have a very different structure than one established for only two Owner Boards. Size and structure will also be influenced by the degree to which the DAO decides to pursue businesses outside of the public sector. A DAO may choose not to deliver services and programs directly. It could instead decide to contract the work with appropriate independent agencies or individuals. Staff may then only be needed for administering contracts.
A Delegation Agreement covers the details. It explains the roles and responsibilities of the Owner Boards and the DAO. It contains the specifics of what is to be delegated, to whom, how, and when. This document details how the administrative responsibilities will be performed, sets out reporting requirements, and compels the establishment of an appeal mechanism.
The Delegation Agreement is a living document. It can be changed and amended as needed. Because responsibilities are delegated by the Owner Boards they can expand or retract what has been delegated, depending on the performance of the DAO, the wishes of the stakeholders, and the limitations, if any, imposed by government, unions etc. The delegation agreement will bind owner Boards, to a minimum level of activity.
A DAO carries out its administrative responsibilities as a private sector business, guided by a Board of Directors.It funds itself through fees for service with Owner Boards and other clients in the private sector. The intent is to give the Owner Boards the ability to control service levels while achieving economies of scale and scope. In this way state of the art processes and mechanisms will be available to the Boards to ensure a high level of service while eliminating the need for a great deal of middle management.
Appointment of a board of directors
A Board of Directors will oversee the establishment and operation of a DAO. Part of the Board's role is to reflect the interests of all affected stakeholders. Daily activities will normally be handled by a group which reports to the Board. The Board would consist of one appointed member from each Board to look after the interests of the specific Board.
The Board of Directors will conduct itself as any typical Board and enact bylaws that:
- provide for the acceptance and exercise of powers;
- establish administrative and operational policies;
- establish fees, assessments or levies;
- establish procedures by which bylaws are adopted and amended;
Appointment of a chief administrative officer A Chief Administrative Officer would have to be appointed to oversee the operation of the DAO. The Chief Administrative Officer (CAO) in fact would be the Secretary-Treasurer of each of the Owner Boards. The CAO would, as currently is the case, attend each of the various Boards Public and Closed meetings and act as the Boards financial and administrative advisor. The CAO would in fact be in charge of a virtual organization that would have component parts located in each District to ensure a sharing of employment opportunities. Technology as it exists today can support such an initiative. The CAO would report to the Board of Directors for general direction and serve in a more one on one typical employment relationship with Boards on individual issues and matters.
Benefits of a DAO
The DAO concept has numerous benefits several of the more important include:
- DAOs are large enough that they can benefit both from scales of economy and scope that most School Districts, due to their size, cannot.
- DAOs reduce costs to Boards and ultimately the taxpayer by eliminating the numerous levels of management that exist with the replication of administrative structures in each District. Currently each District has a Secretary-Treasurer, an Assistant Secretary-Treasurer, and various Directors and Managers for each operational unit. By moving five Districts into a DAO four of each could be eliminated with significant savings accruing.
- Programs and services demanded by owners/clients continue to be delivered at levels they desire.
- The ability to attract and keep scarce professionals is greatly enhanced, particularly in the IT sector where salaries are high and individual Boards cannot attract experts, not only due to remuneration factors but also in terms of challenging work environments.
Process for establishing a DAO
Establishing a DAO involves:
- communicating the concept of "a new way of doing business".
- interested stakeholders exploring the possible application of a DAO.
- an alliance of interested stakeholders exploring the concept
- a group of stakeholders developing a draft model to use in communicating to others.
- communicating the draft model to the affected parties, creating an opportunity for everyone to be heard.
- incorporating stakeholder feedback into a final model (a continuous consultation process ensures consensus and commitment).
- presenting a formal proposal to those Owner Boards interested in pursuing the matter.
- upon approval and support of Owner Boards establishing a draft delegation agreement.
- establishing the DAO as a legal entity.
- finalizing a Delegation Agreement between the Owner Boards and the DAO.
Creating the concept The DAO will not happen on its own it will take a champion, and a dedicated support group, to pull together the essential elements and gain consensus. A DAO Support Group will be essential, this groups will play a lead role in:
Creating the DAO model
After the preliminary task of exploring the concept, a draft proposal can be put together. Through consultation and feedback, the stakeholders' and DAO support group formulate a draft model. The draft model will be incorporated into a communication plan to inform all stakeholders.
It is important for everyone to have a clear understanding of what is contemplated:
- what responsibilities will be delegated;
- what programs and services will be taken on by the DAO;
- how the services will be delivered;
- and the relationship to Owner Boards.
Communicating the model to stakeholders
The key to having a proposal understood and accepted is clear communication with stakeholders. Communication can take many forms. The DAO support group will determine the most appropriate process for their circumstances. It will also have to identify the stakeholders.
The proposal will probably be incorporated into a discussion paper to generate interest and feedback. The proposal can be distributed through a general mail out, a series of meetings, advertising, or through a combination of these and other avenues. Communicating the draft model is the responsibility of the stakeholders' DAO support group.
Getting commitment to the concept
The process is one of developing the concept and then, communicating it. The objective is to obtain support and direction from the affected parties. The stakeholders must agree to:
- delegating administrative responsibility to a new entity outside of the District.
- the kinds of responsibilities and authorities the DAO would have.
- the kinds of services the DAO will provide.
- how programs will be delivered.
- the organization's structure.
- how the DAO will operate.
- ;how the DAO is funded.
- how fees will be set and changed.
Establishing time lines
The process is time consuming. Depending on the complexity of a DAO, the number of stakeholders and the extent of responsibility being delegated, it may take many months to well over a year or more, before a Delegation Agreement can be put in place. All stakeholders must be able to accept what is developed. Therefore it's important to ensure the process is not rushed. On the other hand, because of the scope of the task, it is also important that time lines be established to make sure the project does not drag on unduly.
Identifying issues and concerns
As the concept is developed and explored, many issues and concerns will surface. All parties involved have to be comfortable with the resolution of those concerns. That means there must be the opportunity for all sides to express themselves. It is the DAO project teams' responsibility to make sure that all views are heard, and to facilitate discussions where required.
The Owner Boards may adopt and use any form that is suitable for the circumstances. The Delegation Agreement must address at a minimum:
- when the DAO commences operation;
- the protocol followed during the transition period when responsibilities are transferred to the DAO;
- what services and programs the DAO will provide;
- what responsibilities and authorities the DAO has;
- how the DAO funds itself;
- how fees are set and changed;
- establishment, selection and replacement of the Board of Directors
- the reporting requirements of the DAO:
- an annual report on: activities of the DAO; any changes to bylaws, policy, and the Board of Directors; and an independent financial audit
- access by the Minister to all operational information
- monitoring of the system to ensure that programs are delivered in accordance with public policy
- audit of the DAO's operations to ensure effective and appropriate administration of the delegation agreement.
- amendment and termination provisions
Implementing the DAO
When the Delegation Agreement is in force, the DAO can assume its administrative responsibilities. Commencement of the DAO's operations will depend on the specifics of the Delegation Agreement.
Human resource issues
Delegated Administrative Organizations will need employees, and the transition of administrative responsibilities to a DAO will have an affect on existing staff.
Staffing a DAO
Within the context of the Delegation Agreement, the DAO's Board of Directors determines what programs are to be delivered by the DAO and how those services will be provided.
The DAO may decide to deliver programs directly, it may contract a significant portion of the work to outside agencies that have the necessary competencies, or it may combine the options.
The DAO will be encouraged to utilize the expertise and special skills developed by Owner Board staff in administering business services for school boards. The DAO could take most, some, or none of the existing staff.
The transition process
Once a DAO is formally established, there will be a start time where the DAO commences to assume administrative responsibilities. The responsibilities may be delegated all at once, or they may be phased in over time.
The transition process will be unique for each DAO. The transition period covers the time frame wherein Government ceases to deliver the programs and the DAO assumes responsibility for administration of the regulation.
In many ways a DAO is the same as any other business. A DAO has to set up all of the systems, including generating funds, needed to run its operations. Depending on the circumstances and the specifics of the Delegation Agreement, the Owner Boards may provide various kinds of support to ensure that a DAO will be able to establish itself as a free standing operation. However, Boards will have to be compensated for this assistance.
The DAO will need staff in order to perform its operations. If existing staff are recruited to the DAO, then there will be formal termination with Boards and a formal establishment of employment with the DAO.
Termination and severance packages
The union and the employer will have to reach agreement on termination and severance. However, if the Owner Boards have arranged for continuous employment, severance will not bare an issue
Essentially, if the employer provides continuous employment through a successor employer, no severance or termination package is required. This applies to those who accept the offered employment as well as those who choose not to accept, as they have a duty to mitigate loss. There are other conditions, such as requirement for proper notice. Depending upon the arrangement reached with a DAO, what the employment offer is,and the timing of the offer, then recruitment to a DAO will usually be considered continuous employment for the purposes of the understanding reached.
The intent is to arrange continuous employment for as many employees with the DAO as possible. For those who choose not to accept offers of alternate employment arranged, the provisions of the collective agreement apply.
District employees who accept employment with the DAO are treated as "terminations". Health Care, pensions, Extended Health, Insurance coverage, LTD and Dental Plans terminate on the last day of the calendar month in which the employee terminates.
The consensus interpretation is that successor rights provisions are likely to be an issue as the contracts of the unionized employees will carry over to the new entity. There will likely have to be a determination of which union locals will become the bargaining agent but this is a matter for the Labour Relations Board to deal with. The issue of whether the new entity would come under the control of BCPSEA and PESEC are all an issue that would have to be determined.