Costing children's placements

• There are various methods for costing children's placements. Many councils are currently working with their neighbours to develop a more standardised approach. 'Benchmarking clubs' have been formed in several parts of the country - for example, in the West Midlands.
  
• The method used to determine the cost will depend on the purpose for which it will be used.
  
• For budget setting purposes, the marginal costs of placements will be important. The marginal cost is the expected cost of the next placement, not the average cost of placements overall. This is because there may be wide variation in the costs of different placements, depending on the type of placement and the supplier. Where in-house fostering services are operating at capacity, the marginal unit cost of increasing the number of children in family placements may be the same as the cost of a typical independent sector placement. For an example of work in this area see Greenwich.
  
• To understand the trends over time, it may be useful to calculate the average costs of placements each year. These can only be understood by using activity data to explain any changes in the numbers and types of placements used.
  
• Unit costing is necessary to:
  
  • Enable comparisons to be made between the costs of different placement options
    
  • Challenge the cost effectiveness of the council's own service
    
  • Achieve reliable comparisons with other councils
    
  • Assess whether the current range of services offer Best Value.
    
• To assess whether a service offers Best Value, the quality of the service and the outcomes achieved need to be explored alongside the unit cost. A placement that can achieve the safe and secure return of the child to its own family within six weeks at a cost of £1,000 per week, is better value than a placement at £500 per week that is unlikely to return a child home in under three months.
  
• The unit cost should indicate the total cost23 of the care package. This should include direct and indirect costs including:
  
  • Weekly placement cost x planned duration of placement (no. of weeks)
    
  • Additional travelling costs for example, placement to school (particularly relevant for some out of authority placements)
    
  • Contact costs for example, cost of child visiting siblings/parents/other family members
    
  • Social worker cost: planned time input x hourly rate (permanent or agency)
    
  • Social workers' travel costs for visiting the placement, and
    
  • Support services, including legal costs.
    
• Overheads should be charged, allocated or apportioned across users and other beneficiaries in accordance with Chartered Institute of Public Finance and Accountancy (CIPFA) principles. Of particular note in this area are the recharges for legal services. Authorities need to be clear whether recharges from Corporate Legal Services are on a case by case basis or a standard charge. Depending on the approach used, there is likely to be a considerable difference between the costs of an admission via a Care Order and a voluntary admission to care.
  
• National cost indicators (Department of Health PSS Performance Assessment Framework indicator (PAF B8) and Best Value Performance Indicator (BV51)) now use a definition that attempts to capture the total cost of a placement, including social work activity.
  
• The Best Value Accounting Code of Practice (BVACOP) published by CIPFA in 2002 provides guidance for accounting for social services and defining the cost data for performance indicators.
  
• Examples of good practice are covered in more detail in Sources of further information.
  
• See also the Commissioning module.