By Rob Whiteman
20 May 2010
Local government finance directors will play an increasingly important role in the harsh financial times ahead – but they will need different skills, argues Rob Whiteman
The new parliamentary term will be marked by reductions in public expenditure and an assessment of the effectiveness of our political institutions. For local government, the two go hand in hand. Greater devolution of total public spending to a locality will make it more accountable to local people and allow significant savings, as multiple funding streams from Whitehall are streamlined.
But any new settlement will need a new generation of finance professionals to make it a reality; and the local government sector needs the profession to rise to the challenge.
Before the last decade of growth, it was common for chief executives to have a finance background. In the 1990s, half of London boroughs were led by accountants and, indeed, half of these doubled up and carried out both jobs. More recently, the shift in emphasis from money to improving services has led to many service directors taking the top jobs. Today, just five London boroughs are led by accountants.
Even the need to have the chief financial officer on the management board has not always been apparent in the years of plenty. But it is likely now that in public bodies the director of finance will increasingly be the number two helping management boards and politicians balance priorities and resources.
So what competencies will be needed – and can the profession generate enough people to take more leading roles? These chief financial officers should have a range of skills, including the ability to work well with politicians; take a sensible approach to risks; and link efficiently with other departments and services. They should also have sound commercial, commissioning and procurement skills; be able to use data to improve productivity; ensure spending leads to the desired policy outcomes; and be able to help the organisation consider shared services.
Working with politicians used to be commonplace for junior officers, who would advise committee party groups and committee meetings on their financial choices. This is not the case today and so finance directors will need to make a point of involving more junior staff in meetings with Cabinets and leading members.
As stewards of an organisation’s money, finance directors often see partnership working, pooled funds, invest-to-save vehicles and shared objectives as being too risky for any one organisation to enter. This can stand in the way of the flexibility we need to achieve with public money. As local government has a major convening role to bring together public bodies and spending around ‘place’, we need a finance profession that – through its training, guidance and practitioner associations – can bring together public spending models to do this.
Another area in need of change is the finance department’s place in the structure. Very often, finance has been lumped in with other central support services to form ‘Resources’ or ‘Corporate Services’ departments.
But is this the most efficient structure for the next decade? Often corporate policy planning, performance monitoring, engagement, communications and support to members are wrapped up into assistant chief executive portfolios separate to the resources brief. Perhaps this should be linked more to finance than to other corporate services.
Many central services will probably be offshored anyway, but from a strategic perspective organisations need to intertwine finance, policy development, prioritisation, supporting members and involving the community.
CIPFA should move on from the old debates about whether finance should sit at the top table – very soon it will, without question. Instead, it should start a debate about the new role to be carried out, involving treasurers’ societies and the Society of Local Authority Chief Executives and Senior Managers.
Commercial skills and strategic commissioning are vital to local government today and councils have some strengths in this respect. Private sector suppliers and consultants attest that local government does not waste money as freely as some other parts of the public sector. We have flatter structures and less low-hanging fruit in terms of savings because in relative terms we have not received the growth of many other parts of the public sector. But that is not to say we do not have a long way to go.
Contractors and suppliers are candid that local government/public sector clients do not squeeze them in the way that private sector clients do when renegotiating contracts. Finance directors often lead on procurement but some councils are now developing central commercial acumen to commission services along with departmental service experts.
Also emerging is an agenda for local government to be at the heart of localism, where councils and our partners increasingly extend personalisation and the amount commissioned from the third sector, social enterprises and small and medium-sized enterprises. The main political parties hear our intentions to achieve more but believe progress is patchy and in places slow. It is finance directors’ job to ensure good financial reporting and control, but authorities might also want them to develop skills to ensure resources are commissioned to meet policy intentions.
Changing the way we deploy people, buildings, systems and money needs better data than is often presently available. Many local authorities do not enjoy the sort of real-time cost data and analysis common in the private sector where managers eat, drink and sleep their unit cost data.
Indeed, the Audit Commission comments that data quality is patchy and we are not poised to build a new suite of data to improve productivity.
Finally, there is the potential for shared services. The market for financial services in local government has not developed as rapidly as other sectors and many treasurers have been reluctant to outsource their operations. But the need for transformative savings means that many councils seriously have to consider this. As a sector we need finance professionals to push this not just for their own services but for the council as a whole. The organisational mergers being led by several district councils to reduce overheads will quickly become a wider movement.
In summary, there is a sense that the reputation of local authority finance, once regarded as the best in the public sector, has not kept pace with the sector it serves. Local government’s reputation has improved considerably, but now we need a reinvigorated finance profession and a debate about how to develop this.
These comments are not meant as criticism but as an opportunity. Surely there is no shame in a profession querying whether it has the right strategic vision and competencies for the requirements of a new age. Indeed, such a debate should be seen to demonstrate the degree of its professionalism.
Rob Whiteman is managing director of the Improvement & Development Agency
20 May 2010
Local government finance directors will play an increasingly important role in the harsh financial times ahead – but they will need different skills, argues Rob Whiteman
The new parliamentary term will be marked by reductions in public expenditure and an assessment of the effectiveness of our political institutions. For local government, the two go hand in hand. Greater devolution of total public spending to a locality will make it more accountable to local people and allow significant savings, as multiple funding streams from Whitehall are streamlined.
But any new settlement will need a new generation of finance professionals to make it a reality; and the local government sector needs the profession to rise to the challenge.
Before the last decade of growth, it was common for chief executives to have a finance background. In the 1990s, half of London boroughs were led by accountants and, indeed, half of these doubled up and carried out both jobs. More recently, the shift in emphasis from money to improving services has led to many service directors taking the top jobs. Today, just five London boroughs are led by accountants.
Even the need to have the chief financial officer on the management board has not always been apparent in the years of plenty. But it is likely now that in public bodies the director of finance will increasingly be the number two helping management boards and politicians balance priorities and resources.
So what competencies will be needed – and can the profession generate enough people to take more leading roles? These chief financial officers should have a range of skills, including the ability to work well with politicians; take a sensible approach to risks; and link efficiently with other departments and services. They should also have sound commercial, commissioning and procurement skills; be able to use data to improve productivity; ensure spending leads to the desired policy outcomes; and be able to help the organisation consider shared services.
Working with politicians used to be commonplace for junior officers, who would advise committee party groups and committee meetings on their financial choices. This is not the case today and so finance directors will need to make a point of involving more junior staff in meetings with Cabinets and leading members.
As stewards of an organisation’s money, finance directors often see partnership working, pooled funds, invest-to-save vehicles and shared objectives as being too risky for any one organisation to enter. This can stand in the way of the flexibility we need to achieve with public money. As local government has a major convening role to bring together public bodies and spending around ‘place’, we need a finance profession that – through its training, guidance and practitioner associations – can bring together public spending models to do this.
Another area in need of change is the finance department’s place in the structure. Very often, finance has been lumped in with other central support services to form ‘Resources’ or ‘Corporate Services’ departments.
But is this the most efficient structure for the next decade? Often corporate policy planning, performance monitoring, engagement, communications and support to members are wrapped up into assistant chief executive portfolios separate to the resources brief. Perhaps this should be linked more to finance than to other corporate services.
Many central services will probably be offshored anyway, but from a strategic perspective organisations need to intertwine finance, policy development, prioritisation, supporting members and involving the community.
CIPFA should move on from the old debates about whether finance should sit at the top table – very soon it will, without question. Instead, it should start a debate about the new role to be carried out, involving treasurers’ societies and the Society of Local Authority Chief Executives and Senior Managers.
Commercial skills and strategic commissioning are vital to local government today and councils have some strengths in this respect. Private sector suppliers and consultants attest that local government does not waste money as freely as some other parts of the public sector. We have flatter structures and less low-hanging fruit in terms of savings because in relative terms we have not received the growth of many other parts of the public sector. But that is not to say we do not have a long way to go.
Contractors and suppliers are candid that local government/public sector clients do not squeeze them in the way that private sector clients do when renegotiating contracts. Finance directors often lead on procurement but some councils are now developing central commercial acumen to commission services along with departmental service experts.
Also emerging is an agenda for local government to be at the heart of localism, where councils and our partners increasingly extend personalisation and the amount commissioned from the third sector, social enterprises and small and medium-sized enterprises. The main political parties hear our intentions to achieve more but believe progress is patchy and in places slow. It is finance directors’ job to ensure good financial reporting and control, but authorities might also want them to develop skills to ensure resources are commissioned to meet policy intentions.
Changing the way we deploy people, buildings, systems and money needs better data than is often presently available. Many local authorities do not enjoy the sort of real-time cost data and analysis common in the private sector where managers eat, drink and sleep their unit cost data.
Indeed, the Audit Commission comments that data quality is patchy and we are not poised to build a new suite of data to improve productivity.
Finally, there is the potential for shared services. The market for financial services in local government has not developed as rapidly as other sectors and many treasurers have been reluctant to outsource their operations. But the need for transformative savings means that many councils seriously have to consider this. As a sector we need finance professionals to push this not just for their own services but for the council as a whole. The organisational mergers being led by several district councils to reduce overheads will quickly become a wider movement.
In summary, there is a sense that the reputation of local authority finance, once regarded as the best in the public sector, has not kept pace with the sector it serves. Local government’s reputation has improved considerably, but now we need a reinvigorated finance profession and a debate about how to develop this.
These comments are not meant as criticism but as an opportunity. Surely there is no shame in a profession querying whether it has the right strategic vision and competencies for the requirements of a new age. Indeed, such a debate should be seen to demonstrate the degree of its professionalism.
Rob Whiteman is managing director of the Improvement & Development Agency
