The role of the chief financial officer will be central to the success of public sector bodies following the tough Spending Review
The Comprehensive Spending Review has given public sector management teams the biggest challenge they have faced for many years. The need for strong financial management leadership and advice to boards will never be more important. The CSR recognised the importance of the chief financial officer role, committing to ‘implementing a programme to strengthen financial discipline across government, enhancing the role of departments’ senior finance professionals’.
In local government, the position of the CFO was reinforced by the March 2010 publication of the revised Statement on the role of the chief financial officer in local government. Alongside this was an application note to the CIPFA/Society of Local Authority Chief Executives framework.
In line with CIPFA’s pan-public sector statement, the first principle is that the CFO ‘is a key member of the leadership team, helping it to develop and implement strategy and to resource and deliver the authority’s strategic objectives sustainably and in the public interest’.
The commentary on this principle states: ‘The CFO should be professionally qualified, report directly to the chief executive and be a member of the leadership team, with a status at least equivalent to other members. The statement requires that if different organisational arrangements are adopted the reasons should be explained publicly in the authority’s annual governance report, together with how these deliver the same impact.’
The application note implements the ‘comply or explain’ approach. It was initially introduced on a voluntary basis for 2009/10 and 2010/11. For 2011/12, it is to be built into the Accounting Code of Practice Statement of Internal Control disclosure requirements, making it mandatory. Councils will have to consider very carefully the reasons for operating a different model and whether it really provides the same level of assurance in practice.
CIPFA is also working on other sector-specific statements, including one for police authorities and one for higher and further education. We might also develop a statement covering arrangements for GP commissioning consortiums.
But these governance frameworks can go only so far in ensuring public sector organisations have the right financial leadership and advice. CFOs’ own skills and knowledge are crucial.
Given the scale and sustained nature of the cuts, the real challenge will be to ensure that the correct decisions are made not only for the short but also for the medium and longer term. To achieve this, CFOs will need the skills to lead work within management teams and ensure the support of elected members.
CIPFA is aiming to support its members in a range of ways. These include working with the local government treasurers’ societies to share ideas for achieving spending reductions. In particular, we recently held a summit of CFOs representing all of the CFO groups and societies in England, Scotland and Wales.
Delegates discussed emerging responses and how we could share best practice and lead the wider debate on public expenditure. We have been running development academies for several of the treasurers’ societies to support individual members. Now we are looking to reform our support for members facing ethical dilemmas. We aim to give them access to the advice and practical experience they need when times are difficult.
The coming years will, without doubt, be difficult times for finance staff in the public services. At CIPFA we are working to ensure members have the professional recognition and support mechanisms they need to help them be effective in their roles. In times of plenty, it is easy to forget the importance of effective financial management. In the times we are now facing, it will be critical to survival, enabling CFOs to demonstrate just how important they are to organisational success.
Ian Carruthers is the policy and technical director at CIPFA
