22 February 2008
The Home Office's failure to have its accounts in good working order was 'inexcusable', its permanent secretary told a Treasury and CIPFA-hosted symposium on financial management in London on February 13.
Sir David Normington said there were no excuses for the fact that the National Audit Office disclaimed the Home Office's accounts in early 2006, shortly after he took over at the troubled department.
But he went on to outline a process of recovery that led to clean accounts in November 2007. 'We are now on track for a pre-recess sign-off for the 2007/08 accounts. It will be the completion of our recovery. It's very important to add that we also brought our budget in on profile, achieved efficiency targets 15 months early and cut head office numbers by a third,' he said.
But Normington added that the department's ambition was not confined to producing clean accounts. 'It is to produce excellent financial management… I don't think senior managers can completely ignore basic systems and processes.'
Vital to the Home Office's recovery had been a willingness to face up to the extent of the problem plus strong leadership from the top, Normington said.
He added that good financial practice needed to run throughout the whole organisation: 'If you're not managing resources well, you're not doing your job properly.'
A further central government perspective was provided by John Codling, finance director at the Department for Work and Pensions.
Codling outlined some of the changes the DWP has put in place since 2004 when financial management at the department was fragmented.
'[We] started by trying to clarify the accountabilities and the decision-making around managing risk, performance and compliance. The objective was to improve the ability of the department to increase value for money.'
Despite these strides, Codling said significant challenges remained, particularly with a £2bn shortfall between the government's aspirations for the department and its operational budget. For the first time, a three-year financial plan has been produced to meet that challenge.
He added that significant change could not be delivered overnight. 'You can't just walk into an organisation and be allowed to do it,' Codling said. 'You've got to do everything incrementally. You've got to have clear aspirations, be patient but persistent… it's got to be continuous improvement.'
Good FDs stay impartial, says expert
Finance directors need to be an impartial presence on senior management boards and support colleagues to make good decisions, the finance director of a leading London council said.
Sue Beauchamp, from the Royal Borough of Kensington & Chelsea, said financial management professionals needed to be 'guardians of good decision-making'.
She added: 'They make sure that financial implications are addressed and issues taken into account and that means being dispassionate… and being the only person who isn't there to bid for a particular outcome, the person who can weigh up the analysis and the facts behind it.'
Beauchamp was speaking at a session at which finance chiefs from different sectors gave their view of what good financial management and a strong financial director should be.
Beccy Fenton, chief finance officer at the Heart of England NHS Foundation Trust, said: 'I'm trying to help the finance staff learn that the decisions don't sit with them. They've got to train and enable people to get better at their jobs and make the right decisions themselves.'
And Nigel Hiller, finance director at South Yorkshire Police, said he saw two roles for the finance director: to create opportunities that shape the future and to ensure stability.
Coffers 'face £10bn shortfall'
Public finances are in a much worse state than was widely believed before the 2005 general election, the BBC's economics editor told the conference.
In his opening address, Evan Davis painted a stark picture of fiscal health. There was a shortfall of some £10bn in the public coffers as a result of over-optimism on the government's part, he said. 'The mistake manifests itself in government borrowing as the government failed to generate the revenue it wants to spend. They've been anticipating revenues coming in that have simply not been coming in.'
The government had three options to overcome the problem, he said: 'fiscal drag', whereby tax thresholds are not increased with inflation; tax rises; and a reduction in the proportion of national income spent on public services.
Davis said all three were in play and predicted that the proportion of gross domestic product devoted to public spending was likely to fall to 37.8% in 2012 from its current level of 38.5%.
'Gordon Brown made the mistake he always said he'd never make. He let public spending rise too far and is clawing it back. Why has this happened? Because revenue optimism was unsustainable.'