Chief among equals, by Alison Scott

14 Jan 10
ALISON SCOTT | CIPFA has now turned its attention to the vital professional and regulatory role of the chief financial officer in local government

CIPFA has now turned its attention to the vital professional and regulatory role of the chief financial officer in local government

The chief financial officer occupies a critical position in any organisation, holding the financial reins of the business and ensuring that resources are used wisely to secure positive results. While the global financial crisis and economic downturn have made these tasks even more difficult, they have also underlined the fundamental importance of the role.

Achieving value for money and securing stewardship are vital components of the CFO’s role in public service organisations, a duty enshrined in legislation for the responsible financial officer in local government.

It is UK government policy that all Whitehall departments should have a professional chief financial officer reporting directly to the permanent secretary. The Treasury’s guidance document, Managing public money, notes that: ‘It is good practice for all other public sector organisations to do the same, and to operate to the same standards.’

CIPFA backs the Treasury’s recommendation and in June last year launched its Statement on the role of the chief financial officer in public service organisations. The statement supports the institute’s work to strengthen governance and financial management across the public services. It sets out five principles, which define the core activities and actions of CFOs and the governance requirements needed to support them.

CIPFA is currently consulting on its Statement on the role of the chief financial officer in local government. This applies the statement for the CFO in public services to the specifics of local government, where the CFO is bound not only by professional standards but also by specific legislative responsibilities.

The statement puts the five CFO principles in a local government context. Successful implementation of each of them requires the right ingredients in terms of the organisation, the role and the individual.

The statement details:

  • the governance arrangements needed for each principle to ensure that CFOs are able to operate effectively and perform their core duties
  • the core responsibilities of the CFO role within the organisation. Many of the day-to-day responsibilities might in practice be delegated or even outsourced, but the CFO should maintain oversight and control
  • the personal skills, professional standards and technical expertise organisations can expect from their CFO.

To support effective governance and financial management, CIPFA recommends that organisations use the statement to benchmark their existing arrangements, and report publicly on their compliance.

The governance requirements in the public services statement are that 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 that of other members.

If different organisational arrangements are adopted, the reasons and impact should be explained publicly in the organisation’s annual governance report. In parallel, therefore, CIPFA is also consulting on an Application note to delivering good governance in local government: a framework. This will advise on applying the local government statement under the current governance framework of CIPFA/Society of Local Authority Chief Executives and Senior Managers.

The note includes advice on how the annual governance statement can reflect compliance with the CFO statement for reporting purposes, including implementing the ‘comply or explain’ concept for organisational arrangements.
Local authorities will need to consider very carefully the reasons for operating a different model and whether it really provides the same level of assurance in practice.

It is intended that, taken together, the statement and application note will provide a strong framework to ensure the effectiveness of the chief financial officer in the difficult times ahead for local government.

Alison Scott is assistant director, local government, at CIPFA. The statements and application note are on the CIPFA website

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