Transcript Do’s & dont’s

In association with
Creating Conditions for Growth through
Sound PFM and Governance
Ian Ball
Chair, CIPFA International
International Festival for Business,
June 2014
cipfa.org
cipfa.org
Ian Ball
Chairman
CIPFA International
cipfa.org
"Do you enjoy all this flummery,
Mr Pitt?"
"No, Mr Fox."
"Do you enjoy anything, Mr
Pitt?"
"A balance-sheet, Mr Fox."
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The BIG Picture
“From Renaissance Italy, the Spanish Empire,
and Louis XIV’s France to the Dutch Republic,
the British Empire, and the early United
States, effective accounting and political
accountability have made the difference
between a society’s rise and fall. Over and
over again, good accounting practices have
produced the levels of trust necessary to
found stable governments and vital capitalist
societies, and poor accounting and its
attendant lack of accountability have led to
financial chaos, economic crimes, civil unrest,
and worse”
Jacob Soll, The Reckoning: Financial Accountability and the Rise and Fall of Nations, Basic Books, 2014
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Session overview
 Introduction
 Why do sound governance and PFM matter?
 Introduction to CIPFA
 CIPFA and <IR>
 Fixing the Foundations and Taking Responsibility
 CIPFA-IFAC International Framework
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Governance - We are Not Where We Want to Be
 Implications for equity,
accountability, trust and
confidence in government
 Impacts service delivery
outcomes, living standards,
quality of life
‘It directly affects the quality
of decision-making and
gnaws away at public trust in
governments.’
Steve Freer,
Former CIPFA Chief Executive
 Affects investor confidence,
economic performance,
development and opportunity
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Environmental drivers
• Financial and economic crises
̶
Revealed weaknesses
̶
Created basis for change
• More prosaic, almost daily events
̶
Systems failures
̶
Inefficiency
̶
Corruption
̶
Poor financial management
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Why good governance matters
Brazil has seen a year of street protests against bad governance
and perceived excessive spending in preparations for the World
Cup and the Olympics, which Rio de Janeiro will host in 2016.
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Why good governance matters
‘…allegations relating to schools in Birmingham raise serious
questions about the quality of school governance
and oversight arrangements in the maintained sector’
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Why good governance matters
‘Following its election victory in May with 62% of the vote, the African
National Congress government faces a challenging task to raise the
country’s growth rate and improve social conditions, which has been
made more difficult by the weaker performance and deteriorating trends
in governance and corruption,’ the firm added
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Why good governance matters
•
Encourages better decision making
― Better informed
― Longer term
•
Leads to efficient and effective use of resources
•
Strengthens stewardship and accountability
•
Improves leadership and management
•
Creates a stable business environment
•
Removes competitive constraints on private sector activity
― Lower taxation
― Lower interest rates
•
Leads to better outcomes and improves peoples’ lives
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Background: CIPFA

Only professional accountancy body to specialise in
public services

Influences and shapes public finance landscape,
promoting strong Public Financial Management
(PFM) globally

Supporting improved PFM and Governance

The professional body for people in public finance
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CIPFA support for public sector
Practical
support for
professionals
and their
organisations
Educating
and training
professionals
PFM & Governance
- Advocacy & advice
- Standards & guidance
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Governance and the <IR> Framework
Source: IIRC (2013) Consultation draft of the international <IR> framework
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CIPFA – A Catalyst within the Profession
‘Making a step-change in government accounting and auditing is
completely within leaders’ control. The on-going crisis screams
out for urgent concerted global action.’
Rob Whiteman
CIPFA Chief Executive
http://www.cipfa.org/policy-and-guidance/reports/fixing-the-foundations
http://www.cipfa.org/policy-and-guidance/reports/pfm-taking-responsibility
In association with
Good Governance in the Public Sector:
PFM and the International Framework
Ian Carruthers
Policy and Technical Director, CIPFA
International Festival for Business,
June 2014
cipfa.org
cipfa.org
Ian Carruthers
Policy and Technical Director
CIPFA
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Why the IFAC/CIPFA International
Framework?
• Importance of public sector
― Role and economic significance
• Effective governance drives:
― better decisions
― use of resources
― accountability
• Previous work by both IFAC and CIPFA
• Update to reflect developing experience and thinking
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International Framework: Aims
• Establish a benchmark for good governance
• Serve as a reference point for those developing or
reviewing national codes
• Help public sector organizations continually improve
governance systems
• Where no code/guidance exists, provide:
― A shared understanding of what constitutes good
governance
― A powerful stimulus for positive action
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International Framework: Structure
Framework:
• Foreword by Mervyn King (Chair, IIRC, and King Report,
South Africa)
• Definitions
• Principles-based to maximize relevance, applicability
• Sub-principles and supporting guidance to provide
explanation
Supplement:
• Examples
̶
Provide practical experience and aid understanding
• Evaluation questions to consider
• Further reading
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Key Definitions: Governance
The arrangements put in
place to ensure that the
intended outcomes
for stakeholders
are defined
and achieved
• Arrangements include:
― Political
― Economic
― Social/environmental
― Administrative
― Legal
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Key Definitions: Governing Body
The person(s) or
group with primary
responsibility for overseeing
an entity’s strategic
direction, operations, and
accountability
• Applicable to different
structures:
― All levels – use of term
‘entity’
― Different executive and
non-executive
structures
― Separate legislature
and executive branches
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Good Governance in the Public Sector
The fundamental function
of good governance in the
public sector is to ensure
that entities achieve their
intended outcomes while
acting in the public
interest at all times.
• Good governance tied to:
― Acting in the public
interest at all times
― Achieving intended
outcomes
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International Framework:
Good Governance in the Public Sector
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International Framework Principles
Acting in the public interest requires:
A. Behaving with integrity, demonstrating strong
commitment to values, and respecting the rule of
law
B. Ensuring openness and comprehensive stakeholder
engagement
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International Framework Principles
Achieving good governance in the public sector
requires:
C. Defining outcomes in terms of sustainable economic,
social, and environmental benefits
D. Determining the interventions necessary to optimize the
achievement of the intended outcomes
E. Developing an the entity’s capacity, including the
capability of its leadership and the individuals within it
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International Framework Principles
Achieving good governance in the public sector
requires:
F. Managing risks and performance through robust internal
control and strong public financial management
G. Implementing good practices in transparency, reporting,
and audit, to deliver effective accountability
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International Framework:
Embedding good governance
• Dissemination via CIPFA, IFAC, and IFAC member bodies
• Revision of CIPFA publications e.g. ‘Delivering Good
Governance in Local Government’
• CIPFA Governance Mark of Excellence
̶
Accreditation based on independent assessment
̶
Report and recommendations
̶
Action plan and follow-up support
̶
2-year monitoring and evaluation
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PFM as part of good governance:
Whole System Approach
Outcomes
Sustainable social benefit
Delivery of services and products
Institutional
Framework
Public Financial
Management
Governance
Demand for services and projects
Stakeholder consultation
www.cipfa.org/policy-and-guidance/articles/pfm-a-whole-system-approach
Enablers
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Embedding PFM:
WSA - Key elements
• Legislation
• Standards & Codes
• Strategy & planning
• Operations
• Monitoring & Control
• Assurance
• Scrutiny
• Learning & Growing
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PFM – Changing the culture (1):
Building the skills – UK experience
• Limited accounting expertise initially
• Training decentralised
• Some centrally-written guides
• Gradual management and external financial reporting
improvements:
– Quality and timeliness.
• Mainstream role for Finance
• Increased number of qualified accountants
• Qualified Finance Directors on Department Boards (by 2007)
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PFM – Changing the culture (2):
CIPFA Role of the CFO Statement
www.cipfa.org/policy-and-guidance/reports/the-role-of-the-chief-financial-officer-in-public-service-organisations
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PFM – Changing the culture (3):
CIPFA Role of the CFO Statement
The CFO in a public service organisations:
1. is a key member of the Leadership Team, helping it to develop and implement
strategy and to resource and deliver the organisation’s strategic objectives
sustainably and in the public interest;
2. must be actively involved in, and able to bring influence to bear on, all material
business decisions to ensure immediate and longer term implications, opportunities
and risks are fully considered, and alignment with the organisation’s overall
financial strategy; and
3. must lead the promotion and delivery by the whole organisation of good financial
management so that public money is safeguarded at all times and used
appropriately, economically, efficiently and effectively.
To deliver these responsibilities the Chief Financial Officer:
4. must lead and direct a finance function that is resourced to be fit for purpose; and
5. must be professionally qualified and suitably experienced.
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PFM – Changing the culture (4):
The CIPFA FM Model
• Strong FM as corporate responsibility
• Is financial management where we want it to be?
• Identifies priority areas for improvement
• Allows tracking over time
• Can be used to benchmark between organisations
• Can test organisational leaders skills in financial
management
http://www.cipfa.org/services/advisory-and-transformation/financialmanagement-model
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PFM – Changing the culture (5):
FM Model good practice statements
Securing
Stewardship
Supporting
Performance
Enabling
Transformation
Leadership
L1, L2
L3 - L5
L6, L7
People
P1, P2
P3, P4
P5, P6
Processes
PR 1 - PR10
PR11 - PR14
PR15, PR16
Stakeholders
S1 – S3
S4 - S6
S7, S8
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Questions and discussion