Improving Financial Management

Nick Jackson Head of Finance Professionalism

Monday 28 th September 2009

Areas to cover

Why do Public Sector Boards needs to work differently?

What are we doing to drive improvement in financial management?

How can you help?

1. Why Boards need to be more involved in financial management

Since the CSR, global developments have caused a sharp deterioration in the UK’s fiscal position…

Public Sector Net Borrowing (PSNB)

0 -2 4 2 14 Per cent of GDP 12 10 8 Budget 2009 figures excluding liabilities and unrealised losses on financial sector interventions 6 -4 1997-98 2000-01 Budget 2008 forecast 2003-04 PBR 2008 forecast 2006-07 2009-10 Budget 2009 forecast 2012-13 Outturn

Reduction required in medium term spending Current Spending (PSCE)

8% 7% 6% 5% 4% 3% 2% 1% 0% -1% 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6 20 06 -0 7 20 07 -0 8 20 08 -0 9 20 09 -1 0 20 10 -1 1 20 11 -1 2 20 12 -1 3 20 13 -1 4

Current spending

priorities will grow by 0.7% each year between 2011-12 and 2013 14, with additional efficiency savings allowing the Government to focus resources on front line public service

Net Investment

4% 3% 3% 2% 2% 1% 1% 0% 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6 20 06 -0 7 20 07 -0 8 20 08 -0 9 20 09 -1 0 20 10 -1 1 20 11 -1 2 20 12 -1 3 20 13 -1 4

Public sector net investment

and property sales available to supplement capital budgets will move to 1¼% of GDP by 2013-14, with proceeds from additional assets

Efficiency is more important than ever… A record of delivery: Gershon £26.5bn and CSR £30bn

Gershon Over-delivered – £26.5bn against £21.5bn target Departments already delivering strongly against CSR £30bn target (08/09 – 10/11)

An additional £5bn in 10/11

Given early findings of OEP & PVP, and additional capability developed within depts

Operational Efficiency Programme Public Value Programme Ambitious VFM programme in next Spending Review Period

Informed by findings of both OEP and PVP

Meeting the challenging fiscal context requires…

• • • improved control over public spending greater value for money from spending, with real service delivery improvements better financial management, integrated effectively with performance management

Strong financial management and governance need now to take centre stage in policy making, planning and delivery

2. What are we doing to improve financial management and governance?

8 Priority outcomes for improving financial management 8. Establish clear alignment across PSG & HM Treasury 7. Understand and address customer expectations 1. Establish visible leadership

“Professionalising and modernising the finance functions in government”

2. Support a change of culture that embraces strong financial management and governance 3. Establish and maintain standards and quality 6. Manage stakeholders in a consistent and open way 5. Establish a sense of a community 4. Promote integration of financial and performance management

Our four key building blocks to improve FM

1.

Introduce a simple and coherent framework -

of Sight (Alignment) project Clear Line

2.

Implement clear and consistent reporting

Government Accounts and IFRS

–

Whole of

3.

Provide strong governance, accountability and independent assurance

–

Corporate Governance Review and Internal Audit Service Review

4.

Develop financial management skills and capabilities

– commitments on professionalising Finance, setting the “tone from the top” and extending skills into the wider civil service

Financial Management skills and capabilities 1.

2.

3.

Qualified Finance Directors - reporting direct to Permanent Secretaries, at same level as other Board members

All departments to complete CIPFA FM Model and VfM benchmarks Embed Financial Management skills across central government

3. How can Non-executives help?

So what does this mean for Finance – how can you help?

Strategic Perspective New Position Innovation New Questions New Roles

Many thanks for your time

Potential supporting slides

Existing financial frameworks – the problem of misalignments

Estimates Budgets What the proposed changes would mean…..

0 58 86 0 35 7 3.8

71 Estimates 0 0 473 0 Budgets 0 0 Resource Accounts 16

Amounts included under each framework (£bn) for 2008-09 plans on COINS as at August 2008. Excludes devolved administrations.

Resource Accounts

Amounts included under each framework (£bn) for departments’ 2008-09 resource plans as at August 2008. Excludes devolved administrations.

FM skills and capabilities – our aim and audience

Aim

– To embed Financial Management skills across central government and facilitate development of a community of finance professionals that is recognised for the value that they bring to departments in realising their business objectives Finance Governanc e Team Finance Professionals c.9,000 people Civil Service Finance Community c.23,000 people Wider Civil Service Community c.500,000 people

FM skills and capabilities – Our priorities Top 200 and SCS training/ skills development – setting the right “ tone from the top ” ; • • FM a Core Skill Master classes on Board Effectiveness and Business Management

Develop finance professionals

qualifieds and trainees; • • • – Trainees and qualifieds from all CCAB bodies Supported training & high quality CPD events Developing first rate business skills

Improve skills and opportunities for

non-finance professionals working in Finance: • Opportunities to obtain Certificate level qualifications (AAT and Diplomas) • Bespoke job specific training • Opportunities to progress

Improve FM skills of those in non finance roles:

• • • Finance Skills for All Meeting the needs of those in specific roles (e g budget managers) Meeting the FM needs of those in more general roles (e.g. policy developers and operational managers)