HMT Finance Transformation Programme

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HMT Finance Transformation Programme
Manj Kalar CIPFA 25 September 2013
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Agenda

• Landscape
• Finance Transformation Programme
• Link to Civil Service Reform
• CIPFA Thinks
• What CIPFA is already doing
• What we plan to do?

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Landscape
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Landscape
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Remember the 2010 deficit reduction plan?
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Autumn Statement 2012 - deficit reduction plan
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Landscape (2)
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Managing Taxpayers Money Wisely

• Identifies four areas of development where the
  public sector can improve financial management
• Leadership driving performance from the top
• Cost conscious culture so every decision is
  built on informed financial assessment
• Professionalism all public servants have
  financial awareness
• Expert central functions providing the strategy
  to work toward common goals

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Whats wrong?
Transparency

• Fragmented, multiple data sources
• Inconsistent data granularity
• Lack of data comparability
• Budgetary protectionism

• Lack quality information for decision makers
• Lack of finance and non-finance staff financial
  management capability
• Inadequate technology, lack infrastructure for
  basics

Simplicity
Accountability

• Few disincentives for poor performance
• No structured incentives to drive savings
• Lack of recourse
• Unclear roles

CULTURE

• Lack of alignment across spending teams
• No true, government wide chart of accounts
• Multiple collection data points (eg. CO HMT)
• Role of Centre

Coherence
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Reason for the FTP

• The UK is facing unprecedented fiscal pressures
  and strengthening financial discipline is an
  essential part of reducing the deficit. To
  deliver best value to the taxpayer the public
  sector has to develop strategic financial
  management and embed sustainable cost
  effectiveness and public value in the delivery of
  all government services. The FTP will deliver the
  step change in the way that resources are managed
  by public servants.

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Financial Management is key

• Good financial management is at the heart of an
  effective, well run organisation understanding
  exactly how they are spending the money and what
  return or policy outcomes they are getting for
  that money
• Managing Taxpayers Money Wisely FM at the heart
  of finance transformation programme

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Vision for the Finance Transformation Programme
EFFECTIVE LEADERSHIP
PEOPLE
COST CONSCIOUS CULTURE
PROFESSIONALISM
EXPERT CENTRAL FUNCTIONS

• Ministers, Boards and SCS demand the highest
  standards of financial management.

• All staff understand they are responsible for
  cost-effective delivery and are appropriately
  trained and incentivised.

• Finance professionals have the range of skills
  and experience needed to support the business.

• The centre aligns with finance departments to
  provide consistent and coherent messaging.

• Finance is an integral part of strategy and
  business planning.

PROCESS

• Processes promote a VFM and continuous
  improvement culture.

• Finance processes are economic, efficient and
  effective.

• Central processes support and incentivise good
  financial management.

• Senior management has expertise to use and
  analyse information effectively.

INFORMATION and TECHNOLOGY

• Systems provide relevant and timely information
  that staff need to exercise their
  responsibilities.

• Systems provide access to clear, consistent and
  well understood information.

• The centre draws on information that is used by
  and useful to departments.

• The FD is a key member of the senior leadership
  team, positioned to influence all material
  business decisions.

STRUCTURES

• Departments internal structures and governance
  support / incentivise a cost-conscious and
  risk-aware culture.

• The finance department is structured and
  resourced to provide the business with the
  support it needs.

• There is clarity between the respective roles and
  responsibilities of the centre and departments.

finance at the centre of decision making
UNCLASSIFIED
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FTP Finance DG-led areas Working with the
Centre Working collectively
Finance and Commercial Awareness for non-Finance
Staff MOJ
Capability (Finance Professionals) DWP
Financial reporting and management
information DCLG
Measuring FM Improvement HMRC
UNCLASSIFIED
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FLG led FTP work streams
Finance and commercial skills for non-finance
professionals Ann Beasley MOJ
Capability (Finance Professionals) Simon Judge -
DfE
Management Information and Financial
Reporting Sue Higgins - DCLG
Value for money - HMT spending controls
and ERG efficiency controls Clare Moriatry DfT
Shared services Howard Orme - BIS
Measuring progress of FTP Simon Bowles - HMRC
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Government Finance Profession

• Of 22,100 FTEs in the finance community - there
  are c.9,000 Finance Professionals
• Nearly 4,000 trainees and over 4,800 qualified
• Over 20 work in areas outside of mainstream
  finance.
• Of the nearly 4,000 qualified finance
  professionals in mainstream finance
• 60 work in Decision Support
• Over 30 work in Reporting and Control
• Less than 10 work in Transaction Processing.
• Over 10 of qualified finance professionals are
  in SCS or equivalent type roles.

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Departmental FM Strengths include

• Strong leadership with qualified FD cadre and
  NEDs on boards established Finance Leadership
  Group
• Good talent pipeline (Finance Fast Stream Option
  and Financial Management Development Scheme for
  graduate recruitment scheme)
• Good up-skilling programmes for SCS e.g. Senior
  leaders analytical capability up skilling project
  (initiatives are widespread but not consistent)
• Rigorous application of spending controls
• Continuous review of finance processes to drive
  out efficiencies, remove manual interventions
• Greater provision of advice and insight (e.g.
  VFM advice, more timely and robust information)
  to board level discussions
• Provision of business partner / expert support

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NAO report - Improvements in Government FM

• Greater recognition of the strategic importance
  of the finance profession
• Finance Leadership Group has established the
  Finance Transformation Programme to position
  finance at the centre of decision-making
• Qualified finance professionals are better
  represented at senior levels in Whitehall
• Improvements in key financial processes, such as
  the Clear Line of Sight and WGA initiatives
• Government taking positive steps with the aim of
  improving management information.

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Departmental FM Areas for further investigation
include

• Better understanding of cost drivers and
  financial implications of operational/policy
  decisions
• Improving forecasting capability to deliver
  increased accuracy and better FM
• Development of model cost effective finance
  function (more cross govt standardising and
  streamlining of services / shared services)
• Opportunities for further joining up on
  capability building and sharing expertise (reduce
  duplication of effort)
• Better cross-government succession planning at
  senior levels
• More in-year and regular consolidation of
  Accounts (Dept ALBs)
• More sharing of good practice e.g. Business
  partnering experiences/models

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NAO report - Scale of FM challenges

• Redesigning and transforming public services so
  they operate sustainably in context of further
  spending reductions and demand increases.
• Treasury to provide more effective central
  leadership, to support public bodies in providing
  services at permanently lower cost.
• Chances of success much greater if financial
  managers are central to decision-making.
• Integrate FM fully within processes to design and
  implement effective target operating models
• Financial impacts of all options should be key
  factor in decision-making by finance and
  non-finance professionals alike.

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Measuring success of the Finance Transformation
Programme

• Use of the CIPFA financial management model to
  provide a comparative and independent assessment
  of all Government departments financial
  management

UNCLASSIFIED
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Power of the FM Model

• Enhanced V3 changes for operating environment
• Improved functionality
• FM Strategy/Audit/Financial Reporting/Stakeholder
  confidence
• Recent application at Department of Health,
  Environment Agency and Skills Funding Agency

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Finance Transformation Programme

• How does this link with the broader Civil Service
  Reform Agenda?

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Civil Service Reform

• 18 Action points
• Size Shape
• Policy Development
• Policy Implementation Accountability
• Capability
• Employment offer

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FTP and Civil Service Reform

• Civil Service Reform Plan published June 2012
  18 Actions.
• FTP was one of these CSR Actions -
  www.civilservice.gov.uk/reform

UNCLASSIFIED
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Civil Service Capability

• 4 key development areas
• Leading managing change
• Commercial skills and behaviours
• Delivering successful projects and programmes
• Redesigning services and delivering them
  digitally

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Civil Service Capability
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Civil Service Reform year 1

• Civil Achievements
• Actions for FTP, as before, completed
• Updating Osmotherly rules and Managing Public
  Money
• Stronger Cross Whitehall leadership of key
  corporate functions
• Move to fixed term tenure for Permanent
  Secretaries
• Extended Ministerial Offices
• Improving delivery of infrastructure and other
  major projects, responding to recommendations by
  Lords Browne
• and Deighton

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Civil service Reform year 2

• Focus on 7 Game Changer Actions
• Digital (by default)
• Functional Leadership
• Open Policy making
• Modern workplaces
• Major Projects
• Capabilities Plan
• Civil service 2020
• And seeing residual actions through to completion

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Finance and commercial skills for non finance
staff

• Finance Skills for All re-launch
• SCS Financial Leadership face-to-face course
• Budget management face-to-face course
• Toolkits/Intranet quick guides/best practice to
  supplement CSL learning.
• Engagement with the Commercial/ procurement
  profession
• Peer review measurement process - testing of peer
  review process and link with CIPFA/NAO model
  review
• Mentoring scheme for business staff by finance
  professionals
• Review of performance appraisal and recruitment
  processes to ensure finance skills and
  performance are measured effectively

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Professionalism focus 2013-14

• Douglas-White Review of Finance overseen by Lord
  Sainsbury
• Set the ambition for the finance professionalism/
  capability
• Succession planning - Management of SCS cadre as
  a community
• Talent management programme for G6 and G7
• Qualified recruitment campaign
• Creation of network community seminar talks
• Secondments and swaps with departments and the
  private sector
• Development of Finance foundation e-learning
  product
• Launch of the finance learning map and career
  mapping tool
• Structured development GFP training event 6-7
  November in Brighton

UNCLASSIFIED
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HMT FM Review - 1

• How HMT can within existing budgets and
  preserving single point accountability to
  Parliament for financial stewardship that the
  accounting officer provides
• Improve quality and consistency of management
  information flows between Treasury and
  departments to ensure these are of the right
  quality to enable effective risk-management and
  decision making across Government
• Strengthen the role of the Head of the Government
  Finance Profession in promoting and assuring
  improved financial capability skills, systems
  and processes across government (considering
  also the interaction of this role with the
  Treasury)

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HMT FM Review - 2

• How HMT can within existing budgets and
  preserving single point accountability to
  Parliament for financial stewardship that the
  accounting officer provides
• Ensure right levels of delegated authorities and
  approvals are in place to ensure both tight
  spending control and appropriate flexibility for
  those departments with proven financial
  management capability
• Create a more streamlined, coherent set of
  central appraisal and approval process for
  projects and programmes outside those delegations

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CIPFA Thinks 1

• Capital and revenue expenditure decisions must be
  taken in a coherent and joined-up way that is
  proportionate to the level of financial and other
  risks involved in both the short and longer terms
  by
• Being set in the context of short, medium and
  long term financial and delivery risks
• Considering capital and revenue impacts together
• Replacing fixed delegation limits with ranges
• Linking delegation levels with risk assessments
• Drawing on FM model outputs and relevant internal
  and external audit reports
• HMT matching skills and experience to the risk
  and complexity of departments
• Requiring medium term expenditure frameworks from
  all major departments

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CIPFA Thinks 2

• The quality and consistency of management
  information flows between departments and the
  Treasury needs to be improved through
• Appropriations on the basis of output targets
• Increased use of shared services
• Widespread adoption of the Common Chart of
  Accounts
• Mid-year closedowns and coordinated
  intra-government balance agreement processes
• Incentivising accurate expenditure and cash flow
  forecasting
• Publishing FM Model assessments and agreed action
  plans

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CIPFA Thinks 3

• The role of the Head of the Government Finance
  Profession needs to be strengthened through
• Being a full-time role based in HM Treasury
• Having a dotted line professional leadership
  relationship with all DGs Finance, including
  input to their appraisals based on the quality of
  information and other interactions with HMT
• Being directly involved in the development of the
  budgetary and performance frameworks
• Finance being recognised as fundamental to the
  management of Government rather than just another
  profession
• Ensuring the FM Model is run regularly in all
  main departments, and having access to the
  results
• Evaluating the FM Model results to develop best
  practice guidance and training
• Monitoring progress of FM Model implementation
  plans
• Coordinating CPD training to ensure balance and
  that FM weak spots are addressed

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Whats CIPFA already doing?

• Supporting finance professionals across
  government
• Training/CPD
• Conferences
• Talent Programmes
• Central Government Panel
• CIPFA FM Reviews
• Financial Management Panel
• Support Treasury/FLG
• review/consultation
• Talent programme

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What we plan to do

• Support HMT Review
• Use our pan public sector expertise to support
  Government bodies lead innovation and using
  unique position to bring sectors together
• Be a champion for public service
• Promote good PFM across all sectors
• Start a debate about the role of the CFO and need
  for protection of officials

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Questions?
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Thank you

• Manj Kalar
• Central Government Financial Management
  Technical Manager
• CIPFA
• September 2013