HMT Finance Transformation Programme

1. HMT Finance Transformation Programme Manj Kalar CIPFA 25 September 2013

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

3. Landscape

4. Landscape

5. Remember the 2010 deficit reduction plan?

6. Autumn Statement 2012 - deficit reduction plan

7. Landscape (2)

8. 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 8

9. What’s 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 9

10. 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.

11. 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

12. Vision for the Finance Transformation Programme EFFECTIVE LEADERSHIP COST CONSCIOUS CULTURE PROFESSIONALISM EXPERT CENTRAL FUNCTIONS PEOPLE 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. Processes promote a VFM and continuous improvement culture. Finance processes are economic, efficient and effective. Central processes support and incentivise good financial management. PROCESS Senior management has expertise to use and analyse information effectively. 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. INFORMATION and TECHNOLOGY STRUCTURES The FD is a key member of the senior leadership team, positioned to influence all material business decisions. 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

13. FTP – Finance DG-led areas Working with the Centre: Working collectively: Finance and Commercial Awareness for non-Finance Staff MOJ Capability (Finance Professionals) DWP HMT Spending framework HO Financial reporting and management information DCLG Value for money and efficiency including ERG relationship DfT Measuring FM Improvement HMRC Shared services BIS UNCLASSIFIED 13

14. Finance and commercial skills for non-finance professionals Ann Beasley – MOJ FLG led FTP work streams 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 MoriatryDfT Shared services Howard Orme - BIS Measuring progress of FTP Simon Bowles - HMRC

15. 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.

16. 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

17. 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 • Improvementsin key financial processes, such as the Clear Line of Sight and WGA initiatives • Government taking positive steps with the aim of improving management information.

18. 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

19. NAO report - Scale of FM challenges • Redesigningand 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.

20. 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 20

23. 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

24. Finance Transformation Programme How does this link with the broader Civil Service Reform Agenda?

25. Civil Service Reform 18 Action points Size & Shape Policy Development Policy Implementation & Accountability Capability Employment “offer”

26. FTP and Civil Service Reform UNCLASSIFIED Civil Service Reform Plan published June 2012 – 18 Actions. FTP was one of these CSR Actions - www.civilservice.gov.uk/reform 26

27. 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

28. Civil Service Capability

29. 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

30. 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

31. 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

32. 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 32

33. 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)

34. 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

35. 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

36. 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

37. 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

38. What’s 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

39. 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

40. Questions?

41. Thank you Manj Kalar Central Government & Financial Management Technical Manager CIPFA September 2013