Government finance professionals face period of austerity

Times have certainly changed for Whitehall’s finance professionals. In just five years the original backroom boys of government have taken a more prominent role, with the modern director-general enjoying a seat on the board and a hotline to the permanent secretary.

Accountants are now Whitehall’s largest ­community and they even have their own awards to celebrate their achievements: the Government Finance Profession (GFP) Awards, emanating from HM Treasury.

But the 14 award winners (see below, The Winners) collected their gongs as perhaps the last finance professionals operating under a regime of bloated spending that many now think must be reined in. As we move from ten years of unprecedented public spending to a period of austerity and severe cuts, times are about to change again for government finance professionals – and drastically.

It is testament to the progress of Whitehall’s accountants that the GFP holds awards at all. Skip back five years and barely a quarter of ­government departments had qualified finance directors. In fact, departments were not even required to have an FD – a principal officer would suffice. Whitehall’s reputation for delivering its accounts late and often with errors brought it the wrong type of fame.

With billions of pounds in the hands of largely financially unqualified civil servants, a rapid drive to get standards up to scratch was launched. Professional Skills for Government, a civil service competency framework launched in 2003, and an aggressive recruitment drive have been relatively successful – although a full ­complement of qualified finance heads across all departments is not yet in place.

The awards are a clear part of the mission to raise the image and perception of accountants in Whitehall. Terry Rogers, the GFP's strategic ­relationships manager, says there was never much of an appetite for celebrating success in central government, with few departments ­entering award schemes.

Just rewards
Perhaps controversially, given that it carries the second largest spend of any government department – which looks to be ringfenced in the future following the Chancellor's pre-Budget report - The Department of Health came away with two awards for financial management. Its financial information and accounts branch won project team of the year for having consolidated the accounts of 250 statutory health bodies and ­delivered them three months early (a significant achievement given that, just a few years ago, the department regularly missed its summer recess target to deliver its accounts to parliament).

Its director-general of finance, Richard Douglas, received a lifetime achievement award for the implementation of a performance-based finance system that aims to reward hospitals for delivery of key targets on a budget of £100bn each year. He recently told GFP magazine The Gasette that the skills FDs need to do the job meant being “diplomatic and robust – we have probably been more robust in this department than many others", he said, adding, “You have to put your foot down. You could have people coming up with ideas that are un-costed or unaffordable... but if all you do is say ‘no’, people will stop listening to you."

Douglas is widely seen as one of the more influential DGs in Whitehall with the sort of skills FDs across all departments could use when spending cuts start to bite from 2011.
Under New Labour’s appetite for reform, most FDs have long since ceased to be simply accountants. As Treasury permanent secretary Nick MacPherson recently acknowledged: “Finance directors within government no longer just add numbers up after the event. They are involved in driving performance and strategy in the first place."

The most competitive category in the 2009 awards, says Rogers, was finance team of the year with 46 out of the 50 Whitehall departments and quangos entering. It’s hardly a surprise, then, that there were two winners: JobcentrePlus's economic downturn team and the Ministry of Defence's (MoD) unmanned air systems project team, reflecting the government's key priorities of tackling the recession and its ­operations in Afghanistan.

Job well done?
Despite receiving heavy criticism earlier in 2009 for being overwhelmed by the volume of demand and unable to understand the needs of its end users, the economic downturn team, nominated by its permanent secretary Leigh Lewis, was recognised for the role it played in preparing JobcentrePlus’s 850 offices for the surge in jobseeker demand last year.

The MoD’s unmanned air systems team, which continues to face condemnation for failing to ­adequately equip troops for deployment in Afghanistan, was recognised for its ­procurement and delivery ­systems and the ability to get vital equipment to the frontline against a number of challenges.

The corporate controller of the Nuclear Decommissioning Authority, a small quango with a budget of just £2.5m a year, scooped an award for innovation. Andrew Oldham devised a system to account for structured waste contracts after two years of research, negotiating his accounting treatment with the National Audit Office and the Treasury before submitting and having it approved by the Public Accounts Committee.

But this progress, which even HM Treasury’s MacPherson admits is patchy in places, has been made under unprecedented public spending increases. Few, if any of the senior finance staff in Whitehall have experience operating and delivering services under significant spending reductions, which requires an entirely different skillset. So, are the latest crop of winners and their colleagues prepared for the biggest change to hit them for more than a decade?

James Close, a partner in Ernst & Young’s ­government services practice, says the profession is aware of the scale of the challenges it faces, but he questions whether they are "institutionally" equipped for it and says some DGs still don’t have enough influence over their departments to be able to make the kind of rapid cultural change required in the next few years. “FDs will have to be much more insightful in helping to support key trade-offs and keep departments to those spending decisions,” he says.

The decision in December to channel more MoD funds into combating roadside bombs in Afghanistan is the kind of spending trade-off Close says will become typical as spending is reined in. He adds that the pockets of poor ­practice remaining in Whitehall are "dangerous" and without improvement, he says, some ­departments will find they don’t have enough funds to meet spending commitments. "What happens if they get to that position?" he asks. “Insolvency? "

Colin Talbot, professor at the University of Manchester Business School and adviser to the Treasury Select Committee agrees that the ­profession has improved, but warns the civil ­service is facing a steep learning curve heading into the next few years. “If we look at when spending increases came in through 1999-2000, it took two years for that money to be allocated. By 2001, the government had underspent by £85bn, largely because the civil service didn’t have the right people in place."

Austere future
Conversely, Talbot also predicts an initial round of damaging “panic cuts" as Whitehall attempts to get to grips with an age of austerity without possessing the skills to think through the effects of any cuts. He believes the “law of unintended consequences" may lead to cuts costing more in benefits or service needs if the effects are not adequately scenario-tested first.

It will be interesting to see who gets gongs for what in the 2010 awards. DoH director of finance Douglas, whose lifelong career in ­government finance includes serving as FD for National Savings, stints at the NAO and HM Customs & Excise, told The Gasette the biggest challenge ahead is that “none of the ­current FDs have operated at the most senior level in the civil service during a period of severe financial restraint" – so finance will be called upon to lead the job that needs doing across the public sector.

Last summer, Jon Thompson, head of the GFP, told Financial Director that he agreed problems persisted in the quality of financial skills. Ernst & Young's Close, meanwhile, questions the ­standard of FDs across all grades and thinks the next two years will require a “significant change in the mindset of finance professionals".

THE WINNERS
Outstanding Contribution to the Profession
Katrina Tully – head of finance people & professional capability, Ministry of Justice

Innovation in Government
Andrew Oldham – corporate controller, Nuclear Decommissioning Authority

Boss of the Year
David Thorpe – shared services director, Department for Work and Pensions

Mentor of the Year
Curtis Juman – director of finance and IT UK Trade and Industry

Government’s Accounting Technican of the Year
Jessica D’Aulerio – head of accounts receivable Foreign and Commonwealth Office

Part Qualified Accountant of the Year
Thomas Burnell – intelligence information solutions project team, Defence Equipment and Support

Newly Qualified Accountant of the Year
Helen McNulty – financial investigation unit Department for Work and Pensions

Project Team of the Year
Financial Information and Accounts Branch Department for Health

Finance Team of the Year (joint winners)
Economic Downturn Team, Jobcentreplus
Unmanned Air Systems Project Team, Ministry of Defence

Personality of the Year
Robert Wright – deputy director of planning, finance and accounting
Judicial Appointments Commission

Sustainability Award
Finance team
Higher Education Funding Council for England

Unsung Hero
Elizabeth Dobson, Department for Transport

Lifetime Achievement
Richard Douglas, director general finance Department of Health