THE CREATION of a CFO position to oversee its spending has been broadly welcomed by the accountancy and finance world, but it is a plan that is not without its critics.
The direction of travel appears to favour combining the head of public spending and head of government finance roles to, in effect, create what has been touted as a CFO position, with the power to designate and manage public spending.
Currently, no single person is responsible for overall finance across all government.
The need for such a role was neatly illustrated in the introduction of the coalition’s botched programme of welfare reforms. In a scathing assessment, the National Audit Office said the Department for Work and Pensions’ universal credit scheme, which will replace various welfare benefits with a single payment, has suffered from “weak management, ineffective control and poor governance”.
In its litany of the programme’s failures, the NAO identified several weaknesses in financial management and controls, including inadequate financial control over spending, ineffective accounts payable processes, unclear financial reporting and poorly managed and documented financial governance.
And so, following the coalition’s announcement that a government CFO position would be created, there was understandable and widespread approval. At last – a civil servant to oversee government finances who will be largely unaffected by winds of politics.
An atypical role
That said, the profession is concerned – and not least because the role does not resemble that of a typical CFO one might find in the private sector. Instead, it seems, the government CFO will only be presiding over the public spending side of the balance sheet, not the whole picture – core finance aspects including income, investments and assets are not included.
The current plan of amalgamating existing roles will not work, the ICAEW says, adding that the position is likely to prove both incoherent and overworked.
Indeed, if it were up to the institute, the amalgamated roles would remain separate, and report directly to the CFO, who in turn would report to the ministerial level of the Treasury, which would act in much the same manner as a private sector board.
“I’m not sure whether this shows the government is naïve about the work, or [it] is looking to deliberately overburden the role to ensure burnout,” institute chief executive Michael Izza noted in a blog. “We think the new CFO role should be supported by two other senior people in the other two roles, creating a team of three.”
ICAEW regulatory policy manager Sumita Shah believes the new role is in danger of not working.
“What they’re doing is actually a bit of a fudge. Not only does it only look at one side of the finance role – and nothing in the private sector would only look at one side of the balance sheet – but they’re lumping other things onto it and it’s going to be almost unworkable. It’s not what it says on tin,” she tells Financial Director.
The unusual nature of the proposed post, she says, could lead to problems when attracting applicants.
“It’s clear to us that the MPs and politicians don’t actually understand what the role of the CFO is. Why would any CFO only want to look at one side of the balance sheet? Who’s likely to apply? It’ll probably only be internal candidates who would apply for that sort of role, and what we’ve said is that this needs somebody to come in from outside with broader, global skills,” Shah adds.
Happily for those sharing the ICAEW’s reservations, there is no timescale imposed on the introduction of the post as yet, although Shah suspects the intention is to appoint someone within the year.
“It depends on how they [politicians] want to play it for their campaigns, but I would think doing it [appointing a CFO] before the election – before the end of the year – would be the right thing to do,” concludes Shah.
The feeling within the profession is that, given its apolitical nature, filling the position should not be beholden to the election in 2015. However, with MPs beginning to turn their attention towards retaining their seats and focusing on votes, there is a danger it may fall down the agenda.