Budget holders and finance - is the culture changing?


Lisa Forster, Senior Consultant, Consultancy and Training, CIPFA

A common response to budget questions has been "Why are you asking me about finance, I don’t work in that department?" If you are a budget holder then regardless of where you work finance is your responsibility. Many councils are teetering on the edge of financial sustainability and so an active rather than passive acceptance of budget responsibility is needed from service departments. We also need to ensure there is understanding and clear communication from the finance department to service departments around budget management. 

Austerity measures in the public sector have directly correlated to staff reductions. In September 2017 local government employment fell by 9,000, the lowest since comparable records began in 1999. Front line services have been protected as far as possible with back office support services bearing the brunt of the spending cuts. For finance teams, where once they provided hand-held gold-star support to budget holders, cutbacks in resources mean they are now forced to reduce the amount of time and sometimes the range and depth of support they can offer.

Budget holders must now ‘self-serve’ in respect of their various budget responsibilities. Some have grasped this mettle admirably and can robustly cite their spending positions and forecasts with confidence. Some however still feel that finance is not their domain and so the financial impact of their actions do not readily play a part in their decision making. This can be down to culture, a lack of understanding or even a lack of challenge.

So how do councils instigate and ingrain this change in behaviours and culture? This a two-pronged approach which needs both finance staff and service teams to work collaboratively. 
One of these approaches is through the development of finance business partners (FBPs). Many councils now have FBPs working in accountancy teams whose role it is to bridge the gap between the traditional ‘number cruncher’ and the service provider. They should understand the service requirements, its challenges and offer proactive advice to get the best outcomes possible. 

CIPFA's FM reviews have shown that when this is done well it can really make a difference, however there are instances whereby this is a cosmetic change to a job title and the role hasn’t really evolved into a true FBP. Technical skills are usually strong but it is the ‘softer’ skills such as coaching, facilitating and negotiating that are less prevalent. We are however seeing significant progress in this area, and CIPFA’s FBP post-graduate programme is evidence of the need and desire to change and progress this role. 

We also need finance departments to respect the budget process and acknowledge ownership of service budgets, for example there are instances of central finance staff changing service budgets (usually cutting!) without the knowledge of the budget holder, this may not be common but it does happen and leads to mistrust and poor working relationships. 

The second line of attack is ingraining a culture of financial responsibility in the non-accountants. For some managers, service provision regardless of cost can be seen as the priority and often different options are not explored which could deliver the same outcome but be more cost effective. 

Some services such as social care are demand led and very volatile, and these uncertainties can make planning very difficult, however this doesn’t mean budget holders can avoid taking responsibility, understanding or scrutinising care decisions.  

CIPFA's work with local authorities has provided us with evidence, written and anecdotal about how budget holders feel about their finance departments. Some have wholeheartedly embraced the challenge, others feel very vulnerable in respect of their poor understanding, lack of accountancy support, and their capacity to deal with this. Others cite financial procedures dictated by accountants as being unrealistic, bureaucratic and a barrier to the effectiveness of their budget management. We also have some who don’t see ‘money’ as their priority and the culture allows them to be left unchallenged on their lack of compliance with financial returns to the centre. 

There is no easy fix to change a culture, but improving understanding through training and change management programmes is possible. What is critical is that budget holders truly appreciate the need. When training or changes to work practices are mandated and communication about the need is unclear some budget holders are reluctant to engage. 

Cultural change across the public sector is needed in many ways, this ranges from commercial skills, budget holders’ financial acumen, communication skills and working practices. The old hierarchical structures and a practice of unbending systems and procedures must move towards more flexible and innovative structures.

Cultural change must be demonstrated at the very top of the organisation, without this lead and ‘permission’ it is unlikely to cascade effectively throughout the organisation. However once cultural change is embedded it can be truly transformational. 

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