It has been 15 years since CIPFA introduced any kind of code. It was a simpler time – Tony Blair was Prime Minster and we were still blissfully ignorant of words such as 'Brexit' or 'selfie'. I point this out not to make anyone feel old, but to serve as a reminder that introducing a new code is not something the institute takes lightly.
Our more recent decision to produce a Financial Management Code was made against the backdrop of intense funding pressures, shortened planning horizons, new delivery arrangements and a greater exposure to commercial risk. It goes without saying that these factors make sound financial management crucial.
It’s important to emphasise that we know that good financial management won’t make up for a decade of austerity. CIPFA will continue to advocate for sustainable funding solutions, but realistically we need to take control where we can and deliver what is within our gift.
While finance professionals have been trained to understand the importance of good financial management, organisations will benefit to a far greater extent when this is seen as part of a wider cultural shift towards collective responsibility.
The majority of respondents to our recent consultation on the Financial Management Code told us that we needed to reinforce that message of collective responsibility and that this would support Section 151 officers to effectively fulfil their professional responsibilities. It was also seen as a way to help elected members, who are faced with increasingly difficult choices to really understand what good looks like in terms of financial management.
The Code works hard to bring this ambition to life, emphasising the role of the leadership team and the importance of good relationships based on professional respect. Much of this may be familiar to those in finance, but surprisingly, this is the first time that CIPFA as a standard setter has codified good financial management in one place.
On a practical level, the Code is based on the application of standards that sit within a framework of six principles. These principles are the benchmarks against which all financial management should be judged. This principle-based approach will be familiar to all those who have worked with the Prudential Code. This approach has stood up well over time, providing the Code with a desirable level of longevity.
Bringing together a complete picture of what good financial management looks like would not have been possible without the support and energy of sector leaders. The Code has been developed in collaboration with the sector. The stakeholder group, the road testers and the treasurers’ societies have all given, and continue to give, their time and expertise to develop it for release in the autumn.
The Code has also been heavily influenced by the many insightful responses to our consultation. For example, one of the key messages we received was that the document was too prescriptive, and that much of the more detailed commentary should be reserved for guidance. We have revisited the document, deconstructed it, and built a leaner, less prescriptive Code which is now being reviewed by the stakeholder group.
The process of introducing this Code has not been without challenge, but the publication will be all the better for it. While it will not be the panacea for all of local governments' financial problems, it will be part of the armoury going forward, strengthening the position of organisations to deliver financially sustainable services for those who need them most.
This article first appeared in Public Finance Magazine.