Key Competencies of the New CFO

Gabriel F. Skaly Executive Director Institute of Public Administration of Canada

gsekaly@ipac.ca May 29, 2007 2007 Public Sector Financial Leadership Conference 1

Topics
Changing Environment Evolving Role of the CFO Change in focus/Challenges Strategic role of the CFO in government Key drivers for Success

May 29, 2007

2007 Public Sector Financial Leadership Conference

Changing Environment
Within the global financial community of private and public sectors, significant changes have and are continuing to take place which have a major impact on the finance function and the role of the CFO. The increased use of technology and consequent access to and availability of financial information have moved the financial function away from a focus on transactional activities to more strategic roles within the organization from a control role to a planning & management role. Globally, we have also moved from tightly regulated national and global financial markets to deregulated environments which significantly increase the complexity for financial managers and at the same time, enhance the opportunity for financial leaders to create real economic value within organizations.

May 29, 2007

2007 Public Sector Financial Leadership Conference

Changing Environment
Financial leaders are increasingly at the table, in partnership with business leaders, developing strategies, considering business initiatives and providing expertise on risk and cost management to enable sound business decisions.
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The Public Sector Context

Within this global framework, public management has also been undergoing a fundamental change in response to fiscal imperatives and public demands for a transformation of the role of government and its institutions. This change involves a global shift to results driven cultures within the public sector. A central theme of reform includes the concept of modern controllership - making informed decisions by using financial and performance information strategically and managing risks within acceptable levels.
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The Public Sector Context

Reforms are based on public expectations of a government that is more business -like in its approach, including operations that:
Involve a greater role different service providers: from the private sector to arms length agencies and other service providers/partners (contracting out/outsourcing, privatization and partnerships). Reflect new human resource, planning, financial and accounting approaches (accrual). Cost less, but provide more value-added, quality services. Are citizen-driven, rather than organization-centred. Are held accountable for results through the publication of performance standards, benchmarks and results achieved.

May 29, 2007

2007 Public Sector Financial Leadership Conference

The Public Sector Context

Governments at all levels are faced with lack of Trust Real and perceived Scandals (HRDC; Sponsorship; Colle-gate) have resulted in more rules out of proportion to the actual Scandal.

May 29, 2007

2007 Public Sector Financial Leadership Conference

Evolving Role
In both private & public sector, CFO role evolving more complex & strategic No longer just chief steward, increasing strategist/business partner activities. Finance organizations are evolving from a transactional focus through an analytical stage and finally to a strategic focus.

May 29, 2007

2007 Public Sector Financial Leadership Conference

Evolving Role
Deloitte (NZ):
Role of CFO in public sector shifting to resemble private sector role-driven by value for money CFO evolving from financial accounting expert to performance improver, knowledge manager & strategic developer (beyond risk management). Role increasingly involved in business planning, risk management & strategy, not just compliance & reporting.

OECD Studystrengthening of strategic and performance measurement functions

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The Changing Focus of Financial Management

Also, changes in policy and structure have had a significant impact on the focus of financial management in government as the following diagram depicts.

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2007 Public Sector Financial Leadership Conference

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The Changing Focus of Financial Management

SHARED RESPONSIBILITY

Decision Support 10% Controls 30% Reporting 20%

Role Transformation

Decision Support & Risk Management 50% Controls 10% Reporting 20% Transaction Processing 20%

Process Redesign

Value Added Services

Transaction Processing 40%

Integrated Systems & Shared Services

EFFICIENCY/EFFECTIVENESS May 29, 2007 2007 Public Sector Financial Leadership Conference 11

Change in Focus/Challenges
Transactions much more complex P3s, outsourcing, expanded reporting entity, etc Public expectations for outcomes not inputs Performance measures Need to move from command/control to allow decision making at front lines Information requirements financial and nonfinancial need to integrate
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Change in Focus/Challenges
Staffing
New skills set needed/Retirements

Centre vs. Line Modern Controllership Private sector failings Enron Auditor General Accountability for all and Transparency
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May 29, 2007

Challenges
Continued Limited Resources (in most jurisdictions) Limited Information systems how accurate? ABC? Performance Information? Accounting driven decision-making vs. Good business driven decision-making (Impact of Accounting Changes) Increased Citizen expectations for results (outcomes not inputs) how do we map? Risk Aversion
May 29, 2007 2007 Public Sector Financial Leadership Conference 14

Strategic Role for CFO

Need departmental as well as overall CFO to provide strategic advice to decision-makers
Not bean-counting But must understand financial implications, know what questions to ask and have ability to judge if answer holds up

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2007 Public Sector Financial Leadership Conference

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Public Sector CFO MANAGEMENT FRAMEWORKTM

Role of the CFO: Leader & Steward

Leadership
Management Advice & Performance Management Stakeholder Management Planning & Resource Management

CFO Organization Management

Policy Development

CFO
Financial Accounting & Reporting Risk Management & Control

Stewardship
Source: Deloitte & Touche, LLP

May 29, 2007

2007 Public Sector Financial Leadership Conference

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Key Drivers for Success

Financial Management a priority for all levels of program managers; Risk Management as part of day-to-day job; Clear governance/accountability; Integrated Financial Information System; Performance Management system; Linking Financial & Performance Information; Attract & retain skilled staff BUY-IN from political & civil service levels!!!
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