1 Foreign and Commonwealth Office
financial management capability
1. The Foreign and Commonwealth Office has traditionally
been an under-spending department and acknowledges that there
have been several contributory factors in previous years' under-spends[2]:
- Lack of financial skills to
monitor budgets effectively;
- Lack of trust in the accounting system to provide
accurate monthly actual figures;
- Budget holder prudence to minimise the risk of
overspending;
- Lack of ownership of budgets, and
- Lack of personal accountability for significant
under-spending.
2. To address the weaknesses in its financial
management track record, the Department has made significant progress
in developing its financial management capability in recent years.[3]
The focus of this effort has been a 'change project', known as
Five Star Finance, setting out a suite of milestones to be achieved
in order for the Department to meet its objective of establishing
itself as one of the best in Whitehall.[4]
Following completion of the Project in July 2010 and the attainment
of 'Five Stars', the Department plans to maintain the momentum
by moving from being a special project, to the procedures and
practices being part of the Department's normal operations. There
should be a culture of producing high quality numbers, where people
can rely upon the data, where they follow all the appropriate
procedures and the Department can manage with reliable performance
data without having to employ additional resources.[5]
3. The main source of in-year financial information
for the Board is the Key Performance Report (KPR). The structure
and content of the KPR has improved significantly in the last
few years, allowing the Board a detailed view of the Department's
financial performance. Until the Board has absolute confidence
in how the high level figures are derived, it is likely that the
Report will remain a lengthy document. The Department reported
that, in terms of reliance on the numbers, confidence is rising
all the time and, by the completion of the Five Star Project in
2010, there will be one set of numbers universally recognised
around the organisation and, at that stage, the Board can perhaps
reduce the size of this KPR. The monthly KPR showed up earlier
this year that the Department was heading for an over-spend and
enabled the Department to take prompt action to start cutting
costs to bring costs back onto profile.[6]
4. Following previous advice to Government departments
from this Committee,[7]
in January 2007 the Accounting Officer appointed a qualified accountant
to be Director General Finance and he joined the Departmental
Board in April 2007. He is supported in turn by a Finance Director
who is also professionally qualified.[8]
The recruitment of professionally qualified accountants at the
top of the organisation has had a number of positive impacts,
which include driving up financial skills more broadly, and providing
a much greater focus on the basics of good financial management.
As confidence has grown in the numbers, the Department has been
able to work its money harder, drive the under-spend down, more
actively manage its budgets and also ensure the Department produces
better quality and more timely annual accounts.[9]
The Department was the first of the main Whitehall departments
to lay its combined 2008-09 Departmental Report and Accounts before
Parliament on 30 June 2009.[10]
This all demonstrated the commitment of the Accounting Officer
and the Board to take financial matters seriously.[11]
5. The Department has recognised that it needs
to do more to build financial skills, both inside and outside
the Finance Department. It launched its Financial Skills Project
in July 2007, which has two main strands, professionalising the
financial community, and improving financial management skills
across the broader Department.[12]
By October 2008, the proportion of qualified staff within the
Department's finance function was 8%, which was below central
government's average of 14%. In September 2009, the percentage
of qualified staff within the finance function had increased to
12% and the Department plans to increase this further to 17% by
March 2010, through a mixture of direct recruitment of outside
experts and sponsoring staff through professional training. The
Department still considers that this is not enough and plans to
do better, continuing to increase the proportion of qualified
staff in the finance function in future years.[13]
6. In previous years, the Department has employed
a large number of contractors and consultants to work in its Finance
Directorate to assist in the production of the accounts.[14]
The Department has set a target for the reduction of its use of
contractors by some 50% and, to this end, a specialist recruitment
campaign was held in late 2008. The Department plans to deploy
those recruited by the end of 2009[15]
and expects these measures will lead to costs being roughly half
the amount the Department was paying for contractors some two
years ago.[16]
7. The Department is also responding to known
areas of weakness to improve skills of non-finance staff and,
from January 2009, two courses will be on offer to all members
of the Department, one for improving general awareness of finance
in the FCO and the other targeted at budgeting, monitoring and
forecasting.[17]
2 Q 104 Back
3
Q 2 Back
4
C&AG's Report, Summary, para 4 Back
5
Q 4 Back
6
Q 106 Back
7
Q 35 Back
8
Q 1 Back
9
Q 2 Back
10
C&AG's Memorandum, para 11 Back
11
Q 3 Back
12
C&AG's Report, para 2.15 Back
13
Q 65 Back
14
Q 68 Back
15
C&AG's Memorandum, para 4 Back
16
Qq 68-69 Back
17
C&AG's Report, para 2.19 Back
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