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AUDIT COMMISSION: GIVE GREATER IMPORTANCE TO FINANCE DIRECTOR

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Some councils are not benefiting from a strategic approach to financial management, because the role of the finance...
Some councils are not benefiting from a strategic approach to financial management, because the role of the finance director has been drawn too narrowly, according to a report by the Audit Commission, the public spending watchdog. In a review of the role of the local authority finance director, Worth More Than Money , published today, the Audit Commission concludes that in some councils the role is seen purely as one of financial administration and accounting. In the best councils, finance directors have a pivotal role in maintaining the financial health of local government, acting as custodians of the public purse and in delivering corporate objectives.

But finance directors themselves have not always been as proactive as they might in developing this wider role. Many finance directors have become involved in day-to-day firefighting, meaning that they have insufficient time left for critical strategic issues. For example, 80% of finance directors spend less than 5% of their time on risk management - a worrying fact in the light of concerns about issues such as the Year 2000 computer issue and housing benefit fraud.

And the profession has concerns that in some councils, the role is being downgraded with councils considering establishing structures in which the finance director is not part of the management board.

Management teams and leading councillors should re-evaluate the role. The tasks of developing a financial strategy to support the delivery of services whilst maintaining financial health and high standards of propriety are fundamental elements of good corporate management. Worth More Than Money reveals how some councils have given their finance directors a key strategic role, whilst recognising that at times they have to give unsolicited or unwelcome advice.

Councils are developing increasingly varied management structures. In some cases, the senior finance role is combined with a wider brief and the person holding the role may not be an accountant, although usually financial expertise and qualifications are a requirement. Providing proper safeguards are in place, such arrangements can work well. But financial management and propriety are so important that there must always be one person on the management board with clearly identified responsibility for the council's financial management and strategy.

However, finance directors themselves must also demonstrate that they can both make the time and develop the skills to play a key role at the heart of local government.

Looking to the future, new challenges face councils, for example, the development of statutory partnerships to tackle juvenile crime, and the development of the private finance initiative where new structures for funding services and ensuring proper control of public money will need to be set up. Councils and finance directors themselves should now review the role to ensure that they are getting best value from it.

Andrew Foster, controller of the Audit Commission, said:

'For local government to work effectively, and deliver best value, it must achieve maximum value from the finance director. If this role is not being performed effectively, the council is exposed to considerable risk of service failure, poor planning, and a lack of financial control. We recommend that councils and finance directors themselves should take this opportunity to re-assess whether they are getting the most out of the role - at the heart of the issue is the need to deliver the council's key objectives whilst safeguarding the public purse.'

- Worth More than Money: the role of the local government finance director (ISBN 186240058) is available from Audit commission publications on 0800 502030, priced£10

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