cipfa.org.uk
CIPFA Financial Management Model V3
Latest Developments
Stuart W Fair LLB, CPFA, FCCA, JP.
Senior Consultant
CIPFA Consultancy
11 November 2010
cipfa.org.uk
Structure
 The Power of the FM Model
 Drivers behind changes to the FM Model
 CIPFA FM Model V3 – The Changes
 Specific Issues
 Functionality
 Summary
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The Power of the FM Model
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History
 Developed from 2004
 Tested throughout UK Public Sector
 Created by a range of senior practitioners at
CEO/FD level
 Version 2 launched in 2007
 Version 3 to be launched January 2010
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Power of the FM Model
 Based on acknowledged good practice
 Spans entire spectrum of FM
 FM Strategy/Audit/Financial Reporting/Stakeholder
confidence
 Wider than Finance Service
 Improvement on FM can be easily tracked
 Complements the NAO Maturity Model
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Structure of the Model
 38 Statements capturing the characteristics
of good financial management
 A score is determined for each statement
 Each statement has supporting questions
 The questions assist in the scoring process
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Users of the FM Model
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Central Government Departments
Local Authorities
Health Bodies
Wales Audit Office
Charitable Organisations
Companies and other Delivery Bodies
Government Finance Officers of America
Abu Dhabi Accountability Authority
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V3 – FM Model Central Government Lite
 Full FM Model for world wide application
 FM Model Lite developed for Central Government
 FM Lite is a sub set of full model shaped for most
relevant Statements and Questions
 Core Statements plus added statements specific to
the attributes of the organisation relative to
complexity/delivery-policy/functionality context
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Drivers behind the changes
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Drivers behind the Changes
 Emerging Financial Landscape
 Development issues
 Customer experience
 Context – Third Iteration
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Emerging Financial Landscape
Unparalleled CSR cost reduction requirements
Relentless focus on priorities: Significant Cost Reduction/Further Savings;
 Both within and between organisations;
 New and creative solutions - change and innovation
must go hand in hand with robust stewardship.
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Emerging Financial Landscape
 Beyond budget management – managers focus on
managing their costs rather than budget
 Finance core to project/programme management and
risk aware rather than risk averse
 Ensuring financial control without inhibiting the pace
of change
 Efficiency techniques and mechanisms - lean
processing, professional procurement, shared service;
 Greater requirement for finance staff to demonstrate
commercial skills
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Sharing Practice: Financial Management
Capacity and Capability
Are Central Government Departments
focused on the financial management skills
and competencies needed to operate
effectively in the new environment?
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Development Issues
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Users of the FM Model – Central Government
Central Government users including: HM Treasury
 Cabinet Office
 DEFRA
 Home Office
 Ministry of Justice
 Department for Works and Pensions
 Department for Children, Schools and Families
 Department for International Development
 Department for Communities and Local Government
 Foreign and Commonwealth Office
 UK Trade & Investment
 Export Credits Guarantee
 Crown Prosecution Service
 8 – NDPBs/Executive Agencies
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Common Findings – Central Government
 Stewardship/Governance generally strong
 Supporting Performance Patchy at best
 Transformational FM barely evident despite
IT/Shared Services Investment
 People Management Dimension the
weakest/Leadership the strongest
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High Level Development Areas
1.
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4.
5.
6.
7.
8.
Value for Money Challenge and Culture
Ownership of Financial Management
Financial Management Competences
Finance Function Service Standards & Performance Mgt.
Positioning of Finance – Adding Value
Linkage -Operational Performance and Financial Planning
Forecasting – Re forecasting
Financial management Information
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Customer Experience
Issues raised on : Scope of Statements – applicability/relevancy
 Terminology
 Electronic Survey functionality
 Reporting of Results
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Context – Third Iteration since 2004
Principles of good FM unchanged but emphasis on: Risk management through change;
 Transactional efficiency and productivity;
 Collaborative working; and
 Commercial acumen of finance staff.
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Version 3 - The Changes
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Version 3 - The Changes
 38 Statements of Good Practice
 Includes 3 New Statements
 Enhanced precision on Statements and Questions
 Stronger/Sharper evidence required
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The Matrix of Good Practice
Management Dimensions
Financial
Management
Styles
Leadership
People
Processes
Stakeholders
Securing
Stewardship
L1 - L2
P1 - P2
PR1 - PR11
S1 - S2
Supporting
Performance
L3 - L6
P3 - P4
PR12 - PR16
S3 - S4
L7
P5 - P6
PR17 - PR19
S5 - S6
Enabling
Transformation
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Issues
 Procurement – national (Green Report) and local
 Treasury Management – Icelandic Bank crisis
 Remuneration strategy – severance, pension
liabilities
 Collaboration - VfM/cost reduction/pooling/shared
services
 Affordability - Investment/Disinvestment
 Savings/Efficiencies/Value for Money
 Integration on Financial Strategies
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Leadership – Added Focus
 Review on activity/actual spend, balance sheet,
forecasting
 Strategy including Affordability/VfM/Risk Transfer
 Plans reflecting efficiency targets
 Key external cost drivers
 Strategic planning - affordability testing/cost and
benefit
 Long term – strategic risk, resilience and financial
standing
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People – Added Focus
 Financial competency requirement
 Finance Function performance standards and
monitoring
 Structure supporting Business Partnering
 Interpersonal skills from Finance Staff
 Help managers to anticipate problems/devise
solutions
 Individual and collective responsibility re VfM
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Processes – Added Focus
 Risk Management at all levels – Risk appetite
 Internal Audit risk based planning
 Transactional
 Financial Reporting – IFRS Compliance
 VfM – systematic opportunity for cost reduction
 Budget Management and Ownership
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Budget Management – PR9
No surprises and leads to responsive action: Does the organisation provide clear documentation, support
and guidance, so that Managers who are budget holders
understand their responsibilities and own their budgets?
 Do Finance staff evaluate budget variances in terms of overall
impact and risk for the organisation’s financial position and
standing?
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Stakeholder – Added Focus
 Transparency on spending – identification/responsibility
 Financial conduct - comment
 Service Performance – data quality validation
 External Ratings/Judgements/Reputation
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Specific Issues
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Impacts of Employee Remuneration – L6
 People - biggest cost/component re cost reduction
 Sustainability of Pensions – current and future
liabilities
 Strategic workforce planning
 Absenteeism and Sickness
 Pay progression – future payroll
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Treasury Management – PR5
 Treasury Risks – risk exposure control
 Liquidity – medium and long term
 Counterparty and interest rate risks – optimal risk
management
 Borrowing and maturity arrangements
 Challenging Treasury Management advisors
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Balance Sheet Management
 Sound and current platform for management action
 Period Movements reported at highest levels
 Asset valuations updated to reflect values and lives
 Impairment/Acquisition/Disposals/Depreciation/IFRS
compliant
 Accurate Asset/Liabilities market values e.g. on
Investments/Borrowings exposure
 Debtor – profile on status/age/legal process etc
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Collaborative Working PR11/16/18
 Complete picture on formal delivery – risk/rewards
 Evaluation of Financial Performance
 Reporting responsibilities and obligations
 Monitoring financial standing of key partners
 Linking Partners’ financials with MTFP
 Imbalance in strengths between Partners
 Sharing of Assets/Pooling
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Procurement
 Procurement capacity and skilling
 Consistency on purchasing under formal contract
 Framework contracts, joint procurement or consortia
 Exploit economies of scale
 VfM from competition/supply chain mgt/
 E-procurement – e-tendering/purchase to pay
 Optimal strategies – lease, buy or make
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Medium Term Financial Management
 MTFP to include scenarios, risks and sensitivity
analysis
 To reflect joint planning with partners and other
stakeholders
 Long Term affordability
 Invest to Save/Disinvestment
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Functionality
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Functionality
 Electronic Survey Completion
 Electronic Survey Monitoring
 Reporting Capability
 Key Terminology changes - Central Government
‘language’
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Functionality Enhancements
 Contributor will only see relevant “culled”
statements/questions
 Lead person can track survey completion by
contributor
 Formatted Reporting of results for analysis
 Terminology friendly
cipfa.org.uk
Summary
 Need for strong Financial Management has never
been greater
 CIPFA FM Version 3 - adapted for emerging financial
landscape and latest good practice
 V3 Central Government Lite to be launched in early
2011
 Enhanced FM Model can help organisations to address
the seismic shift in expectations of Financial
Management
Questions
Stuart W Fair LLB, CPFA, FCCA, JP.
Senior Consultant
CIPFA Consultancy
No 1 Croydon
12-16 Addiscombe Road
Croydon
CR0 0XT
Phone:01259 763592
Mobile:07919 558440
email :stuart.fair@cipfa.org.uk
web :www.cipfa.org.uk/commercial
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