Bulking up the c-suite in government: a key recommendation is to place CFOs in government departments and agencies.(government i

In publicly traded companies, the chief financial officer (CFO) is one of the key decision makers and influencers of corporate strategy. Given the unique role of the Public Service of Canada in Canada's socio-economic affairs, however, its most senior ranks are typically occupied by the best and the brightest policy thinkers--those who demonstrate the ability to conceive and implement innovative solutions to the multitude of complex issues confronting government. Financial acumen often takes a back seat to creative policy-making.

Financial management challenges in the Government of Canada

This structural reality formed the backdrop for the senior committee's review of the Financial Management Framework of the Government of Canada, established in summer 2006. Chaired by the secretary of the Treasury Board, the senior committee's mandate was to review and make recommendations to strengthen and streamline Treasury Board financial management policies. In its March 2007 report to the president of the Treasury Board, the senior committee assessed, with refreshing frankness, the state of affairs within the government's financial management community:

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In addition to the lack of financial expertise in sensitive management roles, the senior committee identified four main problems with the government's financial management framework: (a) unclear expectations and accountabilities; (b) inconsistent format and level of guidance; (c) fragmented reporting requirements; and (d) absence of monitoring, guidance and direction.

Creating the role of the CFO

A detailed and sound road map to rectifying these deficiencies is provided in the senior committee's report. Creating the position of the CFO within federal departments and agencies sits at the core of the senior committee's recommendations. This initiative would follow similar steps taken in the United Kingdom, where deputy ministers must appoint senior-level chief financial officers with professional financial qualifications, and in the United States, which has passed the Chief Financial Officers Act requiring the president to name a qualified CFO for every department.

As envisioned by the senior committee, the comptroller general of Canada would assume responsibility for setting the knowledge and accreditation standards for CFOs. Further, the comptroller general would have the opportunity to participate on any selection committee choosing a departmental CFO. This kind of cross-government functional leadership responsibility is an important outcome of the government's decision to restore the position of comptroller general of Canada in 2003.

CFOs would report directly to the deputy head of their department or agency, making the CFO an integral part of the governmental C-suite. Moreover, CFOs' non-financial responsibilities, such as human resources or information technology management, would be limited. At the same rime as he or she would be a key member of a departmental management team, the CFO should also be free to act independently when an action considered by a deputy head would pose a significant financial risk or violate financial requirements in statutes, regulations or policies. To deal with such circumstances, the senior committee proposes a three-part dispute resolution process, culminating with the deputy head and the comptroller general jointly discussing the matter with the secretary of the Treasury Board.

Placing qualified CFOs in government departments and agencies is only one of several key recommendations in the senior committee report. Also critically important are recommendations that departments and agencies produce annual audited financial statements, and that deputy heads sign an annual statement of internal control providing assurance that effective internal controls are in place and that financial information is fairly stated and fully disclosed.

While the response of the government to the senior committee's recommendations is not known, the Treasury Board's new Financial Management Framework Policy is expected to come into effect in April 2009. It is reasonable to anticipate that the new Policy will adhere closely to the recommendations of the senior committee.

Several obstacles stand in the way of implementing a new financial management framework within an environment where "the general management community lacks a thorough understanding of financial management and internal audit and of how to work with these functions." (2) Many of the most senior leaders in the federal government's financial community are poised to retire over the next few years. Related to this serious concern is that the government must compete with the private sector to attract a pool of properly qualified individuals to fill key financial management roles. Recruitment of financial experts continues to he a challenge for government. Finally, implementing the new financial management framework will come with significant incremental costs, at a time when the federal government is facing major financial pressures.

Award of Excellence for Comptrollership in the Public Sector

In 2005, CMA Canada partnered with the UK-based Chartered Institute of Public finance and Accountancy (CIPFA), to offer a dual CMA/CPFA designation to meet the unique needs of financial management in the public sector. More recently, CMA Canada and CIPFA have reunited to sponsor the Award of Excellence for Comptrollership in the Public Sector, as a follow up on the establishment of their dual designation program. The first of its kind in Canada, the award will recognize a public servant or team making a significant contribution to financial management and/or comptrollership within the Government of Canada. The first annual award recipient will he recognized in May 2009, following a rigorous nomination and evaluation process. Details of the award can be found at www.comptrollershipaward.com.

When I was a child, my grandmother used to say, "Take care of your pennies today and the dollars will take care of themselves tomorrow." At a time of global economic turmoil, domestic retrenchment, and heightened awareness of and criticism for accountability lapses, the Government of Canada is more determined than ever to take care of taxpayers' pennies. Surely the dollars will follow.

Alan Young (young@tactix.ca) is co-president of Tactix Government Consulting Inc.

(1) Report of the Senior Committee on the Review of the Financial Management Framework of the Government of Canada, March 21, 2007, pg. 24. The Report is available on the Treasury Board Secretariat's website: www.tbs-sct.gc.ca/fm-gf/ktopics-dossiersc/gapr-pcrg/framework-cadre/framework-cadre00-eng.asp.

(2) Report of the Senior Committee on the Review of the Financial Management Framework of the Government of Canada, March 21, 2007, pg. 24. The Report is available on the web site of the Treasury Board Secretariat: http://www.tbs-sct.gc.ca/fm-gf/ktopics-dossiersc/gapr-pcrg/framework-cadre/framework-cadre00-eng.asp.

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